株式会社関電工
アニュアルレポート 2018 2018年 3月期

https://www.kandenko.co.jp/

https://www.kandenko.co.jp/

This
corporate report is printed責任ある管理がされた森林からの材を含む
on Forest Stewardship Council (FSC)-certified
made並びにof woodfrom responsiblyを使用しています。
managed forests.
®認証紙」
このコーポレートレポートは、「FSCpaper「ベジタブルインク」
It was also printed using vegetable oil inks.

Printed in Japan

KANDENKOCORPORATEREPORT 2019

Corporate Report 2019

Kandenko is the most experienced firm in general
infrastructure works in the Tokyo metropolitan districtat 75 years since its establishment
Imagine looking down from the air on the Marunouchi area in Tokyo, Japan’s finance andeconomic center, and you will see that Kandenko was involved in the construction of mostof the buildings there. Not only in and around the capital but throughout the nation,
Kandenko has provided end-to-end engineering services ranging from design and execution
to maintenance and renovation, regarding electrical, telecommunications, air conditioning
and sanitation systems and other kinds of building infrastructure.
Upgrading electrical infrastructure, the main artery of cities is also an important businessof ours. From power plants to households, we play a part in stable energy supply to support urban functions.
Our mission is to protect the lives of people, the economy, and a safe and comfortableenvironment. With incomparable experiences and excellent technology, Kandenko is committed to fulfilling this mission.
Delivering electricity with secure construction, we light buildings with high-quality facilities and lighten the spirits of the people living inside. Kandenko aims to be an exceptionallybrilliant company that illuminates the nation.

| Stock Information | (As of March 31, 2019)
The shares of common stock of the Company

Principal Shareholders

are listed on the First Section of the Tokyo| Kandenko Network |Stock Exchange.

Number ofshares held

Name

On March 31,
2019,
there werea total of
Head
OfficeTokyo9,480 shareholders. The following table lists

1 TEPCO Power Grid, Inc.

Shares held as apercentage of total
outstanding shares

94,753,552

46.15

the 10 largest shareholders appearing on the
Divisionsregister at that date.

Hokushinetsu Sales3Division,
Higashikanto
SalesLtd.
Division,
Minamikanto& Tokai Sales4.20
Japan Trustee
Services Bank,(Trust Account)
8,625,200

Branches

Treasury stock
0.50%(0.50%)

2 The
Master Trust Bankof Japan, Tokyo
Ltd. (Trust
Account)
10,170,800
Sales Division, Social
Infrastructure
Division,
Sales
Division,
Kitakanto &4.95

Branches,
Representative
Offices

Division, Nishikanto4 Sales
Division,West Japan Sales Division, Fukushima
Division
MizuhoBank, Ltd.
8,121,839

3.96

5 Kandenko Group Employees Shareholding Association

2.76

Individuals, other
Hyogo: 1, Okinawa:
1, Kumamoto: 1, Miyazaki: 1, Kagoshima: 1, Fukushima: 2,

13.78%
Number of Shares Held by Type of Shareholder (As of March
31, 2019)

Foreigncompanies, etc.
13.40%
Treasury stock(15.23%)0.50%(0.50%)

Foreigncompanies, etc.
13.40%(15.23%)

Nagano: 1

Total number ofshares issued
205,288,338 shares
Total number ofshares issued
205,288,338 shares(13.72%)

Individuals, other
Financial
13.78%
institutions(13.72%)22.59%(20.79%)Note: Figures in parentheses show data as of March 31, 2018.

Financial
Japanese institutions
companies
22.59%
49.73%(20.79%)(49.76%)

Note: Figures in parentheses show data as of March 31, 2018.

Japanese companies
49.73%(49.76%)

Monthly Stock Price

Stock-Related Information

Fiscal year-end

March 31

Ordinary general
meeting of shareholders

June

Record dates for
dividend payments

March 31 for the fiscal year-end dividend.
September 30 for the interim dividend.

Record date

The date on which shares must be owned
for shareholders to exercise voting rights at
the general meeting of shareholders is March
31. If other votes are required, the record
date will be set and announced in advance.

Method of public
notification

Notification will be given electronically.
However, if we cannot issue an electronic
notification, we will place a notice in the Nihon
Keizai Shimbun, published in Tokyo. Kandenko’s
URL for public notices is as follows.
https://www.kandenko.co.jp/

Transfer agent

Sumitomo Mitsui Trust Bank, Limited
1-4-1 Marunouchi, Chiyoda-ku, Tokyo
100-8233, Japan

Transfer agent
contact point

Sumitomo Mitsui Trust Bank, Limited
Stock Transfer Agency Department
2-8-4 Izumi, Suginami-ku, Tokyo 168-0063,
Japan
Tel: 0120-782-031 (toll-free)(Unit: Yen)

1,400
1,200
(Unit: Yen)
1,000
1,400
800
1,200

(inquiries about stockrelated matters)

1,000
0 Apr. May June July Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar.
800

5,657,098

Tokyo Branch, Kanagawa Branch, Chiba Branch, Saitama Branch, Ibaraki Branch,
6 Japan Trustee Services Bank, Ltd. (Trust Account 9)2,408,100
1.17
Tochigi Branch, Gunma Branch, Yamanashi Branch, Shizuoka Branch, Tama Branch,
7 STATE STREET BANK AND TRUST COMPANY 505001
2,275,129
1.11
Kansai Branch, Nagoya Branch, Kyushu Branch, Hokkaido Branch, Tohoku Branch,
8 Japan Trustee Services Bank, Ltd. (Trust Account 5)
1,998,800
0.97
Nagano Branch
NOMURA PB NOMINEES LIMITED OMNIBUS9
1,824,100
0.89
MARGIN(CASHPB)Tokyo: 12, Kanagawa: 13, Chiba: 12, Saitama: 10, Ibaraki: 10, Tochigi: 8, Gunma: 6,
10 JP MORGAN CHASE BANK 385151
1,670,944
0.81
Niigata: 1, Toyama: 1, Ishikawa: 1, Yamanashi: 2, Shizuoka: 5, Hiroshima: 1, Kyoto: 1,

2018

2019

0 Apr. May June July Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar.

1

KANDENKO

2018

2019

Corporate Report
Report 20192019 │ 82
Corporate2

Corporate Report 2019

CONTENTS

P01 ........................... Cover Story
P02 ........................... Kandenko Network
Corporate
Motto

P03 ...........................

Corporate Motto & Corporate Philosophy/ Editorial Policy

P05 ........................... History
P07 ........................... At a Glance“People First”

P09 ........................... Message from the Management
P12 ........................... Growth Strategy
P13 ........................... Business Model
P15 ........................... Business Review by Division
P15 ...........................

Electrical Engineering, Environmental
Facilities and Systems, and Renovation Work

P17 ........................... Information & Communication Work
Corporate
Philosophy

P19 ...........................

Power Distribution Line EngineeringWork

P21 ...........................

Electric Power & Civil EngineeringWork

P23 ........................... Research and Development Activities

1

Based on respect for humanity, Kandenko fulfills its duty of corporatesocial contribution and contributes to creating richer human environments.

P27 ........................... Environmental Initiatives
P29 ........................... Employee Initiatives

2

By anticipating the needs of customers and seeking technological innovation, Kandenko provides optimal services and facilities.

P33 ........................... Coexistence with Society
P35 ........................... Corporate Governance3

By working for human resource development and continual improvement,
Kandenko aims to be a future-oriented company.

P43 ........................... Financial Section
P52 ........................... Company Profile

Tool map
To facilitate communication with its stakeholders, the Kandenko Group conveys multifaceted information by means of various
tools. In addition to the information provided in this report, we make available on our website the Group’s services, CSR
activities, and other diverse information.

The Company’s website: https://www.kandenko.co.jp/

Editorial Policy

Reporting Period:

This integrated report introduces various aspects of the

From April 1, 2018 to March 31, 2019

Company for the purpose of facilitating stakeholders’(Includes reports on some activities outside this period)

understanding of our businesses and medium- to long-termvalue creation.

Corporate Report
Quarterly Financial Results andReference Documents for
Financial Results
Financial information

3

KANDENKO<Notes on proper use of the business result forecast>
Securities Report

Corporate Governance Report

The business result forecast and other forward-looking statements herein are based on the information currently available
and certain assumptions deemed reasonable by the Company, and thus actual results may differ significantly from these

Non-financial information

forecasts due to a wide range of factors.

Corporate Report 20194

Corporate Report 20192017

History

Pacific Century Place
Jakarta completed.

2012

1991

Kandenko will mark the 75th anniversary of its foundation on September 1, 2019.

Tokyo Metropolitan
Government No.1 Building
completed.

This section presents the Company’s history of stably supplying electric power and supporting people’s
lives alongside postwar development in Japan.

TOKYO SKY TREE®, theworld’s highest selfsupporting broadcast tower
opened.

1981
September 1959
Late 1940’s
Large-scale transmission
line works gain momentum

Power distribution network
in Nepal upgraded.

The Company provides disasterrecovery support beyond its
jurisdiction in the wake of the
Isewan Typhoon

2014

July 1986

TORANOMON HILLS
completed.

The Company participated in
the Japanese Antarctic Research
Expedition for the first time.

March 20111978
New Tokyo International
Airport (current Narita
International Airport) opened.

1958
1947

The Company engaged indisaster recovery work
following the Great East Japan
Earthquake

Tokyo Tower
completed.

September 1984

Transport of power polesby hand-drawn cart

40th anniversary of establishment
The Company name is changed
to Kandenko Co., Ltd., and thecompany flag and emblem arealso changed.

Photo courtesy of Narita International Airport

NetNetsales
sales(Millions(Millionsof yen)of yen)600,000
600,000

1968

Net sales/Operating profit

Kasumigaseki Building
completed as the firstskyscraper in Japan.

Net sales

Operating profit
500,000
500,000

September 1944

OperatingOperatingprofitprofit(Millions(Millionsof yen)of yen)Kanto Denki Koji Co., Ltd., wasestablished.
Head office at 2 Tameikemachi,
Akasaka Ward (current Minato
Ward), Tokyo

400,000
400,000

30,00030,000300,000
300,000

20,00020,000200,000
200,000

10,00010,000100,000
100,000

0 0

0 0

1944
1944
5

KANDENKO

1950
1950

1955
1955

1960
1960

1965
1965

1970
1970

1975
1975

1980
1980

1985
1985

1990
1990

1995
1995

2000
2000

2005
2005

2010
2010

2018
2018
Corporate Report 20196

Corporate Report 2019

| At a Glance |Financial Information

Non-financial information
Operating profit

Net sales

Consolidated

563,550¥(Millions of yen)

447,673436,682

470,943507,205

30,012¥

millionConsolidated

563,550(Millions of yen)

26,39729,261

Profitmillion30,012

Number of employees

19,703¥

Consolidated

million(Millions of yen)

Consolidated

9,818

persons(Persons)

17,591

16,416

19,05819,7038,839 8,915

7,202

persons

9,244

2015

2016

2017

2018

2014

2015

2016

2017

2018

331

persons

Year-round recruitment

354

6,976 7,202
6,604 6,660 6,729

156

persons(Persons)

9,571 9,818

4,615
2014

New graduates(Persons)(Persons)

9,412

9,388

Non-consolidated

Number of new recruits

229

331

236

195

2014

2015

2016

2017

156

2018

100
Non-consolidated

493,128¥

million398,495

24,146¥

million410,192

444,452

17,084¥Non-consolidated

493,128
21,921

24,843

15,488

2016

2017

2018

ROE

Consolidated

2014

2015

2016

2017

496,088

¥

%

2018

2014

16,91917,084

2015

2016

2017

2018

Dividend / Consolidated

26

¥

8.5

4.9
506,0262.5

474,452
408,968
2015

Non-consolidated

2016

2017

496,088

14

2018

2014

2016

2017

2018

27.0

62.0

8.2

30.4
2014

2.2

2015

2016

2017

2018

2015

2016

2017

2018

2014

2015

Compared to fiscal 2014

%

(%)

4.3

KANDENKO

2015

Dividend payout ratio / Consolidated

(%)

7

14

Electricity usage

%

8.7

Gold

23.2

25.7

27.0

2016

2017

2018

Compared to fiscal 2010

SilverBronze%26

431,504

8.2
8.5

Number of Skills Competitions winners

Electrical
Installations

14

25

29

Information
Network Cabling

2

5

8

Plumbing andHeating

2

2

1

20

(Millions of yen)

2014

99

(Yen)

8.8

24

2014

Directors’ average attendance at Board of
Director’s meetings

Dividend /Dividend payout ratio

million(%)

8.8

2014 2015 2016 2017 20182014 2015 2016 2017 2018

3,806

New orders received

8.5

2014 2015 2016 2017 2018

7,480

6,824

2015

2014 2015 2016 2017 2018

74

56

24,146

12,6422014

million(Millions of yen)

(Millions of yen)

(Millions of yen)

389,193

Non-consolidated

67(4.5 )(28.5 )
%

%

(MWh)

23,532 23,018 23,141 23,116

22,463* In Electrical Installations, one first place winner and two second placewinners in the World Skills Competition.

2014 2015 2016 2017 2018

Corporate Report 20198

Corporate Report 2019

| Message from the Management |Think outside the box and take on aggressive
targets with bold ideas. With this resolve in mind,
Kandenko will move forward with business
operations toward becoming a 100-Year Company.
Fiscal 2018 Business Environment andBusiness Results
In the year ended March 31, 2019 (fiscal 2018), theJapanese economy was affected by U.S. protectionist
trade policies and a series of natural disasters but backed
by solid corporate earnings and a favorable employment
and income environment, it took a gradual path ofrecovery on the whole.
On the other hand, the business environment
surrounding Kandenko saw a lingering contraction trend
in electric power-related investment by the Tokyo ElectricPower Company (TEPCO) Group. Meanwhile, privatesector construction investment continued to increase withthe construction of factories intended for labor-saving
and greater efficiency, and reconstruction demand in
office and commercial buildings for replacement.
Against this background, Kandenko rolled out onestop sales to respond to the diverse needs of customers
and strove to improve productivity through thestandardization of the operational process, covering
stages from proposals to order intake and construction.
As a result, the Kandenko Group’s consolidated
business result for fiscal 2018 was as follows: net salesof ¥563,550 million (11.1% increase year-on-year),
operating profit of ¥30,012 million (2.6% increase year-

on-year), ordinary profit of ¥30,795 million (2.5%increase year-on-year), and profit attributable to ownersof parent of ¥19,703 million (3.4% increase year-onyear), which were record-high business results ever since
we began consolidated financial reporting. This wasachieved by a steady improvement in profitability ofGroup companies while the Company maintained
excellent results on a non-consolidated basis.

Outlook for Fiscal 2019 Onward andKey Management Policies
Looking ahead, from fiscal 2019 onward, we forecast
continued measures to squeeze electric power-related
investment. Meanwhile, domestic construction investment is
expected to remain at high levels on the back of a numberof large-scale redevelopment projects in the planningpipeline after the completion of Olympics-related projects,
along with the construction of factories and logistics
facilities owing to an upbeat trend in capital investment.
To respond to these conditions accurately, the Groupwill implement the key management policies shown
below on a group-wide basis to achieve sustained
growth into the future.
First, we will work to improve productivity byeffectively deploying work execution abilities and having

Fiscal 2018 Business Results
Consolidated results (Billions of yen)

Non-consolidated results (Billions of yen)

Net sales

New orders received¥496.0 (down 2.0% YoY)

Net sales

493.1 (up 11.0% YoY)

Operating profit

24.1 (down 2.8% YoY)

Ordinary profit

25.1 (down 2.5% YoY)

Profit17.0 (up 1.0% YoY)

Operating profit

Ordinary profit

9

KANDENKO

Chairman and Director

President and Director

Kiyoshi Goto

Yoshimi Morito

Profit attributable toowners of parent¥563.5 (up 11.1% YoY)

30.0 (up 2.6% YoY)

30.7 (up 2.5% YoY)

19.7 (up 3.4% YoY)

Corporate Report 201910

Corporate Report 2019

| Message from the Management |Progress of the Growth Strategy and Business Results Outlook

worksite support systems in place. At the same time, wewill pursue a range of profit-generating strategies
including further spreading cost management methods
and thorough reduction of operational unit costs bystrengthening procurement functions.
In parallel, we will seek to secure contracts by rollingout total solution services encompassing everything fromdesign and execution to maintenance and renovation ofbuilding infrastructures and aggressively expand into thefield of social infrastructure construction by making useof our technologies and expertise accumulated as a
general infrastructure company.
Next, we will move forward with the utilization ofadvanced technologies for higher safety, quality, andoperational efficiency, such as artificial intelligence, virtual
reality, and robots. Also, we will promote technologies
that may expand business fields such as upgrade of oursmall diameter pipe jacking method and the developmentof systems related to virtual power plants (VPP).
Furthermore, as a response to customer needs, we will
engage in research on quake resistance and lightning
damage countermeasures, and introduce the Internet ofThings to diagnose facility failures and energy use.
We will also develop human resources that bear our
future by implementing on-the-job training (OJT) that
contributes to skill development among young and mid-level employees and introduce training programs using IT.
In addition to the above, we will create a vibrant work
environment by promoting reforms for work practices
and annual leave systems and nurturing an open
workplace environment.
In parallel, we will stay closely attuned to contemporarysocial changes, from the full-fledged arrival of a society
based on long-lasting infrastructure and the progress ofelectric power system reforms to the decline in thedomestic working population. This will give us a new setof eyes in carrying out dynamic structural reforms inbusiness.
Finally, Kandenko will mark the 75th anniversary of its
foundation on September 1, 2019. We appreciate thesupport from all of our stakeholders including
shareholders, customers and business partners, and local
residents who have made it possible. To mark theoccasion of the 75th anniversary, we decided to pay acommemorative dividend of ¥2 together with an interim
dividend for a total annual dividend of ¥28 per share.
Going forward, Kandenko is committed to working as
one to ensure thorough compliance and further enhancesafety and quality while devoting all of its energy toestablishing a flexible and resilient corporate structure
capable of transforming itself to innovate the future,with the aim of achieving greater corporate value.

Fiscal 2019 Business Results (Forecast)
Consolidated results (Billions of yen)

Non-consolidated results (Billions of yen)

Net sales

New orders received¥516.0 (up 4.0% YoY)

Net sales

525.0 (up 6.5% YoY)

Operating profit

27.5 (up 13.9% YoY)

Ordinary profit

28.5 (up 13.2% YoY)

Profit19.0 (up 11.2% YoY)

Operating profit

Ordinary profit
Profit attributable toowners of parent
11

KANDENKO¥600.0 (up 6.5% YoY)

33.0 (up 10.0% YoY)

33.6 (up 9.1% YoY)

21.6 (up 9.6% YoY)

The Kandenko Group is now focusing on promoting
its growth strategy for the period from fiscal 2016
to fiscal 2020. Recently, as we maintain record-highlevels of work in hand, we have reviewed nonconsolidated numerical targets for fiscal 2020, thefinal year of this growth strategy, and revised ourtargets for new orders received from ¥610 billion to¥550 billion and net sales from ¥580 billion to ¥550
billion in order to promote orders that provide aneffective balance with our work execution abilities
and to take into account the fact that initiatives toreduce workloads such as reforms for work practices
and annual leave systems have been identified as
issues to be addressed.
With regard to non-consolidated profit targets
and consolidated numerical targets, our original
targets will remain unchanged in order to ensurethat initiatives for business activities which prioritize
profit acquisition and improving productivity arecarried out thoroughly and to promote an expansionof business fields and areas throughout the Group.

Numerical targets
Fiscal 2018 (Actual)

Fiscal 2019

Fiscal 2020

Consolidated net sales¥563.5 billion¥600.0 billion¥650.0 billion

Consolidated operating profit¥30.0 billion¥33.0 billion¥36.0 billion

New orders received (non-consolidated)¥496.0 billion¥516.0 billion¥550.0 billion

Net sales (non-consolidated)¥493.1 billion¥525.0 billion¥550.0 billion

Operating profit (non-consolidated)¥24.1 billion¥27.5 billion¥30.0 billion

Key Management Policies for Fiscal 2019
Focus on initiatives toimprove customer confidence

Focus on safety education and practices
that prioritize safety
Emphasize and entrench work rules

Reinforce profit-generating capacity
and ability to win orders

Focus on income/expenditures and cost management
Extreme reduction of controllable expenses
Implement sales strategy under theleadership of the Construction Headquarters

Develop technologies to support
business activities

Develop technologies to contribute to improving
productivity at the worksite by strengthening
internal and external coordination

Reinforce “people first”
principle to motivate staff and energize the workplace

Progress with structural reformof business

Reinforce human resources development
Promote reforms for work practices andannual leave systems
Create an open and free workplace
Establish maintenance and renovation
work as a major focus
Nationwide development in the field ofsocial infrastructure

Corporate Report 201912

Corporate Report 2019

| Business Model |The Company aims for the mutual prosperity of its customers and the communities where it works and finds its purpose in thispursuit. We are a general infrastructure company that conducts business in a wide range of fields from building infrastructure
to electric power infrastructure, and telecommunications infrastructure. Through its safe and high-quality facilities and services,
Kandenko will make a long-lasting contribution to society as a partner in social infrastructure.

Business Fields

Social issues
Reduction of energy costs
Prevention of global warming
Damage to infrastructure due to natural
disasters
Arrival of an aging society

Value to be Provided to Society

Electrical Engineering, Environmental Facilities and Systems, and Renovation WorkPower Distribution Line Engineering Work

The segment covers the design, construction,
maintenance, and renovation of electrical facilities,
air-conditioning and sanitation work for various
structures including office buildings, department
stores, theaters, hospitals, and factories.

The segment covers installation andmaintenance work of power distribution linesthat deliver electricity directly to households,
stores, and other customers.

Information & Communication WorkElectric Power & Civil Engineering Work

The segment is engaged in all types of works
related to information and communication,
including upgrades to optical fiber cable networks,
installation of transmission base stations formobile communications, and construction of
networks for cable TV and municipalities.

The segment is engaged in electrical work innuclear power plants, in addition to work on power
stations and substations, and on transmission lines.
Recently, the division covers the construction ofwind power plants and solar power plants, as well
as work on transmission line networks.

Correcting long working hours
Increase in cybercrime and accidents
etc.

Provision of comfortable living
environments
Stable supply of electric power
Provision of stable communication services
Restoration of infrastructure damaged bynatural disasters
Maintenance and updates for aging
social infrastructure
Energy-saving initiatives for building
infrastructure

Corporate Motto“People First”
Corporate Philosophy
1. Based on respect for humanity, Kandenko
fulfills its duty of corporate social
contribution and contributes to creatingricher human environments.
2. By anticipating the needs of customers andseeking technological innovation, Kandenko
provides optimal services and facilities.
3. By working for human resource development
and continual improvement, Kandenko aims
to be a future-oriented company.

