Integrated Report

KYUDENKO REPORT

2020

1. Introduction

Introduction

Corporate Philosophy
Contents
1. Introduction

3. CSR/Corporate GovernanceCorporate Philosophy

02

Basic Concept of CSR

34

Message from the President

03

Initiatives for Safety

35

Structure of KYUDENKO REPORT 202009

Workplace and Labor Environment

36

Coexistence with Local Communities—Sports

37

Corporate Governance

38

Interview with Outside Directors

45

2. Vision and Strategy
Value Creation Process

11

Our Vision for the Future13

Mid-term Management Plan

15

Special Feature
Growth Strategy of the Kyudenko Group~ Roles the Tokyo Head Office Should Play ~17

Special Feature
Growth Strategy of the Kyudenko Group~ Human Resources are the Key ~19

Special Feature
Growth Strategy of the Kyudenko Group~ Development of New Business Fields ~21

Growth Trajectory of Kyudenko

4. Data Section
Management Team of Kyudenko

47

Financial and Non-financial Highlights

49

10-year Financial Summary

51

Report on Financial Results and Financial
Analysis

53

Consolidated Balance Sheet

55

Consolidated Statement of Income

56

23

Consolidated Statement of Cash Flows

57

Business of Kyudenko

25

Corporate Proﬁle58

Performance by Business Category

27

Stock Information

59

List of Reference for Key Information

60i) Electrical work1

We contribute to society through providing agreeable
environmental solution.

2

We keep challenging for sustainable development throughour engineering strength and create a new value.

3

We aim to create mutual respecting environment in
Kyudenko which utilize and develop

employees’ personality.

Action Guidelines(1) We will create the future environment with a new perspective(2) We will enhance technological force with creativity and ingenuity(3) We will appropriately accept and respond to customers’ voice(4) We will embrace teamwork in work(5) We will create a vibrant and bright workplaceii) Heating, Ventilation, and Air Conditioning(HVAC) and sanitary facility workiii) Power distribution line workiv) Renewable energy generation plant workv) Renewable energy generation business

PB
01

Overseas Business of Kyudenko

32

Business Locations

33

Kyudenko Corporation

KYUDENKO REPORT 2020

PB
02

1. Introduction

Message from the President

The Kyudenko Group will achieve sustainable growth
to realize our vision for the 100th anniversary.
Representative Director and President

I took office as President in June 2020. Ever since, I
was faced with the COVID-19 crisis, as well as aseries of natural disasters that tested our crisis
management systems. The experience made me
acutely aware of the weight of my responsibility as
President not only of the Company but also a
company that supports the infrastructure of local
communities and other companies.
Under the leadership of former President Nishimura,our business scope steadily expanded to sales ofover 400 billion yen. We have more or less achieved
targets set in the previous Mid-term Management
Plan (FY2015-FY2019) as well.
The main theme of the previous Mid-termManagement Plan was “Taking on Challenges to
Make the Next Leap Forward ~ To the next growthstage ~”. “Establish stable foundation in Kyushu”,“Strengthening business in the metropolitan area”,
and “Development of human resources” were thepillars of our growth strategy, and we worked onstrengthening the four forces, namely, “sales force”,“engineering strength”, “on-site capabilities”, and“growing force”.
The initiatives in the previous Mid-termManagement Plan not only contributed to achieving
work related to solar power, but also brought about
more orders from outside Kyushu, especially in themetropolitan area, through efforts including
strengthening the organizational structure andconstruction system of the Tokyo Head Office as well
as allowed us to focus on expanding HVAC andsanitary facility work.
In addition, we actively performed M&As ofconstruction companies and expanded our businessscope especially in the field of facility work in Japan.
We also worked on thorough cost management andhorizontally shared experience and knowhow

company-wide through the Technology Management
Department, and Q-mast, a material sales subsidiaryestablished in FY2017 played a central role in
reducing material costs.
In particular, we focused on “worksites” that are thefrontline of the business and strengthened ourconstruction capability by systematically recruiting
new graduate engineers, hiring mid-career engineers,
performing M&As and taking other measures toproactively secure workforce in an organized manner.
These were the most important factors that
contributed to expanding our business scope, and it
brought about the greatest achievement,
unprecedented in the results of former Mid-termManagement Plans.
Thanks in part to these achievements, we havebeen a constituent of JPX-Nikkei Index 400 sinceAugust 2016. I believe that by meeting the “corporate
earnings” criteria of the Index, our profitability andmanagement achieved high esteem, allowing us toenhance the Kyudenko brand across Japan.
It is a great honor to be one of the top 400
companies among the entire 3,500 or so listedcompanies, and we appreciate it as a token ofinvestors’ recognition of the Group. Such a status is
expected to foster a more positive mindset among
officers and employees within the Company.
Meanwhile, a number of challenges have emerged
as we expanded our business scope of late.
Specifically, construction volume has rapidly
increased so much so that human resource
development cannot keep pace. This led to overtime
work and increased turnover of young employees,
which in turn caused increased construction quality
issues and serious misconduct.
We need to address these issues by working on
the initiatives in the new Mid-term Management Plan.

1. Introduction

Naofumi Sato

Greetings from the New President

Previous Mid-term Management Plan (2015-2019)
Sales (Billion Yen)

Operating profit ratio (%)

Target: 400 billion yen
311.3

2015

341.8

408.1

428.9
8.1

360.9

9.6

9.0

8.4

Target: over 9.0%

2016

2017

2018

2019

Gross profit ratio (%)

14.5

9.0

2015

2016

2017

2018

2019

ROE (%)

15.2

15.7

14.8

14.0
16.7

17.8

16.8

15.6

Target: over 15.0%

14.0

Target: over 14.0%

2015

03

Kyudenko Corporation

2016

2017

2018

2019

2015

2016

2017

2018

2019

KYUDENKO REPORT 202004

1. Introduction

Message from the President

Steadily Carrying Out the New Mid-term Management Plan

Toward the 100th Anniversary
business. By applying this technology, we will aim for the
dissemination of Kyudenko EMS in each local area.
Next, “increased environmental awareness” suggests
a larger proportion of energy will consist of renewablesin the future to realize a carbon-free society. I am certainthat the Kyudenko Group will be able to take advantageof the construction records and business know-how it
has accumulated in the renewable energy business as
demand rises in the field.
Third, “demographic change and diversified working
styles”. Going forward, as local communities further
depopulate, the Kyudenko Group intends to play anactive role in keeping up the level of infrastructure indepopulated areas and providing maintenance, using
the aforementioned Kyudenko EMS for example.
I believe that diversifying working styles is important inthat a new working style needs to be established for anenvironment where we can accept foreign workers andadapt to life with and after COVID-19. Through suchinitiatives, we aim to create an appealing company that
attracts a tide of prospective employees.
Lastly, “advancement of digital technology” isexpected to bring about a significant change toeconomic activities as a whole, with the progress of
automation utilizing AI and robots dramatically increasing
productivity in all industries. The construction industry
will also enjoy benefits such as AIs preparing
construction drawings, robots performing construction
at worksites, and even AR/VR-assisted education. The
Kyudenko Group will refine operations through digitaltechnology while flexibly adapting to such changes, andcreate innovation through crossovers with initiatives
capitalizing on the other three megatrends.

