Integrated Report

KYUDENKO REPORT2019

Introduction

Corporate Philosophy
1 W
 e contribute to society through providing agreeable

environmental solution.
2 W
 e keep challenging for sustainable development

Contents
3. ESG…Foundation to Support Value
Creation

1. Introduction•

Corporate Philosophy

01•

Message from the President

03

(1)

Corporate Governance

36•

Management Team of Kyudenko

09

(2)

Basic Concept of CSR

43

(3)

Initiatives for Safety

44

(4)

Workplace and Labor Environment

45

(5)

Coexistence with Local Communities

46

(6)

Sports46(7)Interview with Outside Directors

47

through our engineering strength and create a

2. Growth and Development of the
Kyudenko Groupnew value.

(1)

75 Years of Kyudenko

11

(2)

Business of Kyudenko

13

(3)

Performance by Business Category

15

3 W
 e aim to create mutual respecting environment in

4. Data Sectioni) Electrical work

Kyudenko which utilize and developii) Heating, Ventilation, and Air Conditioning(HVAC) and sanitary facility work

employees’ personality.

(1)

10-year Financial Summary

4951iii) Power distribution line work(2)	Report on Financial Results and Financial
Analysisiv) Renewable energy generation plant work

(3)

Consolidated Balance Sheet

53v) Non-facility work

(4)

Consolidated Statement of Income

54

(4)

Overseas Business of Kyudenko

21

(5)

Consolidated Statement of Cash Flows

55

(5)

Business Locations

22

(6)

Corporate Proﬁle

56

(6)

Corporate Value Creation Model

23

(7)

Stock Information

57

(7)

Progress of Mid-term Management Plan

25

(8)

List of Reference for Key Information

58

(8)

Six Strategies of Differentiation

25(9)	Investment in Business and Human Resources 27
and Financial Strategies
Financial and Non-financial Highlights

29

Special Feature C reating optimal harmony of“People,” “Environment” and“Engineering Skill” as an integrated
utilities engineering service

31

(10)

	“Kyudenko EMS” which can distribute renewableenergy stably

01

Kyudenko Corporation

Disclaimer regarding forward-looking statements
This Kyudenko Report 2019 contains certain forward-looking
statements, including plans, strategies, results, etc., of the
Kyudenko Group. Such forward-looking statements are basedon judgements made by management using information
currently available to them. Actual results are subject to various	The institution to human resource development
for our brilliant future by polishing know-how,
technical skill and spritrisks and uncertainties and thus may differ materially from	Supporting various aspects of life by protecting
infrastructure throughout Kyushu

businesses” on page 42, but factors that may affect the resultsthese forward-looking statements. Factors that may affect theforward-looking statements are described under “Risks inare not limited to those described therein.

KYUDENKO REPORT 201902

1. Introduction

Message from the President

Matsuji Nishimura
Representative Director and President

How has the Kyudenko Group grown so far andQ what is the essence of its strength?

The Kyudenko Group will mark the 75th anniversary of its
foundation on December 1, 2019.
During the first 25 years after our foundation, during thechaotic periods during and after the war in Japan, we took asignificant role in boosting the reconstruction of people’s
lives by supplying electricity to local people. Throughproviding such services, we expanded our business fields tocover the overall infrastructure required for life, such as waterand air, and established a basis for integrated utilities
engineering services, providing one-stop solutions tocustomers’ needs.
During the next 25 years, the Company was listed on thefirst section of the Tokyo Stock Exchange, establishing thebasis as a corporation that actively operates nationwide. We
also widely expanded the size and sales area of the generalfacility work division including electrical, HVAC and sanitary,and telecommunications to support the growth of theJapanese economy through integrated utilities engineering
service. Meanwhile, we worked on preventive measuresagainst operational accidents such as power outages andelectric shocks in the power distribution line work division byintroducing the non-power outage method and indirect
hot-line work technique.

03

Kyudenko Corporation

In the recent 25 years, we were able to expand ourbusiness scope and further enhance the Kyudenko brandamid the lost 20 years, Japan's prolonged stagnation after
the collapse of the bubble economy and its following
breakthrough. Specifically, in a continued severe
management environment with a sharp decrease inconstruction demand, we made efforts to reinforce our costcompetitiveness and technical capabilities as well as
strengthen the quality and quantity of human resources,
which is the biggest management resource in theconstruction industry, and made steady progress toward thecreation of a corporation that can respond to labor
shortages associated with the recent recovery inconstruction demand and the aging society.
Looking back at any period of our history, the KyudenkoGroup has always moved forward to take on the challengeof new technologies, business fields and sales areas to solve
the inconveniences and issues faced by customers. I believe
this attitude enabled the Group to grow together with people
in the region. In terms of the environment, we have taken fulladvantage of our technical capabilities to resolve social
issues, such as public hazards and air pollution during thehigh economic growth period, and for the reduction ofQ

1. Introduction

Kyudenko willachieve sustainablegrowth over
100 years beyond
75 years of its history.

management policy to fulfill a social mission as an integrated
utilities engineering service company which engages in thedesign and installation of electrics, HVAC and sanitary, andtelecommunications, and become a company growing
together with customers and the local community. I believethat the sources of ongoing creation of new value in the longterm are personnel with reliable technical capabilities, andthe essence of strength of the Kyudenko Group lies in theharmonization of people and technology.

carbon dioxide emissions and use of fossil fuels by utilizing
natural energy.
With the Corporate Philosophy of the Kyudenko Group “We contribute to society through providing agreeable
environmental solution,” “We keep challenging forsustainable development through our engineering strengthand create a new value,” and “We aim to create mutual
respecting environment in Kyudenko which utilize anddevelop employees’ personality,” the Group has a basic

How is the current progress of the Mid-term Management Plan
(FY2015～FY2019)?
local community, and this fact continues to be one of thestrengths of the Kyudenko Group in the current period oflabor shortage. Staff employed in the first fiscal year of the
Mid-term Management Plan have become more reliable after
experiencing five years of service. I expect them to support
the future growth of the Group.
Based on the Mid-term Management Plan, we haveenhanced our cost competitiveness by combining our sales
force, technological force and on-site capabilities so that we
can win the competition.
As the construction industry is a moving industry where awork site moves from here to there, a physical andpsychological distance tends to arise between the
management of head office/branch offices and on-site staff.
In order to resolve this issue, the Technology Management
Department and Team were established in the head officeand branch offices to increase the engagement of the
management with work sites. Review meetings forconstruction works were held several times with involvementby the management from the quotation stage until thefollow-up stage after the completion/handover to facilitatecompany-wide sharing of know-how and visualization ofwork sites. Enhancing the transparency in work sites andcosts is highly significant in terms of compliance as well.
Meanwhile, new issues were found for FY2019.

The Mid-term Management Plan which started in FY2015
reaches the final fiscal year this year, FY2019. With theconcept of “creation of a company that can continue togrow under any environment” in mind, we conducted afollow-up evaluation and extracted new issues every year tostrengthen the “sales force, technological force, on-site
capabilities and growing force”. Backed by achievementsfrom these initiatives and improvement in the management
environment, we expect to achieve the numerical targets in
the Plan.
Under the Plan, we project sales of 418 billion yen andoperating profit of 38 billion yen for FY2019, which are
increases of more than 100 billion yen in sales and more than
20 billion yen in operating profit from FY2014. I believe thisincrease in our performance are attributable to the increase in
the number of Group employees and their growth.
Over the last five years, approximately 1,000 staff,
equivalent to 10% of the total, joined the Group. The
Kyudenko Group has firmly held a policy that “engineers are
not fixed costs but management resources essential toboost financial results and the Company’s growth”, which
led the Group to acquire personnel prior to other companies
in the period of economic recovery. The Group continued torecruit people even during the period of economic slowdown,
which led to earning trust from schools and people in thePlan for March 2020 (Consolidated)

Road map of sales plan (Billion Yen)

(Billion Yen)
March 2019
Result■Solar power plant work ■Electrical work ■HVAC and sanitary facility work
■Power distribution line work ■Others

Plan forMarch 2020

48.4

50.0

45.2

Sales

408.1

418.0

Operating profit

36.7

38.0

39.9

40.7

Ordinary profit
Profit attributable toowners of parent
Orders

26.6
405.9

27.2
425.0

49.5
65.6

48.1

165.6

170.0

126.6

135.5

153.4
110.5

126.7

137.9

80.4

74.9

94.1

101.2

45.2

46.9

47.4

46.6

47.7

47.5

14.0
2015.3

14.7
2016.312.9
2017.3

14.5
2018.3

19.8
2019.315.0
2020.3Mid-term Management Plan (2016.3～2020.3)

KYUDENKO REPORT 201904

1. Introduction

Message from the President
working process and procure staff and materials at theearliest possible stage. Due to the decrease in the profit
margin, the Kyudenko Group promptly held a meeting forprofit margin measures in April, attended by generalmanagers and managers of Technology Departments of all
branch offices. A range of large and small issues wereidentified at the meeting, and it was decided that measures
to solve these issues shall be shared every month. Althoughvarious types of new issues may arise in the future, we will
identify them at an early stage to address them speedily.

material prices. Small-scale works, in which such risks are
small, will therefore highly contribute to stable management.
With regard to construction of solar power plants, while
the number of projects already reached its peak, there arestill multiple ultra-large-scale projects under development.
The Kyudenko Group has established a businessdevelopment-based business model, which engages in bothfacility construction and businesses such as PFI (Private
Finance Initiative) and renewable energy generation
businesses to differentiate from other facility work operators.
While conducting planning and development in alliance withother industries such as energy and leasing, we strive not
only to acquire construction work orders but to gain returns
through investments. Such management stance andtechnologies capable of providing one-stop construction
services for overall facility have been appreciated by ouralliance partners, bringing us information for construction ofsolar power plants, which already came to an end at othercompanies. As this business model is also effective for otherrenewable energy related businesses including wind powerand biomass, and decentralized energy plans, ourinvolvement in these businesses is also increasing every year.

1. Introduction

Regarding the financial results for FY2018, the profit margindecreased by approximately 1% compared to the previous
year. While the work style reform is being promoted,
construction schedules are becoming extremely tight due tothe rush for completion of construction works associatedwith the Tokyo 2020 Olympic and Paralympic Games, andthus we must enhance our productivity. Affected by labor
shortages in construction and manufacturing sites, unit
costs for labor and materials are increasing, and it has
therefore become increasingly important to manage detailed

While this year is the final fiscal year of the Mid-term Management Plan, what is the key

Q to achieving the Plan? And how do you see the business environment going forward?
In FY2019, with approaching delivery of large-scale projects
especially in the metropolitan area, I think the managementof working process will become increasingly important. While
the management of branch offices should firmly grasp thesituation of each site, excellent technicians should be
efficiently allocated to sites with tight work schedules toprevent cost increase. I suppose the feasibility of the sales
plan is high because there are many sites where delivery will
be completed, but more efforts are needed to recover andraise as much as possible the profit margin that decreased
in FY2018 by gathering company-wide wisdom.
With regard to acquisition of orders, I feel the competition
has intensified mainly for ultra-large-scale projects in themetropolitan area. As an overall trend in the industry,companies seem to target projects that will become thefoundation of sales for FY2021 and FY2022, after 2020
when completion and delivery reach their peak. The
Kyudenko Group aims to increase orders by leveraging its
cost competitiveness which it has built over the years.

Large-scale redevelopment in the metropolitan area will
still continue. Also in our hometown, Fukuoka in Kyushu,
large-scale redevelopment is on the verge of being
implemented in the Tenjin area, Fukuoka's central area,
Hakata Port as an ocean gateway and Hakata Station as aland gateway, and large-scale construction works will notdecrease.
On the other hand, areas with declining and aging
population face severe issues of labor shortages in facility
works, and thus the Kyudenko Group has a mission to
support the infrastructure for people in the region. I expect
these small-scale works will continue to grow. Large-scale
works can bring higher sales per engineer because they do
not require much transportation for construction and can be
carried out in an integrated and efficient way. However,competitors are leading companies across Japan, and theconstruction period is relatively long, which means that theamount of orders are likely to be affected by economic
swings, and costs are largely affected by manpower andWhat are the specific initiatives for environmental issues,

Q especially global environmental issues?
The Kyudenko Group sees its contribution to solving global
environmental issues as a big business opportunity andcontinues to explore the possibility of achieving a sustainable
society by using its technologies. These business activities
are in accordance with our Corporate Philosophy - “We
contribute to society through providing agreeable
environmental solution”, and we have over the years workedon the construction of facilities for filtration and reprocessingof drained water and sludge, and heat supply facilities, inaddition to various renewable energy generation facilities. In
Taiwan, a local subsidiary has been engaged in theenvironmental analysis business from 1987 and it was thefirst company in Taiwan to receive an environmental
substances’ measurement and inspection license from the
Taiwanese Government.
Currently, we are working on the dissemination of the
Kyudenko EMS. This Kyudenko EMS is a globally patented
system that combines renewable energy generation facilities

and long-life lead storage batteries, and enables a stable
and lower cost supply of electricity in an off-grid mode forremote islands and under-populated areas. EMS proof
facilities are established in Sumba Island, the eastern part ofIndonesia, to supply electricity. This business was adopted
as “low-carbon innovation creation business for developing
countries” by the Ministry of the Environment, and “study on
business opportunity of high-quality energy infrastructure tooverseas” by the Ministry of Economy, Trade and Industry.
The system is an effective solution for areas such as
Indonesia with many small islands where construction costsof power transmission facilities do not pay off, and may beintroduced in other unelectrified areas in emerging countries,
as well as remote islands and distant areas in Japan. As thisbusiness has potential for big business and is also
consistent with our mission to improve the lives of people inlocal communities, we will make efforts for its dissemination.

I believe safety is fundamental to corporate activities.

Q Would you once again explain about the initiatives for safety?
Under the basic philosophy that “Safety comes first before
anything else. Safety and health are the foundation for
management and a prerequisite of all activities”, we areworking to realize “zero-accident” and “healthy
management”. The FY2019 basic policy on safety andhealth management stipulates that (i) for safety, “allemployees must ‘think & practice’, which means employees
take initiatives to think and act to prevent disasters inadvance, and (ii) for health, “aiming for ‘creation of aworkplace where everyone can enjoy working’”.
In terms of safety, there have been many disasters, and insome cases, valuable lives of our coworkers were lost.
When we analyze the reasons for past accidents in detail,
we always discover things that make us say “again?”. Why
does the same tragedies happen again and again? Do
people forget the shock of accidents of their colleagues?
At an education facility called the Kyudenko Academy, theKyudenko Group established a permanent facility “Safety

05

Kyudenko Corporation

Heritage Facility” to relive the experience of past disasters.
The exhibition includes painful videos and pictures, andcontents of pre-work meetings, and the overall Group ismaking efforts not to let the past failures fade away.
In terms of sanitation, the Group places health of
employees as one of its important management resources.
Recognizing that support for health enhancement activities
led by employees and organizational promotion of healthactivities are essential to corporate growth, the Group
adopted the Kyudenko’s “Health Management Declaration”.
In order to create a comfortable workplace environment,
employees’ self-responsibility and enhanced awareness forhealth are essential prerequisites. At the same time, it is asocial responsibility of a company to maintain the health of
its employees. The Kyudenko Group will reinforce the healthmanagement and health enhancement activities for its
employees.

KYUDENKO REPORT 201906

1. Introduction

Message from the President
What kind of employees do you seek for and what is the importance of

Q human resources?

Even after joining the Company, a range of training
programs are conducted in a timely manner to reinforce theinternal network and develop employees who can realize
company-wide optimization by overseeing the overall
company from a management perspective, including ayounger generation elder training, qualification acquisition
training, training for management candidates and training fornext-generation leaders.
In recent years, we especially focus on the recruitment
and development of new graduates for technicians andprofessionals who directly engage in construction works. We
expect that shortages of construction workers will continue.
Although the utilization of foreign workers is an option going
forward, retaining and reinforcing human resources withreliable technical capabilities and skills within the Group willcontinuously facilitate further differentiation of the KyudenkoGroup.
As part of the above initiatives, for the purpose ofpromoting active involvement by women in the constructionindustry, the Group employed new female recruits, 10 staff in
April 2018 and nine staff in April 2019, as site techniciansworking at electricity sites. In addition, in order to nurturenext generation leaders of technicians working on site, we
encourage employees to participate in the “Skill Olympics”,
where young engineers compete their technical skill levels.
To fully support our employees, the academy is equippedwith training rooms designed to practice skills for the Skill
Olympics. We also work to raise the overall skill level bytransferring predecessors' skills and technologies to juniorstaff.

We sincerely extend our apologies to shareholders andrelevant parties for much inconvenience caused due toviolation of laws and regulations by an employee of theCompany concerning bidding of a construction project of
Chikujyo town water and waste sewage treatment facility.
The Group has taken this situation seriously and has put
forth every effort in grasping the fact and detecting thecause at an early stage.
While the Group has worked on strict compliance acrossall companies from the past, given this incident, it has

President’s Declaration to Stop Misconducts
The Kyudenko Group will comply with laws and regulations
thoroughly in all its business activities
We will strive to establish a system in which misconducts are not tolerated,cannot be conducted, or exposed.

Recurrence prevention measures
1. Enhance compliance awareness3. Review of outsourcing order scheme(1) Reform employee’s awareness to create a corporate culture in which
misconducts can be detected(1) Thoroughly pursue a scheme to avoid misconducts in outsourcing
orders.
● Separate the construction division and order division.
(2) Enhancement of verification of validity of the outsourcing order amount● Make sure to hold a meeting to examine construction works and apply
strict cost management.
● Establish a new system where approval is given after discrepancy inorders is checked by a manager.
(3) Enhancement of misconduct monitoring function for construction orders(2) Reeducate compliance thoroughly● Implement thorough education by “reestablishing the education
framework” based on required knowledge on laws and regulations by
position and job scope as well as past events.
(3) Formulate and disseminate “sales representatives action guidelines”
thoroughly● Clarify actions considered as misconducts in all sales activities, andimplement education for sales representatives based on the guidelines.
(4) Raise awareness for the prevention of misconducts● Include a check item such as “a seal for acknowledgement ofcompliance with laws and regulations” in internal documents forconstruction bidding.

Could you give a message

Q to stakeholders?

2. Enhance in-house check functions

Thanks to all of you, Kyudenko has grown with its customers,
business partners, local communities, employees andshareholders over as long as 75 years. Going forward, we
aim for an optimal harmony of “People”, “Environment” and“Engineering Skill”, and take the challenge and solve allissues of society to remain a helpful corporation trusted by

07

Kyudenko Corporation

all of you. In a changing society, we will always question
ourselves whether our business activities properly satisfysocial needs, and continue to change. We ensure strict
compliance with laws and regulations in all businessactivities so that misconducts will never happen again. We
appreciate your continued support.

established recurrence prevention measures as described
below, based on the facts discovered and detection of thecauses regarding this event.
Going forward, the Group will put further efforts inthoroughly complying with laws and regulations in all its
business activities to recover trust.
The recurrence prevention measures will promptly
incorporate practical and detailed approaches, and theoverall Group will make efforts so that this kind of incident
will never happen again and will not be faded away.