For details, see page 15

Strengthsof theCompany

Technology

Experience

Researchanddevelopment

Quality

Customerconfidence

Corporate GovernanceFor details, see page 35

13

KANDENKO

Corporate Report 201914

Corporate Report 2019

| Business Review by Division |Electrical Engineering, Environmental
Facilities and Systems, and Renovation Work

New orders received(Millions of yen)

251,469

DescriptionofBusiness

Results of operations in fiscal 2018

Toshio Nakama
Executive Vice President and Executive Officer,
Division Manager of Sales Division

In fiscal 2018, we won a number of large-scale projects
including Tokyo Big Sight maintenance work (Tokyo),electrical work for the CR Building of Toshiba Memory
Iwate Corporation (Iwate Prefecture), and headquarters
building reconstruction planning for the Chiba Bank
(Chiba Prefecture). As a result, new orders received grew
0.9%, or ¥2,398 million from the previous fiscal year, to¥265,741 million, maintaining a result roughly on parwith the previous year.
Net sales retained double-digit growth of 13.4%, or¥31,479 million, to ¥266,520 million. Major projects
completed during the year include Marunouchi Nijubashi
Building new construction work (Tokyo) and plant
construction work for electricity and heat supply
operations in the Nihonbashi Muromachi area (Tokyo).
Construction contracts brought forward as of March
31, 2019, remained high, amounting to ¥302,234 million,a decrease of ¥779 million, or 0.3% year on year.

Expanding Renovation Work and Improving
Profitability at Worksites
The division of Electrical Engineering, Environmental
Facilities and Systems, and Renovation Work is the largest
segment of the Company in financial terms. In addition
to electrical engineering work on electrical facilities andcontrol equipment works for all types of buildings andstructures, the segment provides environmental facilities
and systems and renovation work such as air
conditioning, sanitation systems, water, heat, and disasterprevention systems. Redevelopment projects and factory
construction subcontracted by general constructors makeup about 60% of overall sales, while the remainder isdirect orders from property owners.
Our strength lies in the sales foundation in the Kanto
area that the Company has built throughout its history.
In order to keep defending our high market sharecentered in Tokyo, we will implement growth investment
KANDENKO

217,182

224,170

Fiscal 2014

Fiscal 2015

263,342

Fiscal 2016

266,520

265,741
235,040

Electrical engineering work: Work on electrical facilities and equipment inside alltypes of buildings and structures, building interiors, and control equipment
Environmental facilities and systems, and renovation work: Work on air
conditioning and sanitation systems as well as water, heat and disaster prevention
systems

Electrical Engineering, Environmental Facilities andSystems, and Renovation Work is a growth driver ofKandenko. We are focusing on expanding renovation
work and improving worksite profitability to raiseoverall profitability as we strengthen our operational
abilities to realize steady progress in construction.

15

Net sales(Millions of yen)

Fiscal 2017

Fiscal 2018

to enhance work execution abilities.
Amid the labor shortage faced by the entire
construction industry, the Company has succeeded insecuring much talent thanks to the recognition for its
brand and good working environment. This is anotherone of our strengths. We not only enhance our in-househuman resources but also work to build close
partnerships with subcontractors to secure work
execution abilities.
The division currently focuses on “expanding
renovation work” and “improving worksite profitability”
as key management policies.
Compared to new construction work involving fierce
competition for orders, renovation work is highly
profitable despite being small in monetary amount,bringing about an overall improvement in earnings as it
directly targets our many existing customers and leads.
In recent years, the amount of orders received forrenovation work has been increasing due to reinforced
sales structure to make proposals, which resulted in an
increased number of proposals. In fiscal 2018, theamount came to ¥139.7 billion, exceeding that for new
construction work.
As for “improving worksite profitability,” we provide
training to sales office managers in order for them tothoroughly control costs as well as income and outlays
while helping them improve management methods andshare information with an aim to increase cost
performance.

Driving growth and profitability
The Company aims to “establish a resilient corporate
structure” and “achieve high profitability” with a view tofulfilling the growth strategy covering the period up to theend of fiscal 2020. We recognize that the mission ofElectrical Engineering, Environmental Facilities and Systems,
and Renovation Work is to capture market share in thiscompetitive climate and drive growth and profitability. As
performance targets for fiscal 2020, the growth strategy
dictates consolidated net sales of ¥650 billion, and neworders received and net sales of ¥550 billion each on a
non-consolidated basis. This is based on the premise thatthe division further expands the volume of work it handles.
Our strategic pillar to achieve this is the promotion of
one-stop sales activities aimed at winning orders by

195,170

202,815

203,627

Fiscal 2014

Fiscal 2015

Fiscal 2016

Fiscal 2017

Fiscal 2018

handling electrical, air conditioning and sanitation system
work end to end. By receiving orders for multiple works
that call for high-level expertise in a one-stop process,we will be able to facilitate scheduling and field
operations and reduce costs while boosting sales
efficiency. This will benefit both customers and theCompany. With regard to the renovation work mentioned
earlier, we will seek to enhance sales performance andexpand new orders by using IT systems aimed atstrengthening our information gathering and proposal
capabilities.
While accumulating orders through theabovementioned initiatives, our policy for fiscal 2019(ending March 31, 2020) is to further focus on securing
work execution abilities and engineer training, aiming forsteady progress in construction works to bolster sales.
Spearheaded by the Sales Division, we will exert thecomprehensive power of Electrical Engineering,
Environmental Facilities and Systems, and Renovation
Work as a whole to raise productivity.

To become a segment that creates social value
for the future
In Japan, investment in construction and facilities isforecast to hit a peak ahead of the Tokyo Olympic andParalympic Games, however, the market is projected toretain a certain level of growth instead of shrinking
shortly after 2020. Under such an environment, theElectrical Engineering, Environmental Facilities andSystems, and Renovation Work segment plans tocontinue investment toward expanding new orders
received and accumulating net sales.
Our business has operational abilities capable ofproviding all types of facilities in places for living and forindustrial use. Moreover, in response to changes insociety, we are actively introducing cutting-edgeengineering technology and telecommunication
technology. Anticipating new fields with businesspossibilities opened up by such technologies that will
also meet customer needs, we will endeavor to keep
creating social value toward a more abundant future. At
the same time, we will raise the growth potential of ourbusiness so as to become a company of choice for all
stakeholders surrounding the Company including
customers and business partners.
Corporate Report 201916

Corporate Report 2019

| Business Review by Division |Information & Communication Work

New orders received

Net sales(Millions of yen)

(Millions of yen)

44,64640,051

DescriptionofBusiness

Develop proposals for and carry out installation and maintenance of informationand telecommunications systems, lay optical fiber cables for telecommunications
providers, install optical transmission equipment, build and maintaintransmission base stations for mobile communications, build and maintainnetworks for cable TV and municipalities, and maintain telecommunications
facilities for electric power providers.

Shinichiro Kitayama

Shigeyuki Uchida

Senior Managing Director, Executive Officer,
and Division Manager of Social Infrastructure Division

Senior Executive Managing Officer and Head of Information &Communication Unit

In the Information & Communication Work sector,
we need to keep up with fast-evolving
technological innovation. Acting as a catalyst forthe spread of 4K/8K satellite broadcasting andnext-generation mobile communications, thedivision aims to provide value appreciated by users.

Net sales retained double-digit growth of 11.0%, or¥4,139 million to ¥41,790 million owing to steadyprogress in construction works.
Construction contracts brought forward as of March
31, 2019, amounted to ¥21,753 million, a decrease by¥6,242 million, or 22.3% year on year.

Results of operations in fiscal 2018

Growth opportunities driven by technologicalinnovation and addressing its issues

During fiscal 2018, the division acquired orders such as
the Azumino Television Fiber-to-the-Home (FTTH) project(Nagano Prefecture) and digital system updating work forthe disaster prevention radio system in Misatomachi,
Kodama-gun (Saitama Prefecture). While large-scale
updating work for cable television operators and work formobile communications base stations were solid, orders
for upgrading work of highway telecommunications
networks and those by new customers were stagnant,causing new orders received to decrease ¥9,097 million,
or 20.4% year on year, to ¥35,548 million.
17

KANDENKO

The Information & Communication Work division
primarily engages in laying and maintaining optical fiber
cables for electric power providers andtelecommunications providers; building and maintaining
networks for cable TV and municipalities; and building
and maintaining transmission base stations. Sales are
divided almost equally among these three businesses.
Nearly 90% of our customers are telecommunications
providers, including cable TV. The business environment
is such that capital investment, especially in 4K/8K

30,080Fiscal 2014

35,54831,860Fiscal 2015

37,651
32,65027,876

Fiscal 2016

Fiscal 2017

Fiscal 2018satellite broadcasting and fifth-generation mobile
communication systems (5G), is projected to ramp up,
with anticipation for related construction demand.
In such a market where technological innovation brings
about growth opportunities, we have acquired orders bytaking advantage of our expertise in overhead line
construction work that we fostered as an electric
construction company working for the TEPCO Group,and manpower from operational abilities that include ourbusiness partners. In businesses related to cable TV
networks, we enjoy an excellent reputation for our
flexible proposals suited to the needs of each customer,
enabled by our status as an independent construction
firm not affiliated with any equipment manufacturers.
Meanwhile, as a construction company, we must
maintain technological capabilities sufficient to keep up
with progress made by manufacturers and vendors. As
such, the constant challenge for the division is that weneed to stay up to date with cutting-edge technologies
through collaboration with the research and development
division and external partner companies.
During fiscal 2018, in cooperation with ElectricalEngineering, Environmental Facilities and Systems, andRenovation Work, we promoted initiatives to win orders
by collaborative sales activity companywide in the field of
network construction work. Under this integrated system,
the Information & Communication Work division tookcharge of indoor communications network construction
for general construction projects, which are usually out of
its scope. We plan to continue the initiative aggressively
with the aim of utilizing the Company’s comprehensive
capabilities to expand market share.

Human resources development and contribution to profit
The two themes of “establishing a resilient corporate
structure” and “achieving high profitability” currently
upheld by the Company directly relate to initiatives tobuild up a future growth foundation for the Information& Communication Work segment. Through steady
implementation, we will contribute to realizing the
growth strategy.
The first thing the division needs to do to “establish
resilient corporate structure” is to develop highly skilledhuman resources. At the same time, we are tasked withstrengthening capabilities to respond to market changes
through alliance and collaboration with equipment

Fiscal 2014

Fiscal 2015

41,79031,596

Fiscal 2016

Fiscal 2017

Fiscal 2018

manufacturers and vendors dealing with advanced
technologies.
“Achieving high profitability” is a pressing issue for thesegment, which has been struggling in terms of
profitability. We must take on the challenge ofintroducing new management methods and businessmodels to raise profitability as much as possible.
Specifically, we plan to take the lead in launching new
initiatives and yield results in areas such as introducing
work management systems utilizing IT and developing
fee-based businesses such as post-completion
maintenance and operational support.
In conjunction with these missions, as one of its key
strategies, the division focuses on sales activities toenable independent cable TV operators to shift to FTTH,
and mainline construction works are on the rise.
Construction work is expected to increase in service lines
for subscribers after fiscal 2020 when the period under
the growth strategy runs its full course. The division willcontinue supporting the shift to FTTH. Another key
strategy is strengthening sales to mobile communication
providers. In addition to works to support 5G, we will
work on order-taking from a medium- and long-term
perspective, also targeting infrastructure development for
a new mobile phone carrier.
In fiscal 2019, we will focus on expanding new orders
received and net sales through these initiatives andincrease our contributions to profit.

As a medium for advanced technologies toenter the market
The business environment surrounding the Information &Communication Work segment will see technologicalinnovation invigorating the market and boosting demand.
Meanwhile, the effects of economic fluctuations are
expected to be mild. For this reason, stable andsustainable growth is anticipated for the medium to longterm, without experiencing rapid expansion upon the2020 Tokyo Olympic and Paralympic Games orsubsequent contraction, for example.
Looking further ahead, to provide value appreciated byusers, simply being a construction company that receives
orders from manufacturers would not be enough. We
aim to be a medium for advanced technologies to enter
the market and become an entity required by society.
Please look forward to our continued endeavors.
Corporate Report 201918

Corporate Report 2019

| Business Review by Division |Power Distribution Line Engineering Work

New orders received

Net sales(Millions of yen)

(Millions of yen)

130,700

DescriptionofBusiness

Fiscal 2015

Fiscal 2016

147,853

142,968

128,742

138,419

138,557

136,633

138,992

Fiscal 2015

Fiscal 2016

Fiscal 2017

Fiscal 2018

Work on underground power distribution lines: Construction and maintenanceof underground distribution lines facilities involving power cables underground

Shinichiro Kitayama

Mitsuru Fujii

Senior Managing Director, Executive Officer,
and Division Manager of Social Infrastructure Division

Executive Managing Officer
and Head of Power Distribution Department

Power Distribution Line Engineering Work is
the division that supports the stable supply ofelectric power with Japan’s leading operational
abilities and technology. With the mission ofachieving sustained growth, it will evolve withan eye to the year 2020 and beyond.

Net sales achieved year-on-year growth to ¥138,992
million, an increase by ¥2,359 million, or 1.7% year on
year owing to overhead power distribution lines thatmaintained results almost equal to the previous year andsolid performance in underground power distributionlines.
We secured construction contracts brought forward asof March 31, 2019, of ¥26,644 million, an increase by¥3,975 million, or 17.5% year on year.

Results of operations in fiscal 2018
In fiscal 2018, underground power distribution lines saw
an increase in new orders received that amounted to¥42,785 million, an increase by ¥4,653 million, or 12.2%
year on year. However, new orders received for overhead
power distribution lines were ¥100,183 million, adecrease by ¥9,538 million, or 8.7% year on year due tothe impact of a contraction in capital investment by the
TEPCO Group. As a result, new orders received for PowerDistribution Line Engineering Work as a whole came to¥142,968 million, a decrease by ¥4,884 million, or 3.3%
year on year.
KANDENKO

140,632

Work on overhead power distribution lines: Construction and maintenance ofoverhead power distribution lines facilities involving power poles with power cables

Fiscal 2014

19

139,234

Growth in underground lines with overheadlines as a foothold
Power Distribution Line Engineering Work is the division
engaged in the construction and maintenance of electric
power facilities. More than 90% of sales come from thework we receive from the TEPCO Group. There are two
types of works: overhead power distribution lines to fix
pole-mounted power cables in between power poles;
and underground power distribution lines for laying

Fiscal 2017

Fiscal 2018

cables underground. Over 70% of sales are fromoverhead power distribution lines and the rest is fromunderground power distribution lines. Works onoverhead power distribution lines involves the roughly
5.9 million power poles held by the TEPCO Group andhas maintained a relatively stable amount of work.
However, its volume is struggling, and the growth inunderground power distribution lines makes up for it.
Currently, for overhead power distribution lines, we areworking to receive general customers’ orders for
replacing streetlights with LEDs and power distribution
work for factory facilities. For underground power
distribution lines, construction works related to railways
and renewable energies are on the rise, taking advantage
of our strengths in civil engineering technology. In
addition, demand is growing for undergrounding of
power lines with the aim of strengthening disaster
resilience and improving scenic amenities in cities. An
increasing number of this undergrounding work is basedon orders from local municipalities, in addition to thosefrom the TEPCO Group.
Under such circumstances, growth opportunities forthe division stem from an increase in demand forunderground power distribution lines, such as
undergrounding of power lines and renewable energyrelated work. As for overhead power distribution lines,
although the TEPCO Group continues to curb capital
investment, its large-scale infrastructure still holds
considerable potential.
Meanwhile, there is a risk that regulations could be
imposed on construction work across Tokyo during andaround the time of the 2020 Tokyo Olympic andParalympic Games. Also, due to the nature of the workon power distribution lines, it is difficult to save labor or
streamline work with the use of robot technologies, forexample. Therefore, over the medium to long term,
major issues are foreseen in workforce shortage causedby the decline in the working population, and we needto share human resources across divisions by nurturingmultiskilled workers.

Reinforce profit-generating capacity and ability
to win orders
In the Company’s growth strategy, we believe that themission of the Power Distribution Line Engineering Worksegment is to secure the power to earn stable profits

Fiscal 2014

and realize sustained growth. To that end, the businessmust be developed by fully utilizing the division’s
resources such as its core technologies and abundant
human resources. While striving to maintain our work
execution abilities including those at business partners,
we will strengthen cooperation with other divisions.
In terms of profitability, while we are securing stableprofits owing to organizational streamlining and other recent
structural reform efforts, we will continue to focus onbuilding a leaner structure to contribute to the companywide target of “achieving high profitability.”
In order to achieve the targets upheld in the growthstrategy toward fiscal 2020, which are consolidated net salesof ¥650 billion and non-consolidated net sales of ¥550
billion, we must increase the scale of sales at our division.
The key policy for fiscal 2019 to that end is “Reinforce
profit-generating capacity and ability to win orders.”
Toward increasing orders from general customers, thedivision will roll out initiatives under a company-wide
cooperation framework based on shared sales information,
targeting priority areas such as renewable energy. At thesame time, we will strive for thorough profit improvement
through systematic project management.
Taking to heart the social significance of the division’s
operation, we will offer services that provide trust andassurance to society under the banner of “safety, quality,
and compliance.”

Toward securing sustained growth
Undergrounding of power lines, a promising field for thePower Distribution Line Engineering Work segment, isanticipated to pick up speed after the 2020 Tokyo
Olympic Paralympic Games. In light of this trend, thedivision’s medium- to long-term vision is to securesustained growth by diversifying orders from generalcustomers that we have expanded transactions with,aside from the basic work volume expected from theTEPCO Group.
With the largest construction workforce and numberof facilities in Japan, the division strives to maintain topnotch technology and cost competitiveness in Japan.
Going forward, we will foster multiskilled workers tofurther enhance the division’s strengths and use it as adriver to expand our business field nationwide beyond
Kanto area, with the ultimate goal of developing
internationally in the future.
Corporate Report 201920

Corporate Report 2019

| Business Review by Division |Electric Power & Civil Engineering Work

New orders received

Net sales(Millions of yen)

(Millions of yen)

50,184

DescriptionofBusiness

Power generation and transformation work: Work on power stations andsubstations, and wind/solar power generation
Transmission lines work: Work on overhead transmission lines
Civil engineering work and underground lines work: Work on undergroundtransmission lines, and civil engineering work using C.C. Box technology
Nuclear power work: Regular inspections and maintenance of nuclear power plantfacilities and equipment

Shinichiro Kitayama

Shuichi Yamaguchi

Senior Managing Director, Executive Officer,
and Division Manager of Social Infrastructure Division

Managing Director and Executive Officer, Head of Power Engineering Unit,
in charge of Strategy & Technology Development Division

The Electric Power & Civil Engineering Workdivision continues to expand orders on the backof increased redevelopments centered on urban
areas and the introduction of renewableenergy. Focusing on its specialty business fields,
the division will press forward with initiatives
to support a resilient corporate structure.

billion for two consecutive years.
Net sales also jumped to ¥45,824 million, an increaseby ¥10,697 million, or 30.5% year on year, as a result ofgrowth in power generation and transformation work,transmission lines work, and civil engineering work andunderground lines work.
Construction contracts brought forward as of March
31, 2019, came to ¥57,439 million, an increase by ¥6,005
million, or 11.7% year on year.

Results of operations in fiscal 2018
Major projects we won during fiscal 2018 include utility
tunnel relocation work for the redevelopment of the
Nihonbashi 2-chome area (Tokyo) and redevelopment
supply construction work in the Asamizodai and Araisonoarea (Kanagawa Prefecture). Also, in Hokkaido, we
received an order for large-scale construction work tobuild a transmission line network linked to a renewableenergy power plant. As a result, new orders received
amounted to ¥51,829 million, an increase by ¥1,645
million, or 3.3% year on year, achieving the level of ¥50
21

KANDENKO

Maintaining an end-to-end framework frompower generation to distribution
The business handled by the Electric Power & Civil
Engineering Work division is broadly classified into fourgroups: power generation and transformation work;transmission lines work; civil engineering work andunderground lines work; and nuclear power work.
Nonetheless, except for orders from the TEPCO Group,
most works are undertaken as joint projects based on

51,82945,82442,29936,23932,62931,004

Fiscal 2014

Fiscal 2015

Fiscal 2016

Fiscal 2017

Fiscal 2018

cooperation across multiple corporate divisions excluding
the nuclear power division. As such, our work cannot becompleted within a single construction category. In recent
years, the proportion of orders from the TEPCO Grouphas been on a significant decline, accounting for only
23.9% in new orders received during fiscal 2018, which isextremely low. In other words, the division receives morethan three-quarters of orders from general customers.
In securing orders from general customers, we mainly
target power intake and transformer equipment for large
factories that are known as extra-high-voltage
consumers, and we engage in collaborative sales activity
with the Electrical Engineering, Environmental Facilities
and Systems, and Renovation Work division. Anotherpriority target is power producers using renewableenergy. In addition to the construction of power plants,
we undertake the establishment of transmission line
networks. Meanwhile, initiatives to win orders from
customers other than the TEPCO Group are underway by
our Nuclear Power Work division that provides
inspections and maintenance of nuclear power plantfacilities and equipment. Currently, as project orders
continue on an upward trend as a whole, the volume ofthe division’s work in hand continues to be on the rise.
Our competitive edge lies in an end-to-end frameworkfrom power generation to distribution that hands off to
the Power Distribution Line Engineering Work division,
including construction work related to renewable energy.
Another advantage is that we do not only undertake
construction but also provide support from the design
stage. In terms of expertise, we believe that ourconstruction technology to manage high-voltage current
is one of the key differentiators.
Growth opportunities in the market are in the
expanding demand for renovation of various social
infrastructures such as electric power, gas, water andsewerage, and railways as they age. In addition to this,continued growth in demand is expected in the field of
renewable energy, as mentioned earlier.
To steadily seize these growth opportunities, we willsecure and develop a workforce so as to strengthen ourcapabilities in engineering and project management, witha view to brushing up our proposals to generalcustomers and facilitating smooth operation from design
to construction.

Fiscal 2014

36,41135,127

Fiscal 2016

Fiscal 2017

29,383Fiscal 2015

Fiscal 2018

Focus on renewable energy and urban redevelopment
One of the Company’s growth strategy themes“establishing a resilient corporate structure” from thedivision’s standpoint, is to determine focus business fields
and narrowing down the scope to a certain range. Thismeans that the division shall concentrate efforts in its
specialty business fields, such as extra-high-voltage
power intake and transformer equipment and renewableenergy, and enhance its capabilities in engineering anddesign, to contribute to a resilient corporate structure.
To work on the other theme, “achieving highprofitability,” we must step up our cost management uponstreamlining administrative functions under efficient business
operation based on a Regional Headquarters system.
In addition to extra-high-voltage power intake andtransformer equipment and renewable energy-related work
mentioned above, priority targets for expanding orders in
the field of social infrastructure include urban civilengineering required for large-scale redevelopment projects
centered on the Tokyo metropolitan area. Redevelopmentin Tokyo is anticipated to continue after 2020 and ourdivision has received many inquiries from customers.
Priority challenges for fiscal 2019 are improving profitabilityby thorough cost management and implementing systematic
measures to strengthen engineering. Also, this year we plan
to inject our construction workforce intensively mainly intolarge-scale projects with the aim of steadily advancing
projects to secure net sales.

