(English Translation of the Original Japanese Document)

May 13, 2021
Name of the Company:

WAKACHIKU CONSTRUCTION
CO., LTD.
Representative: Katsuhiko Karasuda
President & Representative Director(Securities Code: 1888; 1st Section of TSE)
Contact:
Makoto Nakamura
Director and Managing Executive Officer incharge of Corporate Planning Department
TEL: +81-3-3492-0308

Notice Regarding Formulation of Medium-Term Business Plan (FY2021–FY2023)
WAKACHIKU CONSTRUCTION CO., LTD. (the “Company”) hereby announces that it has formulated
the Medium-Term Business Plan (FY2021–FY2023) with FY2021 as the first year of the plan.

Under the previous Medium-Term Business Plan (FY2018–FY2020), the Company established a basic
policy of “strengthening profitability by effectively utilizing management resources for further growth” andput all of its efforts into various initiatives for achieving the goals of the plan.
In the construction industry during this period, investment in the public sector and capital investment in theprivate sector were both firm and, based on a strong business environment overall, a trend of increasing
sales and earnings in the business results continued until the second year (FY2019) of the plan and theCompany was able to achieve its profit goals one year ahead of schedule. In the final year of the plan,although sales and earnings decreased significantly due to a drop in net sales of completed construction
contracts, coupled with the provision for warranties for construction completed in the previous fiscal year,
the equity ratio improved due to an increase in net assets during the plan period and, regarding dividends,
the Company paid a 130th anniversary commemorative dividend and was able to achieve its goal of adividend payout ratio of 25% or more for the final year.
Regarding the future business environment, although the novel coronavirus disease (COVID-19) is
expected to have a prolonged impact on the global economy, we believe that the impact on the constructionindustry will be limited. In addition, the Japanese government’s national resilience policy and othercontinuing social infrastructure development are expected to be strong and, regarding private capital
investment, a recovery is expected in demand over the long term, mainly in urban areas. However, there areconcerns about a decrease in the number of construction workers in the future, and workstyle reforms,
including five-day workweeks, increasing productivity, securing workers, etc. have become urgent issues
for the entire industry. Companies are also being called upon to realize both economic value and social
value and proactively respond to global warming and other social problems.
Based on this business environment, as a new start looking ahead to the 140th anniversary of theCompany’s founding, the Company has formulated a long-term vision with a basic policy of “pursuingsustainability.” For the new Medium-Term Business Plan (FY2021–FY2023) during the first period of thisvision, the Company is strengthening the business foundation and promoting ESG management. By
promoting each basic strategy, aiming to be “a company able to respond to the expectations of all
stakeholders,” and striving to achieve the goals of the plan with making company-wide efforts, theCompany will improve its corporate value.

The figures presented in these materials regarding future plans are based on information available to theCompany as of the date of this notice. Actual business results may differ due to various factors going forward.

Medium-Term Business Plan
〔2021-2023〕

May 13, 2021

WAKACHIKU CONSTRUCTION CO., LTD.

1. Previous Medium-Term Business Plan in Retrospect11. Previous Medium-Term Business Plan (FY2018-FY2020) in Retrospect● Review of quantitative targets (unconsolidated)
FY2018FY2019TargetResults(Billions of yen)

Billions of yen

FY2020120.0

TargetResults

TargetConstruction
orders received

95.0

92.1

97.0

95.4

100.0

87.6

Net sales

90.0

96.2

93.0

104.7

96.0

87.0

Gross profit

8.3

9.4

8.9

10.0

9.3

7.8

(%)

9.3

9.8

9.6

9.6

9.7

9.0

3.3

4.1

3.9

4.4

4.2

2.4

(%)

3.7

4.3

4.2

4.2

4.5

2.8

Ordinary profit

3.2

4.0

3.8

4.2

4.1

2.6

Net assets

－

28.1

－

29.8 30.0 or more

30.8

Approx. 9%

11.3%

Approx. 9%

9.7%

Approx. 9%

5.5%

27.5% 25% or more

42.3%

Dividend payout
20% or moreratio

23.3% 20% or more

Operating profit (right axis) Billions of yen

12.0
104.7

Results

Operating profit

ROE

Net sales (left axis)

100.0
80.0

89.6
73.4

96.2
87.0

78.9

8.0

60.0
4.1

6.0

4.4

3.3

40.0
2.2

2.4

2.5

4.0

20.0

2.0

0.0
FY 2015

0.0
2016

2017

2018

2019

2020

• Construction orders received: Construction orders received were below target and decreased markedly by 7.7% in FY2020 due to the COVID-19
pandemic.
• Operating profit margin: The target was achieved in FY2018 and FY2019, but the OPM fell significantly below the target in the plan’s final fiscal year
as a result of the Company having recognized provision for warranties for construction completed with respect to construction projects in the previous
fiscal year, in addition to a downturn in net sales of completed construction contracts.
• Net assets: Net assets surpassed the target of ¥30.0 billion for the final fiscal year of the plan.
• ROE: ROE significantly exceeded the targets for FY2018 and FY2019, but fell short of the target for the final fiscal year of the plan for the
aforementioned reasons.
• Dividend payout ratio: The Company paid dividends exceeding the plan’s target.