1. Introduction

As I mentioned before, the Kyudenko Group has steadilystrengthened its human resources, which are our greatest
management resources. We are proud that the number of
our new recruits is ranked number one in the constructionindustry, surpassing leading general contractors. Amid therecent clamor about labor shortages and difficulty inrecruitment, our capability for steadily employing competentstaff centered in Kyushu is the outcome of our ongoing
business activities rooted in the region, and I strongly feelthat we have to respond to the trust placed in us by people
in the region by nurturing our staff to become independent
Kyudenko men/women.
The idea that underlies our human resources development
is our desire to nurture Kyudenko Group employees who
have imaginative minds to think from the perspectives ofcustomers, people of the local community and coworkers in
the course of their daily work and to develop self-establishedpersons who can think and act on their own. The Company
also strongly encourages employees to contribute to society
with an awareness that they represent Kyudenko.
Under the philosophy that “employees are the greatest
assets”, the Kyudenko Group established and opened the
Kyudenko Academy as an institution for human resource
development of the Kyudenko Group in 2012. The academy
conducts a wide range of trainings to nurture well-balanced
person in terms of all aspects of knowledge, physicalstrength and mental strength.
The Kyudenko Group has a relatively high percentage ofstudents who join the Company after graduating high school,
compared to other companies. Accordingly, the academy's
program for new recruits offers training focused on principles
and manners as a member of society, including training ingreetings and basic actions. The program guides employees
the first step toward becoming a person with excellent
personality through cultivating the mindset for ensuring safety,
enhancing teamwork and building a healthy body and mind.

Corporate governance and violation of compliance(1) Thorough scrutiny of costs● Eradicate any room for inappropriate costs in estimated costs, ordercosts and working budgets through cooperation between sales andtechnical teams.
(2) Thorough implementation of new personnel and evaluation system● Not create a hotbed of misconduct by conducting appropriate rotation.
● Raise the notion of employees that there are many eyes around themby conducting multifaceted evaluation.
(3) Enhancement of check functions in business processing● Reinforce check functions by amending internal and self-audit
procedures.
(4) Enhancement of verification using systems● Consider introducing a system to monitor misconducts in email
contents.

4. Thorough prevention of misconducts at outsourcing
companies(1) Request for cooperation of outsourcing companies to prevent
misconducts.
● Request them to refuse and not become involved in misconducts(2) Review the items of the contract with outsourcing companies● Review items for misconduct prevention included in basic construction
contracts, and terms and conditions for construction.

5. Enhancement of reporting systems and stricter
internal disciplinary action(1) Dissemination and enhancement of the reporting system● Make internal reporting mandatory when detecting a misconduct.
● Thoroughly inform employees about the compliance desks.
(2) Stricter internal disciplinary action●

Make the reward and punishment system stricter, and apply themappropriately.

KYUDENKO REPORT 201908

1. Introduction

Management Team of Kyudenko

1. Introduction

09

Yasuhiro Kashima Director

Masaaki Jono Director

Kazuyuki Ishibashi Director

Kunihiko Kitamura Director

Keizo Fukui Director

Managing Executive Officer, Responsible for the
President’s Office, human resources and labor affairs,
and general affairs

Senior Managing Executive Officer, General
Manager, Technology Div. Responsible for overall
technology and procurement

Senior Managing Executive Officer, General Manager,
Sales Div. Responsible for overall sales

Managing Executive Officer, Deputy General Manager,
Technology Div.

Managing Executive Officer, Responsible forcorporate strategic planning

Naofumi Sato Director and Chairman

Seiki Ino Representative Director

Akiyoshi Watanabe Director (part-time)

Vice President Executive Officer, Representative,
Tokyo Head Office

Independent Director, Outside Director

Sumio Kuratomi Director (part-time)

Hironori Higaki Representative Director

Matsuji Nishimura

Independent Director, Outside Director

Vice President Executive Officer, Responsible for overallbusiness administration and overall Electric Power Div.

Representative Director and President

Kyudenko Corporation

KYUDENKO REPORT 201910

2. Growth and Development of the Kyudenko Group(1) 75 Years of Kyudenko

Sales■Power distribution line work ■Electrical work

Exceeded

March 2012 Newly established atraining center “Kyudenko Academy”■HVAC and sanitary facility work ■Solar power plant work
■Others

400

billion yen(Million Yen)

December 1994 50th Anniversary
Publication of the anniversary
booklet400,000

Exceeded300

billion yen

300,000

2. Growth and Development of
the Kyudenko Group

December 1989 Change of thecompany name to Kyudenko
Corporation

Exceeded200

billion yen

April 1976 Relocation of Head Officeto Nanokawa, Minamiku, Fukuoka city

200,000

Exceeded

October 1969 Beginning of theService-oriented Month (currently the
Refreshing Community Period)

100,000

0(FY)

Kyushu Denkikouji Corporation
at the time of its foundation

1944

1950

1955

1960

1965

1970

1975

Foundation phase when Kyudenko was born as acompany engaging in electrical and power distribution line work across the Kyushu region

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

Kyudenko was established in December 1944 as “Kyushu Denkikouji Corporation” (former Kyudenko) by integrating fourteen electric
work companies in Kyushu.

The Company was listed on the Fukuoka Stock Exchange and Osaka
Exchange (second section) in November 1968, and designated to
the first section of the Tokyo Stock Exchange and Osaka Exchange
in September 1972. In December 1989, the company name waschanged to the current “Kyudenko”, and it marked the 50th anniversary in 1994.

December 1944

October 1945
June 1947

February 1952
May 1962
July 1964
February 1965
March 1968

Established Kyushu Denkikouji Corporation
Paid in capital 2.5 million yen
Head Office 11 Hasuikemachi, Fukuoka city
Opened Tokyo Satellite Office (current Tokyo Head Office)Concluded an agreement on contracted power distribution
line work with Kyushu Haiden Co, Ltd. (current Kyushu
Electric Power Company, Incorporated)
Relocated Head Office to Denki Building
Opened a training center (current Kyudenko Academy)
Started operation of HVAC and sanitary facility work
Opened Osaka Office (current Kansai Branch Office)Opened Nagoya Sales Office (current Nagoya regional office)November 1968
November 1968
July 1971
September 1972
September 1972
April 1976
April 1978
July 1981
March 1987
December 1989
December 1994

11

100

billion yen

Kyudenko Corporation

Listed on the Fukuoka Stock Exchange
Listed on the Osaka Exchange second section
Started operation of water treatment work
Designated to the Tokyo Stock Exchange first section
Designated to the Osaka Exchange first section
Head office was newly established and relocated to thecurrent location
Completed Sunshine 60
Started operation of public sewerage works
Issued the first series of unsecured convertible bond of 10
billion yen
Changed the company name to Kyudenko Corporation
Marked the 50th Anniversary

1980

1985

1990

1995

2000

2005

2010

2015

New management stage with expansion
into the metropolitan area and overseas
Tokyo Head Office was established in July 2008, and “Kyudenko
Academy”, a training facility, was newly established in March 2012,
to build a stronger management base in Japan. With full entry into
global businesses, as well as further expansion of businesses in themetropolitan area, Kansai, Chukyo and Okinawa, we are entering a
new management stage.
December 1997 Obtained ISO9001 Certification
December 1999 Obtained ISO14001 Certification
June 2004
Delisted from the Osaka Exchange
June 2008
Introduced the Executive Officer System
July 2008
Established Tokyo Head Office
Newly established a training center “Kyudenko Academy,” inMarch 2012
Kiyama-cho, Miyaki-gun, Saga Prefecture
Newly established the Tohoku regional office
April 2012
September 2012 Started establishment of local subsidiaries in Southeast Asia
May 2013
Capital participation in Asia Projects Engineering Pte. Ltd.
(APECO) in Singapore
March 2015
Issued the second series of unsecured convertible bond of 10
billion yen
December 2019 To mark the 75th Anniversary

Origin of our logo
Our logo is based on the letter “K”,
the initial of Kyudenko, andrepresents a corporate image thataims 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.

KYUDENKO REPORT 201912

2. Growth and Development of the Kyudenko Group(2) Business of Kyudenko

Comprehensive energy management as a leading company of “Integrated Utilities Engineering Service (electricity, air and water)”Electrical work

As a company that undertakes contracted
works from Kyushu Electric Power Company,
Incorporated, it engages in installation andmaintenance of overhead distribution
equipment, installation of drop wires andmeters, and installation of communication
cables and related devices to build a
distribution automatic control system.
Specifically, in case of power outage due tonatural disasters, etc., the Company conducts
recovery works day and night, largely
contributing to the local community.

Electrical division installs substationequipment in order to receive electricity fromthe power company, as well as power source
for mechanical equipment, lighting equipment,
switches, plugs, low power equipment, antidisaster facilities and communication facilities,
so that they can be used safely andconveniently. Construction managers are
responsible for the design and costcalculation of such facilities, preparation ofdrawings, management of safety, working
process, quality and costs for the construction
work, while technicians are responsible for thewiring and installation work on site.

Others5%Power distribution
line work

2. Growth and Development of
the Kyudenko GroupPower Distribution Line Work12%

FY 2018

Sales 47.7 billion yen
Power distribution line and underground distribution line, etc.

HVAC and sanitary facility work

HVAC andsanitary facility
work

HVAC and sanitary facility work division not
only provides a comfortable living
environment in terms of air and water but also
safety and security through installation of heatand ventilation air conditioning equipment,
plumbing system, and sanitation and disasterproof equipment in a wide range of buildings,
such as office buildings, hospitals, hotels andfactories. From designing to construction, thedivision thoroughly controls the safety ofworking sites, quality of works, andmanagement of working process, providing
high-quality facilities. In addition, by providing
after care services for the HVAC and sanitaryfacilities and being involved in the entire
lifetime of the building, the division supports
the safe and comfortable lives of clients.

31%

Renewableenergygeneration
plant work

Sales 129.1 billion yen
Air conditioning, plumbing and sanitary, etc.

13

Kyudenko Corporation

Sales

408.1

billion yen

Sales 211.4 billion yen
Electrical work

Electrical, telecommunications
and energy, etc.

52%

Renewable energy generation plant work

14%

Sales 57.0 billion yen
Construction of solar, wind, biomass, and other power generation plants

Solar power generation using natural energy
is a promising renewable energy which is also
cost effective, and is commercially operated
in Europe and the U.S. in large volume.
Kyudenko has worked to introduce a solar
power generation system since 1992, and has
been offering detailed services including
proposal of a construction method suitable forthe location to be installed, management suchas proper maintenance after installation andproposal of attached equipment. We haveaccumulated a wealth of experience in serving
clients in Kyushu, as well as Honshu, and built
a 70MW large-scale solar power generation
system in the Nanatsu Island Mega SP Stationin Kagoshima Prefecture.
We have also worked on the construction ofvarious renewable energy generation plants,
such as wind power and biomass, tocontribute to the realization of a carbon-freesociety.

KYUDENKO REPORT 201914

(3) Performance by Business Category(3) Performance by Business Categoryi) Electrical workii) HVAC and sanitaryfacility work

Kumamoto Kenmin Television

146.9
124.1

157.1

133.0

109.6

2015.32016.32017.32018.32019.3

Orders (Billion Yen)
[excluding renewable energy work]
164.1
148.9
122.4

2015.3Pick-up

162.1

135.0

2016.32017.32018.32019.3Business environment／performance trend● Sales increased by 6.9% year-on-year and orders received decreased by 1.2% year-on-

year. Sales progressed steadily on the back of abundant work in hand, while orders
received decreased mainly in Kanto.
● Orders received by region were 73.0% in Kyushu, 20.8% in Kanto, Tohoku and Chubu,
5.9% in Kansai, and 0.3% overseas.
● With high technical capabilities and abundant expertise, we offer electrical facilities thatpeople can use safely in various places, such as increasingly complicated andmultifunctional office buildings, commercial buildings, factories, educational andcultural facilities, and resort facilities, in order to contribute to society.
Business strategy● We will work to offer clients highly efficient, stable and safe electric and instrumentation

facility at a competitive price and with high quality by promoting IT, considering
introduction of advanced technology such as VR and AI, and improving productivity on
an ongoing basis.
● We will strengthen our cost competitiveness through “creation of minimum costs”, andrealize ongoing improvement of the profit margin.
● Construction managers and technicians in over 100 sales offices across Japan will
directly grasp issues concerning customers' facilities and respond to their needs
comprehensively and speedily by making technical proposals involving the entire
electrical, HVAC and sanitary facility divisions.
● We will secure workforce through active recruitment, and nurture a number oftechnicians who can conduct a set of electrical facilities work in buildings of any sizeand for any purpose.
● We will further strengthen our initiatives to acquire more orders for hotels, apartments
and energy service business, which are areas where there are potential for growth indemand.

Realization of “Electric/HVAC Paired Construction Management” by nurturing multi-skilled engineers

Aiming to become a top integrated utilities engineering
service company, we promote the “Electric/HVAC Paired
Construction Management” in which electrical, HVAC andsanitary facility works are managed by one person. We areestablishing a framework that realizes both improvement ofcustomer satisfaction and reduction of construction costs at
a high level with a one-stop solution leveraging cutting-edge
technology.
AEON MALL Miyazaki

15

Kyudenko Corporation

JR Hakata City

Sales (Billion Yen)
[excluding renewable energy work]

126.4
93.8
80.4

2015.3

101.0

74.7

2016.32017.32018.32019.3

Orders (Billion Yen)
[excluding renewable energy work]

150.2
120.2
93.8

96.2

2016.32017.373.9

2015.3Pick-up2018.32019.3Kindai University
Higashiosaka Campus(ACADEMIC THEATER)

2. Growth and Development of
the Kyudenko Group

Sales (Billion Yen)
[excluding renewable energy work]

DaiyaGate Ikebukuro

Business environment/Performance trend● Sales increased by 25.2% year-on-year and orders received increased by 24.9%

year-on-year. Sales progressed steadily on the back of abundant work in hand, andorders received increased mainly in Kyushu and Kanto.
● Orders received by region were 66.1% in Kyushu, 23.1% in Kanto, Tohoku, and Chubu,
7.3% in Kansai, and 3.5% overseas.
● We provide technical capabilities and expertise to provide services such as HVAC,
plumbing, and fire prevention facilities that is environment-friendly, reliable, andhigh-quality in every building, to allow a safe, comfortable place for everyone.
● With “Security and safety of water”, “Carbon dioxide emissions reduction” and“Resource circulation” as key concepts, we provide services in the “wastewater
treatment facilities,” involving public sewers and factory wastewater, “resource
circulation facilities,” involving sludge recycling and recycled water treatment, and“water supply facilities,” involving water purification plants and reservoirs. We arecontributing to society in the field of water-related environmental infrastructure by
operating closely with our customers and local community and respond to their needs
using our comprehensive capabilities.
Business strategy● Due to the increasing shortage of technicians in the construction industry, we haveresumed the recruitment of directly-managed technicians in the HVAC and sanitaryfacility work division from FY2014, in order to strengthen our Company’s construction
capabilities. We are currently building a system to provide high-quality and highly
mobile construction under the Kyudenko brand.
● In the water industry, we are developing business by combining advanced technicalcapabilities, attractive planning capabilities, and proposal capabilities that exceed
customer expectations. In addition, to expand orders in the future and accommodate
trends such as “energy-saving”, “ICT”, “low carbon society” and “depopulation”, we areworking to acquire new technologies by sharing various technology information andcollaborating with universities, etc., and build a new pillar of business in the field ofenvironmental infrastructure.

Development of the Great Eco Cooling Tower System

The “Great Eco Cooling Tower System” utilizes our internally developed energy-saving cooling tower. In thissystem, by lowering the temperature of the cooling water inlet of the freezer below the normal level, evenwhen there is an increase in temperature difference in the cooling water, a decrease in freezer efficiency
can be prevented and the amount of circulated water can be reduced as well, resulting in a reduction ofcooling water pump power.
In addition, even though the power of the cooling tower fan will increase by lowering the cooling water
inlet temperature, we are working to reduce the required power by customizing the tower body, fan blade
shape, and volume and distribution of filler material for each project.

KYUDENKO REPORT 201916

(3) Performance by Business Category(3) Performance by Business Categoryiii) Power distribution
line workiv) Renewable energy
generation plant work

Nanatsu Island Mega SP Station

Sales (Billion Yen)

45.2

46.9

47.4

46.6

47.7

year.
● In the second half, sales and profit margin increased due to an increase in construction
volume.
● We are responding to the frequent natural disasters by leveraging our personnel
resources not only in Kyushu but across the entire Company to realize early recovery.

2. Growth and Development of
the Kyudenko Group

Business environment/Performance trend● Sales increased by 2.4% year-on-year and orders received increased by 2% year-on-

Nagashima Wind Power Generation Plants

Business environment/Performance trend
Sales (Billion Yen)
(Figures in lower parentheses represent solar power
plant work)

66.5(65.6)

54.6

50.7(49.4)(48.0)

51.7(45.1)

57.0(48.3)● Taking the opportunity of the legal separation of power companies (separation of power● Sales increased by 10.1% year-on-year and orders received decreased by 14.4%

year-on-year. Sales progressed steadily on the back of abundant work in hand, andorders received decreased mainly in Kyushu.
● Orders received by region were 30.4% in Kyushu, 59.5% in Kanto, Tohoku and Chubu,
and 10.1% in Kansai.
● We will improve operational efficiency by promoting the restructuring of operations,such as reviewing O&M (operation and maintenance) inspection methods and utilizing IT.
● We are thoroughly managing the progress of large-scale renewable energy businesses

generation and distribution) to be implemented in 2020, we are working to secure aand working closely with power companies with a sufficient margin in the construction

stable volume of orders for the future.

period. We are also working to secure monthly expected power generation volume.
2015.32016.32017.32018.32019.3Business strategy

2015.32016.32017.32018.32019.3● With the full liberalization of electricity retail sales, we aim to further improve

Orders (Billion Yen)

45.5

47.0

47.7

46.5

47.4

2015.32016.32017.32018.32019.3

construction quality to provide a stable supply of electricity to all customers.
● We aim to strengthen competitiveness and improve profitability through technology
development, enhancement of work efficiency, securing workers by improving work
environments, and further reducing costs for power system reform.
● Regarding underground distribution line work, we will strive to expand sales and profit
by working to acquire orders not only in Kyushu but nationwide by utilizing the expertise
we have accumulated thus far.
● By responding promptly to the increasingly powerful natural disasters utilizing ourmobilization capabilities, we will work for the early restoration of electricity andcontribute to the maintenance of the infrastructure throughout Kyushu.

Business strategy

Orders (Billion Yen)
(Figures in lower parentheses represent solar power
plant work)

82.1(80.0)

87.6

84.7(85.7)

clean natural energy generation facilities aimed at reducing CO2 emissions.
● We are constructing a tight connection with partners in other industries as a result of(60.9)

appreciation of abilities to develop deals and judge investments.
53.7(50.7)● There is a huge volume of information on large deals requiring much time for46.0(45.3)

2015.3● To prevent further global warming, we are promoting the installation and construction of

2016.32017.32018.32019.3development, and we see an increase in orders directly nominated from partners.
● After newly constructing power generation plants, we aim to acquire orders formaintenance work under long-term contracts and realize stable power generation,
while seeking to gain demand for replacing power conditioning systems 10 years laterand replacement demand 20 years later.
● Looking ahead to the next stage, we will aim to expand our pipelines by participating ina multi-industry community for the implementation of an offshore wind farm project.