Entry to overseas social infrastructure
As for the expanding potential of the Electric Power & Civil
Engineering Work segment, we are considering entry into
overseas social infrastructure centered on Southeast Asia. In
response to industry trends in Japan and circumstances ineach country, we intend to develop businesses starting with
the introduction of power supplies at industrial parks in
Vietnam, Thailand, Myanmar, and other emerging nations.
Given the population decline in Japan causing the market
to shrink over the long term, seeking growth opportunities
in overseas markets is an inevitable industry trend. The
division kicked off exchanges of personnel and technologies
with overseas design companies in an effort to foster global
human resources responsible for future generations.
By exerting our strengths in operational abilities andtechnology, we will extend our initiatives to supportsocial infrastructure.
Corporate Report 201922

Corporate Report 2019

| Research and Development Activities |Message from the Officer in Charge

The Research and Development Division that
supports technology is the core organization forvalue creation, the key to securing a competitiveedge in the market and contributing to sustained
growth of the business. Its steady efforts will
help Kandenko take the next leap forward.
Shuichi Yamaguchi
Managing Director and Executive Officer, Head of Power Engineering Unit,
in charge of Strategy & Technology Development Division

Mission and overview of the research anddevelopment division
The research and development division is an organization
responsible for the Company’s overall technicaldevelopment and improvement, and consists of theTechnology Development Unit established within theStrategy & Technology Development Division, with theTechnology Development Department and Technology
Research & Development Institute as subordinate
organizations.
In the growth strategy, the division is tasked withthree policies as its mission. The first one is “improvesafety, quality, and operational efficiency,” all of which
are elements that serve as the basis of the Company’s
operations. By supporting their company-wide
improvement, the division contributes to winning thetrust of customers.
The second mission is “catering to customer needs.”
We accurately grasp customer desires and develop
technologies to satisfy these needs. One recent example
is a backup power supply technology offered as a
response to business continuity plans.
The third is “business field expansion.” We take charge
headfirst into new fields to seize growth opportunities

Fiscal 2018 Basic Policy on Technology Development

Fiscal 2018 Basic Policy on Technology Development“Aim to improve productivity at worksites
by utilizing digital technologies and prefabrication!”and create value. One such example is our entry into
virtual power plants (VPP), which has just started.
The division is made up of a total of 58 persons
comprising 22 persons in the Technology Development
Department and 36 persons in the Technology Research& Development Institute as of March 2019. An
intellectual property team is also included in theorganization, which is in charge of administrative work
related to intellectual properties of the Company. The
division’s business is wide-ranging. In addition todevelopment operation on a computer, we accompany
sales staff on visits to customers when making proposals,
and respond to requests for support or cooperation fromthe worksite and customers. As fiscal 2018 saw theoccurrence of many natural disasters such as earthquakes
and lightning strikes, we responded to reports on facility
damage and rolled out proposal activities in cooperation
with the sales division in accordance with the reports.

Technology development needs towardachieving the growth strategy
For fiscal 2019, we formulated priority action items foreach type of technology development as follows, inaccordance with the three policies mentioned earlier.
For “technology development to improve safety,
quality, and operational efficiency,” we endeavor todevelop IT-based worksite support systems, prefab
technology to boost productivity at worksites, utilizationof research in advanced technologies such as virtual
reality and augmented reality, and technologies tosupport construction.
For “technology development to cater to customer
needs,” we focus on research of technologies designed
to support business continuity plans and electromagnetic
compatibility and sales tools for telecommunicationsrelated work.
For “technology development to support business field
expansion,” we engage in a demo project to build VPPs
utilizing consumer-end energy sources, advanced
technologies using the Internet of Things, big data andartificial intelligence, construction technologies tofacilitate undergrounding of power cables, and researchof technologies for energy management of air
conditioning systems.

The priority action items above relate to each strategic
theme of “strengthening sales base,” “business field
expansion,” “stable supply of electric power,”“manpower,” and “investment to boost work execution
abilities,” all of which are technology development needs
toward achieving the growth strategy.

Gains from coordination within and outside
Kandenko
Coordination within and outside the Company is an
important process for the research and development
division to promote technology development. Outcomesof technology development will be proactively utilized as
intellectual property information with information relayed
to worksites. Also, we strive to enhance and acceleratetechnology development through industry-academiagovernment collaboration with universities, research
institutes, and other companies possessing highly
specialized skills and advanced expertise.
We intend to continue promoting such collaborations
actively as they are expected to produce newdevelopment themes and expand business fields.

Creating new business fields and new value
Business field expansion, the theme currently undertakenby the Company, requires the research and development
division to think autonomously and conduct development
toward creating new value.
However, the division has long dedicated itself todevelopment and improvement in response to requests
from worksites. Therefore, in order to engage in researchand development more independently, our Technology
Development Unit, a team in charge of research anddevelopment, and the Strategic Business Unit, responsible
for business development, have been collocated within theStrategy & Technology Development Division. This
framework enables mutual cooperation that will open up
opportunities to create new business fields and new value.
In order for Kandenko to survive as a leading company
into the future, systems are required to foster the
independent creation of something new and develop
new businesses. Our division strives to function as abody that supports that system and contributes to thesustained growth of the Company.

R&D expenses (Millions of yen)
1,381

1,024

Improving productivity
at the worksites

Enhancing safety
and labor-saving

Customer needs

1,093

1,188

1,217

Fiscal 2016

Fiscal 2017

Business field expansion

Provide technical support and cooperation to worksites and customers
Fiscal 2014

23

KANDENKO

Fiscal 2015

Fiscal 2018

Corporate Report 201924

Corporate Report 2019

| Research and Development Activities |Research and Development System
To respond to issues at the worksite and customer needs, the Kandenko Group is focusing on four key areas: technology
development to support the improvement of productivity at worksites; technology development to enhance safety andlabor-saving; technology development to cater to customer needs; and technology development to support business field
expansion. In fiscal 2018, our R&D was guided by the idea of “aim to improve productivity at worksites by utilizing digitaltechnologies and prefabrication.” In particular, as technologies to contribute to improving productivity and enhancing
labor-saving at worksites, we actively promoted research of prefab technologies for worksite operations, technologies using
IT and robots, and technology development for undergrounding of power lines to support business field expansion. At thesame time, we worked to strengthen technology development through collaborations with parties in industry, government,
and academia, as well as with group companies.
Consolidated R&D expenses in fiscal 2018 totaled ¥1,381 million. Please note that R&D expenses are not broken down
by business segment.

Technology Research & Development InstituteHigh-Voltage Laboratory

The Technology Research & Development Instituteconsists of a research building, experiment building, andoutdoor testing site. In the laboratories of the experimentbuilding, we conduct basic experiments to establish new
systems and construction technologies, experiment totest the strengths of materials and tools and conduct
verification tests for development results. The institutealso houses an anechoic chamber, shielded room,
blackout curtain device, and other experimental
equipment utilized for developing construction
technology for electrical facilities, communication
facilities, and air conditioning and environment facilities.

The High-Voltage Laboratory is made up of a test room,physical test room, working room, and outdoor watertank used for voltage resistance tests. In the test room,
we have large-scale experiment devices, including a 350
kV-AC voltage generator, a 1,800 kV-impulse voltage
generator, and a high current generator.

Examples of Initiatives
Research of prefab technologies to improve
productivity at worksites
Of the operations of processing, assembly, and installationthat are conducted at indoor electrical engineering
worksites, we established an off-site factory forprocessing and assembly. Aside from this, by further
promoting research of EPS prefab technology andintegrated construction methods for power panels andoutdoor units, we are working to improve productivity
through enhancing labor-saving and efficiency ofworksite operations. Also, a worksite support system will
be built in the future to enable drawing datatransmissions between worksites and factories, thereby
further improving worksite productivity.

Development of overhead cabling robots
In the renewal work of overhead power distribution lines,
efficient and safe cabling to messenger ropes is key, which
has been difficult in wooded sites with poor visibility or
locations that are not easily accessible, such as
mountainous areas or when crossing a gorge. In response,the division developed a self-propelled overhead cabling
robot with excellent traveling performance and towing
capability that can make use of existing low-voltage
distribution lines and can be operated remotely. We plan
to utilize this robot to enhance safety and labor-saving inengineering work on overhead power distribution lines.

25

KANDENKO

Development of device for laying small diameter curbed
pipes—a technology for undergrounding power lines
When laying branch circuits for use by major corporate
consumers that are directly connected to core powerlines without involving power poles, an open-cut method
has been traditionally used, where excavation is carriedout on the ground. This method had difficulty in gaining
the understanding of local residents for excavation in thepremises of corporate consumers, as well as presenting
issues in labor and time required for removal andrestoration of obstacles such as walls and concrete floorslabs. In response, we improved existing methods anddeveloped a device for laying utility tunnels with adiameter of 80mm LEP, without digging into the ground.
As the device is expected to not only enhance laborsaving in utility tunnel excavation work but also reduce
consumer burden, we aim to expand orders for work on
the undergrounding of power lines, an area where
further growth in demand is anticipated.

Development of semi-automated device forattaching snow resistant rings
Attaching of snow resistant rings used in transmission
lines work is a meticulous operation requiring labor andtime, where electricians must sit on wires and attacheach ring by hand. It was also difficult to reduce
operation time as it calls for attention to prevent the fallof materials and tools. In response, an automated device
for attaching snow resistant rings was developed jointly
by the Company and group companies, with the aim of
streamlining and speeding electricians’ overhead wiring
work done in midair. We will deploy this device toenhance labor-saving in work on transmission lines.

Corporate Report 201926

Corporate Report 2019

| CSR Report – Environmental Initiatives |The human race has enjoyed many benefits of industrial and economic development, but these benefits
have come at the cost of global warming, pollution, and ecological destruction. A great burden has thus
been placed on the global environment.
Coexistence with the natural environment, the foundation of our existence, is essential for any
healthy society. This is also a theme that we must continually keep in mind in our business activities.
At Kandenko, we take the long-term view that it is corporate management’s vital social responsibility
to have an environmental vision leading to the creation of a sustainable society. We will do our part toleave a safe, sound environment for future generations by implementing initiatives that reduce theburden on the environment.

Safety, Environment & Quality Committee

President

Basic Policy on the Environment

Head Office
Safety & Environment Division

To realize a sustainable society, the Company strives for
management in which business activities are in harmony
with nature from a long-term view in every situation as a
general infrastructure company.

Activity Plan
1. We will follow environmental legal regulations andreduce environmental risk to fulfill our corporate social
responsibility.
2. To realize a low carbon, recycling-based society, we will
work to conserve energy, save resources, promote recycling,
and prevent pollution through development, design, andexecution of environmentally-conscious technologies.
3. We consider environmental conservation to be an
important management issue. We are committed tomaking continual improvements to our environmental
management system (EMS).
4. We will educate all employees who engage in ourbusiness operations about the environment and raise
their environmental awareness.
5. We will build bridges of cooperation to regional society andcontribute to creating a society considerate of biodiversity.

Structure for Promoting the Environmental
Management System
To facilitate a deep review of its policies and initiatives in
the field of environmental conservation activities,
Kandenko appoints a Safety, Environment & Quality
Committee chaired by the company president. Under thecontrol of the Environment Department of Safety &Environment Division, the departments set up to promote
environmental activities are as follows: in theConstruction Headquarters, the Safety & Environment
Department; and in the Regional Headquarters, theSafety & Environment Team of the General Control
Department, and the Safety & Environment Group.

27

KANDENKO

Main department
Environment Department

Construction Headquarters

Responsible department

Sales Division
Social Infrastructure Division

Safety & Environment Department

Regional Headquarters
Tokyo Sales Division
Kitakanto & Hokushinetsu Sales Division
Higashikanto Sales Division
Minamikanto & Tokai Sales Division
Nishikanto Sales Division
West Japan Sales Division

Regional Headquarters
Fukushima Division

Responsible department
Safety & Environment Team,
General Control Department

Examples of Initiatives
Introducing green electric power
Assenting to the wide use ofgreen energy, the Company
commissions power generationfrom natural energy sources of
1,000,000 kWh per year
(standard generated energy) toJapan Natural Energy Company
Limited, based on a Green
Energy Certification System. Thisis equivalent to about 35% of
the electric power consumed by
the Kandenko head officebuilding in fiscal 2017.

Promoting green purchasing
Kandenko engages in green purchasing activities withrespect to materials used at its offices and worksites,
including stationery, office supplies, office machinery,furnishings, and uniforms. To prioritize purchasing ofenvironment-friendly eco-products, Kandenko bases its
initiatives on a set of green purchasing guidelines.

Electric energy-saving initiatives
Responsible department
Safety & Environment Group

Initiatives to Reducethe Environmental Burden
Amid intensifying global environmental issues, we believethat we can contribute to protecting the soundbiodiversity of the ecosystem and realize a sustainable
society by implementing systematic and efficientenvironmental conservation measures in all aspects ofour business activities.
In addition to promoting environment-friendly
procurement, Kandenko’s initiatives for environmental
conservation include efforts to reduce consumption of
resources and energy and measures to improve industrial
waste recycling rates and convert waste into valuable
resources. By ensuring strict compliance with environmental
laws and regulations, we are also working to eliminate
environmental risk, enhance environmental awareness, andfurther integrate environmental conservation activities. As acorporate member of a recycling-based society, Kandenko
seeks to create a rich human environment and implement
unceasing innovation, contributing in this way to activities
that conserve the global environment.

Kandenko provides a service known as Kandenko EcoBusiness to respond to the many and diverse needs ofcustomers in the field of environmental burden reduction.
Covering customer facilities such as electric power, airconditioning and sanitation systems, IT networks, andsecurity systems, it offers a one-stop service from
inspection, diagnosis and planning, to design, installationand maintenance to promote energy-saving and CO2
reduction at customer facilities.
Kandenko’s business bases are fitted with an energysaving office lighting control system that uses daylightsensors to detect the strength of daylight from windows
and personnel sensors to detect human movement andthen adjusts the amount of artificial light provided
accordingly. Kandenko has additionally introduced
energy-saving facilities such as LED lighting, ice-based
thermal storage air conditioning systems, and its hotwater supply system for industrial use: EcoCute Q.
Kandenko’s other energy-saving activities include
switching off unnecessary lighting and avoiding wasteful
air conditioning settings that result in excessive coolingor heating of indoor spaces.

raise the fuel efficiency of all vehicles, employees haveworked in concert to promote eco-driving.
Concurrently, Kandenko is promoting the introductionof electric vehicles, which have outstanding
environmental performance features such as no CO2emissions during operation, and hybrid vehicles, whichhave excellent fuel efficiency.

Power generation business
Generation of electricity from wind and solar power is inprogress as a way to utilize natural energy. The Company
has engaged in the design and construction of numerous
solar and wind power generation systems and participatedin experimental studies of renewable energy in andoutside Japan. Leveraging our accumulated technologies
and expertise, we operate a power generation businessusing renewable energy since fiscal 2012.

Power plants in operation (Excerpt)
Maximum output
ChoshiWind Power Plant
Yagi Wind Power Plant

13.5 MW

(9 windmills with acapacity of 1.5 MW each)

9.0 MW(6 windmills with acapacity of 1.5 MW each)

Location
Choshi-shi, Chiba
Choshi-shi, Chiba

Shiraoka
Solar Power Plant

1.5 MW Shiraoka-shi, Saitama

Kaminokawa
Solar Power Plant

1.75 MW

Kaminokawamachi,
Kawachi-gun, Tochigi

Sosa Solar Power Plant

1.5 MW

Sosa-shi, Chiba

Shin-Koga
Solar Power Plant

1.5 MW

Sakaimachi,
Sashima-gun, Ibaraki

Ushikuma
Solar Power Plant

1.5 MW

Kama-shi, Fukuoka

Kama
No.1 Solar Power Plant

13.75 MWKama-shi, Iizuka-shi,
Fukuoka

Kama
No.2 Solar Power Plant

5.0 MW

Kama-shi, Fukuoka

Maebashi
Biomass Power Plant

6.75 MW Maebashi-shi, Gunma

Net sales(Millions of yen)

4,271

2,970
2,408
1,864
939

Vehicle energy-saving initiatives
Kandenko employs a large vehicle fleet consisting mainlyof work vehicles such as aerial work platform trucks andother vehicles to transport materials and equipment. To

Mar. 2015

Mar. 2016

Mar. 2017

Mar. 2018

Mar. 2019

Corporate Report 201928

Corporate Report 2019

| Employee Initiatives |Under the corporate motto of “People First,” the Company strives for “human resources development,”“reforms for work practices and annual leave systems,” and “creation of an open workplaceenvironment.” Through these measures, we work to realize a working environment where each
employee can take an active role by fully realizing their potential.

Training Programs
OJT training

Basic Policy on Human Resources
Development
While continuously nurturing a “professional workforce
trusted by society and customers” necessary for sustained

Personnel We Aspire to Be
1. Professional workforce trusted by society andcustomers

growth, the Company will develop and raise the

Human resources committed to a mission to live up

capabilities of each employee.

to the trust and expectations of customers and

OJT training is a program whereby senior employees in theworkplace encourage junior employees to acquire businessabilities by providing guidance on practical knowledge and skills
in daily operations.
OJT training is also important as a way for expert employees
to pass on technologies and skills to young employees.
(Status of implementation)
OJT leadership training (Held 9 times, attended by 168
employees)
Review of the OJT system status through worksite visits (45 sites)

ActionPlan

Improvement

Formulation of plans
Human
resourcesdevelopment
through OJT

Check

Do

Evaluation and validation

Implementation of training

make contributions to society

Outline of Initiatives
for Human Resources Development
The Company has continuously worked to establish
systems to develop excellent human resources.
An outline of specific initiatives is as follows.
1. Personnel development
OJT: Guidance and training through workplace operation
Group seminars: Training for professional expertise and skills
Self-development: Support upskilling of employees,
such as acquisition of qualifications
2. Development of a workplace culture andenvironment that fosters human resources
3. Development of a human resources development
system (standardization of development methods)

Developmentof personnel

Continuous humanresourcesdevelopment
Developmentof human
resourcesdevelopment
system29

KANDENKO

Developmentof workplaceculture andenvironment

Human resources equipped with high skills necessaryGroup seminars

to provide the best services and facilities

Group seminars are held for the purpose of equipping
employees of the Company with the necessary skillscommensurate with their positions.
We seek to upskill each employee by classifying theminto new employees, mid-level employees, and employees
in managerial positions.

Human resources respecting diverse values to copewith changes in the times and ceaselessly striving forself-development and ingenuity
2. Workplace culture and environment that foster
human resources
A workplace where everyone can learn from eachother and grow together

Category

Level

Division

Duties related to construction,
sales, and administration

A workplace where employees can speak andconsult with others frankly
A workplace where each employee can exert theirown abilities(Status of implementation)
Reducing the period of training for Electrical Engineering
Work through curriculum review (from 83 days to 75 days)
Holding training that can be attended by affiliatedcompanies and business partners
Enhancement of curriculums regarding interpersonal skills targetedat young employees (improvement of communication skills)

New employee training

Specialized training
Duties related toconstruction

Duties related to sales

Introductory training
Technical training

1 - 2 years

Basic training

3 - 4 years

Intermediate training

New salesperson training
Salesperson basic training
Design training,
estimation training, etc.

5 - 7 years

Advanced training

8 - 10 years

Special advanced training

Team leader level

Team leader training

Assistant section manager level

Assistant section manager training

Section manager level

Section manager training

Department manager and deputy
department manager level

Training for next generation leaders

Self-development
In acquiring national qualifications required for duties,
the Company provides various support to employees who
are willing to learn and grow on their own. Support
includes in-house seminars and bearing expenses forcorrespondence education programs, external workshops,
and examinations.

Salesperson specialized
training

Examples of qualifications recommended by the Company

1st grade construction managing engineer
Third-class chief electricity engineer
Professional engineer and associate professional engineer
Fire defense equipment officer
First-class electrician
Construction accounting specialist
Corporate Report 201930

Corporate Report 2019

| Employee Initiatives |Examples of Initiatives

Reforms for Work Practices and Annual
Leave Systems
To realize a company where each employee can work
energetically in every workplace, the Company promotes
various work practices and annual leave systems aiming
to shorten total working hours while enhancing thehealth management of employees.

Basic policy
Leading and implementing reforms by managers
including executives
Shifting to a work-life balance mindset
Strengthening the industrial insurance system andencouraging self-care obligations

Priority items and issues to be addressed
Priority items
1. Proper
managementof work hours

3. Implementation oflabor management
education

2. Thorough management of
employees working long hours

5. Enhanced healthmanagement

Managers

4. Shift to well-balanced
work practices

K. Assertion

Initiatives to Promote Diversity

To create a workplace environment with greater
openness, the Company is currently engaging in “K.
Assertion” activities under the slogan of “Voice yourfindings and appreciate voices.” Assertion* is acommunication method to develop smooth relationships,
and the Company’s understanding of assertion is “torespect oneself and others, and frankly voice findings,
questions, and opinions.” Continuous promotion of thisactivity will encourage proactive communication among
employees and solidify relationships of trust. Also, theactivities will improve work quality and productivity as
they strengthen inter-organizational cooperation and aid
in preventing disasters and accidents.

In October 2018, Kandenko established a Diversity
Promotion Team. So that each employee can demonstrate
his or her capabilities irrespective of gender, nationality, age,or bodily features, we are working to develop vigorous
personnel and a workplace environment in conjunction with“reforms for work practices and annual leave systems” and“measures for human resources development.”
Also, by respecting the diverse ideas of employees, we
aim to raise corporate value and become a company thatwill continue to be trusted.

*Assertions are communication skills to assert oneself properly withoutcausing distress in other persons. Generally, disparities in position makeit difficult to assert oneself, but using this skill enables frankcommunication based on mutual respect, without superiors imposing
their opinions on others or subordinates feeling timid. This provides
additional assurance to employees in the workplace that they areallowed to voice their questions and opinions.

(Outline of activities)
Issuing messages from executives on a regular basis
Making activities known internally and raising awarenessby displaying posters and distributing leaflets
Implementing practical assertion training at group seminars,
etc.
Implementing assertion through practical operations
Superiors

Facilitatecommunication

Employees

Speak out

Human resources development
Health management

Superiors

Subordinates

Create an affable atmosphere
Interorganizational
cooperation

Major initiatives
Scheduled grant of annual paid leave(2 days)Established Work and Leave Restyling
Committees at all branches

Average numberof paid leave
taken in fiscal
2018: 9.3 days

Held 126 briefings on work hours at all offices
etc.
31

KANDENKO

Achievingan openworkplaceenvironment

Prevention ofdisasters andaccidents

Promoting the advancement of women
The Company has been promoting the Project toPromote Female Advancement as an action plan tofurther promote the advancement of female employees
since fiscal 2016. An overview and major initiatives ofthe project are as follows.
Period of the Action Plan

Basic Policies of Initiative

Proper management of work hours
Facilitate acquisition of days off and vacations

We take up LGBT at workplace training to educate andraise awareness on the issue.

Action Target

Show
appreciation
Listenattentively

Encourage and support promotion of various human resources

Inclusion of LGBT

A fourfold or more increase (32 or more people) in the numberof women in managerial positions to the end of fiscal 2020.

Issues to be addressed

Operational improvement

To step up diversity promotion, we engage in initiatives for
employment and advancement of persons with disabilities.