2

10.0

1. Previous Medium-Term Business Plan (FY2018-FY2020) in Retrospect● The basic strategies in retrospect○ Gradual increasing net sales of completed construction contracts centered on quality and safety• Net sales of completed construction contracts: ¥88.8bn (2017) → ¥95.4bn (2018) → ¥104.1bn (2019)→ ¥85.9bn (2020)○ Further strengthening of civil works segment• Disseminate ICT technologies; Upgrade construction information modeling (CIM) at ports; Adopt AI technologies○ Upgrading the private sector segment• Orders related to renewable energy: Maintain high proportion of orders related to renewable energy• Private sector architecture: Expand into multiple fields (expressway service areas, biomass power generation facilities, etc.)○ Staffing, employee training, and enhancing worker vitality• Gradually increase recruitment of recent graduates; Actively offer internships; Create Wakachiku Construction Scholarship Program• Launch Wakachiku Employee Education Project “Hagukumi”○ Strengthening foundations of overseas business• Orders involving large construction projects → Increase in business volume○ Aggressive capital investment in further growth• Aggressive investment in ICT-related R&D → Worksite adoption of labor-saving technologies, safety management technologies, etc.
• Shift to monetary payment for subcontracting○ Engaging in initiatives involving workstyle reforms• Draw up roadmap for five-day workweek; Improve work using ICT and shift to digital solutions for on-site work
• Empowerment of female employees: “Kensetsu-Komachi” commendations and special awards for empowerment of women;
Appointment of women to serve as outside directors

3

2. Long-term Vision42.1 10-year Vision

2. Long-term Vision

Vision = Serve as a company that meets the expectations of all of its stakeholders
Shareholders
Financial
Provide appropriate shareholder
institutions

Customers

returns and interest, appropriately
disclose information
High-quality structures andsafe construction

Wakachiku Construction
Business
partners
Safe worksite environments

Educational
institutions• Recruitment• Job satisfaction and sense ofachievement• Healthy and safe workplaces

Employees

Local
communities
Infrastructure development andconservation of local environments

International
community
Environmental
consciousness and social
sustainability

Corporate philosophy: Cooperation consistently within and outside the Company

Student support andon-site educational
tours, etc.

“We engage in business enlisting a like-minded, cooperative approach both within
and outside the Company with a focus on the public good.”(Sentiment voiced about the harbor construction business when the Company’s firstpresident Kanpei Ishino founded the Company)

Working together to achieve a sustainable society“Leave no one behind” serves as a principle underpinning the Sustainable
Development Goals (SDGs)
5

2.2 Basic Policy

2. Long-term Vision

Pursuing sustainability: Looking toward Wakachiku Construction’s 140th anniversary
Pursuing three components of sustainability underpinned by construction
centered on quality and safety

Sustainability I
Market sustainability

Sustainability II
Organizational sustainability

Sustainability III
Social sustainability• Increase corporate value• Achieve consistent shareholder returns• Ensure business continuity in the aftercorona era• Increase employee satisfaction• Social contribution to communities• Address global environmental challenges

2021
Medium-TermBusiness
Plan

Aiming to be a company
able to respond to the
expectations of all
stakeholders

Phase 1 (2021-2023)
Strengthen business foundations
and promote ESG management

2030
Phase 2(2024-2026)

6

Phase 3(2027-2029)

Wakachiku
Construction’s 140th
anniversary

3. Medium-Term Business Plan FY2021-FY2023

7

3.1 Basic Strategies

3. Medium-Term Business Plan FY2021-FY2023

Sustainability I
Market sustainability

Sustainability II
Organizational sustainability

Sustainability III
Social sustainability

The Company’s
challenges• Improve PBR• Upgrade information disclosure• Worksite employee mix• Ensure productivity• Enhance initiatives to address SDGs

Relatedcircumstances• Securities market restructuring• Amendments of the Companies Act andCorporate Governance Code• Workstyle reforms• Securing workers• Carbon neutrality• Expectations for renewable energy

Essential strategies

Strengthen business foundations and promote ESG management
Strengthen business foundations