Pick-up“Non-power outage method” and “indirect hot-line work technique”
that maintain convenience and realize worker safety

The “non-power outage method” (a construction method that prevents power outages byusing bypass cables, generators, etc.) and “indirect hot-line work technique” (a secure
installation work method, with which on-site workers do not need to touch hot wires directly
while installing and replacing wires and its related equipment), that were introduced ahead ofother domestic companies, maintain the convenience of electricity, an essential infrastructure,
while improving the safety of workers and their work environment.

17

Kyudenko Corporation

Pick-upCompletion of Nanatsu Island Biomass Power Generation Plant

The Nanatsu Island Biomass Power Generation Plant, established by the Company, IHI Corporationand seven other investment companies and constructed by Nanatsu Island Biomass Power G.K.
(location: Kagoshima City, Kagoshima Prefecture), which operates a woody biomass power
generation business, was completed on May 7, 2019.
The output scale of this power generation plant is 49,000kW, the largest in the prefecture, with anannual power generation forecast of approximately 337,000MWh, equivalent to the amount consumed by approximately 77,000 households.
By using palm kernel shells, wood pellets, and domestic lumber obtained from thinning, we provide environmentally friendly renewable energy
generation, which not only aims for a stable supply of electricity, but also contributes to reducing approximately 200,000 tons of CO2 annually.

KYUDENKO REPORT 201918

(3) Performance by Business Categoryv) Non-facility work
Renewable energy generation businessWe construct, own, and operate solar power and wind power
generation plants and engage in the business of selling electricity
using the Feed-in Tariff (FIT) scheme. We also jointly participate in thebusiness of generating and selling solar power, wind power andbiomass power through equity investment and anonymous partnership.

Main initiatives

April 2018

Solar power generation

Participation in floating solar power
generation business in Taiwan■ Sales (Billion Yen)
● Operation output (MW)TAIWAN Ltd., and Kyuden Mirai Energy Company,

Kyudenko, Tokyo Century Corporation, CIEL ET TERRE

4.2
3.2

Urban Development (Bayside Place Hakata)

In April 2017, the Procurement Division of Kyudenko and that of our
subsidiaries were merged to form Q-mast. By taking advantage of
economies of scale and reducing procurement costs, Q-mast iscontributing to generating profit for the Kyudenko Group.

Kyudenko has been operating Bayside Place Hakata since 2009,
increasing the number of visitors every year by attracting appealing
tenants. By holding various events, the place has become a popularplace to visit not only for Japanese tourists but also for tourists fromabroad.

Olive Business

Hotel Business (Hotel Urbic Kagoshima)

Kyudenko is taking on the challenge to enter the sixth industry, bothin Japan and abroad, to contribute to the further development of the
agricultural industry in Kyushu region, and by establishing a new
business model, it is also contributing to society. Under the Amakusa
Olive Orchard AVILO brand, we sell the olive oil at shops and online.

A one-minute walk from the west exit of Kagoshima-chuo Station,
the Hotel Urbic Kagoshima is highly convenient. The hotel has been
received well by many guests since its establishment in 2007 due toits sophisticated design and reasonable price range.

Medical Support Business (Net Medical Center)

Golf business (Hokuzan Country Club)

Incorporated jointly started a floating solar power generation
by floating solar cell modules in regulating ponds owned by

2. Growth and Development of
the Kyudenko Group

Tainan City is sold to Taiwan Electric Power Company throughthe renewable energy FIT scheme of Taiwan. Kyulien

2.1

2015.3

Material Sales (Q-mast)business in Taiwan. In this project, the electricity generated

3.5

2.7

57

By utilizing our expertise and management resources obtained through facility work, the Kyudenko Group is developing businesses in a wide
range of areas, such as remote medical image diagnosis support services and materials and equipment sales business related to electrical,
HVAC, and sanitary facility work. Furthermore, we are engaged in the business development of the Bayside Place Hakata, which is leading to
the revitalization of the Fukuoka waterfront.

65

2016.372

2017.385

92

2018.32019.3

Environment Improving Co., Ltd., Kyudenko’s local subsidiary,also participates in the construction of the facilities.

May 2018
Conclusion of basic agreement on
renewable energy generation businessWind power generation

Kyudenko, Tokyo Gas Co., Ltd., and Tokyo Century Corporation■ Sales (Billion Yen)
● Operation output (MW)jointly concluded the “Basic agreement on renewable energy
generation business” for the purpose of acquiring, developing
and operating a renewable energy generation business. Goingforward, we will bring together the knowledge that eachcompany has accumulated regarding development, funding,

0.8
38

0.9
38

1.0

38

0.9

0.9

38

38

construction, and operation to contribute to the spread ofrenewable energy and creation of a sustainable society.

September 20182015.32016.32017.32018.32019.3Equity investment■ Non-operating income (Billion Yen)
● Operation output (MW)

131
110

1.4

75
53

0.7

36
0.1
2015.319

0.2
2016.3

Kyudenko Corporation

Jointly commenced the prefecture’s largest
woody biomass power generation businessin Uruma City, Okinawa Prefecture
Kyudenko, Kyuden Mirai Energy Company, Incorporated, TOYOKANETSU K.K., Okinawa Gas Co., Ltd., Tokyo Gas Engineering
Solutions Corporation, and five local companies in Okinawa
Prefecture participated in the investment in Okinawa Uruma
New Energy Co., Ltd., established by erex Co., Ltd. Okinawa
Uruma New Energy Co., Ltd. constructed the Nakagusuku
Biomass Power Generation Plant, which exclusively burns
woody biomass to generate a 49,000kW output and is
expected to reach an annual energy production of approximately 350,000MWh, equivalent to the annual electricity
consumption of approximately 110,000 households. Kyudenko will be responsible for the electricity facility work of thispower generation plant.

We provide a series of medical services in which CT and MRI image
data are received via telecommunication lines by contracted medical
institutions, where radiologists analyze the data and send a report of
the analysis to the patient’s medical facility.

The golf course at the Hokuzan Country Club, located in the centerof Sefuri Hokuzan Prefectural Natural Park in Saga Prefecture, is oneof the top 18-hole golf courses in Kyushu. We provide a comfortablegolf environment by focusing on maintaining the quality of thecourse and providing services to users.

0.1
2017.32018.32019.3KYUDENKO REPORT 201920

2. Growth and Development of the Kyudenko Group(4) Overseas Business of Kyudenko(5) Business Locations

The overseas business of Kyudenko was launched in 1979. As Japanese general contractors and plantJapanmanufacturers expand overseas, Kyudenko has also participated in many projects in areas including
Asia, Africa, the Middle East, and Europe, building up a track record of construction work.
this year. APECO is a leading engineering andmaintenance company serving diversified industries,
including the power & energy, petrochemical, and water
utility industries.
About seven years have passed since the establishmentof local subsidiaries in Malaysia, Vietnam and Thailand,
and the companies are receiving orders from Japanesemanufacturers and general contractors for such work as
construction of new factories and renovations, steadilybuilding up a track record of construction work.

Oita Branch Office
Kumamoto Branch OfficeMiyazaki Branch Office
Kagoshima Branch Office
2. Growth and Development of
the Kyudenko Group

Although the overseas business entered a period of
temporary stagnation from the 1990s, we established theInternational Business Division in 2011 and decided todevelop business in Southeast Asia, which continues tohave one of the highest growth rates in the world.
Currently, we are developing businesses in six countries
and regions: Singapore, Malaysia, Vietnam, Thailand,
Indonesia and Taiwan.
APECO in Singapore is a plant engineering company
invested in 2013 and will celebrate its 50th anniversary

Nagasaki Branch Office
Saga Branch Office
Head Office, Fukuoka Branch Officeand Fukuoka regional office
Kitakyushu Branch Office

Tohoku regional office
Saitama regional office
Tokyo Head Office andTokyo regional office
Yokohama regional office
Nagoya regional officeKansai Branch Office
Kobe regional office
Chugoku regional office
Yamaguchi regional office
Okinawa Branch OfficeVietnamSingapore (APECO)

The main business of Kyulien Environment Improving Co.,
Ltd. in Taiwan is the environmental measurement andanalysis of exhaust gas and wastewater released fromfactories and waste disposal facilities. It is the firstcompany in Taiwan to receive an environmental
substances’ measurement and inspection license fromthe Taiwanese Government and has earned the trust ofcustomers with its high-quality services.
In April 2018, we set up a Representative Office inIndonesia. Kyudenko has developed “Kyudenko EMS,” anenergy management system that can convert renewableenergy, such as solar power and wind power, whose
output is extremely changeable, into a stable form for

Thailandutilization. We are conducting demonstration projects in
Sumba Island, Indonesia, and are working to spread
Kyudenko’s EMS technology throughout Indonesia, anisland country.
Kyudenko’s overseas business covers a wide range offields, including facility work such as electrical, HVAC andplumbing, plant engineering business, environmental
analysis business, energy management business (EMS),
and renewable energy business.
By bringing together the technical capabilities
accumulated in Japan and the technical capabilities
possessed in each country abroad, we would like tofurther develop business overseas.

Overseas
Japan Head Office

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

Kyudenko (THAILAND) Co., Ltd.
Line of business: Electrical works, HVAC and sanitary facility works andenergy-saving works

Kyudenko Vietnam Co., Ltd.
Line of business: Electrical works, HVAC and sanitary facility works andconsulting service on construction technology

Kyudenko Malaysia Sdn.Bhd
Line of business: Electrical works, HVAC and sanitary facility works andfire prevention facility works

Kyudenko South East Asia Pte. Ltd.
Line of business: regional headquarter of Kyudenko's overseas businessdevelopment in South East Asia region, operating support tolocal subsidiaries

Asia Projects Engineering Pte. Ltd.
Line of business: Plant installation works, maintenance and EPC works anddistrict cooling facilities works

Indnesian OfficeLine of business: Diffusion and commercialization of EMS(Energy Management System)

Kyulien21

Kyudenko Corporation

Malaysia

KYUDENKO REPORT 201922

2. Growth and Development of the Kyudenko Group(6) Corporate Value
Creation Model

Corporate Philosophy“We contribute to society through providing agreeable environmental solution.”“We keep challenging for sustainable development through our engineeringstrength and create a new value.”“We aim to create mutual respecting environment in Kyudenko which utilize
and develop employees’ personality.”

Promotion of Mid-term Management Plan (FY2015-FY2019)
Input

Overview of business model

Output(Strength of the Kyudenko Group)(Value creation process)(Results of business activities)

Manufacturing capital
112 locations throughout
Kyushu and Okinawa.

●	‌Shortage of construction

workers● Increase in costs ofconstruction materials
and laborIntellectual capital
Development and utilizationof IT, AI, and 3D technology
by the R&D division.

● Damage caused byincreasing natural
disasters● Expectations forrenewable energy● Issue of useful live ofbuildings constructedduring the period of higheconomic growth● Long working hours

becoming a social
issue● Enhancement ofpension assets
etc.

Human capital
In preparation for a shortageof engineers, we provide
in-house training not only
for construction managers
but also for technicians.
Financial capital
Financing capabilities
by maintaining a highROE and rating.
Social relationship capital
Promotion of flexible
capital alliances in areasof new expansion.
Natural capital●‌ S olar power generation

Number of projects:
over 100 sites●‌ W ind power generation

Total wind power
generation capability:
At present: over 54MW
Including those not in
operation: over 91MW●‌	‌Kyudenko EMS

A leading company in“Integrated Utilities Engineering Service”“Sales force” tomeet trusts andexpectations of clients●‌	 Enhancement of after-sales●‌	 Thorough quality assurance andservices●‌	 Strengthening and expanding ourmanagement base in themetropolitan area●‌	 Enhancement of solution sales

strengthening cost competitiveness●‌	 Improving profitability of PowerDistribution Line Work●‌	 Promoting research anddevelopment in the energy field

Installation ofdemonstration modelin Sumba Island●	‌Recruitment ofengineers and skilled
persons: Over 300
persons●‌ A bout 80% of Group

employees areengineers“Technological force” towin the cost &quality competition●‌	 Development of human resources

who will bear the next generation●‌	 Enhancing and strengthening●‌	 Strengthening overseas

construction force●‌	 Promoting efficiency to improve
productivity●‌	 Strengthening of Group companies

management bases●‌	 Promoting renewable energy
generation business●‌	 Developing business in new areas“On-site capabilities”
to obtain more projects
and profit efficiency“Growing force”
for future success●‌	‌Integrated Utilities

Engineering Service
Company

Net sales: Third placein the industry

Financial resultsS ecured retained earnings
for further growth• Stable returns toshareholders• Increase in equity ratio• Flexible acquisition oftreasury stock•(Utilization of our strength as the leader of integrated utilities
engineering service)
One-stop service for all types of facility works through integration of know-how
Establishment of stable foundation in Kyushu and expansion to the metropolitan area
Continuous development of human resources●‌Operating cash flows: 26.0 billion yen(FY2018)●‌Cash dividends per share: 100.0 yen (FY2018)●‌‌ Payout ratio: 26.7% (FY2018)●‌Equity ratio: 50.5% (FY2018)●‌‌ ROE 15.6% (FY2018)●‌Rating A- (R&I)●‌‌ Annual sales: over 400.0 billion yen

Further exploration ofdiverse business modelsP roposal and originalcontract type
• Sub-contract type
• Capital participation type•Operating profit: increase to 38.0 billion yen(FY2019 plan)from approximately 5.0 billion yen●‌Sales recorded in the metropolitan area: over

65.0 billion yen (FY2018)●‌Responding to the demand for upgradingbuildings that have passed its useful life.

Relationship with society uilt infrastructureB
resistant to natural
disasters• Ensured stable supply ofelectricity• Reduced energy cost
• Contributed to pleasantfacility operation• Promoted work stylereform and healthmanagement.
•

Three driving forces of growth

2. Growth and Development of
the Kyudenko Group

Socialchallenges andbusinesschallenges●‌‌ Nationwide expansion of solar power

generation and wind power generation

Becoming a business that contributes to ourstable performance for 20 years

Corporate Governance (Supporting the overall Group management)
23

Kyudenko Corporation

KYUDENKO REPORT 201924

2. Growth and Development of the Kyudenko Group(7) Progress of Mid-term Management Plan
Pillars of growth strategy

Taking on Challenges to Make
the Next Leap Forward

Road map of sales plan (Billion Yen)

Establish stable foundation in Kyushu～To the next growth stage～■Solar power plant work

■HVAC andsanitary facility work

Development of humanresources■Power distribution
line work■Others● Customers do not need to meet with multiple companies.

HVAC andsanitary works

Proportion
FY2018 Sales

Integrating expertise in electrical work and HVAC andsanitary works

6
165.6 billion yen

4
126.6 billion yen
Increased by

Increased byBusiness launched

Cost reduction through management of working processof entire facility

25%
1964
Top6

8%
1944
Top3 in the industry

Year-on-year increase rate

● Total solutions that realize energy saving.

Sales

in the industry● S hortening construction periods, line and pipe distribution that enables

Strategy

2112 business bases throughout Kyushu and Okinawa■

Placed engineers and technicians of electrical works and HVAC andsanitary works at each business base.
Developed services for maintenance and solution-driven sales.

■

■
■■ ■
■
■
■ ■
■■
■
■ ■ ■ ■■
■
■
■
■
■■
■■
■
■
■
■
■
■
■
■
■
■ ■
■
■
■
■
■
■
■
■
■
■
■ ■
■
■
■
■
■ ■
■
■
■
■
■
■
■
■
■ ■
■
■
■
■
■

■

■

Aiming for Kyudenko to become a company that is continually chosen
by customers through local-based business activities and social
contribution activities.

■
■
■

■

■

■

■

■

■

■

■ ■

■

■

■

46.9
14.7
2016.3

47.4
12.9
2017.3

46.6
14.5
2018.3

135.5

47.7

47.5
15.0
2020.3

19.8
2019.3

3

■

25

A
B

Reorganized Osaka Branch Office to Kansai Branch Office to2012
expand its business territoryC2012 Established Tohoku regional officeD

Reorganized Yokohama business office to Yokohama regional
2014
officeE2015 Established Nagoya regional officeF2017 Reorganized Saitama business office to Saitama regional office

Kyudenko Corporation

14.0 %[Persons]

Electrical work department
HVAC work department
Year-end workforce of electrical and HVAC
Power distribution line department
Other
Employees of Kyudenko (non-consolidated)

FY2019 (plan)
2,228
1,160
3,388
1,647
1,433
6,468

Increase or decrease in plan
About +500
About +240
About +740
About -220
About +40
About +560

Employees of the Group

8,976

9,287

9,843

9,954

10,000

About +1,000

Growth of solar power plant work

other industries as a result of appreciation of abilities
to develop deals and judge investments.
● There is a huge volume of information on large deals
requiring much time for development, and we now
expect orders directly nominated from partners. (Thefollowing expectations exclude the Ukujima project.)● We seek to gain demand for replacing power
conditioning systems 10 years later and replacement
demand 20 years later as a direct constructor.

■Amount (Billion yen)

●Number of deals of solar power facility construction
works worth 100 million yen or more by deal
100

Actual and expected results of works in hand

150.0

100.0

50

50.0

■

Strategy

6

Name of Company

Location

Sales for FY2018

Koteradengyo
Kakusokukeisou
Kawachikougyou
Shoeidensetsu
Kyusetukougyou
Jinnouchikoumutenn
Sanyudensetsu
ErgotechSeiwakougyou

Osaka
Fukuoka
Osaka
Chiba
Nagasaki
Yoshinogari-machi, Saga
Koriyama
Yokohama
Mito

1,932 million yen
1,153 million yen
1,488 million yen
983 million yen
571 million yen
450 million yen
857 million yen
10,427 million yen
1,763 million yen

A

Proposal and original contract type
Increasing market share while keeping afirm foothold in Kyushu and Okinawa

B

Sub-contract type
Expanding to Kansai, Tokai, Tohoku andChugoku in addition to the metropolitan
area

Employees
50
57
18
28
9
34
47
144
36

C

2014.32015.32016.32017.32018.32019.32020.3Cultivation of diverse business models
Business model■ New participant companies of the Kyudenko Group (in construction)
1
2
3
4
5
6
7
8
9

over

FY2018
2,203
1,107
3,310
1,669
1,420
6,399

Conduct capital tie-ups with companies seeking local-based business operations in the metropolitan area and new areas and companies possessing
technology that can complement Kyudenko.
Year ofparticipation
2014
2014
2015
2015
2016
2017
2018
2018
2018

ROE

FY2017
2,090
1,052
3,142
1,741
1,418
6,301

Promote expansion and strengthening of business areas

Reorganized organizations in the metropolitan area and2008
established Tokyo Headquarters

9.0 %

■

Expansion of business areas and acceptance of brand■ Strengthening of organizations in areas outside Kyushu

overFY2016
1,826
990
2,816
1,816
1,408
6,040

2013.3Strategy

Operating Profit Ratio

Recruitment and development of human resources● We constructed a tight connection with partners in

■

■

■

■

A reliable company that immediately rushes to protect the basic
infrastructure in the event of a disaster.