April 1, 2016, to March 31, 2021

Make a request

Correcting long working hours

Promoting employment of persons with disabilities

Deterring power
harassment
Active communication

Improvement of work quality
Improvement of productivity

Improvement in Workplace Culture and Awareness
Create a workplace culture and awareness thatappropriately values and rewards people who work hardregardless of gender.
Expansion of Assigned Duties and Development ofProfessional Abilities
Roll out initiatives to expand the range of duties assigned
to female employees, for instance by promoting theadvancement of women at engineering worksites, andcreate an environment in which employees can take theinitiative in developing their professional skills.
Enhanced Support for Work-Life Balance
Achieve a workplace environment that supports both male andfemale employees who continue working while raising children.

Kurumin Accreditation Mark Recognizing Support for Child-Rearing
In 2015, Kandenko was recognized by the Tokyo Labor
Bureau as a company that supports child-rearing with theaward of the Kurumin Mark.
To be recognized as a company that
supports child-rearing, companies mustmeet a certain set of conditions, including
the formulation of an Employers’ Action
Plan in accordance with the Act on
Advancement of Measures to Support
Raising Next-Generation Children andachievement during the plan of a target
figure for female employees taking childKurumin logo
rearing leave.
Kandenko received the accreditation mark in recognitionof achievements during the five years of the plan startingfrom 2010, which included the introduction of a child-rearing
leave system that exceeds the legal requirement andrelaxation of the qualifying requirements for a maternityfriendly work pattern.
Participation in Science and Technology Challenge*
Since fiscal 2016, we have participated in the Science andTechnology Challenge—an initiative organized by theJapanese Cabinet Office and the Japan Business Federation—by actively supporting female students in their choice of
career paths in the fields of science and technology.

女子高校生・女子学生の理工系分野への選択

http://www.gender.co.jp/c-challenge/about_rikochalle/index.html(in Japanese)* Through initiatives led by the Gender Equality Bureau of the Cabinet
Office, the Science and Technology Challenge supports female students
interested in the fields of science and technology, who are taking on thechallenge of a related career path based on a clear vision of their future.

Held Forum for Female Technical and Engineering Staff
We hold lectures and seminars with an aim of reforming
the awareness of female employees appointed at worksites
and to expand the range of their duties. The lectures andseminars also serve as a networking opportunity for them.
Held Seminar for Employees Taking Childcare Leave
We provide a venue for information exchange regarding childrearing and casual communication to parenting employees. We
support them in balancing work and child-rearing through easing
their anxiety about returning to work and sharing problems.
Compilation of Support for Work-Life Balance Handbook
As an aid to supporting employees’ work-life balance, thehandbook provides various information such as in-housesystems related to child-rearing and sends messages tobosses who are working with junior colleagues preparing
for maternity leave and child-rearing leave.
Corporate Report 201932

Corporate Report 2019

| CSR Report – Coexistence with Society |Kandenko maintains that it “fulfills its duty of corporate social contribution and contributes to creatingricher human environments” as one part of our Corporate Philosophy, and we are dedicated to promoting
CSR management throughout the Group and contributing to the sustainable growth of society.

Responding after natural disasters occur
Kandenko believes that, as part of its social responsibility as
a company that is involved in supplying public utilities, it isour duty to devote all of our strength to the expedited
restoration of electrical infrastructure for the stable provisionof electric power in the event of a disaster. We would liketo take this opportunity to introduce initiatives we
implemented following the Great East Japan Earthquake.

March
2011

May
2012

The Great
East Japan
Earthquake

February
2014

Damage by

September heavy rain in
Kanto &
2015

August2016

Damage by
Kumamoto
Earthquake(Indoor electricalengineering)

Damage by
Typhoon No.9

Damage by

September tornado in
Saitama &2013

September- Damage by
October Typhoon
No.21 & 24
2018

Chiba

Social contribution activities

Kandenko aims for social contribution through sports
promotion and serves as an Official Partner in sponsoring
the “All-Japan High School Rugby Football Championship”
organized by associations such as the All Japan High School
Athletic Federation and the Japan Rugby Football Union.
Through sponsoring this championship, held atHanazono Rugby Stadium, the representative symbol ofhigh school rugby, we support the development of Japan
rugby and the futures of the high school students whowill carry the rugby world forward.

“The MICHINOKU Future Fund”
Sponsored events
The 97th Championship
The 98th Championship

Golf lessons for children, the “Green
Classroom of the Future”
Kandenko sponsors three major national open tournaments
in Japan organized by the Japan Golf Association (JGA) andgolf lessons for children, the “Green Classroom of the
Future,” which are held during these tournaments.
The “Green Classroom of the Future,” a project thataims to support the physical and mental development ofchildren who will lead the next generation, is an event
where participants can experience the fun and sense ofaccomplishment of golf under the guidance of professional
golfers through a series of lessons that use SNAG Golf toteach those who have yet to fully experience golf.

The Mount Fuji Reforestation Project
The Mount Fuji Reforestation Project was undertakenwith the goal of protecting the nearly untouched forest
ecosystem, fearing the loss of Mount Fuji’s rich forest
resources and the natural ecosystem. (Operated by theOrganization for Industrial, Spiritual and Cultural
Advancement (OISCA), a nonprofit foundation)
Kandenko has participated in these activities since 2017,
through which Kandenko employees and their families haveassisted in efforts such as tree planting and the installation ofnets to prevent damage from feeding deer. Participants comeand listen to talks on the natural environment of Mount Fuji,
and raise their awareness of environmental protection while
deepening their understanding of Mount Fuji.
Activities in the past
Participants

Activities

May 2017 123 persons Tree planting, installing nets to prevent damage from feeding deer
May 2018 252 persons Installing nets to prevent damage from feeding deer, forest thinning

33

KANDENKO

The “Kyu-Can-Cho Project” is amovement to collect stockpiled
canned bread before its expiration
date and deliver it through NGOs as
relief supplies to people suffering from starvation aroundthe world. This bread is delivered to disaster-affectedareas in Japan as well, and the empty bread cans arealso designed so that they can be used by the recipientsas cups or bowls.

TohokuApril
2016

Damage bytornado in
Northern
Kanto

Damage by heavy
snow in Gunma

Sponsorship of the “All-Japan High School
Rugby Football Championship”

Activities in the past
Participants

Location

September 201721 persons

Miyawaka-shi, Fukuoka

July 201830 persons

Tomakomai-shi, Hokkaido

Participation in the “Kyu-Can-Cho Project”
As one of our CSR activities, Kandenko participates inthe “Kyu-Can-Cho Project” (Canned help bird project), a
project initiated by PAN AKIMOTO CO., LTD. to help fightagainst world starvation, and we have stored 1,500 cansof bread in our head office.

Charitable Foundation, The
MICHINOKU Future Fund provides
full funding for enrollment fees andtuition fees of children who losttheir parents in the Great East
Japan Earthquake to continue their education after
graduating high school (university, junior college, andtechnical school), with no repayment required. This fundwas established by three private companies in 2011 andhas been operated by four companies since April 2013.
Kandenko has participated in the fund since fiscal
2016 and made regular donations. We believe that
supporting children in holding on to their dreams andgoals without giving up on their education will help to
support the process of recovery.

“KIDS EARTH FUND”
Since its establishment in 1988,
KIDS EARTH FUND has
sponsored and carried out the
distribution of art supplies,
picture books, and donations
for children throughout theworld who suffer from theresults of disease, war, anddisasters.
The fund conducts “Kids
Helping Kids” activities anduses proceeds to support
children afflicted by poverty
who are unable to afford
schooling.
Kandenko supports these“Kids Helping Kids” activities
by publishing pictures drawn
by children in its corporate
calendar.
Corporate Report 201934

Corporate Report 2019

| Corporate Governance |Corporate Governance System

Corporate Governance
As Kandenko’s operating environment changes dramatically, we are working to make management more efficientand transparent while ensuring the fairness of business execution. We realize that Kandenko’s continued existence as

Gener al Meet ing of Shar eholder s

a company with high value to its stakeholders depends on a robust corporate governance system. We are therefore
unstinting in our efforts to strengthen corporate governance.
Appointment, dismissal

Basic Corporate Governance Policy

ReportAppointment,
dismissal

ReportIn keeping with the content and the spirit of the Corporate Governance Code established by the Tokyo Stock
Exchange, Kandenko implements a basic corporate governance policy that sets out its basic approach with the aim ofReportDecision-making, monitoring and oversightenhancing the practical effectiveness of corporate governance.

Board of Directors (Directors)

Outline of the Current Corporate
Governance System

the Audit & Supervisory Board members with the
Auditing Office to enable the complete and effective
fulfillment of their duties.

Independent Accounting Auditor
Board of Directors
The Kandenko Board of Directors, which consists of 14
members including three outside directors, meetsregularly once a month, and additionally whenevernecessary, to discuss important business matters and toreach final decisions, taking account of the contributionsof the independent directors and other considerations.
The Board also oversees the execution of business by the
directors. A designated corporate department is in place
to provide support to the outside directors, for instanceby briefing them where necessary on items due to be
discussed at Board meetings. Important managerial
issues, including those that will be brought up at a Boardof Directors’ meeting, are discussed by the Management
Committee, which meets regularly each week andadditionally whenever necessary. In these ways, we strive
for rational corporate administration. Moreover, we haveintroduced an executive officer system, which separates
managerial oversight from business execution, toaccelerate the decision-making process and reinforce
business execution while enhancing the efficiency of thedirectors’ business execution system. To foster swift
responses to changes in the operating environment andinvigorate management, directors’ terms are limited to
one year from the time of appointment.

Audit & Supervisory Board Members
Kandenko has employed an Audit & Supervisory Board
member system for some time. Five Audit & Supervisory
Board members, including three from outside theCompany, conduct audits appropriately based on legal
requirements and Kandenko’s audit policy. The outside
members heighten our system’s independence andneutrality. They attend our Board of Directors’ meetingsand other important meetings, where they express their
independent and objective opinions. Audit & Supervisory
Board members, including outside members, meet with
the Company’s directors on a regular and irregular basis
to ask about the state of the latter’s work. We provide
35

KANDENKO

Kandenko has appointed Inoue Audit Corporation as its
independent accounting auditor. The three CPAs who
audited Kandenko’s accounts are Masami Hiramatsu,
Teruo Hayashi, and Katsuhiro Suzuki, none of whom has
audited our accounts for over seven consecutive years.
Five other CPAs and three additional persons assist withthe account audit.

Supervisionandoversight

Decision-making,monitoring and oversight,
business execution

President /Director
responsible forbusiness

Outside Directors and Outside Audit & Supervisory
Board Members
Currently, the Company has three outside directors andthree outside Audit & Supervisory Board members. We
appoint outside directors and outside Audit & Supervisory
Board members to fulfill monitoring and oversightfunctions and to enhance transparency, so in accordancewith the Companies Act and other regulations, we lookfor candidates whose experience and expertise outside
the Company will be useful to Kandenko, and who can

Appointment,
dismissal

ReportReportAudit,
reportManagement
Committee

Internal Control
Committee
Safety, Environment &Quality Committee

Internal Audit
For internal auditing, the 13 staff of the Internal Audit
Division carries out the audit in accordance with theInternal Control Enhancement Plan. The audit results arereported to the Internal Control Committee and theManagement Committee, and as appropriate to theBoard of Directors, to enable any required remedialaction to be taken.
Independent accounting auditors and the Internal
Audit Division report their findings at Audit & Supervisory
Board meetings and regularly discuss these matters with
the Audit & Supervisory Board members, including
outside members. Opinions are exchanged whenevernecessary so that cooperation is ensured. While the
Audit & Supervisory Board members (including outside
members), independent accounting auditors, and theInternal Audit Division carry out their audits, they receive
regular reports on the state of maintenance andoperation of internal control from each division
responsible for business execution.

Audit

Audit by Audit & Supervisory Board members

Audit & Supervisory Board members(Audit & Supervisory Board)

Auditing
OfficeReportAudit

Accountant audit

Independentaccounting
auditorBusiness execution

Directors,
executive officers(Division managers, department
managers, branch heads)

Internal Control
Division(Compliance consultations)

Employees

Affiliated companies

Corporate Report 201936

Corporate Report 2019

| Corporate Governance |oversee and audit the directors’ execution of duties froman independent and neutral standpoint. Regarding
outside Audit & Supervisory Board members, the Audit &Supervisory Board meeting first agrees on the candidates,
the Board of Directors approves them, and then they arepresented at a general meeting of shareholders for avote. In the case of outside directors, the Board of
Directors nominates a number of outside director
candidates who meet the independence criteria listed
below, giving due consideration to the practicaleffectiveness of its operations. For outside members of
the Audit & Supervisory Board, the Board of Directors
nominates a number of candidates with the ability toaudit the execution of business by the directors from a
position of independence and objectivity.
Independence Criteria for Outside Directors andOutside Audit & Supervisory Board Members
Kandenko considers candidates for outside director andoutside Audit & Supervisory Board Members to be
independent as long as they do not trigger any of thefollowing exclusion criteria:
1. The candidate is or has been a business executive ofKandenko or a Kandenko’s subsidiary.
2. The candidate is a business executive of a major
shareholder of Kandenko (a shareholder with 10% ormore of the voting rights including indirect holdings)
or a business executive of a company of which
Kandenko is a major shareholder.
3. The candidate is a business executive of a major
creditor of Kandenko (a creditor who has providedloans of more than 1% of consolidated assets in themost recent fiscal year).
4. The candidate is a business executive of a major
business client of Kandenko (a client accounting for
more than 1% of consolidated net sales in the mostrecent fiscal year) or a business executive of acompany of which Kandenko is a major businessclient.
5. The candidate is a representative employee or an
employee of an accounting auditor of Kandenko.
6. The candidate is a person who has, or a member of agroup that has, received from Kandenko material
benefits or gifts of high value (more than ¥10 million
excluding corporate officers’ remuneration).
7. The candidate is a business executive of a company
with a reciprocal relationship with Kandenko throughoutside officers.
8. The candidate has a relative (a spouse or relative
within the second degree of kinship) to whom any of
1 to 6 above applies (restricted to officers and senior
employees).
9. The candidate has triggered any of 2 to 8 above inthe past five years.
Compensation Advisory Committee
The Company established an arbitrary advisory committee
in January 2019 to secure transparency in the process ofdetermining directors’ compensation.
The outline of the committee is as follows.
Name:
Compensation Advisory Committee
Composition: Chairman (Chair of the Committee),President, independent outside directors,
Chair of the Audit & Supervisory Board,and independent outside Audit &Supervisory Board members
37

KANDENKO

Matters for deliberation and discussion: Matters related
to the compensation of directors and Audit& Supervisory Board members, and othermatters related to corporate governanceand compliance
Effectiveness evaluation
To secure the effectiveness of the Board of Directors, theCompany carries out self-evaluation by all directors andAudit & Supervisory Board members after the end ofeach fiscal year regarding the effectiveness of the Boardof Directors. The content of the evaluation is analyzed
and assessed by the Board of Directors. In the selfevaluation implemented in April 2019, opinions wereraised on discussions by the Board of Directors and thecomposition of the Board of Directors, but the overall
effectiveness of the Board of Directors in fiscal 2018 was
judged to have been secured.
The Company will continue to raise the effectivenessof the Board of Directors as a whole in light of these
opinions.

State of Progress of the Internal
Control System
Based on the Basic Policy for Enhancing the Internal
Control System adopted by the Board of Directors(enacted April 2006, revised May 2015), Kandenko has
established an Internal Control Committee chaired by thecompany president that discusses issues relating to theinternal control system. The Company also lays downinternal control regulations that set out the basic principles
of internal control and management regulations foraffiliated companies that set out relevant management
principles. Through these and other measures, Kandenko
has put in place a system to ensure appropriate businessconduct by the Company and by the corporate groupconsisting of Kandenko and its subsidiaries. Additionally,
to promote adaptation to the internal control reporting
system introduced in fiscal 2008 in accordance with the
Financial Instruments and Exchange Act, the Company has
set up a department in charge of reviewing internal
controls relating to financial reporting in order to promote
appropriate operation and evaluation and to ensure thecredibility of financial reporting.

Compliance System
To clarify important points in the Kandenko Group’sbusiness activities and encourage deeper inculcation ofcompliance, we have enacted the Kandenko Group
Charter of Corporate Behavior, and we are promoting its
establishment and raising the awareness of all Group
employees about the Charter. We have set up acompliance consultation point for employees and aninternal system where legal violations can be reported.
We are working to establish and maintain a corporate
culture of fairness and transparency.
In its attitude toward antisocial forces, the whole
Kandenko organization is committed to a resolute stancerejecting any action that could raise suspicion of an
inappropriate relationship. Backing this stance are theKandenko Group Charter of Corporate Behavior and theInternal Control Enhancement Plan adopted by theInternal Control Committee, which form the basis foreducation, training, and related activities to ensurecompliance and promote full awareness throughout theorganization.

Risk Management System
The Kandenko Group operates a set of internal regulations
on risk management. Having categorized and defined risks
relating to business operations item by item, Kandenko
devises countermeasures to match their degree of impact
and likelihood of occurrence. In addition to taking advancemeasures of this kind to prevent risk, Kandenko has
designated reporting channels and response systems inplace for the event of the risk materializing.
Additionally, the Internal Control Committee meets
periodically to check the operating status of the risk
management system and to analyze and evaluate risk
status and related matters, while the establishment of a
dedicated Internal Control Division serves to strengthen
the risk management system.
Described below are factors that could possibly have asignificant impact on decisions made by investors.
In recognizing that there is the potential for such risks
to occur, the Kandenko Group is undertaking efforts toavoid their occurrence as well as formulating
countermeasures in the event such risks occur.
Moreover, the statements described below regarding
the future reflect judgments made by the KandenkoGroup based information available up to the end of the
fiscal year ended March 31, 2019.
Changes in the business environment
In the event that significant changes occur in thebusiness environment, such as decreases in constructionrelated investments or capital investment in electric
power facilities and equipment exceeding projectedchanges, it is possible that the actual financial
performance or other results of the Company could be
affected. Sales to the TEPCO Group account for about
30% of the Kandenko Group’s sales.
Fluctuations in the cost of materials or labor costs
Should the cost of materials or labor costs increasesignificantly, and the increase cannot be reflected in thecontracted fees, it is possible that the actual financial
performance or other results of the Company could be
affected.
Work and related risks
If work undertaken by Kandenko turns out to beseriously defective or an accident occurs in the course ofwork, it is possible that the actual financial performanceor other results of the Company could be affected.
Credit risk of client company
In the construction industry, the contracted fee for eachtransaction is very large, and in many cases, the contract
is subject to the payment of a large construction fee atthe handover of the completed construction. Should theclient company suffer from a credit shortage before theCompany can receive payment of the construction fee, it
is possible that the actual financial performance or otherresults of the Company could be affected.
Asset holding risk
As it is necessary to have such assets as real estate andsecurities for business activities, should something
happen, such as a significant decline in the fair value ofthe held assets, or a dramatic drop in the profitability of
the real estate for business purposes, it is possible thatthe actual financial performance or other results of theCompany could be affected.
Liability for employees’ retirement benefits
Should the fair value of pension assets decline, or should
there be changes in the assumptions, such as the returnon investments or discount rate, used to calculate theliability for employees’ retirement benefits, it is possiblethat the actual financial performance or other results of
the Company could be affected.
Legal regulations
The Company is subject to legal regulations, including
the Construction Business Act, the Antimonopoly Act,and the Industrial Safety and Health Act. Should there
be any changes, such as the revision or repeal of legal
regulations, or the enactment of new legal regulations,or if changes are made to criteria for their application oradministrative sanctions are handed down based on thelegal regulations, it is possible that the actual financial
performance or other results of the Company could be
affected.

Systems to Ensure Appropriate Business Conduct
by Kandenko and the Corporate Group Consistingof Kandenko and Its Subsidiaries
Kandenko has put in place a system to promote
information sharing with its subsidiaries, under which the
Kandenko Board of Directors receives reports onimportant matters relating to the business conduct ofsubsidiaries, including their accounting and internal
control operations.
Moreover, for the purpose of risk management at
subsidiaries, internal regulations are in place whose basic
aim is to prevent crisis situations in advance and tominimize the impact on business activities in the eventthat a crisis situation materializes. Additionally, Kandenko
provides advice and other support for the creation of risk
management systems at subsidiaries, and periodicallychecks and evaluates the status of risk management at
its subsidiaries.
By periodically receiving reports from its subsidiaries,
Kandenko is able to check their conduct of business,
ascertain the state of management operations at thesubsidiary, and offer advice and other measures to tackle
management issues.
In parallel, the Internal Audit Division carries out
internal audit of subsidiaries in accordance with theInternal Control Enhancement Plan. The audit results arereported to the Internal Control Committee and theManagement Committee, and as appropriate to theBoard of Directors, to enable any remedial action to betaken.
Corporate Report 201938

Corporate Report 2019

| Management Structure | (As of July 1, 2019)
Directors
Chairman and Director

President and Executive Officer

Executive Vice President and Executive Officer

Managing Director and Executive Officer

Kiyoshi Goto *Yoshimi Morito *Shinichiro Kitayama

Toru Yukimura

Tenure as Director:
8 years

Tenure as Director:
5 years

Administrative delegation
Division Manager of Social Infrastructure
Division, and Head of Sales Unit

Administrative delegation,
jurisdiction, and responsibility
Acting Division Manager of Corporate
Division (accounting and IT unit)

Tenure as Director:
5 years

Kiyoshi Goto was elected as a Director as he has experience and expertise,etc. gained through serving in positions that include Chairman and Directorof the Company which will contribute to management of the Company.
Significant Concurrent Positions outside the Company:
President of Japan Electrical Construction Association

Yoshimi Morito was elected as a Director as he has experience andexpertise, etc. gained through serving in positions that include President
and Executive Officer which will contribute to management of theCompany.

Shinichiro Kitayama was elected as a Director as he has knowledge in theoperation of the area of electric power & civil engineering as well as his
experience and expertise, etc. gained through serving in positions that
include Senior Managing Director and Executive Officer which willcontribute to management of the Company.

Tenure as Director:
3 years

Toru Yukimura was elected as a Director as he has knowledge in theoperation of the area of administration as well as his experience andexpertise, etc. gained through serving in positions that include Managing
Director and Executive Officer which will contribute to management of theCompany.