Environment (E)Social (S)Governance (G)▶ Enhance planning and proposal
capabilities to address customer
needs▶ Increase productivity▶ Enhance human resources▶ Strengthen financial standing▶ Focus on field of renewableenergy▶ Reduce CO₂ emissions inconstruction work
▶ Improve marine environments
through efforts that include those
involving blue carbon ecosystems▶ Provide safe and top-quality
infrastructure▶ Achieve rewarding workplaceenvironments in the after-corona era▶ Develop professionals for theconstruction industry▶ Achieve coexistence with partnercompanies▶ Contribute to local communities▶ Manage risks based on new
approaches▶ Strengthen governance practices▶ Ensure thorough compliance▶ Strengthen IR83.2 Strengthen Business Foundations

3. Medium-Term Business Plan FY2021-FY2023● Business strategy: Enhance planning and proposal capabilities to address customer needs▶ Overseas business• Actively seek involvement in ODA projects• Strengthen sales efforts geared to Japanesecompanies seeking overseas expansion• Train local engineers▶ Civil works business• Increase share of work involving government agencies by improving capability tomake comprehensive assessments and proposals• Maintain and increase orders related to renewable energy• Enhance sales capabilities involving planning and proposals for private-sector
customers• Strengthen handling of the ECI order method

Shichiri-nagahama Wind FarmShowa Yokkaichi Sekiyu Co., Ltd.

Kyushu Shinkansen Ureshino Overpass

Hirara Port Wharf (-10m)

Yokkaichi Refinery Pier

Port of Apia (Samoa)▶ Architecture business• Expand into multiple fields: Factories, warehouses, transportation facilities, hospitals, schools, etc.
• Strengthen sales in port areas: Hinterland in international strategic ports, etc.
• Work in partnership with the real estate business

Biomass power plant

Expressway service area facilities

Elementary school building

9▶ Real estate business• Make effective use of real estate holdings• Enhance efforts with revenue-generatinglease properties

Hospital

Residential care housing for senior citizens

3.2 Strengthen Business Foundations

3. Medium-Term Business Plan FY2021-FY2023● Increase productivity: Promotion of Wakachiku digital transformation (DX)
▶ R&D regarding labor-saving construction• Upgrade semi-automated systems using ICT• Develop precast technologies• Contactless, remote technologies, etc.

SDG KPIs to be achieved by 2030
Achieve five or more technological developmentsthat boost work productivity by 20%▶ Establishment of worksite support rooms• Strengthen efforts to take on BIM/CIM• Promote and instill worksite ICT(One technological development completed andtwo in process thus far)Managers are provided
with information on
usable life andcompaction[Network server]
Centralized management ofconstruction information

Input upon completionof compaction

Scheduling of
shipments/receipts

Data input upon
arrivalTime of concrete
placement completion

Scenario involving adoption of Port CIM▶ Operational streamlining
Concrete placement
worksite

Ready-mix
concrete factory

Underwater Gyro that controls suspended
load rotation

Concrete compaction management system● Enhance human resources• Enhance coordination among existing systems• Adopt robotic process automation (RPA), etc.

● Strengthen financial standing▶ Bolster recruitment efforts▶ Promote diversity▶ Achieve flexible and consistentfinancing▶ Improve employee engagement through workstyle reforms▶ Shorten the cash conversion cycle▶ Deploy the “Hagukumi” education system▶ Improve the equity ratio
Online employee training10

3.3 Promotion of ESG Management

3. Medium-Term Business Plan FY2021-FY2023

Environment (E)● Focus on field of renewable energy▶ Engage in initiatives involving offshore wind power• Carry out R&D on reducing construction costs• Take part in business involving maintenance of facilities
related to offshore wind power• Engage in initiatives that involve building multi-purpose
work vessels▶ Take part in business involving large-scale biomass power

SDG KPIs to beachieved by 2030
Construction of renewableenergy-related facilities
Cumulative annual power
generation of 10 billion kWh

Akita Port

▶ Continue work involving solar and small hydropower

Noshiro Port

Cumulative total of 3 billion
kWh thus far

Offshore wind terminal maintenance● Reduce CO₂ emissions in construction work
▶ Operate hybrid dredgers

SDG KPIs to beachieved by 2030

▶ Increase work productivity▶ Use low carbon fuel (BDF, GTL, etc.)▶ Set up worksite-based solar houses

Wakawashi-maru hybrid dredger(Owned by Wakachiku Construction)• Environmentally-sound engine-driven
generators• Use of regenerative energy• ICT dredging management system● Environmental restoration & reduction of environmental impact▶ Environmental restoration business• Lake and river dredging▶ Develop technology for reducing environmental
impact• Technology for reducing volume of dredged soil
• Technology for effective utilization of
Sediment removal at Shinjuku Gyoen
construction byproducts
National Garden