Our Vision for the Future (See page 13 for details)

Megatrendsi) Advent of a decentralizedenergy societyii) Increased environmental
awarenessiii) Demographic change anddiversified working stylesiv) Advancement of digitaltechnology

Directions to Head for

Basic Approach

I. Maintain local public
infrastructure
II. Realize a carbon-free society
III. Solve social problems· Creating an appealing
company where diverse
employees work
· Expanding a wide range oftechnology fields that meetcustomer expectations· Refining operations throughdigital technology· Creating innovation throughalliance

The Kyudenko Group has launched a new Mid-termManagement Plan covering five years from FY2020 toFY2024, which aims to “Establish a managementfoundation for sustainable growth”. My mission is tosteadily promote the initiatives in the Plan to achieve thefinal target.
To this end, it is essential to promptly and steadily
realize three reforms, namely, “reforms in construction
capability, productivity, and governance”, which are thepillars of the Plan, and create a “strong and muscular
corporate culture” that can win the competition even in
an economic recession, to solidify the trust from
customers.
FY2020, the first year of the Plan, is positioned as ayear to thoroughly review and reflect on past initiatives
and to make the foundation for a new step.
The initiative with top-most priority is to secure anddevelop human resources that can handle the volume oforders and construction ability required and establish a
workplace environment where each employee can findgrowth and fulfilment.
The second is to promote IoT, AI, and other digitaltechnologies, not only to increase operational efficiency
but also to create unprecedented business models andvalue aiming to offer new value to customers andsociety.
The third is to build awareness toward complianceand establish a system of preventing misconduct, sothat laws and regulations are thoroughly observed, apremise for corporate activities and survival of acompany.
Amid the COVID-19 crisis, acquisition of orders is
expected to become more difficult. We plan to closely
analyze projects that turned out to be fruitless andidentify why we failed, whether it was sales, costs, orother factors, and reflect the lessons learned on futureorder-taking activities. As price competition could further
intensify, we will strive to promptly secure costadvantage among the competition and steadily obtainorders for targeted projects.
The Mid-term Management Plan also focuses on thedevelopment of new business fields. We will actively
engage in large-scale wind power generation, biomass
power generation and other renewable energy
businesses that may replace solar power, and in energy
services with promising growth in future demand.
By energy services, we mean back-to-back solutions
ranging from system design to construction, operation,and maintenance. Specifically, we partner with majorenergy service providers and offer solutions tocustomers’ energy-related issues by introducing cuttingedge equipment, managing energy, and improving theoperation. A distinctive feature of this business is that
customers do not need to make an initial investment.
Energy service providers supply energy required tobuildings, and customers pay monthly service charges,
which enables them to level out the costs. In addition, as
energy service providers also manage the equipment,
customers can do away with the hassle. By broadening
our scope to these businesses and expanding our range
from construction work to maintenance services that
follow, the Kyudenko Group aims to secure long-termand stable revenue.

New Mid-term Management Plan (Road map of sales plan) (Billion Yen)

New Mid-term Management Plan (2020-2024)

Renewable energy business, etc.
Electrical work
Power distribution line work
OthersThe Track and Field Team symbolizes operations of
the Kyudenko Group and has strong ties with thecommunity. Just as athletes pass on the sash in ekiden
across sections of different lengths and geographicalfeatures to achieve the goal (vision) of the team, we
expect Group employees in different locations andenvironments to make a concerted effort at theworkplace to address challenges to achieve the final
goal we have in common.

Numerical target for the final year (FY2024) (consolidated)

HVAC and sanitary facility work
Goals for the
final year:

Final year forthe previous
Mid-term Plan:

500

billion yen

428.9

billion yen

Sales(Solar plant construction: 17.0)(Solar plant construction: 59.3)

191.0

157.7

Ordinary profit

50 billion yen(Ordinary profit ratio)(over 10.0%)

143.0

129.9
46.9
26.7

2019

500 billion yen

81.0

67.8

2020

2021

2022

1. Introduction

The Corporate Philosophy forms the basis of ourbusiness activities. We have set out our vision for the
future based on the Corporate Philosophy and with aneye on megatrends of 2044, when we mark our 100th
anniversary.
Among various reforms in social structure(megatrends) expected in the future, the Group places
importance on “advent of a decentralized energy
society”, “increased environmental awareness”,“demographic change and diversified working styles”,
and “advancement of digital technology”.
Based on these four megatrends, we have set thedirections the Kyudenko Group heads for, which are to“maintain local public infrastructure”, “realize a carbonfree society”, and “solve social problems”.
To this end, we will actively engage in businessactivities with the basic approach of “creating anappealing company where diverse employees work”,“expanding a wide range of technology fields that meetcustomer expectations”, “refining operations throughdigital technology”, and “creating innovation throughalliance”.
Let me elaborate on the four megatrends starting with“advent of a decentralized energy society”. As local
communities further depopulate, along with the spreadof renewable energy, storage batteries, and electricvehicles in the future, the mainstream of energy supply
will be decentralized and complete within each local
area, instead of energy supplied from large-scale power
plants or through large transmission and distribution
networks. Accordingly, we expect expanding needs forenergy management systems (EMS) in each region andsmart cities to be developed. The Kyudenko Group has
been working on the establishment of “Kyudenko EMS”,
a hybrid power generation control system combining
solar power generation and lead storage batteries. A
project to adopt the system is in progress in Sumba
Island, Indonesia, and success in building such a largescale power network will pave the way for a new

2023

50.0
35.0
2024

Return on
invested capital(ROIC)

Over

10.0 %

Sales breakdown
Power
distributionline

50 billion yen

Electrical/HVAC
and sanitaryfacility

334 billion yen

Renewableenergybusiness, etc.

81 billion yen

Others

35 billion yen

The period of the new mid-term management plan (2020-2024)05

Kyudenko Corporation

KYUDENKO REPORT 202006

1. Introduction

Message from the President

Affinity with the SDGs and Strengthening Governancewe will strive to prevent recurrence so that similar
incidents will never materialize.
The first specific step for preventing recurrence is to“enhance compliance awareness”. To reform employee
awareness for building a corporate culture that canidentify misconduct, we announced the “Declaration to
Stop Misconduct”. Our officers take every opportunity tomake the contents known. In addition, we reestablishedthe education framework by position and job scope,based on required knowledge on laws and regulations
as well as past events, and implement thoroughcompliance education.
The second is to “enhance in-house check functions”.
We eradicate any room for inappropriate costs inestimated costs, order costs and working budgets
through stringent review under cooperation between
sales and technical teams. In terms of human resource
management, employees who have been in the same
position for a long time are identified and appropriate
rotation is conducted so as not to create a hotbed of
misconduct.
The third is “review of outsourcing order scheme”. To
prevent misconduct in outsourcing orders, theconstruction division and order division have been
separated. Specifically, orders, which had been made at
the construction division (sales offices), are now made at
the technology division of branch offices.
Other initiatives include request for cooperation ofoutsourcing companies to prevent misconduct,enhancement of reporting systems, and stricter internal
disciplinary action.
We will strive to recover trust by keeping thesemeasures in place, and make Group-wide efforts not to
let this incident fade away.