Executive Vice President

Executive Vice President and Executive Officer

Managing Director and Executive Officer

Managing Director and Executive Officer

Shigenori Takaoka *Shoichiro Kashiwabara *Shigeru Nagaoka

Yuji Ueda

Administrative delegation,
jurisdiction, and responsibility
In charge of Overall Operations, Social
Infrastructure Division and Fukushima
Division

Administrative delegation,
jurisdiction, and responsibility
Division Manager of Corporate Divisionin charge of Overall Operations andInternal Control Division

Administrative delegation
Division Manager of Tokyo Sales Division

Tenure as Director:
4 years

Tenure as Director:
4 years

Administrative delegation,
jurisdiction, and responsibility
Deputy Executive General Manager ofSales Division, in charge of Strategy &Technology Development Division andGroup Business

Tenure as Director:
2 years

Tenure as Director:
1 yearShigenori Takaoka was elected as a Director as he has knowledge in the

Shoichiro Kashiwabara was elected as a Director as he has knowledge in

Shigeru Nagaoka was elected as a Director as he has knowledge in the

Yuji Ueda was elected as a Director as he has experience and expertise, etc.

operation of the area of power distribution as well as his experience andexpertise, etc. gained through serving in positions that include Executive
Vice President of the Company which will contribute to management of
the Company.

the operation of the area of administration as well as his experience andexpertise, etc. gained through serving in positions that include Executive
Vice President which will contribute to management of the Company.

operation of the area of electrical engineering, environmental facilities andsystems, and renovation as well as his experience and expertise, etc. gained
through serving in positions that include Managing Director and Executive
Officer which will contribute to management of the Company.

gained through serving in positions that include Managing Director of
TEPCO Energy Partner, Inc. as well as Managing Director and Executive
Officer of the Company which will contribute to management of theCompany.

Executive Vice President and Executive Officer

Executive Vice President and Executive Officer

Managing Director and Executive Officer

Toshio Nakama *Kenichi Takahashi

Shinichi Miyauchi

Administrative delegation
Division Manager of Sales Division

Administrative delegation,
jurisdiction, and responsibility
Acting Division Manager of Sales
Division, in charge of International
Business Division, and Strengthening ofCorporate Structure

Administrative delegation,
jurisdiction, and responsibility
Division Manager of Cost Management
Division, in charge of Safety &Environment Division

Tenure as Director:
4 years

Tenure as Director:
5 years

Toshio Nakama was elected as a Director as he has knowledge in theoperation of the area of electrical engineering, environmental facilities andsystems, and renovation as well as his experience and expertise, etc. gained
through serving in positions that include Executive Vice President andExecutive Officer which will contribute to management of the Company.

Kenichi Takahashi was elected as a Director as he has knowledge in theoperation of the area of electrical engineering, environmental facilities andsystems, and renovation as well as his experience and expertise, etc. gained
through serving in positions that include Executive Vice President andExecutive Officer which will contribute to management of the Company.

Tenure as Director:—

Shinichi Miyauchi was elected as a Director as he has knowledge in theoperation of the area of administration as well as his experience andexpertise, etc. gained through serving in positions that include Division
Manager of Cost Management Division.

* denotes Representative Directors

39

KANDENKO

Corporate Report 201940

Corporate Report 2019

| Management Structure |Outside Directors

Outside Audit & Supervisory Board Members
Outside Director

Outside Director

Outside Audit & Supervisory Board Member

Outside Audit & Supervisory Board Member

Takashi Uchino

Masataka Ishizuka

Sumihito Okawa

Takashi Suetsuna

Tenure as Director:
6 years

Tenure as Director:
4 years

Tenure as Outside Audit &Supervisory Board Member:
11 yearsTenure as Outside Audit &Supervisory Board Member:
3 years

Takashi Uchino was elected as a Director as he has broad expertise, etc. asa university professor and as a business administration expert which willcontribute to management of the Company.

Masataka Ishizuka was elected as a Director as he has experience andexpertise, etc. gained through serving as Director of Central Japan Railway
Company and JR TOKAI AGENCY CO., LTD which will contribute to
management of the Company.
Significant Concurrent Positions outside the Company:
Curator of GRANSHIP convention center, Shizuoka Cultural Foundation

Outside Director

Sumihito Okawa was elected as an Audit & Supervisory Board Member as
he has experience and expertise, etc. gained through serving in positions
that include Audit & Supervisory Board Member of ANA HOLDINGS INC.
and ALL NIPPON AIRWAYS CO., LTD. which will contribute to the effective
auditing of the Company.

Takashi Suetsuna was elected as an Audit & Supervisory Board Member as
he has experience and expertise, etc. gained through serving in positions
that include senior official of administrative agencies and outside director of
Marubeni Corporation and Totetsu Kogyo Co., Ltd. which will contribute to
the effective auditing of the Company.

Significant Concurrent Positions outside the Company:
Outside Audit & Supervisory Board Member, ANA HOLDINGS INC.
Audit & Supervisory Board Member, ALL NIPPON AIRWAYS CO., LTD.

Significant Concurrent Positions outside the Company:
Outside Director, Totetsu Kogyo Co., Ltd.
Outside Director, JCR Pharmaceuticals Co., Ltd.
Outside Auditor, Aioi Nissay Dowa Insurance Co., Ltd.
Outside Auditor, Keikyu Corporation

Hajime Saito
Tenure as Director:—
Outside Audit & Supervisory Board Member

Shoichi Muto
Tenure as Outside Audit &Supervisory Board Member:—
Hajime Saito was elected as a Director as he has experience and expertise,etc. gained through serving in positions that include Director of Mizuho
Financial Group, Inc. and Mizuho Securities Co., Ltd., etc. which willcontribute to the management of the Company.

Full-time Audit & Supervisory Board Members
Full-time Audit & Supervisory Board Member

Full-time Audit & Supervisory Board Member

Haruhiko Terauchi

Hiroyuki Kaneko

Tenure as Audit & Supervisory Board Member:
3 years

Tenure as Audit & Supervisory Board Member:
3 years

Haruhiko Terauchi was elected as an Audit & Supervisory Board Member as
he has knowledge in the operation of the area of administration as well as
his experience and expertise, etc. gained through serving in positions that
include Managing Director and Executive Officer which will contribute toeffective auditing of the Company.

41

KANDENKO

Shoichi Muto was elected as an Audit & Supervisory Board Member as hehas experience and expertise, etc. gained through serving in positions at
Tokyo Electric Power Company Holdings which will contribute to effective
auditing of the Company.

Hiroyuki Kaneko was elected as an Audit & Supervisory Board Member as
he has knowledge in the operation of the area of electrical engineering,
environmental facilities and systems, and renovation as well as his
experience and expertise, etc. gained through serving in positions that
include Executive Officer and Branch Manager which will contribute toeffective auditing of the Company.
Corporate Report 201942

Corporate Report 2019

| Consolidated 11-Year Financial Summary |(Millions of yen)

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

473,804

453,623

462,482441,786

447,741

437,930

436,682447,673

470,943507,205

563,550

8,858

9,477

10,735

8,034

7,364

8,284

9,388

16,416

26,39729,26130,012

1.9

2.1

2.3

1.8

1.6

1.9

2.1

3.7

5.6

5.8

5.3

Ordinary profit

9,854

10,484

11,634

9,070

8,301

9,089

10,336

17,077

27,34530,03130,795

Profit attributable to owners of parent

5,586

5,428

5,866

1,876

3,952

4,226

4,615

9,412

17,591

19,05819,703

–

–

1,772

4,381

8,238

7,327

11,984

7,137

18,422

22,927

20,319Total assets

379,093378,150

353,342359,726

364,008359,933

366,177

407,681424,874

443,751459,854

Total net assets

172,487

177,536

176,808

178,757

184,269

189,692

193,345

197,980

213,356

230,810

245,954

ROE (%)

3.3

3.2

3.9

1.1

2.2

2.3

2.5

4.9

8.8

8.8

8.5

ROA (%)

2.6

2.8

3.2

2.5

2.3

2.5

2.8

4.4

6.6

6.9

6.8

Equity ratio (%)

44.57

45.96

48.93

48.54

49.49

51.45

51.44

47.22

48.72

50.51

51.85

Net assets per share (yen)826.08850.04845.67854.31

881.41906.29922.05942.42

1,013.33

1,097.36

1,167.30

Earnings per share (yen)

27.30

26.54

28.69

9.18

19.34

20.69

22.59

46.07

86.11

93.31

96.46

Cash dividends per share (yen)

12.00

14.00

12.00

12.00

12.00

12.00

14.00

14.00

20.00

24.00

26.00

Net cash provided by (used in) operating activities

16,947

12,236

10,257

13,035

15,401

r2,2182,921

18,042

6,751

11,46928,251

Net cash provided by (used in) investing activities

r9,825

r9,763

r3,7991,583

r12,748

r5,8392,253

r7,101

r17,867

r10,015

r10,131

Net cash used in financing activities

r3,519r4,400r4,037

r5,423

r2,900

r4,540r3,74319,807r169

r7,857

r9,153

Cash and cash equivalents at end of period

41,06039,142

41,53950,72550,55038,69740,15770,89959,61254,09963,068

Number of employees (persons)

8,513

8,665

8,769

8,746

8,732

8,821

8,839

8,915

9,244

9,571

9,818

For the fiscal years ended March 31

Net sales
Operating profit
Operating profit ratio (%)

Comprehensive income

43

KANDENKO

Corporate Report 201944

Corporate Report 2019

| Consolidated Financial Statements |CONSOLIDATED BALANCE SHEETKANDENKO CO., LTD. AND CONSOLIDATED SUBSIDIARIESMARCH 31, 2018 AND 2019
(Millions of Yen)

(Thousands of U.S. Dollars)

2019

2018

2019

(Thousands of U.S. Dollars)

2019

2018

Assets2019

Liabilities
Current liabilities

Current assets
Cash and deposits*3

Notes receivable, accounts receivable from completed
construction contracts and other*3¥

Costs on uncompleted construction contracts

56,787*3

163,061*3¥

62,586*3

184,424*3$

563,837
1,661,477

Notes payable, accounts payable for construction
contracts and other
Short-term loans payable¥

24,040

*5

9,986

*5

*3

889,936
62,6394,729

Income taxes payable

4,639

4,249

38,27989,963

Advances received on uncompleted construction contracts

17,51015,036

135,459

Provision for warranties for completed construction

241

211

1,900

5,123

4,787

43,126Other

13,148

11,980107,927

(648)

(494)

(4,450)271,512285,2692,569,990

Total current assets

6,953

*3

$

525

Raw materials and supplies

Allowance for doubtful accounts

98,783477

108,099*5¥

89,704
10,072*3

Lease obligations

11,9999,999

Securities

Provision for loss on construction contracts

3,214

*5

*5

21,36923,361

24,862

223,981

Total current liabilities

149,222

152,994

1,378,324

20,06020,040180,540

Non-current liabilities

Long-term loans payable

Property, plant and equipment

2,372

*5

Other

Convertible bond-type bonds with share acquisition rights

Non-current assets

8,799

*3

8,503

*3

981

966

Lease obligations*376,603
8,837

Buildings and structures*3

90,192*3

92,813*3

836,153

Deferred tax liabilities for land revaluation

Machinery, vehicles, tools, furniture and fixtures*3

60,105*3

59,651*3

537,396

Net defined benefit liability

25,18822,902

206,324*2, *360,292*2, *359,983*2, *3

540,387

Other

1,931

1,792

16,144

Total non-current liabilities

63,71860,906

548,702212,940

213,900

1,927,027

Land

6,772

*2

6,686

*2

*2

60,234

Leased assets

2,537

2,825

25,450Construction in progress

1,095

2,331

21,000

Accumulated depreciation(109,140)(109,940)(990,450)

Shareholders’ equity

Total property, plant and equipment

105,082

107,665

969,954

Capital stock

10,264

10,264

92,468

5,902

5,662

51,009

Capital surplus

6,351

6,352

57,225Retained earnings

196,568

211,314

1,903,729

(585)

(586)

(5,279)212,599

227,343

2,048,135

15,286

15,530139,909

(471)

(334)

(3,009)Intangible assets
Investments and other assets
Investment securities

46,318*1, *3

Deferred tax assets
Other*1, *3

427,405

0

–

–

9,723

8,053

72,5496,003*347,442*1, *3

6,467

*3

*3

7,954

Total accumulated other comprehensive income

11,546

11,08899,891

6,665

7,521

67,756

230,810

245,954

2,215,801

459,854$ 4,142,828

61,253

61,257

551,864

172,239

174,585

1,572,837

459,854$ 4,142,828

KANDENKO¥

Deferred gains or losses on hedges

883

Total investments and other assets

443,751

Valuation difference on available-for-sale securities

1,573(6,351)¥

Accumulated other comprehensive income

Remeasurements of defined benefit plans(705)

Total non-current assets

Total shareholders’ equity

Revaluation reserve for land(792)

The accompanying notes are an integral part of financial statements.

Net assets

58,261

Allowance for doubtful accounts

Total assets

Total liabilities

Treasury shares

Net defined benefit asset

45(Millions of Yen)

(4,842)*2

Non-controlling interests
Total net assets
Total liabilities and net assets¥

443,751(4,990)*2¥*2(44,954)

The accompanying notes are an integral part of financial statements.
Corporate Report 201946

Corporate Report 2019

| Consolidated Financial Statements |CONSOLIDATED STATEMENT OF INCOMECONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

KANDENKO CO., LTD. AND CONSOLIDATED SUBSIDIARIESYEARS ENDED MARCH 31, 2018 AND 2019

KANDENKO CO., LTD. AND CONSOLIDATED SUBSIDIARIESYEARS ENDED MARCH 31, 2018 AND 2019
(Millions of Yen)

Net sales of completed construction contracts
Cost of sales of completed construction contracts

2018

2019

2019

¥

¥

$ 5,077,027

507,205
452,828*1, *2

25,115*3

25,663*3*330,012(Millions of Yen)

231,198

Interest income

16

17

153

Dividend income

837

878

7,909

Other

428

339

3,054

1,282

1,235

11,126

Interest expenses

237

224

2,018

Business commencement expenses

95

–

–

Other

180

227

2,045

Total non-operating expenses

512

452

4,072

30,03130,795

277,432

20,636$

185,909

244

2,198

Deferred gains or losses on hedges

50

137

1,234

Remeasurements of defined benefit plans, net of tax

150

(698)

(6,288)Comprehensive income

3,100

*1

¥

22,927

(317)

*1

¥

20,319(2,855)*1$

183,054

Comprehensive income attributable to19,39422,091

Comprehensive income attributable to owners of parent
Comprehensive income attributable tonon-controlling interests

Non-operating expenses¥

19,826

2019

2,899

Total other comprehensive income

Ordinary profit (loss)

2019

Other comprehensive income
Valuation difference on available-for-sale securities

270,378¥

Profit (loss)

501,576

Non-operating income

Total non-operating income(Thousands of U.S. Dollars)

2018

4,575,441*1

55,67529,261

Operating profit (loss)

563,550
507,874*1

54,377Gross profit (loss) on completed construction contracts
Selling, general and administrative expenses(Thousands of U.S. Dollars)

¥

835

¥

924

174,720$

8,324

The accompanying notes are an integral part of financial statements.

Extraordinary income
Gain on sales of non-current assets

150

*5

74

*5

666

*5

–

22

198

150

96

864

621

820

7,387

363

165

1,486

62

–

–

Total extraordinary losses

1,048

986

8,882

Profit (loss) before income taxes

29,13329,904269,405

Income taxes - current

8,234

7,395

66,621

Income taxes - deferred

1,071

1,872

16,864

Total income taxes

9,306

9,268

83,495

Profit (loss)

19,826

20,636

185,909

768

932

8,396

Gain on sales of investment securities
Total extraordinary income
Extraordinary losses
Loss on retirement of non-current assets
Impairment loss

*6

Other

Profit (loss) attributable to non-controlling interests
Profit (loss) attributable to owners of parent¥

19,058¥19,703$

177,504

The accompanying notes are an integral part of financial statements.

47

KANDENKO

Corporate Report 201948

Corporate Report 2019

| Consolidated Financial Statements |CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
KANDENKO CO., LTD. AND CONSOLIDATED SUBSIDIARIESYEAR ENDED MARCH 31, 2018

YEAR ENDED MARCH 31, 2019
(Millions of Yen)

(Millions of Yen)

Shareholders’ equity

Balance at beginning ofcurrent period

Capital stock

Capital surplus¥¥

10,264

6,350

Shareholders’ equity

Retainedearnings¥

182,458

Treasuryshares¥Total shareholders’equity(575) ¥

Balance at beginning ofcurrent period

198,496

Changes of items during period

Capital stock

Capital surplus¥¥

10,264¥

Treasuryshares196,568¥

Total shareholders’equity(585) ¥

212,599

Changes of items during period

Purchase of shares of
consolidated subsidiaries

1

Purchase of shares of
consolidated subsidiaries

1

(0)

(0)

Dividends of surplus(4,902)(4,902)

Dividends of surplus(5,106)(5,106)

Profit (loss) attributable toowners of parent

19,05819,058

Profit (loss) attributable toowners of parent

19,703

19,703

Reversal of revaluation
reserve for land

(19)

(19)

Reversal of revaluation
reserve for land

148

148

Change of scope of consolidation(26)

Purchase of treasury shares(26)

Change of scope of consolidation

(10)

(10)

Purchase of treasury shares

00

Disposal of treasury shares

0

Disposal of treasury shares
Net changes of items otherthan shareholders’ equity

Balance at end of current period

–

(0)

0

0

(0)

14,744(586) ¥

227,343

0–¥

10,264

1¥

6,351

14,110¥196,568¥(10)

14,102

Total changes of items during period(585) ¥

212,599

Balance at end of current period–¥

10,2640¥

Accumulated other comprehensive income
Valuation difference Deferred gains
on available-for-sale or losses on
securities
hedgesBalance at beginning ofcurrent period–(0)

Net changes of items otherthan shareholders’ equity

Total changes of items during period¥

12,418¥

Revaluation
reserve for land(522) ¥

(4,861) ¥plans

Valuation difference Deferred gains
on available-for-sale or losses on
securities
hedgesincome

1,460

6,352

14,745¥211,314¥

Accumulated other comprehensive income

Remeasurements Total accumulated Non-controlling Total net assetsinterestsof defined benefit other comprehensive

¥

8,494

¥

6,364

¥ 213,356

Changes of items during period

Balance at beginning ofcurrent period¥

15,286¥

Remeasurements Total accumulated Non-controlling Total net assets
Revaluationinterestsof defined benefit other comprehensive
reserve for landplansincome(471) ¥

(4,842) ¥

1,573

¥

11,546¥

6,665¥ 230,810

Changes of items during period

Purchase of shares of
consolidated subsidiaries

1

Purchase of shares of
consolidated subsidiaries(0)

Dividends of surplus(4,902)

Dividends of surplus(5,106)

Profit (loss) attributable toowners of parent

19,058

Profit (loss) attributable toowners of parent

19,703
148

Reversal of revaluation
reserve for land

(19)

Reversal of revaluation
reserve for land

Change of scope of consolidation(26)

Change of scope of consolidation–

Purchase of treasury shares(10)

Purchase of treasury shares(0)

Disposal of treasury shares

0

Disposal of treasury shares0

Net changes of items otherthan shareholders’ equity

Net changes of items otherthan shareholders’ equity
Total changes of items during period
Balance at end of current period

¥

2,868

50

19

112

3,051

300

3,352

2,868

50

19

112

3,051

300

17,454(471) ¥

(4,842) ¥

1,573

6,665

¥ 230,810

15,286

The accompanying notes are an integral part of financial statements.

49

6,351

Retainedearnings

KANDENKO¥¥

11,546¥

Total changes of items during period
Balance at end of current period

¥

243

137

(148)

(689)

(457)

856

399

243

137

(148)

(689)

(457)

856

15,143(4,990) ¥

883

7,521

¥ 245,954

15,530¥(334) ¥¥

11,088¥The accompanying notes are an integral part of financial statements.

Corporate Report 201950

Corporate Report 2019

| Consolidated Financial Statements |CONSOLIDATED STATEMENT OF CASH FLOWSKANDENKO CO., LTD. AND CONSOLIDATED SUBSIDIARIESYEARS ENDED MARCH 31, 2018 AND 2019YEAR ENDED MARCH 31, 2019
(Thousands of U.S. Dollars)(Millions of Yen)

Shareholders’ equity

Balance at beginning ofcurrent period

Capital stock

Capital surplus$$

92,46857,216

Retainedearnings$(5,270) $ 1,915,306

Changes of items during period
Purchase of shares of
consolidated subsidiaries

(0)

(0)

Dividends of surplus(46,000)(46,000)

Profit (loss) attributable toowners of parent

177,504

177,504

Reversal of revaluation
reserve for land

1,333

1,333

–

–

Change of scope of consolidation
Purchase of treasury shares

0

Disposal of treasury shares

(0)

(0)

0

0

Net changes of items otherthan shareholders’ equity–

Total changes of items during period
Balance at end of current period$

92,468$0132,837

57,225$ 1,903,729(0)$

132,828(5,279) $ 2,048,135

Accumulated other comprehensive income
Valuation difference Deferred gains
on available-for-sale or losses on
securities
hedgesBalance at beginning ofcurrent period$

137,711$

Remeasurements Total accumulated Non-controlling Total net assets
Revaluationinterestsof defined benefit other comprehensive
reserve for landplansincome(4,243) $(43,621) $14,171$ 104,018$

60,045$ 2,079,369

Changes of items during period
Purchase of shares of
consolidated subsidiaries(0)

Dividends of surplus(46,000)

Profit (loss) attributable toowners of parent

177,504

Reversal of revaluation
reserve for land

1,333

Change of scope of consolidation–

Purchase of treasury shares(0)

Disposal of treasury shares0

Net changes of items otherthan shareholders’ equity
Total changes of items during period
Balance at end of current period

$

2,189

1,234

(1,333)(6,207)(4,117)

7,711

3,594

2,189

1,234

(1,333)(6,207)(4,117)

7,711

136,423(3,009) $(44,954) $7,954

67,756$ 2,215,801

139,909

The accompanying notes are an integral part of financial statements.

51

KANDENKO

$

2019

2018

Total shareholders’
Treasury shares
equity$ 1,770,882(Thousands of U.S. Dollars)$

99,891$

Cash flows from operating activities
Profit (loss) before income taxes
Depreciation and amortization
Impairment loss
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for loss on construction
contracts
Increase (decrease) in net defined benefit liability
Decrease (increase) in net defined benefit asset
Interest and dividend income
Interest expenses
Loss (gain) on valuation of investment securities
Loss (gain) on sales of investment securities
Decrease (increase) in notes and accounts receivable - trade
Decrease (increase) in costs on uncompleted construction
contracts
Decrease (increase) in other inventories
Increase (decrease) in notes and accounts payable - trade
Increase (decrease) in advances received on uncompleted
construction contracts
Other, net
SubtotalInterest and dividend income received
Interest expenses paid
Income taxes (paid) refund
Net cash provided by (used in) operating activities
Cash flows from investing activities
Net decrease (increase) in time deposits
Purchase of securities
Proceeds from sales and redemption of securities
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of investment securities
Proceeds from sales and redemption of investment securities
Payments of loans receivableCollection of loans receivable
Other, net
Net cash provided by (used in) investing activities
Cash flows from financing activities
Net increase (decrease) in short-term loans payable
Proceeds from long-term loans payable
Repayments of long-term loans payable
Repayments of lease obligations
Cash dividends paid
Other, net
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Increase (decrease) in cash and cash equivalents resulting fromchange of scope of consolidation
Cash and cash equivalents at end of period

¥

*1

¥

¥

29,133
5,101
363
(26)

2019

29,904
6,188
165
(240)

$

269,405
55,747
1,486(2,162)

(835)

(842)

(7,585)(2,063)
(0)
(854)
237
21
–
(23,869)(2,438)
–
(895)
224
–
(22)
(21,289)(21,963)–(8,063)
2,018
–
(198)
(191,792)

6,860

14,054

126,612

(570)
7,320

335
9,079

3,018
81,792(2,089)(2,473)(22,279)851
19,579854(257)(8,706)
11,4693,616
35,367895(244)(7,767)28,251

32,576318,621
8,063(2,198)(69,972)
254,513

2,873(5,199)5,199(9,614)
9
(709)
26
(533)
220
(2,287)(10,015)70(4,000)5,000(8,660)
636
(827)
79
(860)
386
(1,956)(10,131)630(36,036)
45,045(78,018)
5,729(7,450)711(7,747)
3,477(17,621)(91,270)(1,632)
560
(798)
(522)
(4,902)(562)(7,857)(5)(6,407)59,612(2,325)651(1,740)(563)(5,106)(69)(9,153)
2
8,969
54,099(20,945)5,864(15,675)(5,072)(46,000)(621)(82,459)18
80,801
487,378894––

54,099*1¥

63,068*1$

568,180

The accompanying notes are an integral part of financial statements.