1130% reduction in CO₂emissions at the construction
phase (relative to 1990)
26% average reduction overthe last 3 years● Redouble efforts to improve marine environments▶ Beach cleaning and other volunteer initiatives▶ Initiatives involving blue carbon ecosystems▶ Reduction of pollution in maritime construction
Beach cleaning campaign

3.3 Promotion of ESG Management

3. Medium-Term Business Plan FY2021-FY2023

Social (S)● Provide safe and top-quality infrastructure▶ Eliminate occupational accidents: Effective risk assessment practices• Worksite deployment of crane camera AI▶ Enhance quality control systems (better worksite communication)• Quality advisor system and cross-checking patrols• Construction patrols performed remotely

AI-baseddetection ofhuman objects▶ Improve skills of technical workers• Hierarchy-specific online education and training• Upgrading skills enlisting recurrent education programs

Worker recognition through cranecamera AI

Patrols performed remotely● Achieve rewarding workplace environments▶ Promote health management● Achieve coexistence with partner companies▶ Fully implement the five-day workweek• Operational streamlining enlisting Wakachiku
digital transformation (DX)• Outsourcing of on-site work

▶ Support employee education including technology sharing sessions▶ Integrated initiatives to achieve worksite labor savings▶ Provide support for administering construction career advancement
programs
Daily meeting for▶ Improve work-life balance through a diverse range of telework employees
work arrangements• Adoption of telework arrangements● Develop professionals for the construction industry▶ Human resource development programs for laying the foundations of amaritime nation• Educational programs enlisting industry-government-academia collaboration;
Wakachiku Scholarship Program▶ Worksite tours, visiting lectures, internship programs

12● Contribute to communities▶ Initiatives for projects on disaster prevention
and mitigation▶ Social assistance for areas in the vicinity of
construction sites• Patrols, cleaning campaigns, etc.
▶ Donation campaigns (LED nighttime lighting, etc.)▶ Tours of Wakachiku Museum• Education on the history and roles of theconstruction industry

Wakachiku Museum

3.3 Promotion of ESG Management

3. Medium-Term Business Plan FY2021-FY2023

Governance (G)● Manage risks based on new approaches▶ Engage in thorough measures to combat infectious disease• Ensure social distancing initiatives that include contactless andremote solutions• On-site work arrangements aligned with status of infection▶ Draw up business continuity plans for the new normal era• Enhance systems for gathering information in the event of crisis, etc.
▶ Strengthen core systems
Shielding using acrylic board• Shift to cloud data storage and bolster information security● Strengthen governance practices

Social distancing at morning
Contactless bodygatherings
temperature measurement

General Meeting of Shareholders▶ Instill the corporate philosophy: Cooperation consistently within and outside
the Company▶ Strengthen the governance framework• Increase the number of independent outside directors, which are to account for
at least one-third of the number of directors• Ensure effective administration of the Nomination and Remuneration Committee• Adopt performance-linked remuneration and stock-based compensation plans

Accounting
Auditor▶ Effectively operate internal and external reporting systems▶ Have the Crisis Management Office flexibly take action▶ Enhance audits performed enlisting respective management systems
Internal
controlsystemOccupationalsafety management
systemManagement andOperations Committee

Board ofAuditors● Ensure thorough complianceIntegrated quality
and environmental
management systems

Nomination andRemuneration
Committee

Board of Directors

Disasterprevention
management
system13

Crisis Management
OfficeVariousdepartments

Internal Control
Audit Team● Strengthen IR▶ Achieve consistent shareholder returns• Review and implement share buybacks▶ Ensure truthful and timely information disclosure• Issue corporate reports• English-language information disclosure (financial result
reports, corporate website)▶ Enhance dialogue with shareholders and investors

3.4 Business Targets and Investment Plans● Quantitative business targets

3. Medium-Term Business Plan FY2021-FY2023
Net sales (left axis)

Billions of yen(non-consolidated, final fiscal year of the MTBP)

Construction orders
received¥100.0 billion

Operating profit¥5.0 billion

120.0
100.0

96.2

89.6

Operating profit (right axis) Billions of yen

12.0

104.7

10.0

87.0

80.0

8.0

60.0
ROE

9%

Dividend payout
ratio

30%

Equity ratio

40%

40.0

4.1

3.3

6.0

4.4

4.0

2.4

20.0

2.0

0.0

0.0
FY 2017

2018

2019

2020

2021

2022

2023

Net sales and operating profit scenario● Investment plans
Capital investment

Ship machinery, profit-generating real estate, etc.

R&D investment

Geotechnical, concrete, maritime construction, ICT
construction, environment, etc.

DX investment

ICT equipment, rationalization of core systems, etc.

HR investment

Hierarchy-specific training, scholarship programs, improving
recruitment, etc.

14

Estimatedinvestment of¥8.0 bn overthree years