Under the basic philosophy, “Safety takes precedence
over everything”, the FY2020 basic policy on safety andhealth management states that (i) for safety, “allemployees must ‘think & practice’, which means
employees take initiatives to think and act to prevent
disasters in advance, and (ii) for health, “aiming for‘creation of a workplace where everyone can enjoy
working’”.
When it comes to safety, accidents have occurredalmost every year. In a number of cases, one mistake
may lead to a disaster, causing damage that cannot be
undone. It is important to ensure that we take advantageof past reflections and lessons, as well as recurrence
prevention measures, and to be even more sensitive tohazards. All employees of the Kyudenko Group take thesituation seriously, make sure to “think & practice” whatsafety is and what they should do now, and work inearnest to realize “zero-accidents”.
The Kyudenko Group has established the “Safety
Heritage Facility” inside the Kyudenko Academy, an
education facility. The facility is dedicated tocommunicating the lessons we have learned from tragic
accidents in the past without letting them fade. It offers
safety education to “raise awareness, promote learningand contemplation about safety, and to arousemotivation to follow safety procedures”. By giving
employees a strong sense of pride and awareness of
their role as a professional who creates safety, we
remind them of the importance of securing safety. We
are striving to build a safety culture by continuing efforts
to achieve zero accidents, utilizing this facility.
Health of employees is one of the Group’s importantmanagement resources. Recognizing that support for
health enhancement activities led by employees andorganizational promotion of health activities are essential
to corporate growth, the Group has adopted the
Kyudenko’s “Health Management Declaration”.
In order to create a comfortable workplaceenvironment, employees’ self-responsibility andenhanced awareness for health are essential
prerequisites. At the same time, it is a social
responsibility of a company to maintain the “health of its
employees”. We declared the policy to further raiseawareness of “putting health first” and work on “creatinga work environment with peace of mind” and “creating a
happy and agreeable work environment” and are
reinforcing the health management and healthenhancement activities for our employees.

1. Introduction

The Sustainable Development Goals (SDGs) set forth by
the United Nations in 2015 are positioned as the
Kyudenko Group’s top management agenda. The Groupwill actively work to achieve them by identifying the areasof the 17 goals where the Group can leverage its
management resources and strengths.
The Kyudenko Group has solved various social
problems, including global environmental issues throughthe proposal, design, and construction of energy-saving,clean energy facilities, water treatment facilities, anddisaster-resistant infrastructure, based on the corporate
philosophy “We contribute to society through providing
agreeable environmental solution”. We see ourcontribution to solving those social problems as a big
business opportunity and continue to explore ideas toachieve a sustainable society by using our technologies.
The Kyudenko Group’s business thus has a closeaffinity with the SDGs by nature. By further refining ourtechnology and know-how, we will be able to contributeeven more to achieving the SDGs. At the same time, we
believe SDGs initiatives need to be managed as part ofthe company’s business. If considered solely as social
contribution, such efforts are nothing but costs for acompany. We will commit to sustainable growth bycontinuing to yield profits through the efforts.
Meanwhile, strengthened governance is much
required as a basis for solving those social problems.
The Kyudenko Group recognizes strengthened corporate
governance as an extremely important issue, and“Reform of Governance” is one of the three reforms set
out in the new Mid-term Management Plan. We
apologize for the violation of compliance committed lastyear, causing significant inconvenience to shareholders
and various other stakeholders. The businesssuspension ordered by the government has expired, but

Initiatives for Safety ~ Thorough Implementation of ‘Thinking and Practicing’ Safety on One’s Own ~Human Resource Development ~ Employees are the Greatest Assets ~The Kyudenko Group has actively recruited engineers
and technicians.
We are proud that the number of our new recruits is
ranked number one in the industry, surpassing otherelectrical and HVAC work companies and leading
general contractors. This spring, around 360 new
recruits joined the Company, of which around 340 are
engineers or technicians.
Unlike other companies, we have been increasing therecruitment of directly-managed technicians who workon site, anticipating a future shortage of technicians.
They learn sophisticated technologies and skills at theeducation facility Kyudenko Academy and develop into
competent Kyudenko employees. Such a policy willcontinuously facilitate further differentiation of the
Kyudenko Group.
For the sustainable growth of the Kyudenko Group, it
is important to develop young people who will bear the
next generation. We seek human resources who do notblindly follow the changes but are able to flexibly adapt
to the era of transformation with creativity and vitality,
and take on any challenge.
For the Kyudenko Group to be a company thatcreates new value and solves various issues, we needhuman resources who bring about innovative ideas orboldly take on any challenge. To spread such a culturethat encourages employees to take on new challenges,
we introduced a new personnel evaluation system in
FY2019. The system recognizes the fact that employees
took on new challenges. Employees set targets that are
difficult to achieve; the level of achievement, the process,and specific actions they took are evaluated from amultifaceted perspective; and the results of their selfdriven actions are reflected in their compensation andhuman resource management.
Through this system, we will foster a culture thatencourages Kyudenko Group employees to take on new
challenges.

Message to Stakeholders
To remain a trusted corporation, the Kyudenko Group,with an eye toward the 100th anniversary, will first carryout the three reforms in the Mid-term Management Planand put forth every effort to secure firm trust from
customers.

07

Kyudenko Corporation

In addition, we will ensure strict compliance with laws
and regulations in all business activities so that
misconduct will never happen again. We appreciate yourcontinued support.

KYUDENKO REPORT 202008

1. Introduction

Structure of KYUDENKO REPORT 2020
The purpose of KYUDENKO REPORT 2020 is to promote understanding of how the Kyudenko Group creates value, as
well as to facilitate opportunities for dialogue.
The report was written, by referring to the past, present, and future of the Group, to provide an integrated story that
contains our future vision, the Mid-term Management Plan and other medium- to long-term strategies, and features of ourbusiness.
1. Introduction

The diagram below illustrates the structure of key elements that constitute the story.

1

2

3

4

Basic Concept
Underlying our Policies

Future Vision

Strategy to Achieve
the GoalBusiness Strategy

The Kyudenko Group’s
Vision for the Future

Mid-term
Management Plan

Business Strategy
Business Overview

Corporate Philosophy

P02

Corporate Philosophy

5
Value Creation Process

Our Vision for the Future

P13

Mid-term Management Plan

P15

Growth Strategy of the Kyudenko
Group

P17

Performance by Business Category

P27

Overseas Business of Kyudenko

P32

Initiatives for Safety

P35

Workplace and Labor Environment

P36

Coexistence with Local Communities—Sports

P37

Value Creation Process

P11

6

Corporate
Governance

Basic Concept of CSR

P34

Corporate Governance

P38

Interview with Outside Directors

P45

Disclaimer regarding forward-looking statements
KYUDENKO REPORT 2020 contains certain forward-looking statements, including plans, strategies, results, etc., of the Kyudenko Group.
Such forward-looking statements are based on judgements made by management using information currently available to them. Actual
results are subject to various risks and uncertainties and thus may differ materially from these forward-looking statements. Factors that may
affect the forward-looking statements are described under “Risks in businesses” on page 43, but factors that may affect the results are notlimited to those described therein.