■ Regional offices andbusiness offices

■

■

45.2
14.0
2015.3126.6

FY2015
1,728
921
2,649
1,869
1,394
5,912

5

Building a solid foundation in Kyushu and Okinawa

101.2■ Planned year-end workforce until FY2020 March

Strategy

maximum use of space.
■

94.1

15.0 %● To prepare for a shortage of skilled persons in the future, provide in-house training for not only construction managers but also technicians.

● In the construction of energy facilities and renovation work, whichmainly consists of facility work, we engage in direct contract work
instead of construction.

74.9

over

Implement solid recruitment even in difficult times, with the philosophy of “Human resources is the biggest management
resource”.

excluding solar power plant

Electrical works

One-stop construction of all types of facility works

80.4

Gross Profit Ratio

2. Growth and Development of
the Kyudenko Group

Strategy

Utilizing technologies of Integrated Utilities Engineering Service

137.9

126.7

400.0 billion yen

170.0

165.6
153.4

110.5

Sales

Mid-term Management Plan (2016.3～2020.3)

4

1

45.2

48.1

■Electrical work

(8) Six Strategies of Differentiation
Strategy

49.5
65.6

1. “Sales force” to meet trusts and expectations of clients
2. “Technological force” to win the cost & quality competition
3. “On-site capabilities” to obtain more projects and profit
efficiency
4. “Growing force” for future success

Strengthening businessin the metropolitan area

50.0

48.4

Kyudenko’s Four Strategic Policies

In the Mid-term Management Plan (FY2015-FY2019:
five-year plan), we will further improve sales force,technological force, on-site capabilities and growing
force, and work to raise the comprehensive strengthof the Kyudenko Group to win the cutthroat competition, no matter how a management environmentchanges.

Numerical target of Mid-term Management Plan (consolidated)

Capital participation type
Nationwide renewal energy development
and energy service operations PFI

Characteristics• Local based business offices
 ne-stop construction ofOelectricity, air and water facilities • Engineer = salesperson• Sales of solutions• Mid- and small-sized deals• Aftersales services
with high margins• Subcontract from general• Making suggestions forcontractors
improvement during• New construction ⇒construction• Large deals with low margins
Maintenance••• apital participation in operations
CParticipation as contractors
Securing profits of constructors•

B earing development risk
Securing investment income

TargetStrengths of Kyudenko

Ordinary companies:
offices, commercial facilities,
plants, hospitals and others•

General contractors
Design offices•

Public sector, landowners,
trading companies,
developers, energy
companies and othersE ngineers’ proposal capability• Network of business offices• Co-existence with local communities••A bility to collect workforce
Ability of direct construction
Cost competitivenessExperiences and know-how
One-stop construction of electricity, air and water
facilities
Differentiation from competitors(possible to make independent management
judgments)
Credibility from regions and presence in the regions

KYUDENKO REPORT 201926

2. Growth and Development of the Kyudenko Group

Hironori Higaki
Representative Director, Vice President,
Responsible for overall business administration

Since the start of the second Abe administration in
December 2012, the Japanese economy has been
generally doing well, and supported by our strong
performance as well, we have expanded our business
operations. In the process, we have taken various financial
measures to sustainably increase our corporate value
beyond 2020.
The first is improving the current ratio of shares byacquiring treasury stock from major shareholders. In
November 2013, we acquired and canceled approximately
10% of outstanding shares of Kyushu Electric Power
Company, our parent company. At the same time, we
commenced full-fledged investor relations (IR) activities andsince then we have worked to deepen dialogue with thestock market.
The second measure is the issuance of domestic
convertible bonds, aiming to diversify funding methods andshareholder composition. The stock price of the convertible
bonds issued in February 2015 rose significantly andfinished conversion before maturity. In addition, prior to theissuance, we obtained a BBB+ rating from R&I.
The third is the construction of a strong financial base thatis necessary to advance active investment. As mentioned
earlier, the enhancement of capital from the conversion of
the bonds and the improvement of balance sheets due tostrong business performance resulted in a dramaticincrease of ROE and credit rating rose from BBB+ to A-.
Financial measures and review of Kyudenko’s stock price (yen)Kyudenko
(yen)
6,000

Nikkei average

2013.12.5
2014.8.19
Commenced IR
Commenced IR
activities for institutional activities for individual
investors 631 yen
investors 1,189 yen
4,000
5,000

2,000
1,000
0

27

2013.11.27
Acquisition andcancellation of treasury
stock 586 → 632 yen

In operation
Under
construction
Plan
Total

2014

Kyudenko Corporation

2018.2.14
Credit rating(rise in grade) (R&I)
BBB+→A-2015.2.19
Credit rating (New)(R&I) BBB+
2015

2016.4.1
Change in the number of shares
per trading unit 1,000 shares→100 shares 2,631 yen

2016

2017

Trends in ROE

Deals operated by group
Deals through investment in equity
Generation Generation capacity Number ofGeneration Generation capacity
Number of capacity(that equal to the(thecapacity (the (that equal to thepower plants entire operation)
power plants entire
equity)equity)operation)2016.8.31
Designated in
JPX-Nikkei Index 400
3,270 yen

2015.2.26
Issuance resolution ofdomestic CB 1,431 yen

2013

Investment in solar power plants

Strong performance and continuous IR activities

2012.12
Launch of Abenomics

3,000

While taking such measures, we have made the following
investments to realize the differentiation of Kyudenko.
The first is the expansion of investment in the renewableenergy generation business. Thus far, we have invested
approximately ¥35 billion in the construction of renewableenergy generation plants. In addition, we have jointly
established power generation companies with leasing
companies and solar panel manufacturers, strengthened
our alliances, and invested about ¥22 billion in securities.
The revenue from electricity sales generated by power
plants using the FIT scheme is expected to contribute as abase of profit and cash flow without being affected by the
economy for over the next 10 years.
The second is investment toward business area
expansion and diversification of integrated utilities
engineering service. We have proceeded in capital
participation mainly in companies running local-based
business operations in the Kanto and Kansai area andcompanies possessing technology that can complement
the integrated utilities engineering works of Kyudenko.
The third is investment in the reconstruction of businessoffices and branch offices to further strengthen the sales
base in Kyushu and Okinawa, and construction of
educational, dormitory, and recreational facilities for training
young employees and enhancing company benefits.
The above investments were carried out after anappropriate institutional decision was made, taking into
account the return on investment and magnitude of risk.

2018

2019

49

92MW

87MW

43

368MW

116MW

–

–

–

8

280MW

77MW

–
49

–
92MW

–
87MW

1
52

50MW
698MW

20MW
213MW

Deals operated by group
Deals through investment in equity
Generation Generation capacity Number ofGeneration Generation capacity
Number of capacity(that equal to the(thecapacity (the (that equal to thepower plants entire operation)
power plants entire
equity)equity)operation)

In operation
Under
construction
Plan
Total

5

38MW

38MW

3

73MW

15MW

–

–

–

2

72MW

34MW

–
5

–
38MW

–
38MW

–
5

–
145MW

–
49MW

▍Stable shareholder returns
With regard to profit distribution, we will strive to maintainan appropriate financial structure and shareholder returns
while securing internal reserves necessary for strengthening
our management base and further business expansion to
improve business performance.
Taking into account factors such as the businessenvironment, performance results, and financial conditions,
we will respond to our shareholder’s expectations bycontinuously paying stable dividends with a consolidated
dividend ratio of 25%.
In addition, we intend to conduct share buyback as partof a flexible capital policy corresponding to changes in thebusiness environment.

Cash dividends
Cash dividends

自己株式取得（株）

ROE (%)■ Profit attributable to owners of parent (million yen)(plan)

182,176■ Net assets (million yen)

100 yen 100 yen

164,13990 yen104,658

113,19917.8
16.7

70 yen16.8

Special 10

Commemorative
2

15.6

11.9
3.1
2,882
2013/33.9
3,681
2014/3

11,517
2015/3Special725,296 26,691
17,901 22,297
2017/3

2018/3

2019/325 yenSpecial3

10 yen 10 yen 10 yen
55

2016/3

50

50

50

50

Special 10

141,503

95,950 94,438

Investment in wind power plants

Since the conventional construction industry does not
require large capital investment, a balance sheet with arelatively small amount of total assets, particularly fixed
assets, is common. However, Kyudenko has carried out abusiness development-based business model, throughcapital participation and a local-based proposal and originalcontract type business model at the operation bases
throughout Kyushu and Okinawa. Through such active
investment, we are realizing differentiation. Each investment
has its own characteristics, such as high risk in businessdevelopment and low risk for local-based development.
While considering the balance between risk and investment
return, we will establish a strong but not excessive financialbase and execute financial strategies that support
investments for further growth. To do so, we believe thatdiversifying funding methods and improving capitalefficiency is important.
We will also invest in human resources, the mostimportant management resource. In addition to theimprovement of employee treatment, we will make tangible
and intangible investments in education for young
employees and improvement of employee benefits andwork environment. We also believe that certain funds are
required to control retirement benefit obligation related tocorporate pensions and lump-sum retirement benefits.
In addition, we will consider investments in overseas
business expansion.

2. Growth and Development of
the Kyudenko Group▍Previous Financial and investment activities
and their results

We recognize the following financial issues faced by
Kyudenko.
The first issue is the increase in working capital due tothe increasing scale of construction works. The cycle frominvestment to collection of funds is getting longer, due toorders of construction work accompanying large-scaleurban development and large-scale solar power plants inrecent years. Through construction review meetings, wewill strengthen involvement in the construction site of thetechnology management division, which is a Head Officepersonnel organization, and thoroughly implement
construction management. By doing so, we will not only
strengthen governance and increase profit margin, but also
realize timely and appropriate return on investment.
Compressing total assets by improving capital turnover isalso essential.
We are also aware of issues such as the gradual increasein the ratio of net assets, a gradual decrease in ROE, and adeterioration in capital efficiency due to the rapid increasein capital resulting from improved business performance.
Meanwhile, we are planning to increase investments tocontinuously raise corporate value. Previous investments
involved in business development have mainly been in theform of facility works, maintenance, and participation inbusiness operations through investments in renewableenergy generation companies and PFI companies.
In the future, in addition to these, we would like tostrengthen investments in urban development, such ascompanies that supply energy to local areas and also
strengthen alliances with companies in other industries.
We are also considering capital participation andalliances with companies that expand the range of
integrated utilities engineering works, including plants.
To improve operation flow from the perspective of
increasing operational efficiency, we will promote IT
investment, development of construction methods, andintroduction of new equipment that will contribute to work
style reform and improve productivity. In regard to IT, we
believe investment is necessary to utilize the massive
amount of construction data possessed by the Company. In
comparison to other large facility work operators, Kyudenko
has a higher proportion of mid-and small-sized deals, withnearly 100,000 construction projects per year. This data is
an important management resource not found in othercompanies and contributes to Kyudenko’s differentiation.

▍Investment strategies for further growthYear-end dividends

Investment for further growth, shareholder returns,
and the strengthening of corporate governance tosupport such growth and returns are the importantmanagement issues.

▍Future financial and investment strategies
and issues

Interim dividends(9) Investment in Business andHuman Resources andFinancial Strategies

5
5

5
5

13 yen8558SpecialSpecial545 yen
10

40

30

15
30

40

15

2011/3 2012/3 2013/3 2014/3 2015/3 2016/3 2017/3 2018/3 2019/3 2020/3

Deals operated by the Group are depreciated using the declining balance method and electricity sales revenue
are recorded as net sales – other. For deals through equity investment, solar power is depreciated by thestraight line method, wind power is depreciated by the declining balance method, and equity equivalent of
profit is recorded as non-operating income.

KYUDENKO REPORT 201928

2. Growth and Development of the Kyudenko Group(10) Financial and Non-financial Highlights
Sales (consolidated)408,143

Operating profit (consolidated)

36,747

million yen

279,310311,346

341,771100

million yen

360,872

34,72636,74721.4

30,732
16.5

2018.32019.32014.3

Profit attributable to owners of parent (consolidated)

26,691

2015.32016.32017.3405,903

26,691
25,296
22,2972018.32019.3

Orders (consolidated)

million yen

363,564
293,149

90

26.7
8,900

8,985

8,976

2013

2014

2015

9,287

9,843

9,954

2017

2018

100

2014.325

2015.3384,757

2016.32017.32018.32019.3

Average age of employees (non-consolidated)

38.8

million yen

377,76945

405,903

40.9

40.7

2016

362

persons
412

371

40.1

324,12339.5

17,901(FY)

Results of periodic recruitment (non-consolidated)

years old

40.4

2. Growth and Development of
the Kyudenko Group13
2017.3

persons

70
14.3

7,136

2016.3

9,954

%

25.2

25,1972015.3/ 26.725.0

16,7572014.3yen

Number of employees (consolidated)■ Cash dividends per share (yen) ●Dividend ratio (%)

408,143
315,949

Cash dividends and dividend ratio (consolidated)

38.8

257

362

380

2018

2019

287

11,517
3,681
2014.32015.32016.32017.32018.32019.32014.32015.3

Capital investment (consolidated)

4,353

million yen

2016.32018.32019.3

2013

2014

2015

2016

2017

2018

(FY)

2014

2015

2017

(plan)(FY)

Ratio of female employees (non-consolidated)

Re-employment rate of retired employees (non-consolidated)

15.6

8.4

78.8

%

17.8

%

16.8

15.6

9.1

9.0

8.1

8.2

8.4

%

86.0

8.4

83.8

11.9
7,606

2016

ROE (consolidated)

16.7

14,2262017.3

80.3
77.9

7,469
6,127
4,245

78.8

4,353

75.1
3.9

2014.329

2015.3

Kyudenko Corporation

2016.32017.32018.32019.32014.32015.32016.32017.32018.32019.3

2013

2014

2015

2016

2017

2018

(FY)

2013

2014

2015

2016

2017

2018

(FY)

KYUDENKO REPORT 2019

30

31

Kyudenko Corporation●

Kyudenko EMS Indonesia Sumba Island Model

Internet
Solar power generation

Lead storage battery

Cloud server(400kw)(1000kWh)(EMS)

DC/AC inverter

Kyudenko EMS

Large main diesel power generator（4MW+2MW）
Owned by national electric power company

Power distribution
network

Households

The Kyudenko Group and SDGs
The Kyudenko Group has solved various social problems, including global environmental issues through theproposal, design and construction of energy-saving, clean energy facilities, reclaimed water treatment
facilities, and disaster-resistant infrastructure, based on the corporate philosophy of creating optimal harmonyof “People,” “Environment” and “Engineering Skill”. Solving social problems is a business opportunity toutilize the traditional core management resources of the Kyudenko Group, and we believe that the KyudenkoGroup can play a major role in achieving the SDGs. The EMS operation of Kyudenko has been introduced as
an example of Climate Change Adaptation Good Practice by the Ministry of Economy, Trade and Industry.
●

What is Kyudenko EMS?

Since Kyudenko has a wealth of experience in the domestic renewable energy business, the “Kyudenko
EMS” business began with the idea to apply that experience and technology to bring power stabilization todeveloping countries.
“Kyudenko EMS” is an energy management system that can convert and utilize renewable energy suchas solar power and wind power, whose output is extremely changeable, into a stable form for utilization.
For example, on islands where the main power system is far away, even if a solar power plant isintroduced, sufficient power generation capacity cannot be obtained in rainy or cloudy weather. In addition,
since the amount of power generation varies greatly depending on the weather, power transmission to grids
is unstable. Small distribution networks are particularly vulnerable and power outages can occur. Therefore,
conventional diesel generators are still used in such distantplaces, generating power using heavy oil carried from the
distant mainland.
In such places, there is a need for a system that can provide
a stable supply of renewable energy and in the case of remoteislands, a system that can be monitored and operated remotely.
“Kyudenko EMS” can be a decisive solution to the needs ofdeveloping countries.

Technology features

1 The energy source for Kyudenko EMS is compatible with different
power sources, such as wind power generation and solar power
generation, and the individual control device including storage
batteries are autonomously distributed, so the failure of one control
device will not affect the operation of other control devices.
2 Kyudenko EMS’s hybrid power generation control is performed by a
DC circuit (DC 380V), making frequency and power factor control
easier and reducing loss compared to AC control. A stable supply ispossible for AC output (voltage, power factor, frequency).
3 Kyudenko EMS acquires data from smart meters and digitizedremaining battery power data from BMU (Battery Monitoring Unit),
calculates the balance between demand and supply and issues input/
output commands from SPM (Smart Power Manager).
4 Kyudenko EMS incorporates a check/rotation control in its system toextend the life of the lead storage battery and is equipped with a leadstorage battery for cycle use that can extend battery life until thereplacement time of otherequipment is reached (about
15 years). This feature has
dramatically extended the lifeof lead storage batteries,
which usually run out inseveral years, to about 11 to
18 years.

●

2. Growth and Development of
the Kyudenko Group“Kyudenko EMS” which can distribute renewable energy stablySpecial Feature | Creating optimal harmony of “People,” “Environment” and “Engineering Skill” as an integrated utilities engineering service

Commercialization overseas

In 2016, Kyudenko was selected for a subsidized project by the Ministry of the Environment of Japan and established thefirst overseas proof facility in Sumba Island, located in eastern Indonesia. Indonesia has thousands of inhabited remoteislands and Sumba Island is a big island with a population of approximately 600,000. But almost all of the electricity for thewhole island is provided by diesel generators, a condition which often results in a shortage of power supply, hindering
industrial development.
The Indonesian government has designated Sumba Island as “Iconic Island”, a model area for introducing renewableenergy and is planning to introduce renewable energy for the entire island in 2025.
The island’s power distribution grid (micro grid) is very fine and fragile and cannot take unstable power generation.
Therefore, the local government and municipalities have high expectations for this attempt to stabilize renewable energy
using “Kyudenko EMS”.
This proof facility launched operation in
January 2018 and is currently transmitting about
200kWh of electricity to micro grids 7 hours a
day.
In FY2019, this business was selected by JICA
(Japan International Cooperation Agency) as a“Collaboration Program with the Private Sector
for Disseminating Japanese Technology”. With
support from JICA, Kyudenko will work to spread
technology overseas and plan to start businessdevelopment at an early stage.

KYUDENKO REPORT 201932

●

All Employees Aim For Zero-accident
The facility is dedicated to communicating the lessons we have learned fromtragic accidents in the past without letting them fade. It offers safety education
to “raise awareness, promote learning and contemplation about safety, and to
arouse motivation to follow safety procedures”. By giving employees a strong
sense of pride and awareness of their role as a professional who createssafety, we remind them of the importance of securing safety.
We are striving to build a safety culture by continuing efforts to achieve zeroaccidents, utilizing this facility.

Kyudenko Academy
The academy is located in nature-filled Kiyama-cho in Saga Prefecture. We have set the academy as the
symbol of human resource development, based on our belief that employees are the greatest assets,
and their development leads to raising corporate value. In addition to teaching advanced expert
knowledge, technologies and skills, Kyudenko utilizes a special facility called “Hougakuan” for cultivating
mental discipline and another facility called “Safety Heritage Facility” for safety culture building, in order to
conduct an integrated training that covers the aspects of the spirit, technique, and physical strength.