Corporate Report 201952

Notes to Consolidated Financial Statements
KANDENKO CO., LTD. AND CONSOLIDATED SUBSIDIARIESYEARS ENDED MARCH 31, 2018 AND 2019

BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS
Kandenko Co., Ltd. (the “Company”) and its consolidated subsidiaries(the “Companies”) maintain their accounting records and prepare
their financial statements in accordance with accounting principles
generally accepted in Japan, which are different in certain respects as
to the application and disclosure requirements of International
Financial Reporting Standards. The accompanying financial statements
have been compiled from the consolidated financial statements
prepared by the Company as required by the Financial Instruments
and Exchange Act of Japan.
For the convenience of readers, the accompanying consolidated

financial statements as of and for the year ended March 31, 2019
have been translated from yen amounts into U.S. dollar amounts at
the rate of ¥111 =U.S.$1.00, the exchange rate prevailing on March
31, 2019.
As permitted by the Financial Instruments and Exchange Act ofJapan, amounts of less than one million yen have been omitted. As aresult, the totals shown in the accompanying consolidated financial
statements (both in yen and in dollars) do not necessarily agree withthe sum of the individual amounts.

SIGNIFICANT MATTERS PROVIDING THE BASIS FOR THE PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS
1. The scope of consolidation(2) Name of major non-consolidated subsidiary:(1) Number of consolidated subsidiaries: 31

THAI KANDENKO CO., LTD.

Names of the consolidated subsidiaries
Kawasaki Setsubi Kogyo Co., Ltd.
Kanko Facilities Co., Ltd.
Kanagawa K - Techno Co., Ltd.
Chiba K - Techno Co., Ltd.
Saitama K - Techno Co., Ltd.
Ibaraki K - Techno Co., Ltd.
Tochigi K - Techno Co., Ltd.
Gunma K - Techno Co., Ltd.
Tama K - Techno Co., Ltd.
Shizuoka K - Techno Co., Ltd.
HANDENKO CORPORATION
Kanko Power Techno Co., Ltd.
Kanagawa Power Techno Co., Ltd.
Chiba Power Techno Co., Ltd.
Saitama Power Techno Co., Ltd.
Ibaraki Power Techno Co., Ltd.
Tochigi Power Techno Co., Ltd.
Gunma Power Techno Co., Ltd.
Nishikanto Power Techno Co., Ltd.
Shizuoka Power Techno Co., Ltd.
Transmission Line Construction Co., Ltd.
Sato Kensetsu Kogyo Co., Ltd.
SYSTEC ENGINEERING Co., Ltd.
NETSAVE Co., Ltd.
Tokyo Kouji Keibi Co., Ltd.
Bay Techno Co., Ltd.
KANKO SYOJI CO., LTD.
K asset management Co., Ltd.
Choshi Wind Development Co., Ltd.
Kama Solar Power Co., Ltd.
Maebashi Biomass Power Co., Ltd.

53

KANDENKO(Reason for excluding from the scope of consolidation)
All of the non-consolidated subsidiaries are small in scale and haveno material impact on the consolidated financial statements in termsof total assets, net sales, profit or loss (amount corresponding toequity interest) and retained earnings (amount corresponding toequity interest).

2. Application of equity method(1) Number of non-consolidated subsidiaries and affiliatesthat are accounted for by the equity method: None
(2) Name of the major non-consolidated subsidiaries andaffiliates that are not accounted for by the equity
method:THAI KANDENKO CO., LTD.
(Reason for excluding from the scope of the equity method)
Non-consolidated subsidiaries and affiliates that are not accounted
for by the equity method have immaterial impact on the consolidated
financial statements in terms of profit or loss (amount corresponding
to equity interest) and retained earnings (amount corresponding toequity interest), and are not material, taken as a whole.

3. Accounting period of consolidated subsidiaries
The year-end date for consolidated subsidiaries is the same as theconsolidated year-end date.

4.Significant accounting policies(1) Evaluation methods for significant assets(a) Securities
i. Held-to-maturity securities
Amortized cost method (straight-line method)

ii. Available-for-sale securities
Securities with market quotations:
Stated at market value at the end of the year (Unrealized gains
or losses, net of applicable taxes, are comprehensively reported
as a component of net assets and the cost of securities sold iscomputed using the moving-average method.).

(c) Provision for loss on construction contracts
To provide for future losses on construction orders, provision for
estimated losses is provided for uncompleted construction
contracts at the end of the year that are likely to incur losses
and the amount can be reasonably estimated.

(4) Accounting method relating to retirement benefits
Securities without market quotations:
Stated at cost determined by the moving-average method.
(b) Derivatives
Fair value method(c) Inventories
i. Costs on uncompleted construction contracts
Stated at cost determined by the specific cost method.
ii. Raw materials and supplies
Stated at cost determined by the moving-average method(Balance sheet amounts are determined by writing down the
carrying amount based on declining profitability.)(2) Depreciation methods of significant depreciable assets(a) Property, plant and equipment (excluding leased assets)
Depreciated mainly by the declining-balance method
Useful life and residual value are determined on the same basis
as that of the method provided in the Corporation Tax Act.
Useful lives of certain buildings are deemed as 30 years
although their useful lives based on the Corporation Tax Act are
longer than 30 years.
(b) Intangible assets (excluding leased assets)
Straight-line method
Software for internal use is amortized by the straight-line method
over an estimated useful life (5 years).
(c) Leased assets
Leased assets related to finance lease transactions that do nottransfer ownership are depreciated using the straight-line method
based on the assumption that the useful life equals the leaseterm, and the residual value equals zero.

(3) Accounting policies for significant allowance andprovisions(a) Allowance for doubtful accounts
The allowance for doubtful accounts is provided for to theamount sufficient to cover possible losses on collection. It
consists of the estimated uncollectible amount with respect toidentified doubtful receivables and an amount calculated byapplying the percentage of actual losses on collection
experienced in the past to remaining receivables.
(b) Provision for warranties for completed construction
To provide for possible future expenses under warranties forcompleted construction contracts, provision for construction
contracts completed during the year is provided based on future
estimated amount.

(a) Method of attributing expected retirement benefit to periods
Method of attributing expected retirement benefit to periods isallocated by the straight-line basis (the expected benefit divided
by the total service years would be deemed as arising in eachperiod).
(b) Amortization of actuarial gains and losses
Actuarial gains and losses are amortized by the straight-line
method over a certain period (5 years) within the averageremaining years of service of the eligible employees commencing
with the following periods.

(5) Accounting policies for significant revenues andexpenses(a) Recognition of net sales of completed construction contracts
and costs of completed construction contracts
i. Construction contracts that the outcome of the construction
activity is deemed certain during the course of the activity atthe end of the year
Percentage-of-completion method (cost proportion method
shall be applied to estimate the percentage-of-completion ofsuch construction contract)ii. Other construction contracts
Completed-contract method(6) Significant hedge accounting method(a) Hedge accounting method
The Companies use the deferral hedge accounting method.
However, the exceptional accounting is used for interest rate
swaps that meet specified matching criteria.
(b) Hedging instruments and hedged items
Hedging instruments:
Interest rate swaps
Hedged items:
Loans payable(c) Hedging policy
In accordance with internal approval procedures for derivativetransactions, interest rate fluctuation risks related to the hedged
items are hedged to a certain degree.
(d) Method for evaluating the effectiveness of hedges
The Companies evaluate the effectiveness of their hedging
activities by comparing cumulative changes in cash flows on thehedging instruments with cumulative changes in cash flows on
the related hedged items. However, the evaluation of hedging
effectiveness is omitted for interest rate swaps to which the
exceptional accounting is applied.

Corporate Report 201954

(7) Method and period of amortization of goodwill
Goodwill is amortized by the straight-line method over the estimatedperiod that the benefits are expected to be received, not exceeding
20 years.

(8) Cash and cash equivalents in the consolidated
statements of cash flows
Cash and cash equivalents include cash in hand, readily available
deposits and short-term investments with maturities of three months

or less from the purchase date whose value is not subject tosignificant fluctuation risk.

NOTES TO CONSOLIDATED BALANCE SHEET(9) Other significant accounting policies for the preparationof consolidated financial statements*1. Amounts of non-consolidated subsidiaries and affiliates’ stocks included in investment securities

Accounting method for consumption taxes:
Consumption and local consumption taxes are accounted for by the
tax-exclusion method.

ACCOUNTING STANDARDS, ETC. NOT YET EFFECTIVE· “Accounting Standard for Revenue Recognition” (ASBJ Statement
No. 29, March 30, 2018, Accounting Standards Board of Japan)· “Implementation Guidance on Accounting Standard for Revenue
Recognition” (ASBJ Guidance No. 30, March 30, 2018, AccountingStandards Board of Japan)(1) Outline
The International Accounting Standards Board (IASB) and US Financial
Accounting Standards Board (FASB) co-developed a newcomprehensive revenue recognition standard and published “Revenue
from Contracts with Customers” in May 2014 (IFRS No. 15 in IASB,
Topic 606 in FASB). Given that IFRS No. 15 will be applied from fiscal
years starting on or after January 1, 2018 and Topic 606 from fiscal
years starting after December 15, 2017, the Accounting Standards
Board of Japan (ASBJ) developed comprehensive Accounting Standard
on Revenue Recognition and published it together with
implementation guidance.
The fundamental policy for developing Accounting Standard on

Revenue Recognition by the ASBJ was that the accounting standard
would incorporate the fundamental policy of IFRS No. 15 as thestarting point from the perspective of comparability of financial
statements, which is one of the benefits of achieving consistency
with IFRS No. 15. For matters that require actual practice, etc. carriedout in Japan up until present to be taken into consideration,
alternative treatment will be added to an extent that does not impair
financial statement comparability.

Investment securities (Stocks)

These accounting standard and implementation guidance will beapplied from the beginning of the year ending March 31, 2022.

(3) Effects of the application of this accounting standard, etc.
The effects of the application of the “Accounting Standard for
Revenue Recognition,” etc. on the consolidated financial statements
are currently under assessment.

KANDENKO

¥

1,687

2019
1,675

$

15,090

82

82

738

*3. Assets pledged as collateral and secured obligations(1) Assets pledged as collateral which the Company’s subsidiaries provide and secured obligations
Millions of Yen

Thousands of U.S. Dollars
2019

2018
Cash and deposits

¥

2,082

¥

[–]

¥

1,471

2019

¥

[–]

$ 13,252$[–]

Notes receivable, accounts receivable from completed
construction contracts and other

107

[–]

94

[–]

846

[–]

Buildings and structures

1,557

[587]

1,351

[444]

12,171[4,000]Machinery, vehicles, tools, furniture and fixtures

10,097[6,366]

8,243[4,693]74,261[42,279]

657

[–]

744

[–]

6,702

[–]

Land
Investments and other assets – Other (lease deposits)

decreased by ¥6,226 million, and “deferred tax assets” in“investments and other assets” is increased by ¥6,225 million.
Furthermore, “deferred tax liabilities” included in “other” under“current liabilities” is decreased by ¥11 million, and “deferred tax
liabilities” included in “other” under “non-current liabilities” isincreased by ¥10 million.
Note that the deferred tax assets and deferred tax liabilities ofthe same taxable entity are first offset before presentation, and thischange has resulted in a reduction in total assets of ¥1 million
compared with before the change.

Thousands of U.S. Dollars
2019*2. The Company revalued its land held for business use in accordance with the “Act on Revaluation of Land” (the Act No. 34, March 31, 1998)
and recorded revaluation reserve for land in the net assets section.
(a) Method of revaluation:
Revaluation was made by reasonably adjusting the market value of standard sites as stipulated by the Article 2, Clause 1 of the“Enforcement Order of the Act on Revaluation of Land” (Cabinet Order No. 119, March 31, 1998) and value determined by the method
for calculating taxable land price of land holding tax in accordance with the Article 16 of the Land-holding Tax Act as defined andpublished by the Commissioner of National Tax Agency as stipulated by the Article 2, Clause 4 of the “Enforcement Order of the Act on
Revaluation of Land.”(b) Date of revaluation:
March 31, 2002

7¥

14,510¥

Short-term loans payable

¥

1,562

¥

Long-term loans payable
Total

8,419
¥

7

[–]

Total

9,981

¥

[6,954]¥

11,911

¥

[–]

63

[–]

[5,137]$ 107,306$ [46,279]

[615]

¥588

¥[314]$5,297[5,558]

8,503[4,598]76,603[41,423][4,912]$ 81,909$ [44,252][6,173]

¥

9,092

¥

$

[2,828]

Note: The figures in the brackets show factory foundation mortgaged assets and related obligations.

(2) Assets pledged as collateral for the loans of the investing company of the Company and its subsidiaries
Millions of Yen¥

Thousands of U.S. Dollars
2019

2018
Buildings and structures

0

¥

2019
0

$

0

Land

26

26

234

Investment securities

44

32

288

Investments and other assets – Other(long-term loans receivable)

129

129

1,162

Total

55

¥

Investment securities (Investments in capital)(2) Scheduled date of application

CHANGES IN PRESENTATION(Changes due to application of “Partial Amendments to AccountingStandard for Tax Effect Accounting”)
The Companies have applied the “Partial Amendments to AccountingStandard for Tax Effect Accounting” (ASBJ Statement No. 28,
February 16, 2018) effective from the beginning of the year ended
March 31, 2019. Accordingly, the method of presentation has beenchanged whereby deferred tax assets are presented under“investments and other assets” and deferred tax liabilities arepresented under “non-current liabilities.”
As a result, in the consolidated balance sheet for the year ended
March 31, 2018, “deferred tax assets” in “current assets” isMillions of Yen
2018

¥

201

¥

188

$

1,693

Corporate Report 201956

4. Contingent liabilities
The Company provides guarantees of the employees’ loans from financial institutions.

*6. Impairment loss
The Companies recorded impairment loss for the following asset groups.

Millions of Yen
2019

2018
Employees (housing loans)¥Thousands of U.S. Dollars

1,188

¥

2019
1,013

$

Location
9,126*5. Both costs on uncompleted construction contracts relating to construction contracts that are likely to incur losses and provision for loss on
construction contracts are presented without offsetting.
Amount of costs on uncompleted construction contracts corresponding to provision for loss on construction contracts
Millions of Yen

Thousands of U.S. Dollars
2019

2018
¥

233

2019

¥

43

$

387

NOTES TO CONSOLIDATED STATEMENT OF INCOME*1. Provision for loss on construction contracts included in cost of sales of completed construction contracts¥

Thousands of U.S. Dollars
2019

1,454

¥

Purpose of Use

TypeTokyo and others

Idle assets

Land

17

Tokyo

Assets for lease

Land, etc.

3

Chiba prefecture and others

Power production facilities and others

Machinery, vehicles, tools, furniture and fixtures, etc.

3

Idle assets, assets for lease and power production facilities and others for which impairment loss was recognized were grouped mainly by
individual properties.
The book value of the above asset group was reduced to the respective recoverable amount, due to a decline in land prices of the idle assets
and assets for lease and a decline in the profitability of the power production facilities. The decline was recorded as impairment loss of ¥363
million in extraordinary losses. The impairment loss breaks down as ¥212 million for land, ¥91 million for buildings and structures, and ¥59
million for machinery, vehicles, tools, furniture and fixtures.
The recoverable amount for idle assets and assets for lease was measured at the net sales price, primarily based on the market value ofstandard sites and the assessed value of inheritance tax using roadside land prices. For power production facilities, the recoverable amount wasmeasured based on value in use, applying a discount rate of 7.2% to future cash flow.

Disclosure is omitted due to immateriality.

2019
1,118

$

10,072NOTES TO CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME*2. The value of inventories at the year-end represents the value after writing down of the book value in accordance with the declining in
profitability of assets, and the following loss on valuation of inventories is included in cost of sales of completed construction contracts.
Disclosure for the year ended March 31, 2019 is omitted due to immateriality.

*1. Reclassification adjustments and tax effects relating to other comprehensive income
Millions of Yen

Millions of Yen
198

Millions of Yen
11,786Retirement benefit expenses

Thousands of U.S. Dollars
2019

2018
¥

2019
11,958$

107,729

553

609

4,981

4. Total amount of research and development expenses included in general and administrative expenses and manufacturing costs
Millions of Yen¥

Thousands of U.S. Dollars
2019

2018
1,217

¥

2019
1,381

$

12,441*5. Breakdown of gain on sales of non-current assets
Millions of Yen
LandIntangible assets

57

KANDENKO¥

Thousands of U.S. Dollars
2019

2018
–
150

¥

¥

Reclassification adjustments*3. Principal accounts and amounts in selling, general and administrative expenses are as follows.

¥

2019

Valuation difference on available-for-sale securities:
Losses arising during the year

Employees’ salaries and allowances

Thousands of U.S. Dollars
2019

2018

2018
¥

Number of assets

For the year ended March 31, 2019

Millions of Yen
2018

For the year ended March 31, 2018

2019
74
–

$

4,192

¥

382

$

(16)

(9)

3,441
(144)

Amount before income tax effect

4,182

366

3,297

Income tax effect(1,283)(121)(1,090)

Valuation difference on available-for-sale securities

2,899

244

2,198

Deferred gains or losses on hedges
Gains (losses) arising during the year

50

10

90

Income tax effect

–

126

1,135

Deferred gains or losses on hedges

50

137

1,234

Gains (losses) arising during the year

1,017

(153)

(1,378)

Reclassification adjustments

(845)

(853)

(7,684)

Amount before income tax effect172(1,006)(9,063)Remeasurements of defined benefit plans:

Income tax effect

(21)

308

2,774

Remeasurements of defined benefit plans, net of tax

150

(698)

(6,288)

Total other comprehensive income

¥

3,100

¥

(317)

$

(2,855)666–

Corporate Report 201958

NOTES TO CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended March 31, 2019
1. Matters related to class and number of issued shares and class and number of treasury shares(Shares)

For the year ended March 31, 2018
1. Matters related to class and number of issued shares and class and number of treasury shares

As of April 1, 2018
(Shares)

As of April 1, 2017

Increase

Decrease

As of March 31, 2018

Shares issued:
Common shares
Total

205,288,338––

205,288,338

205,288,338––

205,288,338

Treasury shares:
Common shares
Total

1,019,780

9,182

407

1,028,555

1,019,780

9,182

407

1,028,555

Notes:
1. Increase in number of common shares in treasury shares is due to repurchase of shares less than one unit.
2. Decrease in number of common shares in treasury shares is due to the sales of shares less than one unit in response to repurchase requests.

Total dividends

Ordinary general
meeting ofshareholders on June27, 2017

Common shares

Board of directors’
meeting on October
31, 2017

Common shares

Shares issued:
Common shares
Total

205,288,338––

205,288,338

205,288,338––

205,288,338

1,028,555

851

81

1,029,325

1,028,555

851

81

1,029,325

Treasury shares:
Common shares
Total

Notes:
1. Increase in number of common shares in treasury shares is due to repurchase of shares less than one unit.
2. Decrease in number of common shares in treasury shares is due to the sales of shares less than one unit in response to repurchase requests.

(1) Dividends paid

(1) Dividends paid
Class of shares

As of March 31, 2019

2. Matter related to dividends

2. Matter related to dividends
Resolution

Decrease

Increase

Dividends per share

Record date

Effective date

¥2,451 million¥12.0

March 31, 2017

June 28, 2017

¥2,451 million¥12.0

September 30,
2017

December 5, 2017

Resolution

Class of shares

Total dividends

Dividends per share

Record date

Effective dateOrdinary general
meeting ofshareholders on June27, 2018

Common shares¥ 2,451 million$22,081 thousand

¥12.0
$0.10

March 31, 2018

June 28, 2018

Board of directors’
meeting on October
31, 2018

Common shares¥ 2,655 million$23,918 thousand

¥13.0
$0.11

September 30,
2018

December 5, 2018

(2) Dividends whose record date fell in the year ended March 31, 2019, but whose effective date comes after March 31, 2019(2) Dividends whose record date fell in the year ended March 31, 2018, but whose effective date comes after March 31, 2018
Resolution

Class of shares

Total dividends

Source ofdividend funds

Dividends per share

Record date

Effective dateOrdinary general
meeting ofshareholders on June27, 2018

Common shares¥2,451 million

Retained earnings¥12.0

March 31, 2018

June 28, 2018

Resolution

Class of shares

Total dividends

Source ofdividend funds

Dividends per share

Record date

Effective dateOrdinary general
meeting ofshareholders on June27, 2019

Common shares¥ 2,655 million$23,918 thousand

Retained earnings

¥13.0
$0.11

March 31, 2019

June 28, 2019

NOTES TO CONSOLIDATED STATEMENT OF CASH FLOWS*1. Relationship between the balance of cash and cash equivalents at the end of the year and the amount on the consolidated balance sheet
Millions of Yen
Cash and deposits

KANDENKO

56,787¥

2019
62,586$563,837

Time deposits with maturities of more than three months(8,687)(8,517)(76,729)

Short-term investments with maturities of three months
or less from the purchase date

5,999

8,999

81,072

Cash and cash equivalents

59¥

Thousands of U.S. Dollars
2019

2018

¥

54,099¥63,068$568,180

Corporate Report 201960

FINANCIAL INSTRUMENTS
1. Status of financial instruments(1) Policies on financial instruments
The Companies manage surplus funds by investing in high security
financial instruments, primarily short-term deposits and debt securities
and raise funds through borrowings from banks and other financial
institutions and issuance of convertible bond-type bonds with shareacquisition rights.
Certain consolidated subsidiaries enter into derivative transactions
to hedge interest rate fluctuation risks arising from borrowings andthe Companies do not use derivative transactions for speculative
purposes.