09

Kyudenko Corporation

KYUDENKO REPORT 202010

2. Vision and Strategy

Value Creation Process

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

Business Activities of the Kyudenko Group
Business Portfolio

Social challenges
Business challenges

Non-facility work

Electrical work
HVAC and sanitary facility work
Power distribution line work
Renewable energy generation plant work

Renewable energy generation business
Other non-facility works(Equipment sales, real estate, software development,
temporary staffing service, etc.)

Value Offered(Results of business activities)

2. Vision and Strategy

Facility work

FY2019 results
Orders ..................... 507.0 billion yen

Decrease in Japan’s working
population/Shortage of
construction workers due todeclining birthrate and aging
population

Sales ....................... 428.9 billion yen

Invested Capital that Underpins Corporate Value

Operating cash flows 38.2 billion yen

Manufacturing
capitalIncrease in costs of construction
materials and labor
Issue of useful lives of buildings
constructed during the period ofhigh economic growth

Human capital

Expectations for renewableenergy due to increased
environmental awareness
Breakout of natural disasters
and epidemics
Advancement of digitaltechnology, such as IoT and AI

Operating profit ........ 36.0 billion yen

Over 110 business locations in Japan
Kyudenko Academy: Symbol of human resource
development
Number of solar power generation projects: over
100 sites
etc.
Over 10,000 Group employees
80% of Group employees are engineers or
technicians
Recruitment of engineers and technicians:
constantly over 300 persons

Financial
capitalSocialrelationshipcapitaletc.

Intellectual
capital

Kyudenko EMS: Installation of demonstration
model in Sumba Island
etc.

Work style reform

Financing capabilities by maintaining high profit
margin and rating
Total net sales for integrated utilities engineering
service: Third place in the industry
Constituent of JPX-Nikkei Index 400
etc.

Cash dividends per share ..100.0 yen
Payout ratio ............................ 27.0%
ROE ......................................... 14.0%
Equity ratio ............................. 53.1%
Rating A− (R&I)
Designated in JPX-Nikkei Index 400

Promotion of flexible capital alliances in areas of
new expansion
etc.

Group employees ......10,018 persons
New recruits ..................356 persons
Nationwide expansion of solar power
generation and wind power
generation businesses
Solar power generation business
103 sites, 378MW
Wind power generation business11 sites, 91MW
etc.

Enhancement of pension
assetsCorporate Governanceetc.

Supporting overall Group management

11

Kyudenko Corporation

KYUDENKO REPORT 202012

2. Vision and Strategy

Our Vision for the Future
The Kyudenko Group has set out its vision for the future based on the Corporate Philosophy with an eye on possible

engineering service provider that protects lifeline facilities essential for people’s lives, we will further deepen the engineeringchanges in the business environment and megatrends up to 2044, which marks our 100th anniversary. As a milestone forstrength we have cultivated and aim to be a group of companies that are trusted and continually chosen by society. We willrealizing the vision, we formulated the Mid-term Management Plan covering the period up to FY2024. Hereby, we promise

also contribute to the achievement of the SDGs through our business activities.

our stakeholders that we commit to medium- and long-term, continuous growth.

To realize our vision for the future, we will actively invest human, physical and financial resources with the basic stance ofAmong various reforms in social structure and megatrends that are expected to be seen by 2044, the Group places“creating an appealing company where diverse employees work”, “expanding in a wide range of technology fields thatparticular importance on the following four: “advent of a decentralized energy society”, “increased environmental

meet customers’ expectations”, “refining operations through digital technology”, and “creating innovation throughawareness”, “demographic change and diversified working styles”, and “advancement of digital technology”.

alliances”.

Based on these megatrends, the Group has set the directions to head for in expanding our business, which are to“maintain local public infrastructure”, “realize a carbon-free society”, and “solve social problems”. As an integrated utilities

Our vision for the future (toward the 100th anniversary)

Kyudenko Group’s vision for the 100th
anniversary (2044) based on
megatrends

Mid-term Management Plan 2024

Increased environmental
awareness

Demographic change anddiversified working styles

Utility 3.0
Local energy

Carbon-free society
RE100

Population decline and aged society
Freelancing

Creating an appealing company where diverse employees work
Expanding in a wide range of technology fields that meetcustomers’ expectations

13

Kyudenko Corporation

Advancement of digitaltechnology
Use of AI and robots
AR/VR

Targets we should achieve, priority issues, and specific measures
to be taken by FY2024 to realize our vision for the future

Basic Stance

Creating innovation through alliances

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

Advent of a decentralizedenergy society

Directions to head for and relevance to the SDGs

Refining operations through digital technology

2. Vision and Strategy

Corporate Philosophy

Basic concept for the
management of the Groupand pillar of corporate
strategy

I. Maintain local public infrastructure

Contribute to the maintenance and development of local infrastructure through facility work andurban development

II. Realize a carbon-free society

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

III. Solve social problems

Contribute to the realization of affluent life by leveraging our engineering strength torevitalize agriculture and take action against aging society

KYUDENKO REPORT 202014

2. Vision and Strategy

Mid-term Management Plan
Policy and directions of the new Mid-term Management Plan
The Kyudenko Group reviewed and analyzed theachievements of the previous Mid-term Management Plancovering five years up to FY2019, sorted out whatchallenges the Group should continue to work on, andformulated the new Mid-term Management Plan as a goalto achieve by FY2024 in the process of a long-term
strategy based on the Corporate Philosophy.
The main theme of this Mid-term Management Plan is“Establish a management foundation for sustainablegrowth ~ Realization of the three reforms ~”. Based on theachievements and lessons of the previous Mid-termManagement Plan, we recognize that for the renewed
growth of the Kyudenko Group, creating a base to support
the growth should be the top priority. As we secure andmaintain the volume of orders for electrical, HVAC, andsanitary facility works commensurate with our current
construction capability, we will make our utmost efforts tocreate a “strong and muscular corporate structure” thatcan win the competition even in an economic recession.
Specifically, we will work on three reforms. “Reform of
construction capability” will secure engineers who support
core businesses, review construction management

methods, and assign engineers to appropriate positions.
“Reform of productivity” will improve quality and costcompetitiveness, which are the source of our competitiveedge, and promote work style reform. “Reform ofgovernance” will work for the creation of a clean and highly
transparent corporate culture. Through the three reforms,
we aim for dramatic growth and development by the final
year of this Mid-term Management Plan and by thesubsequent 100th anniversary (2044).
While the global spread of COVID-19 is posing stronger
downside risks to the economy, the impact on the Group’sbusiness results is not reflected in this Mid-termManagement Plan because it is difficult at the moment topredict the scale and period of the impact. While beingcommitted to the achievement of targets for the final year,
we will keep a close watch on future trends and review the
Mid-term Management Plan as necessary.