Developing humanresources withgreat personality
Integrated
acquisition ofexpert knowledge,
techniques andtechnical skill

Kyudenko
AcademyPromotion ofhuman resource
development by
all Kyudenko
Group

33

Kyudenko Corporation

Safety Heritage Facility

2. Growth and Development of
the Kyudenko GroupThe institution to human resource development
for our brilliant future by polishing know-how,
technical skill and sprit

Special Feature | Creating optimal harmony of “People,” “Environment” and “Engineering Skill” as an integrated utilities engineering service●

Hougakuan

A place for stimulating character development andspiritual training grounded in Japanese culture, theHougakuan provides “zen-meditation” lectures toheighten concentration as part of mental discipline,
and Japanese tea ceremony and calligraphy lecturesdesigned to learn about work ethics throughJapanese culture. It is also used as a place wheretrainees can gather for discussions and relaxation.

In front of the 117m2 hall is the word “Path” in calligraphy, meaning that it is a place toopen up the “path of life” and “path at Kyudenko”. In addition, there is a 27m2 tearoom
with a Japanese hearth, an important space for learning culture.

National Skill Olympics and World Skill Olympics

Building a safety
culture -“Safety
Heritage Facility”

A retreat for
cultivating
mentaldiscipline“Hougakuan”

The 43rd World Skill Olympic awards
ceremony (Competitor Seto: far right)

In the land of 11,000m2, we have a skill-training
building, a skill practice building and a dormitorybuilding where a maximum of 350 people can stayover in. On the disasters such as typhoons, thisplays a role as a restoration activity base and an
important role for a community level social
infrastructural development.

The 44th World Skill Olympic, during
production of competition assignment(Competitor Inoue)

In order to support the enhancement of techniques of young technicians and to transfer
technologies to junior staff, Kyudenko has started participating in the National Skill
Olympics from the second competition held in 1964, and has since won a total of 10 gold
medals for electrical installations and plumbing ﬁelds.
In recent years, Kyudenko has won a gold medal, a silver medal, and a spirit award in
the field of electrical installations at the 51st national competition held in 2013.
At the 52nd national competition held in the following year, five competitors
participated and received a gold medal, achieving two consecutive wins. The fact that allcompetitors received either a silver medal, a bronze medal, or a spirit award (twoawardees) was an unprecedented achievement. Furthermore, the gold medalist, Seto,
has participated in the 43rd World Skill Olympics (held in Brazil) held every two years, asa representative of Japan, and has won a bronze medal.
At the 54th national competition held in 2016, six competitors participated and fivecompetitors received a gold medal, a silver medal, two bronze medals, and a spirit
award. The gold medalist, Inoue, has participated in the 44th World Skill Olympic held in
UAE in 2017 as a representative of Japan, and has won a spirit award (fifth place).
KYUDENKO REPORT 201934

Special Feature | Creating optimal harmony of “People,” “Environment” and “Engineering Skill”
as an integrated utilities engineering service

3. ESG…Foundation to Support Value Creation(1) Corporate Governance
Basic policy

Organization form：Company with Audit & Supervisory Board

In order to establish the “Kyudenko Brand” that is supported andtrusted by stakeholders including shareholders, customers and local
community, and to realize appropriate and efficient corporate
management, the Company upholds the “enhancement of corporate
governance” as one of its important management issues, andaccordingly will work to thoroughly ensure compliance with laws,
regulations and corporate ethics, earnestly work to sustainably
improve corporate value, and fulfill its corporate social responsibility.

Directors
Audit & Supervisory
Board Members

Number of Independent
Directors
Directors/ Audit &Supervisory Board
Audit & Supervisory Board
Members
Members

Corporate governance system

Supporting various aspects of life
by protecting infrastructure
throughout Kyushu
35

Kyudenko Corporation

Indirect Hot-Line Work Technique

We have made social contributions by reducing disasters through work safety improvements,
realizing a stable supply of electricity across Kyushu through zero work power outages andimproving work environments. Examples of such contributions include the non-power outage
method (a work method that uses bypass cables and generators to cut power only in the work
section without causing power outages for customers), fully introduced in 1985, and theestablishment of the indirect hot-line work technique (a work method in which workers use anindirect tool called a hotstick and do not need to touch high voltage power lines directly),
introduced in 1988 ahead of the entire country.

11 persons(2 persons)
5 persons(3 persons)
2 persons
2 personsof operations, while the Executive Officers engage in the executionof operations based on decisions made by the Board of Directors.
The Articles of Incorporation stipulate that the number of
Directors of the Company shall be 15 or less; the election of
Directors shall be adopted a majority vote of the shareholders inattendance who hold one-third or more of the voting rights ofshareholders entitled to exercise voting rights; and such election
shall not be made by cumulative voting. The Company has two
Outside Directors, who are designated as Independent Directors.
The Company, in principle, holds a meeting of the Board of
Directors every month, and also establishes the Remuneration
Advisory Committee and Nomination Advisory Committee, consistingof Directors including Independent Outside Directors, as an advisory
body to secure transparency in decision-making and independence
and objectivity of functions of the Board of Directors. The
Management Meeting, which is established as a subordinate body to
the Board of Directors, is held once a week to discuss the process
and details of the management judgments concerning matters which
require prior discussion and matters on important business execution
to be deliberated at the meeting of the Board of Directors.

The Company adopts the organizational form of a company with
Audit & Supervisory Board under the Companies Act and establishesa system where the Audit & Supervisory Board, a body independent
from execution of operations, monitors and oversees the Board of
Directors and Directors. By introducing 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 practice efficient andspeedy management. In addition, the Executive Officers who
executes operations are conferred with necessary authorities to drawa clear line between the “oversight responsibility” of Directors andthe “execution responsibility” of Executive Officers. The Company
also aims to enhance corporate governance by building an “internal
control system” aimed at securing and maintaining the harmony ofrisk management, efficiency, and compliance in operations.

▍System for execution of operations and oversightfunction of the Board of Directors

The Company adopts the Executive Officer system where the Boardof Directors determines important matters and oversees execution

3. ESG…Foundation to Support
Value Creation

Non-power outage method using bypass cables

Number of Directors(of which, Outside Directors)
Number of Audit &Supervisory Board Members(of which, Outside Audit &Supervisory Board Members)▍Overview of corporate governance system
General Meeting of Shareholders
Election

Accounting Auditor

Election

Cooperation

Audit &
Supervisory Board

Election
Audit

Board of Directors
Nomination
Advisory
Committee

ReportAuditors’ Office
Accounting audit

Remuneration
Advisory
Committee

ReportAppointment and oversight

Audit

Representative Director andPresident
Cooperation

Cooperation

Internal Control Committee

ReportCooperation

Compliance Committee
Preliminary consideration/
arrangement

Management Meeting
Director and Executive Officer in charge

In the event of typhoons and other natural disasters, we take advantage of our mobilization capabilities
and respond quickly.
In the Kumamoto Earthquake in 2016, we mobilized a total of approximately 3,500 workers within one
week of the earthquake and worked day and night. As a result, we contributed to the early restoration ofelectricity.
In response to the frequent natural disasters in recent years, such as heavy rain disasters andincreasingly powerful typhoons, we will strive to restore and maintain the infrastructure throughout Kyushu
by utilizing the strength of Kyudenko, where most of our workers are directly managed employees.

President’s OfficeInternal audit

General Affairs Division
Development of compliance system
Compliance education

Divisions, offices, branch offices,and business offices
Group companies
Audit

Execution of operations

KYUDENKO REPORT 201936

3. ESG…Foundation to Support Value Creation(1) Corporate Governance
The Compliance Committee and Internal Control Committee arealso established to supplement the functions of the Board of
Directors. The Meeting of Branch Office General Managers isestablished as a body to make reports on execution of operations,raise management issues, discuss measures to be taken, andfacilitate the sharing of information concerning the management
policy and plans, and is held nine times a year.

management measures, in accordance with audit policies and plans
stipulated by the Audit & Supervisory Board. They also study thestatus of operations and assets of the subsidiaries to monitor andsupervise the overall Group. The Audit & Supervisory Board receives
reports on important matters for audit to be discussed or resolved,
and is held at least every three months in principle, and whenevernecessary. (11 meetings were held in the fiscal year ended March
31, 2019) The Audit & Supervisory Board has three Outside Audit &Supervisory Board Members, and two of them are designated as
Independent Audit & Supervisory Board Members.
The Auditors’ Office is established to assist duties of Audit &Supervisory Board Members and the Audit & Supervisory Board, anddesignated employees are assigned to the Office so that efficient
audit activities by Audit & Supervisory Board Members can be
conducted. The Audit & Supervisory Board receives an advanced
notice on personnel transfer of designated employees from the
Director responsible for human resources, etc., and may request forchange of the designated employees by submitting the reason.

▍Remuneration Advisory Committee

In order to ensure transparency in decision-making, andindependence and objectivity of the functions of the Board of
Directors, the Company establishes a Remuneration Advisory
Committee consisting of three or more Directors including
Independent Outside Directors to prepare a “proposal to besubmitted to shareholders’ meeting concerning revision of total
annual remuneration for Directors and total annual remuneration for
Audit & Supervisory Board Members”, which is submitted to theGeneral Meeting of Shareholders upon resolution by the Board of
Directors. The Committee also deliberates on “determination ofindividual annual basic remuneration for Directors”, “assessment andrevision of incentive portion of remuneration for Directors”, “revisionof individual annual basic remuneration for Executive Officers by
position” and “assessment and revision of target management
regarding incentive portion of remuneration for Executive Officers”,
which are reported to Representative Director and President.

▍Accounting audit▍Nomination Advisory Committee

The Internal Control Department, President’s Office that is
responsible for conducting internal audits, reviews and 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 toreport the audit results to the Internal Control Committee chaired byRepresentative Director and President. The Directors in charge, etc.,
who receive the report of the internal audit results formulate ameasure for improvement, and submit it to the Board of Directors,
etc., as necessary. The Internal Control Department, President’s
Office not only gives advice and recommendations to audited bodies
but also requests them to submit a report for improvement
measures, and conducts a follow-up audit as necessary.

▍System of audit by Audit & Supervisory Board Members
Audit & Supervisory Board Members attend the Board of Directors
meetings and other important meetings to express objective and fair
opinions for overall management, and continuously conduct
validation audits, including audit on illegality in the execution ofoperations by Directors and the appropriateness of risk

▍Establishment of voluntary committees, structure of committee members and description of Chairperson

37

Name ofCommittee

Number ofCommittee
members (persons)

Number offull-time Committee members(persons)

Number ofinternal Directors(persons)

Number of
Outside Directors(persons)

Number of
Outside experts(persons)

Number of otherCommittee
members (persons)

Chairperson ofCommittee

Voluntary committee
equivalent toRemuneration
Committee

Remuneration
Advisory
Committee

5

0

4

1

0

0

internal
Director

Voluntary committee
equivalent toNomination
Committee

Nomination
Advisory
Committee

5

0

4

1

0

0

internal
Director

Kyudenko Corporation

Audit & Supervisory Board Member,

Isamu Ogata

Shinji Kato

Audit & Supervisory Board Member (part-time),

Audit & Supervisory Board Member (part-time),

Yuzo Sasaki

Yasuyuki Fukushige

Yukinori Michinaga

Outside Audit & Supervisory Board Member

Independent Audit & Supervisory Board Member,
Outside Audit & Supervisory Board Member

Independent Audit & Supervisory Board Member,
Outside Audit & Supervisory Board Member▍Internal audit

In order to ensure transparency in decision-making, andindependence and objectivity of the functions of the Board of
Directors, the Company establishes a Nomination Advisory
Committee consisting of three or more Directors including
Independent Outside Directors to stipulate matters on nomination ofcandidates for Directors and Audit & Supervisory Board Members
and dismissal of Directors, election of the Director to whom
representative authority is granted, and election and dismissal of
Executive Officers, which are submitted to the Board of Directors.

Audit & Supervisory Board Member,▍Compliance system

The Compliance Committee is established to determine the basic
policy and activities for compliance, prepare plans, confirm theimplementation method, and discuss measures, etc.
The General Affairs Division serves as a division in charge ofcompliance to formulate and amend Compliance Regulations andmanuals, continuously conduct compliance education, as well as
manage and operate a compliance desk that allows officers andemployees to make a report directly. Any information received at
this compliance desk is investigated, analyzed and organized, all ofwhich is reported to the Compliance Committee chaired byRepresentative Director and President. The Compliance Committee
Operational Regulations provide for confidentiality of personal
information concerning provision of information and the reporting
party, and the fact of provision of information, as well as prohibitionof unfair treatment for provision of information and the reporting party.
The Regulations on the Protection of Personal Information are
also established with a basic policy which encourages active andproactive initiatives by clarifying procedures for protection of
personal information, ensuring a responsible system and offering
educations for employees in line with “Act on the Protection of
Personal Information”, “Basic Policy on the Protection of Personal
Information”, “Cabinet Order to Enforce the Act on the Protection of
Personal Information”, and guidelines by ministries and agencies.

3. ESG…Foundation to Support
Value Creation

The Company has concluded an audit contract for accounting audits
with Ernst & Young ShinNihon LLC. There is no special interest
between the Company and Ernst & Young ShinNihon LLC or the
Engagement Partners.
The Company has also concluded an audit contract for internal
control pursuant to the Financial Instruments and Exchange Act.

Audit & Supervisory Board Member (part-time),

Establishment and implementation of“Kyudenko Corporate Governance Guidelines”
The Company establishes the “Kyudenko Corporate Governance
Guidelines” in order to be supported by all stakeholders andrealize appropriate and efficient corporate management, andaims for its realization.
Please refer to the Company’s website for details.
https://www.kyudenko.co.jp/ir/governance/cg_guideline.html(Japanese)

Outside Directors/Audit & Supervisory Board
Members
The number of Directors of the Company is 11, of which two areelected as Independent Outside Directors. The Independent Outside
Directors, as directors who do not engage in the execution ofoperations, give advice on management policies and management
improvement, oversee management and conflict of interest, andreflect opinions of stakeholders to the Board of Directors.
In addition to legal requirements, the Company establishes anddiscloses its own “Independence Standards for Outside Directors/
Audit & Supervisory Board Members”, and the Independent Outside
Directors are elected based on the Independence Standards.
The number of Audit & Supervisory Board Members is five, of
which three are elected as Outside Audit & Supervisory Board
Members. Outside Audit & Supervisory Board Members account for

KYUDENKO REPORT 201938

3. ESG…Foundation to Support Value Creation(1) Corporate Governancemore than half of Audit & Supervisory Board Members. Although
independence is not required for Outside Audit & Supervisory Board
Members, the independence is evaluated if necessary based on the“Independence Standards for Outside Directors/Audit & Supervisory
Board Members”.
In order for Outside Directors/Audit & Supervisory Board
Members to properly execute their roles and operations, the holdingof concurrent positions as officers of other listed companies shallbe limited to the minimum extent, and their concurrent positions aredescribed in the Corporate Governance Report and notice of general
meeting of shareholders. The Company has entered into anagreement with all Outside Directors and Outside Audit &Supervisory Board Members to limit their liability for damages
pursuant to Article 423, Paragraph 1 of the Companies Act to theamount stipulated by laws and regulations.

▍Independence Standards for Outside Directors/

Audit & Supervisory Board Members

39

Kyudenko Corporation

2

3

Outside Directors

Outside Audit & Supervisory
Board Members(out of 11 Directors)(out of 5Audit & Supervisory Board
Members)

Incentive matters
With regard to remuneration for Directors, the “performance-based
remuneration for Directors” is introduced. Under this system, for apart (25%) of the basic amount of annual remuneration of Directors
determined by their positions to be paid as compensation for
execution of operations, a variable amount depending on theachievement level of “consolidated operating profit” is added to or
deducted from the remuneration of the following year within thescope of the total amount of remuneration resolved at the General
Meeting of Shareholders. Such an increase/decrease inremuneration for Directors based on the incentives is not applicablefor Outside Directors.
With the establishment of the Kyudenko Officers Shareholding
Association, Directors, Audit & Supervisory Board Members andExecutive Officers purchase shares of the Company at more than acertain rate of the amount of base remuneration for the purpose ofpromoting value sharing with shareholders as part of incentives toreflect the Company’s medium- to long-term performance andpotential risk.

Internal control system
The Company establishes a system to comply with laws andregulations and the Articles of Incorporation in the execution ofduties by Directors, and ensure appropriate operations by the
corporate group consisting of the Company and its subsidiaries.
1. System to ensure compliance with laws andregulations, and the Articles of Incorporation in theexecution of duties by Directors and employees(1) Representative Director and President ensures compliancewith laws and regulations and social ethics as assumptions
for corporate activities by establishing the Kyudenko Charterof Behavior and repeatedly communicating the spirit of theCharter to officers and employees.
(2) The Compliance Committee chaired by Representative Director
and President deliberates on important issues for compliance,and reports the outcome to the Board of Directors.
(3) The General Affairs Division, which serves as a division in
charge of compliance, works on company-wide developmentof a compliance system and identification of issues, andensures dissemination of manuals through offering education.
In addition, each department/division and branch officedevelops a system for promoting compliance activities to planand implement specific activities for compliance.
(4) We have a compliance framework so that Directors andAudit & Supervisory Board Members can immediately reportany compliance issue detected by them to the Compliance
Committee, and the Kyudenko Group Compliance Desk
(internal desk: phone, fax and email, external desk: phoneand email) which employees can directly contact to and seek
consultation from.
(5) When the General Affairs Division receives a report or whistleblowing from employees, it investigates and reports thedetails to the Compliance Committee after discussion with arelevant division on a recurrence prevention measure, which is
implemented company-wide.
(6) We stipulate that any unfair treatment in terms of personnel
affair, salaries and disturbance of the working environment forprovision of information or a reporting party to the KyudenkoGroup Compliance Desk is prohibited.
(7) The overall company takes a firm attitude against inappropriate
requests from anti-social forces and cuts off any relationshipwith them.
2. Matters on storage and management of information
relating to Directors’ execution of their duties
	A management supervisor is appointed for proper storage andmanagement of documents and other records relating to
Directors’ execution of their duties, in accordance with theregulations on management of documents.
3. Regulations and other systems regarding managementof risk of loss
(1) While each division in charge establishes rules and guidelines,
conducts training, and prepares and distributes manuals forrisks related to compliance, the environment, disaster, quality,
and information security, the General Affairs Division monitors
the status of cross-organizational risks and addresses themwith a company-wide approach.
(2) The Internal Control Department, President’s Office, audits thestatus of risk management of each department/division andbranch office of the Company, and the results andcountermeasures are regularly reported to the Internal Control
Committee chaired by Representative Director and President.
In addition, the Directors in charge, etc. deliberate anddetermine countermeasures to report to the Board of Directors.
4. System to ensure Directors’ efficient execution of theirduties(1) The regulations on organization and administrative authority
stipulate matters to be shared by each department/division,and basic roles, duties and authority, etc. of each position.
(2) The Management Meeting consisting of Directors, etc.
appointed by Representative Director and President isestablished for conducting preliminary discussions to facilitate
the agenda of the Board of Directors meeting and to achieve
efficient execution of operations.
(3) The Board of Directors formulates the Mid-term Management
Plan and implements IT-based management of monthly/quarterly financial results.

5.

(1)

(2)

(3)

6.
(1)

(2)

7.
(1)

(2)

8.