(2) Description of financial instruments and related risks
Notes receivable, accounts receivable from completed construction
contracts and other, trade receivables, are exposed to customer credit
risk. Securities and investment securities, primarily consist of held-tomaturity debt securities and shares of companies with business
relationship, are exposed to market price fluctuation risks.
Notes payable, accounts payable for construction contracts andother, trade payables, are due within one year. Proceeds from shortterm loans payable are mainly used for operational funds andproceeds from convertible bond-type bonds with share acquisitionrights and long-term loans payable are mainly used for capital
expenditures. Floating rate borrowings are exposed to interest rate
fluctuation risks, but are hedged by using derivative transactions(interest rate swaps).
Derivative transactions are interest rate swaps used as hedging
instruments, in order to hedge interest rate fluctuation risks forborrowings. Details of hedge accounting including hedging
instruments and hedged items, hedging policy and method forevaluating the effectiveness of hedges are described in “SIGNIFICANT
MATTERS PROVIDING THE BASIS FOR THE PREPARATION OF
CONSOLIDATED FINANCIAL STATEMENTS, 4. Significant accounting
policies, (6) Significant hedge accounting method.”(3) Risk management system for financial instruments(a) Credit risk management (risks that counterparties may default)
For trade receivables, the sales administration division regularly
monitors major counterparties’ credit status, and performs due

61

KANDENKO

2. Fair value of financial instruments
date controls and balance controls for each customer to mitigate
and quickly capture the collectability issues caused bydeterioration in the financial conditions.
Held-to-maturity securities are invested in debt securities
with high credit rating, therefore, exposed to minimum credit
risk.
The Companies enter into derivative transactions withfinancial institutions with high credit rating in order to mitigate
credit risk.
(b) Market risk management (fluctuation risks in market prices
and interest rates)
Interest rate swaps are used to mitigate interest rate fluctuation
risks for borrowings.
As for securities, and investment securities, except for heldto-maturity debt securities, the accounting department regularly
monitors fair values and issuers’ (counterparties’) financial status,
considers the relationships with the counterparties, andcontinuously reviews the Company’s securities holdings.
Derivative transactions are executed and managed inaccordance with the nature and limits approved by the board of
directors of each company. The executed transactions are
periodically reported to the board of directors.
(c) Liquidity risk management associated with financing activities(payment default risks)
The accounting department prepares and updates a monthly
management plan of funds as necessary to manage the liquidity
risk.

(4) Supplementary explanation on fair value of financial
instruments
Fair value of financial instruments is measured based on the quoted
market price, if available, or reasonably assessed value if a quoted
market price is not available. Fair value of financial instruments, forwhich a quoted market price is not available, is calculated based on
certain assumptions, and the fair value might differ if different
assumptions are used. In addition, the contract amount of thederivative transactions described in “DERIVATIVE TRANSACTIONS”
does not represent the market risk of the derivative transactions.

Carrying amount and fair value of financial instruments, and differences between these values are as follows. The financial instruments whose fairvalues are deemed extremely difficult to determine are excluded from the table below. (See Note 2 below)
Millions of Yen
For the year ended March 31, 2018
Carrying amount(1) Cash and deposits¥(2) Notes receivable, accounts receivable from completed construction contracts and other56,787

Fair value¥

56,787

Difference¥–

163,061

Allowance for doubtful accounts (*1)

(587)
162,473

162,473–

10,04010,040(0)(3) Securities and investment securities
1) Held-to-maturity securities
2) Available-for-sale securities(4) Notes payable, accounts payable for construction contracts and other (*2)

41,695

41,695–(89,704)(89,704)–(5) Short-term loans payable (*2)

(10,072)(10,072)–(6) Convertible bond-type bonds with share acquisition rights (*2)(20,060)(23,330)

3,269(7) Long-term loans payable (*2)

(8,799)(8,764)(35)(8) Derivative transactions (*3)

¥

(471)

¥

(471)

¥

–

(*1) The amount of allowance for doubtful accounts related to notes receivable, accounts receivable from completed construction contracts and other is deducted.
(*2) The value of liabilities is shown in parenthesis.
(*3) The value of assets and liabilities arising from derivative transactions is shown at net value and with the amount in parenthesis indicating the net liability position.

Millions of Yen
For the year ended March 31, 2019
Carrying amount(1) Cash and deposits¥

62,586

Fair value¥

62,586

Difference¥–

184,424(2) Notes receivable, accounts receivable from completed construction contracts and other(434)

Allowance for doubtful accounts (*1)

183,990

183,990–

1) Held-to-maturity securities

11,032

11,032(0)2) Available-for-sale securities

43,846

43,846–(3) Securities and investment securities(4) Notes payable, accounts payable for construction contracts and other (*2)

(98,783)(98,783)–(5) Short-term loans payable (*2)

(6,953)(6,953)–(6) Convertible bond-type bonds with share acquisition rights (*2)(20,040)(20,540)499(7) Long-term loans payable (*2)

(8,503)(8,490)(13)(8) Derivative transactions (*3)

¥

(460)

¥

(460)

¥

–

Corporate Report 201962

Thousands of U.S. Dollars

3. Expected redemption amount of monetary receivables and securities with maturity dates after the consolidated year-end dateMillions of Yen

For the year ended March 31, 2019
Carrying amount$(1) Cash and deposits

563,837

Fair value$

For the year ended March 31, 2018

Difference

563,837$–

1,661,477(2) Notes receivable, accounts receivable from completed construction contracts and otherCash and deposits(3,909)Allowance for doubtful accounts (*1)

1,657,567

1,657,567–

1) Held-to-maturity securities

99,387

99,387(0)2) Available-for-sale securities

395,009

395,009–(4) Notes payable, accounts payable for construction contracts and other (*2)(889,936)(889,936)–(5) Short-term loans payable (*2)(62,639)(62,639)–(6) Convertible bond-type bonds with share acquisition rights (*2)(180,540)(185,045)

4,495(7) Long-term loans payable (*2)

(76,603)(76,486)(117)(3) Securities and investment securities$(8) Derivative transactions (*3)

(4,144)$(4,144)$Due after one year
Due within one year
through five years

Due after five years
through ten years

Due after ten years

¥

¥

¥

Notes receivable, accounts receivable from completed
construction contracts and other56,787

–

–

–

–

10

–

–

Securities and investment securities
Held-to-maturity securities (government/municipal bonds)
Held-to-maturity securities (corporate bonds)

6,000

–

–

–

Held-to-maturity securities (other)

3,000

1,000

–

–

Available-for-sale securities with maturities (other)
Total

1,000
¥

229,848

4,582

¥

–
¥

1,010

–
¥

–

–

¥

–

Millions of Yen

Thousands of U.S. Dollars
2019

2018

–

For the year ended March 31, 2019

2. The carrying amount of financial instruments whose fair values are deemed extremely difficult to determine

¥

–

–

Notes:
1. The calculation methods for the fair value of financial instruments, marketable securities and derivative transactions(1) Cash and deposits
Deposits are stated at their carrying amount as the fair value approximates the carrying amount because of the short maturity.
(2) Notes receivable, accounts receivable from completed construction contracts and other
The fair value of these instruments is stated at the net present value by maturity group which is discounted considering the credit risk. The
fair value with short maturity approximates the carrying amount.
(3) Securities and investment securities
The fair value of stocks is calculated by quoted market price and the fair value of debt securities is calculated by quoted market price orquotes from counterparty financial institutions. Negotiable certificates of deposit and jointly operated money trusts are stated at theircarrying amount as the fair value approximates the carrying amount because of the short maturity.
Information by holding purpose is described in “SECURITIES.”(4) Notes payable, accounts payable for construction contracts and other, and (5) Short-term loans payable
These are stated at their carrying amount as the fair value approximates the carrying amount because these are settled in a short period oftime.
(6) Convertible bond-type bonds with share acquisition rights
The fair value of convertible bond-type bonds with share acquisition rights is based on the prices presented by the counterparty financial
institutions.
(7) Long-term loans payable
The fair value of long-term loans payable is based on the present value of sum of principal and interest discounted using the borrowing rate
for similar new borrowings.
(8) Derivative transactions
Please refer to “DERIVATIVE TRANSACTIONS.”

Unlisted stocks, etc.

–

163,061(*1) The amount of allowance for doubtful accounts related to notes receivable, accounts receivable from completed construction contracts and other is deducted.
(*2) The value of liabilities is shown in parenthesis.
(*3) The value of assets and liabilities arising from derivative transactions is shown at net value and with the amount in parenthesis indicating the net liability position.

Millions of Yen¥

Cash and deposits

Due within one year

Due after one year
through five years

Due after five years
through ten years

Due after ten years

¥

¥

¥

¥

Notes receivable, accounts receivable from completed
construction contracts and other

62,586–––

184,260

163

–

–

–

10

–

–

Held-to-maturity securities (corporate bonds)

5,000

–

–

–

Held-to-maturity securities (other)

5,000

1,000

–

–

Available-for-sale securities with maturities (other)

2,000

–

–

–

Securities and investment securities
Held-to-maturity securities (government/municipal bonds)

Total

¥

258,847

¥

1,173

¥

–

¥

–

Thousands of U.S. Dollars
For the year ended March 31, 2019

Cash and deposits

Due within one year

Due after one year
through five years

Due after five years
through ten years

Due after ten years

$

$

$

$

Notes receivable, accounts receivable from completed
construction contracts and other563,837–––

1,660,000

1,468

–

–

Securities and investment securities
–

90

–

–

Held-to-maturity securities (corporate bonds)

45,045–––

Held-to-maturity securities (other)

45,045

9,009

–

–

Available-for-sale securities with maturities (other)

18,018–––

Held-to-maturity securities (government/municipal bonds)

Total

$

2,331,954$

10,567

$

–

$

–

2019
4,563

$

41,108Since no quoted market price is available, it is extremely difficult to estimate future cash flows and it is deemed extremely difficult to determine
their fair value, these financial instruments are not included in “(3) Securities and investment securities.”

63

KANDENKO

Corporate Report 201964

4. Scheduled amount of repayment of short-term loans payable, convertible bond-type bonds with share acquisition rights and long-term loans
payable after the consolidated year-end dateMillions of Yen
For the year ended March 31, 2018
Due within
one year
Short-term loans payable¥

Convertible bond-type bonds
with share acquisition rights¥–

Long-term loans payable
Total

10,072

Due after
Due after
Due after
Due after
one year through two years through three years through four years throughtwo years
three years
four years
five years

10,072

¥

–

–
¥

–

1,245

¥

20,0001,245¥–

20,874

¥

–

874
¥

–

557

¥

567

Millions of Yen
For the year ended March 31, 2018
–
–

567
¥

5,554
¥

5,554

Millions of Yen
For the year ended March 31, 2019
Due within
one year
Short-term loans payable

¥

6,953

Due after
Due after
Due after
Due after
one year through two years throughthree years
four years throughtwo years
three years
through four years
five years
¥

–

¥

–

¥

–

¥

–

Due after
five years¥–

Convertible bond-type bonds
with share acquisition rights–

20,000––––Long-term loans payable

–

621

632

642

1,339

5,267

Total

¥

6,953

¥

20,621

¥

632

¥

642

¥

1,339

¥

For the year ended March 31, 2019

Short-term loans payable$

62,639Due after
Due after
Due after
Due after
one year through two years through three years through four years throughtwo years
three years
four years
five years
$

–

$

–

$

–

$

–

Due after
five years$––

180,180

–

–

–

–

Long-term loans payable

–

5,594

5,693

5,783

12,06347,450$62,639$185,774

$

5,693

$

5,783

$

12,063$

Securities whose fair value exceeds their carrying amount:
Government/municipal bonds
Corporate bonds
Other
Subtotal

47,450Fair value

Difference

¥

–
–
–

¥

–
–
–

¥

–
–
–

¥

–

¥

–

¥

–

¥

10
5,999
4,030

¥

9
5,999
4,030

¥

(0)
(0)
–

¥
¥

10,04010,040¥¥10,04010,040

¥
¥

(0)
(0)

Securities whose fair value does not exceed their carrying
amount:Government/municipal bonds
Corporate bonds
Other
Subtotal
Total

Millions of Yen
For the year ended March 31, 2019
Carrying amount
Securities whose fair value exceeds their carrying amount:
Government/municipal bonds
Corporate bonds
Other
Subtotal

Convertible bond-type bonds
with share acquisition rights
Total

Carrying amount

5,267

Thousands of U.S. Dollars

Due within
one year

1. Held-to-maturity securities

Due after
five years

–

557
¥

–

SECURITIESFair value

Difference

¥

–
–
–

¥

–
–
–

¥

–
–
–

¥

–

¥

–

¥

–

¥

10
4,999
6,022

¥

9
4,999
6,022

¥

(0)
(0)
–

¥
¥

11,032
11,032¥¥

11,032
11,032

¥
¥

(0)
(0)

Securities whose fair value does not exceed their carrying
amount:Government/municipal bonds
Corporate bonds
Other
Subtotal
Total

Thousands of U.S. Dollars
For the year ended March 31, 2019
Carrying amount
Securities whose fair value exceeds their carrying amount:
Government/municipal bonds
Corporate bonds
Other
Subtotal

Fair value

Difference

$

–
–
–

$

–
–
–

$

–
–
–

$

–

$

–

$

–

$

90
45,03654,252$

81
45,03654,252

$

(0)
(0)
–

$
$

99,387
99,387$$

99,387
99,387

$
$

(0)
(0)

Securities whose fair value does not exceed their carrying
amount:Government/municipal bonds
Corporate bonds
Other
Subtotal
Total

65

KANDENKO

Corporate Report 201966

2. Available-for-sale securities
Millions of Yen
For the year ended March 31, 2018
Carrying amount
Securities whose carrying amount exceeds their acquisition cost:
Stocks
Bonds
Other
Subtotal¥¥

Acquisition cost

38,472––¥38,472¥¥

Subtotal
Total

¥
¥

15,948––¥15,948¥22,524
–
–

2,223
–
1,000

¥

3,223
41,695

¥
¥

2,607
–
1,000

¥

3,607
19,556

¥
¥

(384)
–
–
(384)
22,139For the year ended March 31, 2019
Carrying amount

Acquisition cost

Difference

4.Impairment loss on securities
For the year ended March 31, 2018

For the year ended March 31, 2019

Disclosure is omitted due to immateriality.

Not applicable.

¥

41,556––¥18,998––¥22,557––¥41,556¥18,998¥22,557

Stocks
Bonds
Other

¥

Subtotal
Total

¥
¥

290
–
2,000

¥

2,290
43,846

¥
¥

341
–
2,000

¥

2,341
21,340

¥
¥

(51)
–
–
(51)
22,505

Thousands of U.S. Dollars
For the year ended March 31, 2019
Carrying amount

Acquisition cost

Derivative transactions to which hedge accounting is applied
Interest rate-related
For the year ended March 31, 2018
Hedge accounting
methodType of transactions

Primary hedged items

Contract amountContract amount due
after one year

Fair value

Deferral hedge

Interest rate swaps:
fixed payment, floatingreceipt

Long-term loans
payable¥4,540 million¥4,270 million¥(471) million

Primary hedged items

Contract amountContract amount due
after one year

Fair value

Long-term loans
payable¥1,018 million¥215 million(Note)

Note: Calculation method for fair value:
Fair value is based on the prices presented by the counterparty financial institutions.

Securities whose carrying amount does not exceed theiracquisition cost:

Difference$

374,378––$

171,153––$

203,216––$

374,378$

171,153$

203,216

Stocks
Bonds
Other

$

2,612
–
18,018$3,072–
18,018

$

(459)
–
–

Subtotal
Total

$
$

20,630395,009$$

21,090192,252$$(459)
202,747

Subtotal

Disclosure is omitted due to immateriality.

22,524

Millions of Yen

Securities whose carrying amount exceeds their acquisition cost:
StocksBonds
Other

Disclosure is omitted due to immateriality.

DERIVATIVE TRANSACTIONSStocks
Bonds
Other

Subtotal

For the year ended March 31, 2019

Difference

Securities whose carrying amount does not exceed theiracquisition cost:

Securities whose carrying amount exceeds their acquisition cost:
StocksBonds
Other

3. Available-for-sale securities sold during the year
For the year ended March 31, 2018

Hedge accounting
methodType of transactions

Exceptional accounting
Interest rate swaps:of the interest rate
fixed payment, floating
swaps
receipt

Note: The fair value of interest rate swaps subject to the application of the exceptional accounting is recognized together with long-term loans payable, which is designated as the hedged item,
therefore their fair value is included in the fair value of the relevant long-term loans payable (the fair value of current portion of long-term loans payable is included in the fair value of shortterm loans payable).

For the year ended March 31, 2019
Hedge accounting
methodType of transactions

Primary hedged items

Contract amountContract amount due
after one year

Fair value

Deferral hedge

Interest rate swaps:
fixed payment,
floating receipt

Long-term loans
payable¥ 4,270 million$ 38,468 thousand¥ 3,991 million$ 35,954 thousand¥ (460) million$ (4,144) thousand

Note: Calculation method for fair value:
Fair value is based on the prices presented by the counterparty financial institutions.

Securities whose carrying amount does not exceed theiracquisition cost:

67

KANDENKO

Corporate Report 2019

68

RETIREMENT BENEFITS(4) Breakdown of retirement benefit expenses
Millions of Yen

1. Overview of retirement benefit plans
The Companies have funded and unfunded defined benefit plans and defined contribution plans to prepare for retirement benefits to employees.
Defined benefit pension plans (funded plans) offer retirement lump-sum payments or pensions according to the salary and service period of theeligible employees. Retirement lump-sum payment plans (unfunded plans) offer retirement lump-sum payments according to the salary and service
period of the eligible employees. When employees retire, the Companies may provide them with additional retirement benefits, etc.
Certain consolidated subsidiaries participate in multi-employer corporate pension fund, which is accounted for in the same manner as defined
contribution plans because it is impracticable to reasonably estimate an amount of plan assets for the contributions made by the subsidiaries. In
addition, regarding the multi-employer corporate pension fund, note on the multi-employer plan is omitted due to immateriality.
Certain consolidated subsidiaries use the simplified method in calculating net defined benefit liability and asset, and retirement benefit
expenses.

Current service cost¥¥Thousands of U.S. Dollars
2019

2018
67,940¥2019
66,508$599,171

Current service cost

2,242

2,199

19,810Interest cost

581

567

5,108

Actuarial gains and losses

(98)

(38)

(342)

(4,157)(4,318)(38,900)

Benefit paid¥

66,508¥64,919$¥Thousands of U.S. Dollars
2019

2018
39,670¥2019
41,320$372,252

Expected return on plan assets

589

614

5,531

Actuarial gains and losses

919

(191)

(1,720)Contributions by the employer

3,360

3,454

31,117

Benefits paid

(3,217)(3,178)(28,630)

(2)

(2)

(18)

Other
¥

41,320¥42,017$

378,531(3) Reconciliation between ending balances of defined benefit obligations and plan assets and the net defined benefit liability
and net defined benefit asset reported on the consolidated balance sheet
Millions of Yen¥

Plan assets
Unfunded defined benefit obligations

¥

5,341

$

(589)

(614)

(5,531)

(857)

(853)

(7,684)

Past service cost recognized in the year

12

–

–

Other

249

195

1,756

Total

¥

1,639

¥

1,495

$

13,468(5) Remeasurements of defined benefit plans

Past service cost

(42,017)
¥

2,852

$

20,04919,846

Total

¥

(172)

¥

$

–

1,006

9,063
$

9,063

¥

Thousands of U.S. Dollars
2019

2018
(2,248)¥2019(1,241)$(11,180)(7) Plan assets(a) Breakdown of plan assets
The ratio of each major category to total plan assets is as follows:
2019

2018
General account

41%

41%

Bonds

34%

35%

Equities

24%

23%

Other

1%

1%

Total

100%

100%

(b) Method of determining the long-term expected rates of return on plan assets
Expected return rate on plan assets is determined by considering the current and anticipated future portfolio of plan assets and current
and anticipated future long-term performance of individual asset classes that comprise the funds’ asset mix.

180,621
206,324

Net defined benefit liability¥

25,188¥22,902$

206,324–
22,902

–
$

2018

2019

Discount rate

mainly 0.9%

mainly 0.9%

Expected return rate on plan assets

mainly 1.5%

mainly 1.5%

25,693

$

¥

–
1,006

Millions of Yen

Major assumptions used in actuarial calculations

22,902

25,188¥(159)

Accumulated remeasurements of defined benefit plans (before tax effect) consist of the following:(378,531)

¥

¥

(12)

2019

(6) Accumulated remeasurements of defined benefit plans(8) Assumptions used in actuarial calculations

25,188(0)¥

Actuarial gains and losses

Thousands of U.S. Dollars
2019

2018

404,225¥

KANDENKO

5,108

2019
44,869Net amount of liabilities and assets recognized inconsolidated balance sheet
Net defined benefit asset

69

46,661(41,320)¥

Thousands of U.S. Dollars
2019

2018

Net amount of liabilities and assets recognized inconsolidated balance sheet

19,810

Actuarial gains and losses recognized in the year

Unrecognized actuarial gains and losses
Millions of Yen

Funded defined benefit obligations$

567

Expected return on plan assets

584,855(2) Changes in plan assets

Balance at end of year

2,199

581

Millions of Yen
Millions of Yen

Balance at beginning of year¥

Interest cost

(1) Changes in defined benefit obligations

Balance at end of year

2,242

2019

Remeasurements of defined benefit plans (before tax effect) consist of the following:

2. Defined benefit plans

Balance at beginning of year

Thousands of U.S. Dollars
2019

2018

206,324

3. Defined contribution plans
The required amount of contribution to the defined contribution plans (including the multi-employer corporate pension fund accounted for in thesame manner) of the Companies was ¥1,615 million and ¥1,654 million ($14,900 thousand) for the years ended March 31, 2018 and 2019,respectively.
Corporate Report 201970

DEFERRED TAX ACCOUNTINGSEGMENT INFORMATION, ETC.

1. Breakdown of major factors that caused deferred tax assets and liabilities(Segment information)
1. Outline of reportable segment information

Millions of Yen

Thousands of U.S. Dollars
2019

2018

2019

Deferred tax assets:
Net defined benefit liability

¥

7,756

¥

7,062

$

63,621

3,674

3,689

33,234

Accrued bonuses

3,053

3,269

29,450Loss on valuation of assets

1,405

1,415

12,747

Depreciation and amortization

Provision for loss on construction contracts

987

732

6,594

Allowance for doubtful accounts

474

344

3,099

Loss carry-forward
OthersSubtotal
Valuation allowance

247

197

1,774

2,792

1,879

16,927

20,391

18,592

167,495(2,244)(2,485)

Total(20,216)¥

17,906¥

16,347$

147,270¥(6,746)¥(6,867)$(61,864)

Reportable segments are operating segments or aggregations of operating segments that meet specified criteria. Operating segments arecomponents of an entity about which separate financial information is available and such information is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing performance.
The Companies engage in facility installation work, sales of electrical equipment, rental of real estate, leasing, sales of electrical power andothers. “Engineering” is determined to be the reportable segment.
“Engineering” includes business related to electrical work, plumbing work and various other work on facilities.

2. Method of measurement for the amounts of net sales, profit or loss, assets and other items by reportablesegment
The accounting treatment regarding the reportable business segments is the same as recorded in “SIGNIFICANT MATTERS PROVIDING THE BASISFOR THE PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS.” The profit of reportable segments is based on operating profit. Theintersegment profit and transfers are based on trading prices in the market.