Specific initiatives and relevance to the SDGs
Taking on Challenges to Make the Next Leap Forward~ To the next growth stage ~Growth strategy

Strategic policies

Establish stable foundation in
KyushuStrengthening business in themetropolitan area
Development of humanresources

Sales force
Engineering strength
On-site capabilities
Growing force

Results for the final year of the previous Mid-term Management Plan
Numerical targets for
FY2019

Sales

Numerical results for
FY2019400.0 billion yen 428.9 billion yen

Status of achievement

Achieved

Gross profit ratio

over 15.0 %over 14.0 %Achieved for FY2016
and FY2017

Operating profit
ratio

over 9.0 %8.4%

Achieved for FY2016,
FY2017, and FY2018

over 14.0 %14.0%Achieved

ROE

New Mid-term Management Plan (FY2020-FY2024)

ESG

Establish a management foundation for sustainable growth
Realization of the three reforms
Reform of construction capability
Strengthen hiring of engineers based on a long-term workforce plan
Reduce the turnover rate of young engineers by reviewing technicaleducation
Establish a system to ensure the timely and optimal deployment of alltechnicians
Review the construction management system by strengthening andutilizing the Technology Management Department
Promote multifunctional workers
Reform of productivity
Review the company-wide and departmental training systems
Achieve optimal personnel rotation for the entire company
Promote rationalization and labor saving through the use of cuttingedge technology and IT
Realize business reforms
Reform of governance
Implement measures to prevent recurrence of fraudStrengthen and thoroughly implement a governance system based on
the Kyudenko Corporate Governance Guidelines

Achievements

Issues continuing from the previous Mid-term Plan

(1) Achieved the following driven by robust demand for construction:- Increased orders outside Kyushu- Expanded HVAC and plumbing work leveraging the strength of theintegrated utilities engineering service- M&As of construction companies(2) Strict cost management by the Technology Management
Department and improved profit margin by the establishment of
Q-mast(3) Strengthened construction capability, including increase in the
recruitment of engineers(1) Deepen measures to improve profit margins(2) Strengthen and expand the order base of the domestic facility work
industry(3) Strengthen the profitability of power distribution line work
(4) Development of new business areas(5) Creating an attractive workplace environment(6) Improving corporate value

Environment(1) Challenges in human resource development and productivity
improvement amid rapid increase in construction volume(2) Increase in overtime work and turnover rate
Concerns over future decline in quality and risk of accidents(3) Decrease in profit margin toward the end of the period after once
achieving the target

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

Enhancement ofenergy-saving andenergy-creating
technologies- Expansion of the renewable energy power generation business- Expand energy services (ES) business- Strengthening of Kyudenko EMS business (Indonesian)IT (promotion of labor saving and rationalization)- Eliminate significant work-related injuries

Continue stable- Strengthen hiring of engineers (diversify recruitment)- Reconstruct a development plan that leads to dreams, a sense ofrecruitment andachievement, and confidence
promote humanresource development - Development of executives and next-generation leaders

SocialCreating a fulfilling
and rewarding work
environment
Strengthening andGovernance implementing
compliancemanagement- Reduce the turnover rate of young engineers- Securing holidays and reducing overtime work through thorough work
style reforms- Promoting Diversity- Implement measures to prevent recurrence of fraud- Strengthening and thoroughly implementing a governance system basedon the Kyudenko Corporate Governance Guidelines

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

500.0

Sales
Power distribution line
Electrical work and HVAC
and sanitary works

50.0
334.0

Renewable energy
business, etc.

81.0

Others35.0

Ordinary profit
Ordinary profit ratio

Return on invested capital (ROIC)

Renewable energy business, etc.

Electrical work

Road map of sales plan

HVAC and sanitary facility work

Power distribution line work

OthersTarget for the finalyear:

500.0 billion yen

Final year for theprevious
Mid-term Plan:
428.9 billion yen

81.0(Solar power: 17.0)

67.8(Solar power: 59.3)

191.0
157.7

143.0

129.9

50.0
over 10.0 %46.9

over 10.0 %

26.7
2019

50.0
2020

2021

2022

35.0
2024

2023

New Mid-term Management Plan (2020-2024)
Renewable energy business, etc.

Electrical work

HVAC and sanitary facility work

Power distribution line work

OthersTarget for the final
year:

Final year for theprevious
Mid-term Plan:
428.9 billion yen

15

SDGs

- Maintain a stable power supply through the construction of power
distribution lines

Breakdown

Create a strong andmuscular corporate
cultureSpecific initiatives in the Mid-term Management Plan

Ensuring construction - Increased productivity- Promotion of research and development of advanced technologies andquality and safety

Expansion of business scope

Challenges

Key challenges

2. Vision and Strategy

Previous Mid-term Management Plan (FY2015-FY2019)

500.0 billion yen
81.0(Solar power: 17.0)

67.8

Kyudenko Corporation(Solar power: 59.3)

KYUDENKO REPORT 2020
191.0

157.7

16

2. Vision and Strategy

Special Feature Growth Strategy of the Kyudenko Group ~ Roles the Tokyo Head Office Should Play ~Be a Driver for the Achievement of Targets in the Mid-term Management Plan

We will extend the new wind blowing in
the construction industry across thecountry and raise the level of the entire
Kyudenko Group.
Hideki Takei
Representative Director and Vice President Executive Officer

History of the Tokyo Head Office
FY2015, and changes were made to our organizational
structure, such as establishing regional offices in Nagoya
and Sendai, forming sales offices in Marunouchi andShinagawa area, and granting Yokohama regional officethe same function as a Branch Office. In addition, active
M&As added four new companies to the Group during
the period covered by the previous Mid-termManagement Plan. While the number of Tokyo Head
Office employees, including employees of Group
companies, were about 500 before the previous Midterm Management Plan, it has increased to over 1,000.
With the reinforced organization and construction
system, we focused on “strengthening activities toacquire orders” and “further enhancing our construction
capability”. Both orders and sales exceeded 80 billion
yen in FY2019, the final year of the previous Mid-termManagement Plan, and we feel that our customers havecome to recognize “the Kyudenko Group is a company
that operates nationwide”.
Orders and sales in the metropolitan area (Billion Yen)
Orders

Sales

95.8
61.9
44.8

2015

64.0
53.6

2016

67.9

74.4

84.6 83.9

53.3

2017

2018

2019

Mission of the Tokyo Head Office
So far, the positioning of the Tokyo Head Office in the
Kyudenko Group has been close to that of a Branch Officerather than a Head Office. However, instead of justcontributing to business results as a Branch Office, Tokyo
Head Office needs to properly function as a Head Office aswell to share the latest information gained first-hand in themetropolitan area to Kyushu and raise the level of the entire
Kyudenko Group. The metropolitan area, where major
construction companies and facility work companies
headquartered in Tokyo and large global companies arelocated in great numbers, is full of cutting-edge, valuable
information. Such information includes:
How widespread cutting-edge technologies and IT,
such as building information modeling (BIM), have

17

Kyudenko Corporation

become and how digital transformation (DX) has beenpromoted in the construction industry
Work style trends created through healthy competitionin the metropolitan area with industry peers, as well as
relevant corporate information
Future developments in the energy field, including
renewable energy with the Feed-in Tariff (FIT) scheme
coming to an end
The ideal offices in an era of life with COVID-19 and anincrease in air conditioning and ventilation needs
It is an important mission of the Tokyo Head Office togain such information in a timely manner and share it
across the entire Kyudenko Group.

been launched, and construction will peak again atsome point. By increasing the number of subcontracting
companies by then and offering them the same level of
education as Group employees, we will build a system
to manage the peak.
Thirdly, we will strengthen our IT capabilities byimplementing BIM* and utilizing existing construction
data. The Kyudenko Group offers electrical, HVAC, andsanitary facility works in an integrated manner. A single
team from the Company can manage construction,
which includes electrical work, HVAC work, and sanitaryfacility work, as well as maintenance. In addition, utilizing
the information of nearly 100 thousand construction
projects per year as big data enables us to integrate theworkflow (design and construction to maintenance andmanagement) based on a wealth of experience. By
working on the strengthening of such IT capabilities incooperation with the DX Promotion Department, Tokyo
Head Office will enhance the overall advantages ofintegrated facility work as well as offer optimal quality
and costs to our customers.