(1)

(2)

The Company’s system to ensure compliance with laws andregulations, and the Articles of Incorporation in the executionof duties by Directors and employees of subsidiaries
The Company and its subsidiaries under the Company’s direct
management (hereinafter referred to as “Subsidiaries, etc.”)
work on nurturing compliance awareness for both Directors
and employees based on the “Group Compliance Manual”
established by the Company.
Any important compliance issues arising from the Subsidiaries,
etc., are deliberated by the Compliance Committee of theCompany, and the results are reported to the Board of
Directors of the Company.
The Company has the Kyudenko Group Compliance Desk
which allows employees of the Subsidiaries, etc. in Japan tomake a report directly to the Company upon detection ofcompliance issues.
The Company’s system regarding management of riskof loss of subsidiaries
The Internal Control Department, President’s Office of theCompany, checks the implementation status in the “riskmanagement for business operations” table prepared by theSubsidiaries, etc.
Internal Control Department, President’s Office of the Company,
conducts an internal audit to check the risk management of
the Subsidiaries, etc., and the results and countermeasures
are regularly reported to the Internal Control Committee of theCompany.
The Company’s system to ensure the efficient
execution of the duties by Directors of subsidiaries
The Company notifies its annual “Basic Management Policy” tothe domestic Subsidiaries, etc., and checks the progress of anannual policy formulated by the Subsidiaries, etc., based on
the Company’s Policy.
The meeting of Presidents of affiliated companies mainly
consisting of Directors, full-time Audit & Supervisory Board
Members of the Company and Presidents of domestic
Subsidiaries, etc., is regularly held to share information
including the Group’s strategies.
System for reporting matters concerning the executionof the duties by Directors of subsidiaries to theCompany
The “regulations on affiliated companies administration”
formulated by the Company stipulate the matters to bereported by the Subsidiaries, etc., to establish a reporting
system with main involvement by Corporate Strategic Planning
Division of the Company, and especially important matters arereported to the Management Meeting and the Board of
Directors of the Company.
With regard to important management matters of theSubsidiaries, etc., the “regulations on affiliated companies
administration” designate matters which require priordiscussion, and a prior discussion is held with the Company.
Highly important matters among all are submitted to theManagement Meeting and the Board of Directors of theCompany to make a decision.

KYUDENKO REPORT 2019

3. ESG…Foundation to Support
Value Creation

An Outside Director or Outside Audit & Supervisory Board Member(hereinafter referred to as “Outside Director/Audit & Supervisory
Board Member”) is determined to be independent by the Company
if none of the following attributes applies to:
the Outside Director/Audit & Supervisory Board Member
himself/herself, his/her spouse, or his/her relative within
the second degree of kinship:(1) A person who is an executive of the Company or a groupcompany of the Company or was an executive of the Company
or a group company of the Company within the past 10 years
prior to his/her appointment as an Outside Director/Audit &Supervisory Board Member.
(2) A person who is an executive of a corporation that is abusiness partner of the Company, and in any of the mostrecent three past fiscal years of the Company, has madepayments 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, and cannot
be easily replaced because of the Company’s reliance on thefinancing from such institution.
(3) A person who is an executive of a corporation of which theCompany is a business partner, and in any of the most recent
three past fiscal years of the Company, has received paymentsfrom 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 pastfiscal years of the Company for providing professional services
concerning law, accounting, tax affairs, or consulting services
to the Company (excluding compensation as a Director or an
Audit & Supervisory Board Member of the Company) (If therecipient 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 averageover the most recent three past fiscal years of the Company.
(6) A person who is an executive of a corporation, etc. that is ashareholder of the Company which substantially owns 10% ormore of the voting rights of the Company.

40

3. ESG…Foundation to Support Value Creation(1) Corporate Governance

41

Kyudenko Corporation

Department, President’s Office of the Company, are reported to
Audit & Supervisory Board Members in advance by the Internal
Control Department, President’s Office, in addition to theattendance to the Internal Control Committee by Audit &Supervisory Board Members.
(3) Matters on violation of compliance by the Subsidiaries, etc.,
and matters reported or consulted to the Kyudenko Group
Compliance Desk are reported to Audit & Supervisory Board
Members in advance by the General Affairs Division, in
addition to the attendance to the Compliance Committee by
Audit & Supervisory Board Members.
(4) Any significant violation of laws and regulations or compliancedetected by the Subsidiaries, etc. themselves, is reported to
the Corporate Strategic Planning Division of the Company
without delay, and the Corporate Strategic Planning Division
reports it to Audit & Supervisory Board Members.
(5) When Directors, Audit & Supervisory Board Members andemployees of the Subsidiaries, etc. detect a significant factthat may materially cause damages, they may directly report itto Audit & Supervisory Board Members of the Company.
13. System to secure protection of a person who makes areport to Audit & Supervisory Board Members against
unfair treatment on the ground of making such report
The Company prohibits any unfair treatment for a person who
makes a report to Audit & Supervisory Board Members on the
ground of making such a report.
14. Matters on treatment of prepayment or reimbursement
procedures of expenses arising from the duties of
Audit & Supervisory Board Members, and otherexpenses and liabilities arising from the execution of
the duties
The budget is reserved for audit expenses of the Audit &Supervisory Board to secure an effective audit.
15. Other systems to secure effective audit by the Audit &Supervisory Board(1) The Audit & Supervisory Board and Representative Director
and President have a regular meeting to exchange their opinions.
(2) The Audit & Supervisory Board is guaranteed to have an
opportunity to receive advice on audit duties by utilizing
outside experts.

Disclosure of information to and communication
with shareholders and investors▍Disclosure system

The Company fully realizes that disclosing corporate information toinvestors in a timely and appropriate manner constitutes afundamental part of a healthy securities market, and strives for theenhancement 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 mainly by the
Finance Division in cooperation with the President’s Office, General

Affairs Division and Corporate Strategic Planning Division topromote communication with stakeholders including shareholders.
Representative Director and President and Officer responsible forfinance hold a financial results briefing for analysts and institutional
investors twice a year, and materials for the briefing are disclosed
on the Company’s website. The Company also appropriately holds
individual briefings and responds to interviews for analysts,
institutional investors and individual investors.
The outcome of such financial results briefings and individual
briefings is reported at the Management Meeting to share theinformation with Directors and Audit & Supervisory Board Members.

▍Information management and ensuringtransparency

The IR activities are promoted to ensure transparency of corporate
activities and enhance healthy management by disclosing Financial
Statements, Securities Report, disclosure documents for stock
exchange and important facts to shareholders and investors in atimely and appropriate manner and also providing information on the
management policy, business activities, compliance activities, andsocial contribution activities to the media from the top management
as well as publishing various information on the website.

Explanation on business risks▍Business risks

The major risks that may affect the Group’s business performanceand financial conditions are as follows.
Any forward-looking information stated herein are based on
judgments by the Group as of March 31, 2019.
With the recognition of possible occurrence of these risks, theGroup makes efforts to avoid the occurrence and appropriately andquickly respond to them in case of the occurrence.
The following factors are specific examples of major expectedrisks in continuing the Group’s business, but not limited thereto.
1. Economic conditions, etc.
Given that facility works of the Group are subject to capital
investment trends of Kyushu Electric Power Company, Incorporated,
as well as domestic private companies and governmental agencies,
restraint of such capital investment may affect the Group’s businessperformance, etc.
2. Changes in costs of construction materials and labor
When costs of construction materials and labor significantly
increase, and such costs are not able to be reflected in contract
prices, the increased costs may affect the Group’s businessperformance, etc.
3. Credit risk
Although the Group sets a credit limit according to clients’ financial
conditions and continuously reviews their credit status to prevent
bad debts, any deterioration in management or financial conditionsof clients may affect the Group’s business performance, etc.
4. Risk associated with the Group’s assets
The Group holds assets such as real estate and securities related tobusiness activities, and any significant decrease in the market valueof the assets held or profitability of real estate for commercial use
may affect the Group’s business performance, etc.
5. Risk associated with business other than non-facility work
In addition to its core business of facility works, the Group is
working to expand its business fields to real estate sales, renewableenergy generation, temporary staffing service, softwaredevelopment, environmental analysis and measurement, medicalrelated business, golf course management, business hotelmanagement, and planning and operation of commercial facilities
with effective utilization of the Group’s management resources andnetwork.
These businesses may affect the Group’s business performance,
etc. in case of changes in the business environment such as
development of competitions with competitors.
6. Risk associated with renewable energy generation business
The Group adopts projects for the renewable energy generation
business with sufficient preliminary study and consideration andtakes measures to avoid or minimize expected risks. However, as
the business generally requires a long period of time, any significant
changes in the business environment or occurrence of material
disasters or accidents in business operations may affect theGroup’s business performance, etc.
7. Risk associated with overseas businessIn overseas business activities, any changes in political/economic
conditions or amendments to laws, regulations, and rules in local
countries may affect the Group’s business performance, etc.
8. Retirement benefit obligation
When the performance results of pension plan assets of the Groupdiffer from assumptions, actuarial differences are expensed over acertain period from the following year of occurrence. As such, any
deterioration in yield or decline in discount rates for pension plan
assets may affect the Group’s business performance, etc.
9. Occurrence of natural disasters
Large-scale natural disasters may affect the Group’s businessperformance, etc., due to suspension of or significant delay inconstruction, or damages to facilities of the corporate group.
10. Risk associated with measures and legal procedures byregulatory authorities
The Group is subject to restrictions under various laws andregulations including the Construction Business Act, and any
administrative dispositions, etc., in case of conflict with these laws
and regulations may affect the Group’s business performance, etc.
In March and April 2019, four employees of the Company wereprosecuted for violation of laws and regulations upon generalcompetitive bidding for the construction project of Chikujyo town
water and waste sewage treatment facility. An administrative
disposition may be imposed depending on the conviction.

KYUDENKO REPORT 2019

3. ESG…Foundation to Support
Value Creation(3) Internal Control Department, President’s Office, conducts aninternal audit on the status of reporting and prior discussion of
the Subsidiaries, etc.
9. System concerning employees who assist the Audit &Supervisory Board when the Board requests theappointment of such employees
Employees are exclusively assigned to the Auditors’ Office toassist audit duties.
10. Matters on the independence of employees who assist
the duties of Audit & Supervisory Board Members from
Directors, and matters on securing the effectiveness of
instructions of Audit & Supervisory Board Members to
employees(1) The Audit & Supervisory Board is notified of the transfer of theemployees who work for the Auditors’ Office by the Director
responsible for human resources, etc. in advance, and may
request a change for such transfer of the employees to the
Director responsible for human resources, etc. as necessary
by submitting the reason.
(2) In order to secure the effectiveness of instructions by Audit &Supervisory Board Members, the employees of the Auditors’
Office do not have any concurrent positions relating to the
execution of operations of the Company.
11. System to make a report to Audit & Supervisory Board
Members by Directors and employees of the Company,
and system concerning other reporting to Audit &Supervisory Board Members(1) Audit & Supervisory Board Members attend the Board of
Directors meeting and other meetings including Management
Meeting to share important decisions and reported matters of
the Company.
(2) Directors and employees are required to report the matters as
described below to Audit & Supervisory Board Members.
i) Matters which may materially damage the Companyii) Results of internal audit and countermeasuresiii) 	Matters reported or consulted to the Kyudenko Group
Compliance Deskiv) Important matters of the Company(3) Audit & Supervisory Board Members may request Directors
and employees of the Company to make a report as necessary.
(4) When employees detect any significant fact that may materiallydamage the Company, they may directly report it to Audit &Supervisory Board Members.
12. System to make a report to Audit & Supervisory Board
Members by Directors, Audit & Supervisory Board
Members and employees of a subsidiary, or any party
who receives a report from them(1) Matters to be reported or matters for prior discussion to besubmitted concerning the Subsidiaries, etc. at theManagement Meeting and the Board of Directors meeting are
deemed to be reported when Audit & Supervisory Board
Members attend such Management Meeting and the Board of
Directors meeting.
(2) The results and countermeasures of internal audit for theSubsidiaries, etc., conducted by the Internal Control

42

3. ESG…Foundation to Support Value Creation(2) Basic Concept of CSR(3) Initiatives for Safety

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 sustainablegrowth of Kyudenko.
Toward “specific CSR initiatives” with “consistent values” and “implementation of philosophy”
The Corporate Philosophy has represented the purpose of businesses and the reason of existence of Kyudenko, even before theconcept of “CSR” was recognized by the Company, and all businessactivities of the Company are based 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 of Kyudenko,
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”, specific issues fromlong-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, andthese plans are regarded as “implementation of philosophy”.
Placing these plans at the core, “specific CSR initiatives” aretaken in six categories: “IR information”, “quality management andcustomer satisfaction”, “environmental activities and creation of
comfortable environment”, “workplace and labor environment” and“coexistence with local communities” together with “CSR management” as the foundation of CSR.

“Safety” takes precedence over everything
The Company holds the basic philosophy, “Safety takes precedence over everything”. We believe it is necessary
for workers, who are the basis of safety, to hold the strong belief and intention of “protecting oneself” andmanagers and supervisors to “protect subordinates from accidents under whatever circumstance”, and webelieve in the importance of “creating good relationships and a workplace culture that allows employees towarn each other”.
FY2019 Basic Plan for Safety and Health Management
Basic Philosophy
	Safety takes precedence overeverything‘Safety and health are thefoundation for management anda major premise of all activities’
Goal

Safety To prevent accidents, thorough implementation of ‘thinking andpracticing’ safety by all employees.
Health Strive to ‘create a happy, enjoyable workplace’.

II. Primary Goals

Safety 1. Thorough implementation of ‘thinking and practicing’ safety
on one’s own
			 2. Safety management activities led by the worksite
			 3. Thorough understanding and compliance with laws andregulations
			 4. Supporting safety activity of Group companies and subcontracting companies
			 5. Revitalization of traffic safety activities			 6. Initiatives for worksite operation health
Health 7. Promoting work style reform

Zero-accident

Slogan	Safety of fellow workers,
everyone’s health	Let’s find and reduce risk in
the workplace

Corporate
Philosophy

Consistent value

Action Guidelines

Long-term Vision

Implementation of philosophy

Mid-term Management Plan

Basic Management Policy for the fiscal yearIR
information

Qualitycontrol andcustomersatisfaction

Environmental
activities and Workplace
and labor
creation of
comfortable environment
environment

Coexistencewith local
communities

Specific CSR initiatives

CSR management

Corporate Philosophy

1. We contribute to society through providing agreeable environmental
solution.
We strive for the creation of a rich human environment, aiming for an optimalharmony of “People”, “Environment” and “Engineering Skill” as an Integrated
Utilities Engineering Service Company with a broad 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 andexpectations of clients as a forward-looking company at all times.
3. We aim to create mutual respecting environment in Kyudenko which
utilize and develop employees’ personality.
We foster a vibrant and enriched corporate culture through respecting thepersonality and enhancing the abilities of each individual based on aphilosophy that the corporation is people.

43

Kyudenko Corporation

Safety education facility “Safety Heritage Facility”

Hazard Experience Training Facility“Safety Heritage Facility”, a place to communicate valuablelessons learned from accidents in the past
At this facility, by facing the reality of serious accidents of various
construction works, mainly power distribution line, electrical, HVAC
and sanitary, and telecommunications, and communicating valuablelessons learned from accidents in the past, we aim for all
employees of the Kyudenko Group to learn the tragic nature of
accidents and the importance of securing safety. The “Safety
Heritage Facility” not only aims to raise safety awareness of the
Kyudenko Group but also functions as a place to create a culture ofsafety using the power of the wholeGroup.

Aim to raise safety awareness and improve the ability to
avoid hazards
To prevent accidents, gaining knowledge on safety and healththrough lectures is important, but increasing the ability to perceive
hazards is also essential.
At this facility, we aim to raise safety awareness and improve theability to avoid hazards by experiencing hazards that can occur inthe field. Combining this with education at the “Safety Heritage
Facility”, the effects of further safety and health activities can be
expected.

3. ESG…Foundation to Support
Value Creation

I. Basic policy

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 respond to
customers’ voice
4. We will embrace teamwork in work
5. We will create a vibrant and bright workplace

Taking the Company’s excellent safety measures to a National Convention
To enhance the safety awareness of the Kyudenko Group, theCompany submits research papers to the “National Industrial Safety
and Health Convention held nationwide every year (organized by theJapan Industrial Safety and Health Association). At the “77thNational Industrial Safety and Health Convention in Yokohama” in
FY2018, we gave a research presentation on “Risk assessment:
Bringing awareness to workers regarding chemicals and safetymeasures in construction”.
While planning for company-wide expansion of safety measuresin line with mandatory chemical risk assessment, a poisoning

accident occurred at the Company,
presumably caused by chemical
exposure. A presentation wasgiven on the difficulty of bringing
awareness to workers regarding
the toxic and hazardous nature ofchemicals and safety measures that were implemented when
conducting the same type of construction as the accident. The
presentation was very well received and given a huge round of
applause at the end.
KYUDENKO REPORT 201944

3. ESG…Foundation to Support Value Creation(4) Workplace and Labor Environment
A company that creates mutual respecting environment that utilizes and develops employees’ personality
Charter of Human Resources Development
Based on the Corporate Philosophy, “We aim to create mutual
respecting environment in Kyudenko which utilize and develop
employees’ personality”, the Company has established the Charterof Human Resources Development to clarify policies related to thedevelopment of “human resources”, the greatest management
resource, and to disseminate the policies to all employees.
Starting with the management level, all employees understandand share the “Corporate Philosophy and Action Guidelines” and are
actively making efforts for human resources development in orderto put the Charter into practice.

Charter of Human Resources Development
1. Purpose of human resources development
Employees are assets; the purpose is to develop and utilize employees’
abilities.
2. Method and content of human resources development
Stimulate character development and improve capabilities through work
experience and education.
3. Evaluating human resources development
Appropriately evaluate efforts for human resources development.
4. Responsibility of managers and employees
Being responsible for the development of subordinates and junioremployees, provide education and support to them.
5. Attitude of employees
Be responsible for one’s development and always take on challenges.

(5) Coexistence with Local Community
To contribute to society as a company rooted in our local region through various activities
A community program, dedicating contributing
activities to the local community
Kyudenko believes that it is its responsibility as a member of thelocal community to participate in social contribution activities. We
designate a certain period in late October every year as acommunity program, dedicating contributing activities to the local
community. During the period, the entire group engages incontribution activities rooted in the community, such as cleaning
work utilizing its expertise in cleaning high places and facility
checks at welfare facilities. The activity marked the 50th
anniversary in 2018, and has been established as a core of
Kyudenko’s social contribution activities.

Promoting Health and Productivity Management
We consider our employees’ health to be an important management
resource, and in FY2018, we established the “Health andProductivity Management Declaration”. We actively initiate support
for our employees’ proactive health promotion activities andpromote organizational health activities in order to raise awarenessof “putting health first” and “creating a work environment withpeace of mind” and “creating a happy and agreeable work
environment”.

(6) Sports

Initiatives for “work style reform”

Initiatives to promote the active participation of women

In FY2017, we set up the “Promotion Committee for Work Style
Reform”, an organizational body under the direct control of the
President, and we are working on various initiatives, such as theintroduction of new leave systems, establishment of days in which
taking annual leaves is encouraged and no overtime days,
promotion of diverse work styles, and building a workplace support
system to standardize operations.