3. Net sales, profit or loss, assets and other items by reportable segments

Deferred tax liabilities:

Millions of Yen

Valuation difference on available-for-sale securities
Reserve for advanced depreciation of non-current assets(991)(1,049)(9,450)Reserve for special depreciation

(291)

(210)

(1,891)Others

(168)

(179)

Total
Net deferred tax assets(1,513)¥546,165¥¥

27,491

¥

1,706

¥

29,197

2019¥394,693¥

72,786¥

467,480

¥

3,999

¥

1,595

¥

5,594

8,051

$

72,531

2019$60,234

2. Breakdown of items which caused the difference between the statutory tax rate and the effective tax rate
after adopting tax effect accounting
2018

2019

This note has been omitted as the difference between the statutory tax
rate and the effective tax rate after adopting tax effect accounting is 5%
or less of the statutory tax rate.

This note has been omitted as the difference between the statutory
tax rate and the effective tax rate after adopting tax effect accounting
is 5% or less of the statutory tax rate.

KANDENKO

44,815

Segment assets¥

Customers
Inter-segment

¥

4,716

10,571
34,243¥507,205(38,960)¥

507,205¥64¥

29,261¥(23,729)¥443,751

¥

(493)

¥

5,101

38,960(38,960)–

Other items:
Depreciation and amortization

71–

Segment profit

9,696

6,686

¥

Thousands of U.S. Dollars¥¥

507,205¥(74,738)

6,772¥

501,350$

Consolidated total(Note 3)

Net sales:¥(8,296)2018

Adjustments(Note 2)

Total

¥

¥

Total

496,633(8,209)Note: Except for above, deferred tax liabilities for land revaluation are recorded as follows:

Deferred tax liabilities for land revaluation

Engineering¥¥

Millions of Yen

For the year ended March 31, 2018
Other
(Note 1)

Increase in property, plant and equipment
and intangible assets

7,919

7,575

15,495(1,917)

13,578Notes:
1. The “Other” segment is a business segment which is not included in the reportable segment and includes electrical equipment sales business, real estate business, lease business and power
generation business.
2. Adjustments in segment profit, segment assets and other items are elimination of internal transactions between segments.
3. Segment profit is adjusted with operating profit presented in the consolidated statement of income.

Corporate Report 201972

Millions of Yen
For the year ended March 31, 2019
Other
(Note 1)Engineering

Total

Adjustments(Note 2)¥563,550¥–

Consolidated total(Note 3)

Net sales:¥

551,976

Total¥

Segment profit
Segment assets

Customers¥

11,574552,156¥

53,381¥

605,537¥¥

27,861

¥

2,080

¥

29,941¥

410,645¥

73,794

¥

¥

4,337

¥

2,040

¥

180

Inter-segment

41,806¥

563,550(41,987)¥

563,550¥70¥

30,012484,440¥(24,585)¥459,854

6,378

¥

(189)

¥

6,188

41,987(41,987)–

Other items:
Depreciation and amortization
Increase in property, plant and equipment
and intangible assets

7,781

3,526

11,307(1,555)

9,752(Related information)
For the year ended March 31, 2018
1. Information about products and services

For the year ended March 31, 2019
1. Information about products and services

Information is omitted as similar information is described in thesegment information.

Information is omitted as similar information is described in thesegment information.

2. Information about geographical region

2. Information about geographical region(1) Net sales(1) Net sales

Information is omitted as net sales to external customers inJapan accounted for more than 90% of net sales reported in the
consolidated statement of income.

(2) Property, plant and equipment

Information is omitted as net sales to external customers inJapan accounted for more than 90% of net sales reported in the
consolidated statement of income.

(2) Property, plant and equipment

Details of property, plant and equipment are omitted as amounts
of property, plant and equipment located in Japan accounted formore than 90% of all property, plant and equipment reported on
the consolidated balance sheet.

Details of property, plant and equipment are omitted as amounts
of property, plant and equipment located in Japan accounted formore than 90% of all property, plant and equipment reported on
the consolidated balance sheet.

Thousands of U.S. Dollars

3. Information about major customers

For the year ended March 31, 2019
Other
(Note 1)Engineering

Total

Adjustments(Note 2)

Consolidated total(Note 3)

Net sales:
Customers$ 4,972,756$

104,270

1,621$ 5,077,027$–

376,630

378,261(378,261)–$ 4,974,378$

480,909$ 5,455,288$(378,261)$ 5,077,027

Segment profit$

251,000$

18,738$

269,738$

630

Segment assets$ 3,699,504$

664,810$ 4,364,324$(221,486)$

Increase in property, plant and equipment
and intangible assets$

39,07270,099$18,37831,765$57,459101,864$(1,702)(14,009)

Net sales

Related segment

Customer Name

Net sales

Related segment

Tokyo Electric Power
Company Group¥171,029 million

Engineering

Tokyo Electric Power
Company Group¥ 172,851 million$ 1,557,216 thousand

Engineering$ 4,142,828$(Information about impairment loss in non-current assets of each reportable segment)
For the year ended March 31, 2018

270,378

Other items:
Depreciation and amortization

Customer Name

$ 5,077,027

Total

Inter-segment

3. Information about major customers

Engineering
Impairment loss¥

256 million

55,747

Note: “Other” is related to real estate business and power generation business.

87,855For the year ended March 31, 2019

Notes:
1. The “Other” segment is a business segment which is not included in the reportable segment and includes electrical equipment sales business, real estate business, lease business and power
generation business.
2. Adjustments in segment profit, segment assets and other items are elimination of internal transactions between segments.
3. Segment profit is adjusted with operating profit presented in the consolidated statement of income.

Other (Note)¥

106 million

Corporate/elimination¥– million

Total¥

363 million

Disclosure is omitted due to immateriality.

(Information about amortization and unamortized balance of goodwill of each reportable segment)
For the year ended March 31, 2018

For the year ended March 31, 2019

Disclosure is omitted due to immateriality.

Disclosure is omitted due to immateriality.

(Information about gain on bargain purchase of each reportable segment)
For the year ended March 31, 2018
For the year ended March 31, 2019
Not applicable.

73

KANDENKO

Not applicable.

Corporate Report 201974

RELATED PARTY TRANSACTIONS

For the year ended March 31, 2019
TypeTransactions between related parties

Other affiliates

For the year ended March 31, 2018
Name

Location

Capital stock

Tokyo Electric Power
Company Holdings,
Incorporated

Chiyoda-ku, Tokyo¥1,400,975 million

Other affiliates
TEPCO Power Grid,
Incorporated

Type

Name

Tokyo Electric Power
Company Holdings,
Incorporated

Chiyoda-ku, Tokyo

Nature oftransaction

Installation ofelectric work¥

Description ofbusiness
Electric powerbusiness

General powertransmission and80,000 million
distribution
business

TEPCO Power Grid,
Incorporated

Purchase of raw
materials

75

KANDENKO

Ratio of voting
rights held
(Held)
Direct–%Indirect 47.6%(Held)
Direct 46.4%
Indirect 0.3%

Capital stock

Description ofbusiness

Ratio of voting
rights held

Type

Name

Electric work
contract

Balance at end of year

¥ 5,069 million¥ 8,718 million

Notes receivable, accounts
receivable from completed
construction contracts andother
Advances received on
uncompleted construction
contracts¥

Notes receivable, accounts
receivable from completed
construction contracts andother¥28,457 million¥ 34,395 million

General powertransmission and¥ 80,000 million
Chiyoda-ku, Tokyo$ 720,720 thousand distribution
business

Relation to therelated party(Held)
DirectIndirect–%
47.6%(Held)
DirectIndirectElectric work
46.4%
contract
0.3%

Electric work
contract

Electric work
contract

Account¥144,059 million

TEPCO Power Grid,
Incorporated

Relation to therelated party

Amount of transaction

Other affiliates
Installation ofelectric work

Location

Tokyo Electric Power
¥ 1,400,975 million
Electric power
Company Holdings, Chiyoda-ku, Tokyo$12,621,396 thousand businessIncorporated

Transactions between the Company and related parties
The parent company and major shareholders (limited to companies) of the Company

Type

Name

100 million

Advances received on
uncompleted construction
contracts¥ 1,250 million

Notes payable, accounts
payable for construction
contracts and other¥ 2,670 million

Tokyo Electric Power
Company Holdings,
Incorporated

Nature oftransaction

Installation ofelectric work

Amount of transaction¥$

7,288 million
65,657 thousand

Other affiliates

TEPCO Power Grid,
Incorporated

Installation ofelectric work

Purchase of raw
materials¥ 142,700 million$ 1,285,585 thousand¥ 33,962 million$ 305,963 thousand

Account

Balance at end of year

Notes receivable,accounts receivable fromcompleted construction
contracts and other¥ 5,304 million$ 47,783 thousand

Advances received on
uncompleted construction
contracts¥$

Notes receivable,accounts receivable fromcompleted construction
contracts and other¥ 27,279 million$ 245,756 thousand

Advances received on
uncompleted construction
contracts¥$

Notes payable, accounts
payable for construction
contracts and other¥ 2,273 million$ 20,477 thousand

58 million
522 thousand

957 million
8,621 thousand

Notes:
1. Above transaction amounts do not include consumption taxes and above balances at the end of the year include consumption taxes.
2. Terms and conditions of the transactions and its policies
Terms and conditions for construction orders and purchase of raw materials are determined based on arm’s length basis through negotiations considering market price, etc.

Corporate Report 201976

CONSOLIDATED SUPPLEMENTAL SCHEDULESPER SHARE INFORMATION(Schedule of bonds)
Yen
¥

2019

1,097.36
93.31
85.93

¥

1,167.30
96.46
88.78

Millions of Yen

$

10.51
0.86
0.79

Thousands of U.S. Dollars
2019

2018
¥

19,058–¥$

177,504–

19,703

177,504

Thousands of Shares
2019

2018

204,259

204,262
Millions of Yen

Thousands of U.S. Dollars
2019

2018
Diluted earnings per share
Adjustment of profit attributable to owners of parent[Interest expenses, net of tax included in the above]

Kandenko Co.,Ltd.

Euro-yenconvertible bondtype bonds withshare acquisitionrights due 2021,
subject to call

March 31,
2016

Total

–

–

As of March 31,
2019Interest rate (%)

Collateral

Maturity¥ 20,060 million ¥ 20,040 million$ 180,720 thousand $ 180,540 thousand

–

None

March 31,2021

¥ 20,060 million ¥ 20,040 million$ 180,720 thousand $ 180,540 thousand

–

–

–

Shares to be issued

Common shares

Issuance price of share acquisition rights

GratisIssuance price of shares¥ 1,142.0$ 10.28

Total issuance value¥ 20,100 million$181,081 thousand

Total issuance value of shares issued through the exercise of share acquisition rights¥

Grant ratio of share acquisition rights (%)

100

Exercise period of share acquisition rights

April 14, 2016 to March 17, 2021–

millionUpon the exercise of each of the share acquisition rights, the bonds relating to the share acquisition rights shall be contributed. The value of the bonds shall be the same as their face amount.
2. The redemption schedule for five years subsequent to March 31, 2019 is summarized as follows:

2019
(13)
[(13)](13)[(13)]

As of April 1,
2018

Notes:
1. Information on convertible bond-type bonds with share acquisition rights is as follows:

2019
19,703–19,058Weighted average number of common shares during the year

Issuance date2019

Notes:
1. The basis of calculating earnings per share and diluted earnings per share is as follows:

Earnings per share
Profit attributable to owners of parent
Amount not attributable to common shareholders
Profit attributable to owners of parent applicable tocommon shares

Issue type

U.S. Dollars

2018
Net assets per share
Earnings per share
Diluted earnings per share

Company name(117)[(117)]

Due within one year

Due after one year
through two years

Due after two years
through three years

Due after three years
through four years

Due after four years
through five years–¥ 20,000 million$180,180 thousand

–

–

–

Thousands of Shares
2019

2018
Increase in common shares

17,365

17,513[Convertible bond-type bonds with share acquisitionrights included in the above][17,365][17,513]––

Overview of dilutive securities that are not included in
the computation of diluted earnings per share becauseof their anti-dilutive effect
2. The basis of calculating net assets per share is as follows:

Millions of Yen
Total net assets
Amount deducted from total net assets[Non-controlling interests included in the above]
Total net assets related to common shares¥

Thousands of U.S. Dollars
2019

2018
230,810
6,665[6,665]
224,145¥2019
245,9547,521[7,521]
238,432$

2,215,801
67,756[67,756]
2,148,036

Thousands of Shares
2019

2018
Number of common shares outstanding at end of year

204,259

204,259

SIGNIFICANT SUBSEQUENT EVENTS
Not applicable.
77

KANDENKO

Corporate Report 201978

| Company Profile | (As of March 31, 2019)(Schedule of loans)
Company outline

As of April 1, 2018

As of March 31, 2019

Average interest rate(%)

Short-term loans payable¥ 8,490 million$ 76,486 thousand¥ 6,165 million$ 55,540 thousand

0.7–

Current portion of long-term loans payable¥ 1,582 million$ 14,252 thousand¥$

788 million
7,099 thousand

1.2–

Current portion of lease obligations

¥
$

¥
$

525 million
4,729 thousand––

Long-term loans payable (excluding current portionof long-term loans payable)¥ 8,799 million$ 79,270 thousand¥ 8,503 million$ 76,603 thousand

1.6

Lease obligations (excluding current portion of leaseobligations)

¥
$

¥
$

981 million
8,837 thousand

–

–

–

–

–

¥ 20,315 million$ 183,018 thousand¥ 16,963 million$ 152,819 thousand––

477 million
4,297 thousand

966 million
8,702 thousand

Other interest-bearing debt
Total

Due

Company name

Kandenko Co., Ltd.

Established

September 1, 1944

Head office

4-8-33 Shibaura, Minato-ku, Tokyo, Japan

Paid in capital¥10,264 million

2023 to 2033

Total number of shares issued

205,288,338 shares2020 to 2026

Employees

9,818 persons (consolidated), 7,202 persons (non-consolidated)

The Company’s website

Notes:
1. Interest rates and balances at the end of the year are used to calculate average interest rate. The average interest rate of lease obligations has not been presented since lease obligations before
deducting the amount equivalent to interest expense included in total lease payments are recorded on the consolidated balance sheet.
2. The redemption schedule of long-term loans payable and lease obligations (excluding current portion) for five years subsequent to March 31, 2019 is summarized as follows:

Due after one year
through two years

Due after two years
through three years

Due after three years
through four years

Due after four years
through five years

Long-term loans payable¥$

621 million
5,594 thousand¥$

632 million
5,693 thousand¥$

642 million
5,783 thousand¥ 1,339 million$ 12,063 thousand

Lease obligations¥$

401 million
3,612 thousand¥$

267 million
2,405 thousand¥$

177 million
1,594 thousand¥$

The Company sees its website as one of the importantsources of information. Please visit our website where
we post IR information, an introduction on our
technologies and services, and the latest news.

82 million
738 thousand

To shareholders and investors:(Schedule of Asset Retirement Obligations)
The amounts of asset retirement obligations as of April 1, 2018 and March 31, 2019 are less than 1% of the total liabilities and net assets as ofApril 1, 2018 and March 31, 2019. Therefore, the disclosure is omitted.

OTHERS
Quarterly information for the year ended March 31, 2019
Cumulative period

First quarter

Third quarter

Fourth quarter

Net sales¥ 126,737 million¥ 257,976 million¥ 387,716 million¥ 563,550 million$ 1,141,774 thousand $ 2,324,108 thousand $ 3,492,936 thousand $ 5,077,027 thousand

Profit before income taxes¥$

6,600 million¥
59,459 thousand $14,293 million¥
128,765 thousand $19,481 million¥
175,504 thousand $29,904 million
269,405 thousand

Profit attributable to owners of parent¥$

4,308 million¥
38,810 thousand $9,349 million¥
84,225 thousand $12,733 million¥
114,711 thousand $19,703 million
177,504 thousand

Earnings per share¥$

21.09 ¥
0.19 $

45.77 ¥
0.41 $

62.34 ¥
0.56 $

96.46
0.86

Each quarter
Earnings per share

79

Second quarter

KANDENKOFirst quarter¥$21.09 ¥
0.19 $

Second quarter
24.68 ¥
0.22 $

Third quarter
16.57 ¥
0.14 $

https://www.kandenko.co.jp/

https://www.kandenko.co.jp/ir(in Japanese)(in Japanese)

Fourth quarter
34.12
0.30

Corporate Report 201980

Corporate Report 2019is the |mostexperienced firm in general|Kandenko
Company Profile(As of March 31, 2019)
infrastructure works in the Tokyo metropolitan districtat 75 years since its establishment| Stock Information | (As of March 31, 2019)

Network
Imaginelooking down from the air on the Marunouchi
area in Tokyo, Japan’s finance andDomestic Offices
Overseas Offices
economic center, and you will see that Kandenko was involved in the construction of most
Head
Office4-8-33 Shibaura,
Tokyo,
Singapore
1 Coleman#10-5 The Adelphi,
ofthebuildings
there. Minato-ku,
Not onlyin Japanand aroundthe capitalbut Street,throughout
the nation,
BranchSingapore 179803
Kandenkohasprovided
end-to-end
engineering
servicesrangingfromdesignandexecution
Tokyo Branch
4-8-33 Shibaura, Minato-ku, Tokyo, Japanto maintenance and renovation, regarding electrical,
telecommunications,conditioning
Taiwan Office
6F-1, No. 45, Section 1, air
MinchuanEastern
Kanagawa Branch 1-1-8 Hiranuma, Nishi-ku, Yokohama, Japan
Road, Taipei, Taiwan
andsanitation systems and other kinds of building infrastructure.
Upgradingelectricalinfrastructure,of cities
is alsoan importantbusiness
Chiba
Branch2-1-24
Shinjuku, Chuo-ku,
Chiba, Japanthe main artery
Yangon Office
Room1(A),
University
Paradise Condo,
No.441,of ours. From power plants to households, we play a part New
in stable
supplyto supUniversity energy
Avenue Road,
Bahan Township,
Saitama Branch 1-9-6 Sakuragicho, Omiya-ku, Saitama, Japan
Yangon, Myanmar
port urban functions.
IbarakiBranch2-7-14Mito-shi, Ibaraki,
Japan of people, the economy, and a safe and comfortable
Our
missionisJonan,to protect
the lives
Indonesia Office 12th Floor, Summitmas II Building, Jl. Jend.
environment.
Withincomparable
experiencesand
excellentSudirman
technology,
is comKav. 61-62,Kandenko
Jakarta 12190 Indonesia
Tochigi Branch 91-1 Imaizumicho, Utsunomiya-shi, Tochigi, Japanmitted to fulfilling this mission.
Gunma Branch 215-6 Furuichimachi, Maebashi-shi, Gunma, Japan
Delivering electricity with secure construction, we light buildings with high-quality facilities
andBranchlightenthespirits
ofYamanashi,
the people
Yamanashi
4-12-25
Chuo,
Kofu-shi,Japan living inside. Kandenko aims to be an exceptionallybrilliant company that illuminates the nation.

The shares of common stock of the Company

Tama Branch

2-24-6 Myojincho, Hachioji-shi, Tokyo, Japan

Kansai Branch

Nakanoshima Festival Tower 20th Floor, 2-3-18
Nakanoshima, Kita-ku, Osaka, Japan

Treasury stock
0.50%(0.50%)

Stock Exchange.

Kyushu Branch Yakuin Business Garden 4th Floor, 1-1-1
Yakuin, Chuo-ku, Fukuoka, Japan
Hokkaido
BranchTakeda Resona Building 3rd Floor, 4-1-2 Kitaichijo
Nishi, Chuo-ku, Sapporo-shi, Hokkaido, Japan

Tohoku Branch Sendai Daiichi Seimei Tower Building, 4-6-1
Ichibancho, Aoba-ku, Sendai-shi, Miyagi, Japan

Number ofshares held

Name

On March 31, 2019, there were a total of
9,480 shareholders. The following table lists
the 10 largest shareholders appearing on theregister at that date.

94,753,552

46.15

2 The Master Trust Bank of Japan, Ltd. (Trust Account)

10,170,800

4.95

3 Japan Trustee Services Bank, Ltd. (Trust Account)

8,625,200

4.20

4 Mizuho Bank, Ltd.

8,121,839

3.96

5 Kandenko Group Employees Shareholding Association

5,657,098

2.76

6 Japan Trustee Services Bank, Ltd. (Trust Account 9)2,408,100

1.17

7 STATE STREET BANK AND TRUST COMPANY 505001

2,275,129

1.11

8 Japan Trustee Services Bank, Ltd. (Trust Account 5)

1,998,800

0.97

NOMURA PB NOMINEES LIMITED OMNIBUSMARGIN(CASHPB)

1,824,100

0.89

1,670,944

0.81

10 JP MORGAN CHASE BANK 385151
Individuals, other13.78%
Number of Shares Held by Type of Shareholder (As of March
31, 2019)

Foreigncompanies, etc.
13.40%
Treasury stock(15.23%)0.50%(0.50%)

Foreigncompanies, etc.
13.40%(15.23%)(13.72%)

Total number ofshares issued
205,288,338 shares
Total number ofshares issued
205,288,338 shares

Individuals, other
Financial
13.78%
institutions(13.72%)22.59%(20.79%)Note: Figures in parentheses show data as of March 31, 2018.

Financial
Japanese institutions
companies
22.59%
49.73%(20.79%)(49.76%)

Note: Figures in parentheses show data as of March 31, 2018.

Japanese companies
49.73%(49.76%)

Stock-Related Information
Fiscal year-end

March 31

Ordinary general
meeting of shareholders

June

Record dates for
dividend payments

March 31 for the fiscal year-end dividend.
September 30 for the interim dividend.

Record date

The date on which shares must be owned
for shareholders to exercise voting rights at
the general meeting of shareholders is March
31. If other votes are required, the record
date will be set and announced in advance.

Method of public
notification

Notification will be given electronically.
However, if we cannot issue an electronic
notification, we will place a notice in the Nihon
Keizai Shimbun, published in Tokyo. Kandenko’s
URL for public notices is as follows.
https://www.kandenko.co.jp/

Transfer agent

Sumitomo Mitsui Trust Bank, Limited
1-4-1 Marunouchi, Chiyoda-ku, Tokyo
100-8233, Japan

Transfer agent
contact point

Sumitomo Mitsui Trust Bank, Limited
Stock Transfer Agency Department
2-8-4 Izumi, Suginami-ku, Tokyo 168-0063,
Japan
Tel: 0120-782-031 (toll-free)

Nagano Branch 1629-32 Midoricho, Nagano, Japan

Monthly Stock Price(Unit: Yen)

1,400
1,200
(Unit: Yen)
1,000
1,400
800
1,200

(inquiries about stockrelated matters)

1,000
0 Apr. May June July Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar.
800

Shares held as apercentage of total
outstanding shares

1 TEPCO Power Grid, Inc.

9

Shizuoka Branch 8-12 Yoneyamacho, Numazu-shi, Shizuoka, Japan

Nagoya Branch Nagoya Toho Building 6th Floor, 1-2-7
Sakae, Naka-ku, Nagoya-shi, Aichi, Japan

Principal Shareholders

are listed on the First Section of the Tokyo

2018

2019

0 Apr. May June July Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar.

181

KANDENKO

2018

2019

Corporate Report 201982