2. Vision and Strategy

The Tokyo Head Office started as Tokyo Satellite Office,which was opened in October 1945, the year after theestablishment of the Company. The Satellite Office later
became Tokyo Branch Office and engaged in theconstruction of symbolic buildings in the metropolitanarea, including “Sunshine 60” in Ikebukuro and“Roppongi Hills”. We have thus worked to enhance the
Kyudenko brand nationwide. While we had been willingto “strengthen the base in the metropolitan area andexpand our business scope” since the opening of the
Office, we were held back because we were not as
well-known as other companies and unable to establish
a sufficient construction system in the metropolitan area.
In the 2000s, mainly large construction companies
gradually came to recognize us. In response to theincreasing name recognition, we were reorganized into
the Tokyo Head Office in July 2008, which was the firststep to strengthening our operations in the metropolitan
area. We participated in the construction of “Tokyo Sky
Tree Town” and “Marunouchi Eiraku Building” in 2009
and “Toranomon Hills” in 2010. A significant milestonethat further increased our name recognition in theconstruction industry was the turnkey order acquired in2012 for both electrical and HVAC and sanitary facility
works for “AEON MALL Makuhari New City”, a largescale shopping center with one of the largest total floor
space in Japan. We were appreciated for delivering thework without delays in construction period.
Strengthening business in the metropolitan area
became a pillar of our growth strategy in the previous
Mid-term Management Plan covering the period from

Tokyo Head Office plays an extremely important role inachieving the new Mid-term Management Plan. To givea more concrete form to the role, we have formulated an
action plan for the Tokyo Head office with the numericaltargets of “orders of 100 billion yen, sales of 100 billion
yen, and gross profit ratio of 20.0%”. To achieve thetargets, we will focus on the three areas described
below.
Firstly, we will further strengthen our business base in
the metropolitan area. At the moment, large-scale
projects, such as redevelopment, account for asignificant proportion of works in progress held by the
Tokyo Head Office. In addition to sales activities involving
the construction of high-profile buildings in themetropolitan area, which is typically a large-scale project,
we also consider it necessary to expand across themetropolitan area, the so-called “Kyushu model”,
meaning local-based business activities where theoriginal strength of the Kyudenko Group lies.
Secondly, we will strengthen the construction systemby improving the quality and quantity of subcontracting
companies. While the sales of the Tokyo Head Officerose sharply, tripling in the past decade, the number ofsubcontracting companies has only doubled. Upgrading
the construction system is recognized as a pressing
issue. Projects after the Olympic Games have already*BIM: A workflow intended to secure quality and improve productivity by adding
information on costs, finishing, and management to the 3D digital model ofthe building created on a computer and utilizing it in all processes, fromdesign and construction to maintenance and management.

Making Steady Progress Step by Step
As mentioned above, being able to offer back-to-backservices covering construction, prompt after careservices, and solutions for improvement is a strength of
the Kyudenko Group. For some projects, the Group may
opt to participate in business or capital tie-ups. Taking
advantage of this strength, we will put initiatives in the
aforementioned focus areas on track, bring the
Kyudenko Group up to a higher stage, and increase its
presence.
Our customers praise the sincere working attitude ofeach Kyudenko Group employee. While the external
environment changes constantly, I am certain that weJapan National Stadium

Photo courtesy of Taisei Corporation

are able to gain trust from existing and future customers
as long as our employees engage in each work seriously
under any circumstances. By combining thetechnological and sales forces of the Group and thepower of subcontracting companies, we will aim to be acompany that contributes to society. We would like tohear our customers say, “The Kyudenko Group turned
this town into an appealing place”.

AEON MALL Makuhari New City

Photo courtesy of AEON MALL Co., Ltd.

KYUDENKO REPORT 202018

2. Vision and Strategy

Special Feature Growth Strategy of the Kyudenko Group ~ Human Resources are the Key ~We will focus on the development of
human resources who will bear the
next generation to achievesustainable growth.
Kazuyuki Ishibashi
Director and Vice President Executive Officer

Human Resource Development at the Kyudenko GroupI strongly feel that the “key” to realizing sustainablegrowth is human resources. The Kyudenko Group has
set forth a profile of “ideal human resources”, which is acommon goal for all employees, and watches over their
growth through the education for human resource
development.
To this end, we established an HR development facility
called the Kyudenko Academy in 2012. The Kyudenko
Academy symbolizes human resource development. It
not only serves as the locale for acquiring work-related
knowledge such as advanced expert knowledge,
techniques, and technical skills, but also forcomprehensive character development by nurturing astrong “resolve” at the “Hougakuan” and learning
lessons from past accidents at the “Safety Heritage
Facility”, which are both annexed to the Academy.

Trends in Human Resource Development
At the Kyudenko Academy, many training sessions areorganized throughout the year, such as training for new
recruits, position-based training common to all divisions
which is the backbone of our education system, andtraining for acquiring advanced expert knowledge,
techniques, and technical skills.
In recent years, more and more training sessions
focus on thinking on one’s own. For example, welaunched the “Next-generation Leader Development
Program” in 2015 to develop senior executives who candrive the management of the Company as candidates
for top management. The Program is called Kyudenko
Exterior of the Kyudenko Academy

Management School and develops employees who cantake a bird’s-eye view of the Kyudenko Group from anearly stage. Participants are classified into young
employees, middle-class employees, and managerial
employees, in accordance with their position. They
normally take part in the Program along with their work,
identify issues hidden in everyday work, get together
once in about three months at the Kyudenko Academy,
engage in whole-hearted discussions on real
management issues, and find the best solution. The
solution is proposed directly to the top management,
and serious exchanges of opinions take place.
Training for next-generation leaders

Initiatives to Create New Innovation
The Kyudenko Group has formulated the new Mid-termManagement Plan for the period from FY2020 toFY2024. To realize the Mid-term Management Plan,further transformation is necessary, and we are making
efforts in various initiatives accordingly.
Such initiatives include strengthening of the system topromote DX. We will need to accelerate DX initiatives
and enhance our competitive advantage. First of all, we
would like to swiftly solve issues in front of us. To do so,
it is necessary for flexible and creative young employees
and employees with a wealth of experience to join
forces. I expect to see concerted efforts as one
Kyudenko team, which enables transformation reflecting
a lot of opinions. This initiative, if properly carried out, will
sufficiently contribute to an increase in operational
efficiency, work style reform, and in turn, increase profit
margin, always driving new waves of transformation.
Currently, we are also taking up initiatives to solve
issues using the quality control (QC) technique. Although
it may seem a little outdated, it is a good technique fortraining how to “think”. We currently have over 200
teams in Branch Offices and sales offices across thecountry, and every day they dig into the cause of issues
they recognize to solve them. By adopting the technique,we aim to equip employees with the ability to think andsolve issues, as well as the ability to clearly express theiropinions after listening to others and understanding what
they say. While the result is important, the process of thisactivity has fostered the ability to find the X factor that
may lead to the next step.