We established an action plan for developing an employment
environment in which women can actively participate. We areworking to create a workplace environment in which women canwork comfortably and fully demonstrate their capabilities, bypromoting work-life balance, carrying out appropriate humanresource arrangements, and enhancing parenting and childcare
support systems.

Since its establishment as a Marathon Team in 1953, the Kyudenko
Track and Field Team, the men’s team has been active for 66 years
and the women’s team has been active for 31 years. In the past, theKyudenko Track and Field Team has produced Japan national teammembers of the Olympics and World Athletics Championships andmany other international games. In addition, the Team has participated in the All Japan Industrial Teams Men’s Ekiden (Gunma) heldon January 1 for 44 consecutive years (the longest record of allparticipating teams) and has participated in the All Japan Industrial
Teams Women’s Ekiden (Miyagi) 27 times. We will continue to work
hard to produce more Japan national team members and win the
Men’s and Women’s All Japan Industrial Teams Ekiden.
Participation in Marathon Grand Championship
Competitor Otsuka participated in the Tokyo 2020
Olympic Games Trial for Men’s Marathon held on
Sunday, September 15, 2019, and achieved an
impressive 4th place (2 hours, 11 minutes, 58
seconds).

3. ESG…Foundation to Support
Value Creation

Kyudenko Track and Field Team
Passed on tradition

Official
uniform

Number ofcurrent members

Men (long-distance)

14

Women (long-distance)

11

Jumpers

3

Total

28

Sports Class for Children
As part of “a community program, dedicating contributing activities to the local community”,
members of the Kyudenko Track and Field Team provide local-based sports events to children
every April. Being the ninth time this year, we coordinated with the track and field teams inFukuoka City and the track and field team of Fukuoka University. About 300 children join thisevent every year.

Initiatives for childcare support
The Company’s childcare support system, introduced in 1992, is asystem that exceeds the standards of the Childcare and Family Care
Leave Act. So far, almost all female employees who gave birth andare raising children have used this system and 100% of employees
return to work from childcare leave. After returning to work, manyare successful while balancing childcare and work.
In addition to the special paid leave of three days given when an
employee’s spouse gives birth, there is a system called, “Childcare

45

Kyudenko Corporation

support leave due to spouse’s childbirth”, in which employees canuse their accumulated annual paid leave for one month after theirspouse gives birth.
*	Accumulated annual paid leave: a system that allows employees to accumulate amaximum of 40 days of annual paid leave, which otherwise will expire in two years(10 days of annual paid leave can be accumulated per year; limitations on usage
requirements).
* Summer uniform

We also promote other social contribution activities through sports, including the Kendo Team and Judo Team.

KYUDENKO REPORT 201946

3. ESG…Foundation to Support Value Creation(7) Interview with Outside Directors
By utilizing the diverse experience and knowledge as Outside Directors, we will enhance the effectivenessof corporate governance and the Board of Directors and lead to sustainable growth.

Q

What is your impression of the deliberation of
the Board of Directors meetings?

Q

What is the status of building a risk management
system?

Watanabe Regarding the Mid-term Management Plan, each
Officer in charge has set up a working group whileconstantly checking the status of individual measuresand achievement status of KPIs, and extracting issues
to achieve the goals. I believe that such enthusiasm
and attention to detail is reflected in the current steadyachievements of the highly-set goals.
Kuratomi I received a strong impression that very high goals are
set that express the Company’s willingness to grow.
The current achievement status is also transitioning“As a company that can meet the needs of the times
and society, I feel the potential for further growth”“I look forward to initiatives from Kyushu tonationwide and overseas.”

What are some improvement measures to further
liven up the Board of Directors meeting andenhance its effectiveness?

Q

How do you evaluate the contents and current
progress of the Mid-term Management Plan that isbeing carried out?

Outside Director Sumio Kuratomi
June 2008 	Director and Executive Officer, General Manager, City
Development Business Div., NISHI-NIPPON RAILROAD CO., LTD.
June 2011 	Director and Managing Executive Officer, General Manager,
Corporate Planning Div., NISHI-NIPPON RAILROAD CO., LTD.
June 2013 	Representative Director and President, NISHI-NIPPONRAILROAD CO., LTD.
June 2016 	Representative Director and President Executive Officer,
NISHI-NIPPON RAILROAD CO., LTD. (to the present)
June 2016

Kyudenko Corporation

Q

Watanabe I have been serving as Outside Director of Kyudenko
from 2011 and since that time, I recognize that
Kyudenko is a company that has continued to give top
priority to aspects of risk management and compliance.
But at the same time, it is true that there weredifficulties in completely disseminating these efforts
throughout the whole organization. And unfortunately,
it cannot be denied that there was a gap in theperception of compliance between society and theinternal company. In regard to the recent bid-rigging
case, I think it is necessary to face what happened andwork on recurrence prevention measures while also
ensuring that each employee develops their own
compliance level.
Kuratomi If I may add to what Director Watanabe said, because
the scale of the Company is expanding at such a rapid
pace, concurrent with this growth, I believe setting up
structures and systems to prevent fraud will become
more important in the future. The Company cannot
meet the expectations of society with growth that is

Watanabe I also participate in the Management Meeting held
once a week. As a subordinate organization of theBoard of Directors, the Management Meeting,attended by Executive Officers and division head
employees in charge of practical business operations,hold discussions on an operational level from various
angles on important matters that need discussion inadvance from among the matters to be submitted to theBoard of Directors.

47

steadily. I think it is proof that Kyudenko has come topossess real ability. Then, what is the essence of thatability? I think it is Kyudenko’s daily operations andhuman resources. The foundation of being solid in
those areas and also having a network is a major
factor in reaching the current growth stage. In addition,
I also appreciate that the “recruitment anddevelopment of human resources” is being carried out
as one of the differentiation strategies in preparation
for the future. The gathering of truly excellent humanresources will support big growth in the future.

based solely on scale and figures and not supported
by healthy sustainable growth. The joy that employees
get from contributing to society by working hard toachieve high-quality work will become one of thefactors supporting the future growth of Kyudenko.

Q

What are other issues or themes that Kyudenko
should work on?

Watanabe With the Mid-term Management Plan entering its final
year and the next mid-term management plan coming
into view, in aiming for further growth and expansionof business fields in the future, I feel that efforts
should be focused more overseas. There is a strong
demand for the development and expansion of theinfrastructure environment in South East Asia, the best
example being the Kyudenko EMS operation inprogress in Sumba Island, Indonesia since January
2018. It is a great place for Kyudenko to shine and it
will also lead to a virtuous cycle in which the value of
local initiatives can also be utilized in Kyushu, where
there are many remote islands.
Kuratomi In regard to ESG, which is the basis for the continued
survival of companies in the future, in addition to what
has been mentioned so far, particularly for Kyudenko, I
think that further contributions should be made toenvironmental issues by utilizing technical force. The
Company has shown technical force capable of that. In
that sense, Kyudenko is a company that can meet theneeds of the times and society, and as a company withmore and more possibilities, I am very much looking
forward to its future.

3. ESG…Foundation to Support
Value Creation

Watanabe I think the Board of Directors meetings has appropriate
proposal criteria for the agenda to be considered andoperated after all necessary items and information
have been covered, ensuring its effectiveness. On theother hand, I cannot deny that the overall atmosphereis a little too quiet, so I think that if the Board of
Directors meetings has a livelier atmosphere,
discussions will progress further, and more opinions
will be given.
Kuratomi I believe that appropriate and important agenda items
are discussed and deliberated efficiently in a shortamount of time. Spending a long time does notnecessarily produce a constructive, positive result.
However, as Director Watanabe mentioned, frankly, I
also feel that there should be efforts made to makediscussions a little livelier. Even if the same conclusion
is reached, different viewpoints and improvements
may be added by holding many discussions in theprocess.

From the standpoint of a person who also participatesin the Management Meeting, I hope that the Board of
Directors will not simply discuss the content of the
final decision of the Management Meeting, but also begiven an explanation of the general discussion processof the Management Meeting. In doing so, further
understanding will be gained on the background ofeach agenda, leading to livelier discussions at theBoard of Directors meeting.
Kuratomi I mentioned at the beginning that I appreciate theBoard of Directors meetings being run efficiently in ashort amount of time, but I very much agree with theidea of the Board of Directors meeting being given an
explanation of the general discussion process of theManagement Meeting. It is not necessary to do it at
every Board of Directors meeting, but having thepersons who held discussions at the Management
Meeting give an explanation when there is an
important and big agenda will be a way to check
whether the operation is being run appropriately.

Outside Director Akiyoshi Watanabe
June 1996

Director, TOYOTA MOTOR CORPORATION

June 1998

Director, TOYOTA MOTOR KYUSHU, INC. (part-time)

June 2001

Managing Director, TOYOTA MOTOR CORPORATION

June 2002 	Representative Director and President, TOYOTA MOTOR KYUSHU, INC.
June 2008 	Representative Director and Chairman, TOYOTA MOTOR KYUSHU, INC.
June 2011

Advisor to TOYOTA MOTOR KYUSHU, INC.

June 2011

Director (part-time), the Company (to the present)

Director (part-time), the Company (to the present)

KYUDENKO REPORT 201948

4. Data section(1) 10-year Financial Summary
Financial item
(Unit: Million Yen)

2010.32011.32012.32013.32014.32015.32016.32017.32018.32019.3225,891

248,577

246,660

239,282

279,310

315,949

311,346

341,771

360,872

408,143

Operating profit

5,442

6,186

1,821

4,371

7,136

16,75725,19730,732

34,72636,747

Ordinary profit

7,007

7,874

3,278

5,744

8,908

18,16327,55132,18737,34239,924

Profit attributable to owners of parent

4,102

3,776

1,351

2,882

3,681

11,517

17,901

22,29725,296

26,691

Capital investment

4,838

4,935

7,046

6,034

14,226

7,606

6,127

7,469

4,245

4,353

Depreciation and amortization

2,851

3,327

3,303

3,631

4,305

5,262

5,475

5,449

5,512

6,074

Research and development costs

269

266

263

275

313

288

255

235

286

326

Cash flows from operating activities

10,972

754

6,267

4,871

12,767

19,117

10,77614,18730,016

26,054

Cash flows from investing activities(3,062)(3,796)(622)(6,103)(14,456)(11,816)(13,597)(17,951)(3,830)(11,298)

Free cash flow

7,909

(3,041)

5,645(1,231)(1,688)7,300(2,820)(3,763)

26,185

14,755

892

743

733

730

733

1,190

2,295

3,732

5,635

7,108

Net assets

90,40992,38692,72095,95094,438104,658

113,199

141,503

164,139

182,176

Total assets

212,562

219,207

195,393

211,944

225,727

254,861

261,985

300,261

324,919357,271

Interest-bearing debt

25,27825,512

8,619

15,96625,31933,93931,98636,12820,07819,189

Sales

Cash dividends paid

(Unit: yen)

55.12

51.05

18.41

39.46

51.95

174.54272.45327.22356.89375.17

Net assets per share

1,202.57

1,245.70

1,251.69

1,300.23

1,405.38

1,555.33

1,693.45

1,995.00

2,269.48

2,534.46

Cash dividends per share

12

10

10

10

13

25

45

70

90

100

Operating profit ratio (%)

2.4

2.5

0.7

1.8

2.6

5.3

8.1

9.0

9.6

9.0

Net profit margin (%)

1.8

1.5

0.5

1.2

1.3

3.6

5.7

6.5

7.0

6.5

Gross profit margin (%)

9.8

9.3

7.7

9.1

9.1

11.7

14.5

15.2

15.7

14.8

Return on equity (ROE) (%)

4.7

4.2

1.5

3.1

3.9

11.9

16.7

17.8

16.8

15.6

Return on asset (ROA) (%)

1.8

1.7

0.6

1.4

1.6

4.7

6.9

7.9

8.1

7.8

Return on invested capital (ROIC) (%)

2.8

3.1

1.0

2.5

3.8

8.8

12.1

13.3

13.4

13.4

Equity ratio (%)

42.1

41.7

47.0

44.8

41.1

40.3

42.4

46.6

49.7

50.5

Total asset turn over (times)

1.0

1.1

1.1

1.1

1.2

1.3

1.2

1.2

1.1

1.1

Payout ratio (%)

21.8

19.6

54.3

25.3

25.0

14.3

16.5

21.4

25.2

26.7

Kyudenko Corporation

KYUDENKO REPORT 2019

4. Data section

49

Net profit per share50

4. Data section(2) Report on Financial Results and Financial Analysis
March 31, 2018, in addition to the steady progress of the opening
amount of work in hand.
As sales increased, segment income (operating profit) increased
by 1,676 million yen to 34,949 million yen as compared to the year
ended March 31, 2018.
Other business
Sales increased by 5,347 million yen (37.0% increase) to 19,816
million yen as compared to the year ended March 31, 2018, due tofactors such as an increase in sales business of constructionrelated materials and equipment. Segment income (operating profit)
increased by 2 million yen to 1,738 million yen as compared to theyear ended March 31, 2018, with the increase in sales frombusiness of construction-related materials and equipment sale.
(2) Overview of financial position as of March 31,
2019
Overview of assets, liabilities and net assets
AssetsCurrent assets increased by 27,383 million yen to 206,268 million
yen as compared to March 31, 2018, as a result of an increase ofnotes receivable, accounts receivable on completed construction
contracts and other accounts receivable.
Fixed assets increased by 4,968 million yen to 151,002 million
yen as compared to March 31, 2018, as a result of factors such as
an increase in investments in securities.
As a result, total assets increased by 32,352 million yen to357,271 million yen as compared to March 31, 2018.
Liabilities
Current liabilities increased by 11,922 million yen to 142,144
million yen as compared to March 31, 2018, as a result of factors
such as an increase of notes payable, accounts payable on
construction contracts and other accounts payable.
Long-term liabilities increased by 2,392 million yen to 32,949
million yen as compared to March 31, 2018, as a result of factors
such as an increase in long-term debt.
As a result, total liabilities increased by 14,314 million yen to
175,094 million yen as compared to March 31, 2018.

Net assets
Total net assets increased by 18,037 million yen to 182,176 million
yen as compared to March 31, 2018, as a result of factors such asrecording profit attributable to owners of parent.
(3) Overview of cash flows for the year ended March
31, 2019
Cash and cash equivalents (hereinafter referred to as “Cash”) as ofMarch 31, 2019 increased by 5,687 million yen to 40,192 million
yen from March 31, 2018.
Cash flows from operating activities
Cash provided by operating activities was 26,054 million yen (adecrease of 3,962 million yen in cash inflow as compared to theyear ended March 31, 2018).
This was mainly due to profit before income taxes exceeding theincrease in notes and accounts receivable on completed
construction contracts.
Cash flows from investing activities
Cash used in investing activities was 11,298 million yen (anincrease of 7,467 million yen in cash outflow as compared to theyear ended March 31, 2018).
This was mainly due to an increase in purchase of investments insecurities.
Cash flows from financing activities
Cash used in financing activities was 9,021 million yen (a decreaseof 12,762 million yen in cash outflow as compared to the year
ended March 31, 2018). This was mainly due to cash dividends
paid.
(4) Future outlook
As for the future economic outlook, while domestic corporate
performance still remain at high levels and personal consumption isrecovering due to improved employment and income environment,
attention must be paid to changes in economic fluctuations due tothe impact of the Chinese economy, a slowdown in IT demand, andthe consumption tax hike.
In the construction industry, despite concerns of a decline in thewillingness to make capital investments in the manufacturingindustry, construction demand is expected to remain strong due toimprovements in the office market and private capital investment
following the introduction of 5G and the government’s “Three-year
emergency countermeasures for preventing and reducing disasterdamage and increasing resiliency of Japan”. In the medium term,market expansion is expected from events such as the Expo 2025
Osaka, Kansai. Meanwhile, anticipated issues include theintensification of sales competition to secure construction work
looking ahead to after the Tokyo 2020 Olympic and Paralympic
Games, a shortage of construction workers, increase in construction
material costs and labor costs, and ensuring appropriate
construction periods and work delays associated with “work stylereform”.
The Group expects an increase in rebuilding and renewal demandof buildings constructed during the period of high economic growthin urban areas. In local Fukuoka, due to the deregulation of floorarea ratio and building height, orders of large-scale redevelopment
have started for Tenjin Big Bang and the waterfront. In power
distribution line work, the Company will consider how to make work
more efficient and adapted to the times ahead of the separation of
power generation and distribution of power companies scheduled
for April 2020.
Following the prosecution of employees involved in the Chikujyo
town water and waste sewage treatment facility, there were multiple
designation suspension measures for each period from multiple
municipalities. In regard to the impact on the business results of theyear ending March 31, 2020, it is necessary to include thepossibility that the total amount of orders received for government
contract construction work of approximately 25 billion yen will behalved. Meanwhile, in the year ending March 31, 2020, solar power
plant work is expected to increase from the opening of the fiscal
year, so the Company will strive to cover the decline in government
construction work with such private-sector construction.

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

Gross profit
Operating profit
Ordinary profit
Profit attributable toowners of parent
Net profit per share

51

Kyudenko Corporation

360,872

408,143(100.0%)(100.0%)56,65960,561(15.7%)(14.8%)

34,72636,747(9.6%)(9.0%)

37,34239,924(10.3%)(9.8%)

25,296

26,691(7.0%)(6.5%)

356.89 yen

Year-on-year comparison
113.1%
106.9%
105.8%
106.9%
105.5%

375.17 yen

Plan(April 27, 2018)

385,000(100.0%)63,000(16.4%)

38,000(9.9%)

41,000(10.6%)

28,000(7.3%)

Progress
106.0%

Current assets
AssetsResults

96.7%
97.4%

Fixed assets
Total Assets

96.1%

Current liabilities
Liabilities

Sales(unit: million yen, lower row is composition ratio)

The year ended March 31, 2019

The year ended
March 31, 2018

Long-term liabilities
Total liabilities

95.3%
Total net assets

393.57 yen

4. Data section(1) Overview of financial results for the year ended
March 31, 2019
During the year ended March 31, 2019, the Japanese economy has
continued a moderate recovery backed by improvement in corporate
profit and recovery of personal consumption, but the pace ofrecovery is decelerating due to the impact of trade friction and aslowdown of the global economy in the second half.
In the construction industry, as construction work for the Tokyo
2020 Olympic and Paralympic Games is about to peak, new urban
development plans are being carried out and the labor shortage isbecoming more severe.
For the Group, orders of facility work, such as electrical, HVAC
and sanitary are increasing steadily backed by steady construction
work demand. In regard to solar power plant work, while demands
are starting to converge, we received an order for a large-scale
project that can ensure profitability. Meanwhile, as a result of tightwork schedule caused by labor shortages and cost increases
caused by a rise in material cost and unit cost for labor after
receiving an order, the profit margin declined in general construction
as compared to the year ended March 31, 2018. In power
distribution line work, orders improved due to an increase inconstruction orders, such as those received from Kyushu ElectricPower Company.
In such a business environment, the Group has established thisyear, the fourth year of the Mid-term Management Plan, as a year of“breakthrough”. After verifying and analyzing the results of the past
three years and sorting out issues, the whole Group has focused on
working toward solutions.
In addition, we have advanced specific initiatives of the annual
policy, such as improving the probability of receiving orders,
reinforcement of aftersales services, strengthening measures toimprove construction profit margin by the whole Group, and carryingout diverse reform of work styles.
Results by business segment are as follows.
Facility work
Sales increased by 41,924 million yen (12.1% increase) to 388,327
million yen as compared to the year ended March 31, 2018, due tothe impact of companies that became consolidated subsidiaries on

Total liabilities andnet assets

March 31, 2018

March 31, 2019

178,884

206,268(55.1%)(57.7%)

146,034

151,002(44.9%)(42.3%)

324,919357,271(100.0%)(100.0%)130,222

142,144(40.1%)(39.8%)

30,55732,949(9.4%)(9.2%)

160,780

175,094(49.5%)(49.0%)

164,139

182,176(50.5%)(51.0%)

324,919357,271(100.0%)(100.0%)

Increase/decrease

Major reason for increase/decrease

27,383

Notes receivable and other accounts receivable+23,001

4,968

Investments in securities +5,146

32,352
11,922

Electronically recorded obligations +8,088

2,392

Long-term debt +4,676

14,314
18,037Retained earnings +19,591

32,352KYUDENKO REPORT 201952

4. Data section(3) Consolidated Balance Sheet(4) Consolidated Statement of Income(Unit: million yen)March 2018

March 2019

Assets

Notes receivable, accounts receivable
on completed construction contracts
and other accounts receivable

35,189127,61041,017
150,61285,73288,36013,00621,09426

20

Short-term borrowings

7,584

1,990

Costs of uncompleted
construction

6,826

5,106

Income taxes payable

6,239

8,412

897

1,765

Advances received on uncompleted
construction contracts

6,918

12,909Raw materials and supplies

5,444

979

Other current liabilities

10,741

9,377

Other current assets

2,906

6,791

Total current liabilities

130,222

142,144

Allowance for doubtful
accounts

(17)

(23)

Total current assets

178,884

206,268

Fixed assets
Property and equipment

65,757

66,155

Machinery, vehicles, tools,
furniture and fixtures

39,51541,095

Land

28,48428,874

Leased assets

6,345

6,126

Construction in progress
Accumulated depreciation
Total property andequipment

1,718(56,657)

85,164

1,757(60,259)

83,750

8,983

13,660

Lease obligations

2,597

2,596

Goodwill

500

343

Other intangible assets

943

986

1,443

1,329

Investments andother assets

13,936

Other long-term liabilities

2,822

2,432

Total long-term liabilities

30,55732,949160,780

175,094

Net assets

Capital Surplus
Retained earnings
Treasury stock

932

1,179

Asset for retirement benefits

353

1,646

Deferred tax assets

5,955

5,720

Translation adjustments

Other

4,678

5,291

(1,119)(1,688)

Allowance for doubtful
accounts
Total investments andother assets
Total fixed assets
Total assets

Kyudenko Corporation

12,853
139,80912,561
13,012
159,401(8)(10)

165,209

184,965

4,261

3,585

(570)

(423)

306

179

(7,757)(7,988)(3,759)(4,647)

2,689

1,858

164,139

182,176

65,922

Non- controlling interests

146,034

151,002

Total net assets

357,271

12,555Retirement benefit liability
adjustments
Total accumulated othercomprehensive loss

59,427

324,919

14,46819,816

Total net sales

360,872

408,143

Construction contracts

292,664

331,391

Other

11,547

16,191

304,212347,582

Construction contracts

53,73856,935

Other

2,921

3,625

Total gross profit

56,65960,561

Selling, general and administrative expenses

21,932

23,813Operating income

34,72636,747

Cost of sales

Total cost of sales
Gross profit

Interest income

83

62

Dividend income

564

564

Equity in earnings of affiliates

310

754

Gain on investments in partnership

641

976

Rent income

326

312

Insurance and dividend income

606

443

Other

895

808

3,427

3,921

Interest expenses

411

372

Extra retirement payments

88

80

Provisions of allowance for doubtful accounts of subsidiary

151

153

Other

161

137

Total non-operating expenses

812

744

37,34239,924Gain on sales of property and equipment

516

63

Gain on sales of investments in securities

263

40

Gain on bargain purchase183−

Total non-operating income
Non-operating expenses

Extraordinary income

Gain on liquidation of subsidiary
Total extraordinary income

0

−

965

104

Extraordinary loss

Long-term loans receivable

53,772

346,403

Ordinary profit

Shareholders’ equity

Total shareholders’ equity

48,625324

15,746

Accumulated othercomprehensive loss
Unrealized holding gain on
securities
Unrealized loss on hedging
instruments

Investments in securities

406

Liability for retirement benefits

Common stock

Intangible assets

Total intangible assets

Long-term debt

Total liabilities

388,327

Construction contracts
Other

4. Data section

Buildings and structures

FY2018Non-operating incomeLong-term liabilities

Provision for retirement benefits for
directors and audit and supervisoryboard members

FY2017
Net sales

Current liabilities
Notes payable, accounts payable on
construction contracts and otheraccounts payable
Electronically recorded
obligations(Unit: million yen)March 2019

Short-term investments

Merchandise

53

March 2018
Liabilities

Current assets
Cash on hand and in banks(Unit: million yen)

Total liabilities and net assets

324,919357,271

Impairment loss on fixed assets

831−

Loss on disposal and sales of fixed assets

318

553

Loss on sales of investments in securities−

15

Impairment loss on investments in securities

7

185

Loss on valuation of utility rights

1

13

Loss on valuation of shares of associates−

0

Total extraordinary loss

1,158

768

Profit before income taxes

37,14839,260

Income taxes – current

10,856

12,001

Income taxes – deferred

789

569

Total income taxes

11,645

12,570

Profit25,502

26,689Profit (loss) attributable to non-controlling interests
Profit attributable to owners of parent

206

(1)

25,296

26,691KYUDENKO REPORT 201954

4. Data section(5) Consolidated Statement of Cash Flows(6) Corporate Profile
Corporate Profile
Corporate Name

Kyudenko Corporation

Established

December 1, 1944

Head Office

Kagoshima Branch Office

1-23-35 Nanokawa, Minamiku,
Fukuoka city, 815-0081 JAPAN
Tel: +81-92-523-1691
Fax: +81-92-524-3269

Tokyo Head Office

Kumamoto Branch Office

Fukuoka Branch Office

Nagasaki Branch Office

Kitakyushu Branch Office

Saga Branch Office

Oita Branch OfficeKansai Branch Office

Capital12,561 million yen

Miyazaki Branch Office

Okinawa Branch Office

Number of Employees(Consolidated) 9,954(Non-consolidated) 6,399

Construction Business
LicenseApproved by Minister of Land, Infrastructure, Transport
and Tourism (Sp.29) No.1659

Head Office(Unit: million yen)

FY2017FY2018Cash flows from operating activities
Profit before income taxes

37,14839,260Depreciation and amortization

5,512

6,074

Impairment loss on fixed assets

831−

Increase in allowance for doubtful accounts
Decrease in liability for retirement benefits and provision for retirement benefits for
directors and audit and supervisory board members
Increase (decrease) in provision for loss on construction contracts

107

575

(3,634)(3,295)

(214)

−

1

13

Gain on investments in partnership

(641)

(976)

Interest and dividend income

(648)

(626)

Interest expenses

411

372

Foreign exchange (gain) loss

(35)

22

Equity in earnings of affiliates

(310)

(541)

Gain on sales of property and equipment, net

(509)

(63)

Loss on disposal of fixed assets

318

553

Loss on valuation of utility rights

Impairment loss on investments in securities

7

185

Gain on sales of investments in securities

(263)

(24)

Gain on bargain purchase

(183)

−

Gain on liquidation of subsidiary
Increase in notes and accounts receivable on completed construction contracts(Increase) decrease in costs of uncompleted construction contracts(0)−(17,939)(23,007)

76

1,585

(Increase) decrease in inventories(1,500)3,597

Increase in notes and accounts payable on construction contracts

15,59810,751

Increase (decrease) in advances received on uncompleted construction contracts(3,098)

6,073

9

20

Increase (decrease) in consumption taxes, net

3,594(1,896)

Other, net

5,711(2,866)

Subtotal

Increase in long-term accounts payable

Electrical Contracting Work
Telecommunications
Engineering
Fireﬁghting Facilities Work
Plumbing Work
Machinery, Equipment, andFacility Work
Water Supply Facilities Work
Sanitation Facilities Work

Major Offices[Japan]Civil Engineering BusinessArchitectural andConstruction Business
Paving Work
Scaffolding andExcavation Business
Steel Structure WorkInterior Finishing Business

Kyudenko Group (major subsidiaries)
Construction work

(as of March 31, 2019)

Regional Headquarters in South East Asia

Meikousha Co., Ltd.

Electrical and plumbing work

Kakusokukeisou Co., Ltd.

Electrical work

Jinnouchikoumutenn Co., Ltd.

Civil engineering, power transmission line, and electrical work

Fukuoka densetsu.Co., Ltd.

Electrical and plumbing work

Fukuto densetsu Co., Ltd.

Electrical, telecommunications, and facility work

Kyudenko south east asia
Pte. Ltd.

Regional Headquarters for Subsidiaries in South East Asia

Design and estimation
Quatec corporation Co., Ltd.

Design40,34935,786

Chikugo densetsu Co., Ltd.

Electrical and telecommunications work

Facility maintenance and inspection

Interest and dividend income received

629

604

Fukusetsu Co., Ltd.

HVAC and plumbing work

Setsubihoshu center Co., Ltd.

Interest expenses paid

(398)

(384)

Kitasetsu Co., Ltd.

Electrical, HVAC and plumbing work

(10,562)(9,952)

Oita densetsu Co., Ltd.

Electrical work

Material sales

Net cash provided by operating activities

30,016

26,054

Fusokogyo Co., Ltd.

Facility work and air conditioning equipment sales

Q-mast Co., Ltd.

Miyaei Co., Ltd.

Electrical and plumbing work

Sales of industrial materials, machinery, and equipment forelectric and HVAC facility(644)

Minamikyushu densetsu Co., Ltd.

Electrical work

Rearun Co., Ltd.

Manufacture and sales of high-efficiency lighting equipment

Kaei densetsu, Co., Ltd.

Electrical work

Kyukinsetsubikogyo Co., Ltd

Facility work

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

(406)
168

488

(4,092)(2,877)710

211

Yuei densetsu Co., Ltd.

Electrical work

Kuma densetsu Co., Ltd.

Electrical, plumbing, fireﬁghting facilities, andtelecommunications work

Higo-setubi Co., Ltd.

HVAC and plumbing work

Choei Co., Ltd.

Electrical, plumbing, machinery, equipment, and facility work

Chohoku densetsu Co., Ltd.

Electrical, plumbing, telecommunications, water supply facilities,
and fireﬁghting facilities work

Kyusetsukougyou Co., Ltd.

Facility and plumbing work

Ariake densetsu Co., Ltd.

Electrical, telecommunications, civil engineering, andplumbing work

Kyutie Co., Ltd.

Electrical work

Syoueidensetsu Co., Ltd.

Electrical facility work

Software development

Sanyudensetsu Co., Ltd.

Electrical facility, telecommunications, fireﬁghting facilities, andplumbing work

Automation technology Co., Ltd.

Building information and telecommunication system, andresearch and development

Kyukousogosetsubi Co., Ltd.

Facility work

Systec Co., Ltd.

Ergotech Co., Ltd.

Facility work

Development and sale of transportation service management
supporting system equipment

(113)

(501)

Purchase of investments in securities(3,278)(9,334)

Proceeds from sales of investments in securities

3,140

2,405

Purchase of subsidiaries’ shares resulting in changes in scope of consolidation

(168)

−

Payments of long-term loans receivable

(929)

(289)

Collection of long-term loans receivable

92

181

Other, net

1,046

(938)

Net cash used in investing activities(3,830)(11,298)

Cash flows from financing activities
Net increase (decrease) in short-term borrowings(14,872)(348)

Proceeds from long-term debt

6,187

7,496

Repayments of long-term debt

(6,549)(8,040)(7)(1)(5,635)(7,108)Purchase of treasury stock
Cash dividends paid

Power generation
Kyudenko new energy Co., Ltd.

New energy business including wind power generation,
solar power generation and solar power and fuel battery

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

Supply of electricity generated by solar power, real estate
management and other related businessNatori mega solar kyudenko green
kikaku limited liability partnershipPower generation business and electricity sales business using
solar power

Supply of electricity generated by solar power, real estate
management and other related business

Real estate sales, rental and management
Kyushudenko home, Co., Ltd.

Construction, purchase and sale of real estate, lease brokerage,
non-life insurance agency

Cash dividends paid to non-controlling shareholders

(1)

(6)

Koteradengyo Co., Ltd.

Electrical facility work

Repayments to non-controlling shareholders

(20)

(22)

Kawachikougyou Co., Ltd.

Facility, plumbing, and electrical work

Purchase of subsidiaries’ shares not resulting in changes in scope of consolidation

(1)

(0)

Seiwakougyou Co., Ltd.

HVAC work

Kyulien environment improving
Co., Ltd.

Environmental measurement and analysis, and design andconstruction of electrical, plumbing, and sanitary facility

Asia projects engineering
Pte. Ltd.

Construction, installation, and maintenance work for Power,
Oil & Gas plants, EPC work, and district cooling facilities

Kyudenko friendly Co., Ltd.

Data conversion of blueprints and documents, printing, copying,bookbinding, business card printing

Kyudenko vietnam Co., Ltd.

Electrical, plumbing, HVAC and sanitary facility work, andconsulting services on construction technology

Net medical center Co., Ltd

Remote medical image diagnosis support service using
telecommunication system

Kyudenko malaysia Sdn. Bhd.

Design and construction works of electrical,
HVAC and sanitary facility, and environmental energy

Three in Co., Ltd.

Management of a business hotel, “Hotel Urbic Kagoshima”

Design and construction works of electrical, HVAC facility, andconsulting service on energy saving

kyudenko hokuzan kanko Co., Ltd.

Management of a golf course, “HOKUZAN Country Club”

Bayside place hakata Co., Ltd.

Management of “Bayside Place Hakata”

Other, net

(881)

(988)

(21,783)(9,021)

84(48)

Net increase in cash and cash equivalents

4,486

5,686

Cash and cash equivalents at the beginning of the year
Increase (decrease) in cash and cash equivalents resulting from changes
in accounting period of consolidated subsidiaries
Cash and cash equivalents at the end of the year

30,02734,505

Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents

Kyudenko Corporation(9)

1

34,50540,192

Kyudenko (Thailand) Co., Ltd.

4. Data section

Maintenance of buildings and environmental facilities

Income taxes paid
Cash flows from investing activities

55(as of March 31, 2019)

Temporary staffing service
Portal Co., Ltd.

Temporary staffing service, fee-charging employment placement
service, education consulting, events, and banquet business

OthersKYUDENKO REPORT 201956

4. Data section(7) Stock Information
Stock information(8) List of Reference for Key Information(as of March 31, 2019)

Fiscal year

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

Annual general meeting ofshareholders

Held every year within 3 months from April 1

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 bemade due to an accident or other unavoidable
reason, it will be posted on the Nihon Keizai
Shimbun.

Status of shares(as of March 31, 2019)

Total outstanding shares

250,000,000 shares
71,165,783 shares

Number of shareholders

6,386

Total number of authorized shares

Major shareholders(as of March 31, 2019)
Number of shares held
(thousand shares)

Name

15,98022.46

Japan Trustee Services Bank, Ltd.
(trust account)

5,030

7.07

3,249
3,133

4.57
4.40

2,396

3.37

2,018
1,300
1,142
1,133
887

2.84
1.83
1.60
1.59
1.25

THE NISHI-NIPPON CITY BANK, LTD.

First Section of Tokyo Stock Exchange
Fukuoka Stock Exchange

Stock index

JPX-Nikkei Index 400

The Master Trust Bank of Japan, Ltd.
(trust account)

Securities code

1959

Kyudenko Employees Shareholding Association

Category of business

Construction

Kyudenko Labor Union

Trading unit of shares

100 shares

Nishi-Nippon Railroad Co., Ltd.

Shareholder registryadministrator

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

KYUSHU RAILWAY COMPANY

Office of administrator

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

The Bank of Fukuoka, Ltd.

MUFG Bank, Ltd.

Management strategy

Business of Kyudenko
Business features andstrengths

Foreign individuals
284
15,021 thousand shares (21.1%)

Business fields
https://www.kyudenko.co.jp/service/

IR information > Performance trend
https://www.kyudenko.co.jp/ir/trend.html

Basic Concept of CSR
Creating and increasing
corporate value

Financial institutions
57
23,184 thousand shares (32.6%)

CSR > CSR management > Kyudenko CSR structure
https://www.kyudenko.co.jp/csr/management/system.html

Corporate Value Creation Model

Initiatives for safety

Initiatives for Safety

Trend of dividends
Workplace and Labor Environment

2015.32016.32017.32018.32019.32020.3(forecast)Interim dividends

10 yen20 yen30 yen40 yen50 yen50 yenYear-end
dividends

15 yen25 yen40 yen50 yen50 yen50 yenTotal

25 yen45 yen70 yen90 yen

100 yen 100 yen

Rating information

Rating and Investment Information, Inc.

Kyudenko initiatives > Initiatives for safety
https://www.kyudenko.co.jp/approach/safety/index.html

CSR > Workplace and labor environment
https://www.kyudenko.co.jp/csr/workplace/index.html

CSR > Coexistence with local communities

Relationship withstakeholders

https://www.kyudenko.co.jp/csr/local_symbiosis/index.html

Coexistence with Local Communities

Kyudenko initiatives > social contribution and environmental activities
https://www.kyudenko.co.jp/approach/philanthropy/(as of March 31, 2019)
Name of rating

Ratingissuer rating

A-

Corporate GovernanceIR information > Corporate governanceCorporate governance

Financial and Non-financial Highlights

Nikkei 225 stock price(Yen)

https://www.kyudenko.co.jp/ir/governance/

Interview with Outside Directors

Trend of stock price/volume
(Yen)

6,000

30,0004,000

20,0002,000

10,000

0

0■

Corporate information > Greetings
https://www.kyudenko.co.jp/company/greeting.html(as of March 31, 2019)

Name of rating institution

Kyudenko stock priceDetails of Mid-term Management Plan

Performance by Business Category

Individuals and others
Other domestic corporations
5,901
104
10,558 thousand shares (14.8%) 21,691 thousand shares (30.5%)(R&I)

https://www.kyudenko.co.jp/company/philosophy.html

Investment in Business and Human
Resources and Financial Strategies

Note: Shareholding ratio is calculated excluding treasury stock (670 shares).

Distribution of shares

Corporate information > Corporate Philosophy

4. Data section

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.

Corporate Philosophy

Company website containing related information
https://www.kyudenko.co.jp/company/(Japanese)

Message from the President

Policy on dividends of surplus and trend of dividends
Policy on dividends of surplus

Corporate Philosophy

Information found in this report

Shareholding ratio(%)

Kyushu Electric Power Company, Incorporated

Stock exchange listingContents

IR information > Financial results(securities reports and financial results)
https://www.kyudenko.co.jp/ir/financial/

Financial data
Data Section

IR information >Performance trend
https://www.kyudenko.co.jp/ir/trend.html

Volume(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
2013
2015
2016
2017
2018
2019
2014

57

Kyudenko Corporation(year)KYUDENKO REPORT 201958

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