Although this is just one example, we expect toincrease employee engagement by continuing to workon such initiatives. As an initiative to increase employee
engagement, we will conduct an engagement survey
from FY2021. The survey allows us to identify issues that
may inhibit the growth of the Kyudenko Group in realtime. By making improvements in a timely manner tosolve those issues, we would like employees to feel“work is truly rewarding”, as well as to foster a stronger
company-employee relationship.
The number of Kyudenko Group employees hasgrown to exceed 10,000. We would like each employee
to be strongly aware of the Corporate Philosophy in their
daily work, give serious thought to what the KyudenkoGroup should do, and aim to create a workplace where
employees can work enthusiastically with a strong senseof fulfillment and dreams based on a firm resolve tocontribute to society. I would like to reiterate that humanresources are the most important management
resources, and we will strive to further enhance humanresource development through these initiatives.

Ideal human resources

Number of periodic engineer and technician recruitments

1. Human resources who have asense of mission and pride incontributing to society andsatisfying customers

2. Human resources who accurately
grasp the changing times andcustomer needs with superb
expertise to adapt to them

3. Human resources who are willing to make
improvements, take on the challenge todevelop their abilities, and can think,make decisions, and act on their own

4. Human resources who can workand ensure safety with emphasison trust relationships andteamwork

5. Human resources who can develop
subordinates and junior colleagues
with affection and discipline and letthem demonstrate their abilities

19

Kyudenko Corporation

employees are appointed as elders to create anenvironment where young employees can consult withthem without hesitation. Supervisors also offer support
to facilitate the growth of young employees bothprofessionally and personally. Backed by such a support
system, young employees are given a certain level of
responsibility and authority regarding a work project ormonthly routine tasks, and have the opportunity forvaluable experience that can only be gained on site. The
system thus aims to foster the willingness to take onchallenges as they work hard together with elders (seniorcolleagues) and hone their skills.

2. Vision and Strategy

The history of human resource development at the
Kyudenko Group dates back to its early days after theestablishment. A “sense of mission” driving us tocontribute to society as employees of a company that
protects infrastructure has been passed down from ourpredecessors, and technologies have been transferred
mainly through on-the-job training. As time went by, theideal state of human resource development andeducation became clearer. A phrase in the current
Corporate Philosophy refers to “human resources”, andall employees pay attention to the importance of humanresources in their everyday work.
Amid rapid changes in society, it is necessary toconstantly review our working environment, such as tocope with the decline of the working population and to
implement work style reform. Under such circumstances,

Participants thus strive to come closer to ideals as senior
executives, from the way they identify issues to how theypresent their ideas.
Meanwhile, the working population is shrinking and at
the same time getting younger, amid a declining birthrate
and an aging population. The average age of ouremployees is also getting younger every year, anddevelopment of the younger generation has become anurgent necessity. The Kyudenko Group has introduced
the elder system for young employees who have lessthan three years of experience at the Company. Seniorcolleagues whose age is close to that of eligible(Persons)
20072014

2015

2016

2017

2018

2019

2020

Total

Approx.
200

241

262

344

384

342

336

Engineers

Approx.
100

139

142

185

189

186

194

Technicians

Approx.
100

102

120

159

195

156

142

KYUDENKO REPORT 202020

2. Vision and Strategy

Special Feature Growth Strategy of the Kyudenko Group ~ Development of New Business Fields ~We will strengthen energy-saving and energycreating businesses, such as renewable energy
field that replaces solar power and energy service
operations, to establish a new management basethat realizes sustainable growth.

Masaaki Jono
Director and Vice President Executive Officer

How the Solar Power Generation Business Expandedbusiness operator in addition to taking orders forconstructing power generation plants, and started
construction of our first solar power plant in Takeo City,
Saga Prefecture. Currently, the Group is operating 49
solar power plants, with a total generation capacity ofover 90MW.
Our abilities to develop deals, judge investments, andimplement construction have been appreciated. As aresult, we have been able to establish a business
scheme where a consortium is formed with partners inother industries which developed into a special purpose
company (SPC) through joint investment. Under thescheme, we take orders for construction, and after thesales of electricity begins, we incorporate equity profits
into earnings as an investor.
This is how we accumulated orders received of over
600 billion yen for construction work of solar power
plants since FY2012, which have grown to become amajor pillar of our business.

Construction of a Solar Power Plant in Ukujima, One of the Largest in JapanIn March 2020, we received an order for the constructionof an ultra-large-scale solar power plant on the island of
Ukujima, Sasebo City, Nagasaki Prefecture. This project
was planned to revitalize the island of Ukujima, which
was faced by depopulation, by utilizing renewableenergy. The maximum output of this solar power plant is
480MW, the largest of its kind in Japan, with an
expected annual energy production of approximately
515,000MWh, equivalent to the annual electricity
consumption of approximately 170,000 households. By

constructing a 64-kilometer undersea cable between
Ukujima and the island of Kyushu, all power producedby the plant will be sold to Kyushu Electric Power
Company, Incorporated. To preserve agricultural land on
the island of Ukujima where animal husbandry andagriculture are thriving, some of the solar systems will be
constructed on stilts, thus allowing the land to be
concurrently utilized for both power generation andagriculture.

Scheme at the time of establishing SPC

FIP scheme

Kyudenko
Electric powercompanySellelectricity

Business
owner
(SPC)

Construction work/
Operation and maintenance

Kyudenko

21

Kyudenko Corporation

InvestInvestor A(partner)

Distribute

Investor B(partner)

FIP stands for Feed-in Premium. FIP is a scheme thatleaves the selling price of electricity to the market
mechanism and add a premium to it.
Whereas the FIT scheme was intended to facilitate
new entry into the power generation business by
guaranteeing a fixed electricity price to power producers
for a long term, enabling them to bear no risk ofcompetition arising from market transactions, the FIP
scheme integrates such business operators into thecompetitive market.

The purchase price per unit of commercial solar power
under the FIT scheme has been decreasing year by year
and purchasing is now conducted under a competitive
bidding system. Furthermore, the FIP scheme will be
introduced to replace the existing FIT scheme after theend of FY2020. Therefore, we assume that the demand
for solar power plant construction under the previous
scheme will settle down. In light of this situation, theKyudenko Group will shift its focus to the field of new
renewable energy that replaces the solar power plant
construction work that has contributed to our businessperformance.
Specifically, we will first make sure to secure orders formaintenance work under long-term contracts for thesolar power plants we have constructed so far to realize
stable power generation, while seeking to gain demand
for replacing power conditioning systems 10 years laterand replacement demand 20 years later. Although theamount of orders received per deal will not be on thescale of billions to tens of billions of yen as it has been
so far, we will strive to secure orders as they havesufficient profit potential.
Secondly, we will capture demand for the “selfconsumption” model, where customers use electricity
they generate. Another possibility is a “local
consumption” model for municipalities as a BCP
measure, where local residents use stored electricity.
The Kyudenko Group has established “Kyudenko EMS”,
a hybrid power generation control system that combines
solar power generation and lead storage batteries in
Sumba Island, Indonesia. We hope to establish andpropose a power generation control system for thedomestic market by utilizing this technology.
Thirdly, we will enter into the renewable energy fieldother than solar power generation. We will primarily enter

into wind power and biomass power generation fields.
As Japan is surrounded by oceans on all sides and inparticular, waters around Kyushu are suitable for power
generation, we think that demand for wind power
generation will accelerate. As for biomass power
generation, we think that it could be a base load powersource as it can generate stable power. As we have acertain level of construction experience in both wind andbiomass power generation, it is not entirely a new field
for us. We intend to develop and cultivate our businessby leveraging the tight connection with partners in otherindustries we have nurtured in the solar power
generation business, with a view to participating in windand biomass power generation businesses.
The fourth is to fully enter into the energy service
business field. The business consists of a long-term
maintenance and management service that efficiently
provides customers with electricity, air, and water bydrawing on the strength of the Kyudenko Group thatengages in electrical, HVAC, and sanitary facility works.
We will analyze operation data through remotemonitoring to support optimal operation. Energy options
have expanded for customers with the liberalization ofretailing electricity and city gas, which may make total
optimization difficult to achieve. We would like to develop
our business to meet such customer needs and to help
improve environment-friendliness by realizing energy
saving.
By working on the above-mentioned initiatives andfurther expanding our core business of electrical, HVAC,
and sanitary facility works, we believe that we will beable to build a business model that no other company
has.

2. Vision and Strategy

The Kyudenko Group had some experience in the solar
power plant construction work in the past. However, atthat time, our orders received and construction did nothave the scale that we have today. We mainly handledconstruction of power generation plants with around
500kW output at highest in the course of our local based
business, including solar power generation systems forhousehold use.
At that time, the excess electricity purchasing scheme
was in place. In 2012, the “Act on Special Measures
Concerning Procurement of Electricity from Renewable
Energy Sources by Electricity Utilities (FIT Act)” cameinto force to further promote the spread of renewableenergy. Until that time, the mainstream was solar power
generation systems for residential use. The introductionof the FIT scheme opened possibilities for a certain levelof profitability in the business of selling electricity, andlarge-scale power generation plants, such as mega solar
power plants, have been constructed one after another.
In 2012, the Kyudenko Group decided to enter into
the business of selling electricity as a power generation

Expanding Renewable Energy to Replace Solar Energy

Spreading “Kyudenko EMS” Overseas
Since Kyudenko has a wealth of experience in thedomestic renewable energy business, the “Kyudenko
EMS” business began with the idea to apply thatexperience and technology to bring power stabilization
to developing countries.
Output from renewable energy such as solar power
and wind power is subject to extreme fluctuation.
“Kyudenko EMS” is an energy management system thatcan convert and utilize it into a stable form for utilization.
For example, on islands where the main power grid is
far away, even if a solar power plant is installed, sufficient
power generation capacity cannot be obtained in rainy
or cloudy weather. In addition, since the amount of
power generation varies greatly depending on theweather, power transmission to grids is unstable. Small
distribution networks are particularly vulnerable andpower outages can occur. Therefore, conventional diesel
generators are still used in such distant places,

generating power using heavy oil carried from the distantmainland.
As a means to solve this problem, we newly installed
the first overseas proof facility of “Kyudenko EMS” in
Sumba Island, Indonesia in 2016. The proof facility
launched operation in January 2018, and the Indonesian
government has designated Sumba Island as “Iconic
Island”, a model area for introducing renewable energy
and is planning to introduce renewable energy for theentire island in 2025.
In FY2019, this business was selected by Japan
International Cooperation Agency (JICA) as a“Collaboration Program with the Private Sector for
Disseminating Japanese Technology”. With support from
JICA, the Kyudenko Group will work to spread
technology overseas and start business development at
an early stage.

KYUDENKO REPORT 202022

2. Vision and Strategy

Growth Trajectory of Kyudenko
Sales

500.0500.0

Power distribution
line work
work workHVAC andsanitary
facility work
work
Power distribution
line workElectricalElectrical
HVAC
and sanitaryfacility workSolar power
Solarplant
power
plant workOthers Others(FY2024: renewableenergybusiness,
etc.)(FY2024:
renewableenergybusiness, etc.)
Ordinary
profit profit
Ordinary

billion yen
billion yen

2018
Act on the Arrangement of Related Acts
to Promote Work Style Reform enacted

Sales
Sales
(Million Yen)
(Million Yen)

Ordinary profit
Ordinary profit(Million Yen)
(Million Yen)

500,000 500,000
Origin of our logo

Sales

Sales

60,00060,00045,00045,00030,00030,00015,00015,00000

2016
Introduction of negative interest rates
The 2016 Kumamoto Earthquake

2012
Abenomics

Sales

Sales

315.9315.9

billion yen
billion yen
1995
Great Hanshin-Awaji
Earthquake

2011
Great East Japan Earthquake
2007
Postal service
privatization

Sales

215.0215.0

2008
Global financial
crisisbillion yen
billion yen

200,000 200,000
Sales

Sales

105.1105.1

billion yen
billion yen

100,000 100,000

0
(FY)

0
(FY)1980

1980

1985 1985

1990 1990

1980s 1980s
1986 Worked on full-fledged underground distribution
line work
1987 Issued the first series of unsecured convertible
bond of 10 billion yen
1988 Introduced high voltage indirect hot-line work
technique1989 Changed the company name to Kyudenko
Corporation

23

Kyudenko Corporation

1995 1995
1990s 1990s

1994 Marked the 50th Anniversary
1997 Obtained ISO9001 Certification
1999 Obtained ISO14001 Certification

2000 2000

2005 2005
2000s 2000s

2010 20102015 20152010s 2010s

2004 Delisted from the Osaka Exchange

2012 Newly established Kyudenko Academy

2008 Introduced the Executive Officer
System2012 Established Tohoku regional office2012 Established local subsidiaries in Southeast Asia

2008 Established Tokyo Head Office2015 Issued the second series of unsecured convertible
bond of 10 billion yen
2019 Marked the 75th Anniversary

2020 20202024 2024
(plan)(plan)(target) (target)KYUDENKO REPORT 2020

24

2. Vision and Strategy

300,000 300,000

75,000billion yen
billion yen

400,000 400,000

1986~1991
Bubble economy

75,000Sales

408.1408.1

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

1991
Collapse of the
bubble economy

Sales2. Vision and Strategy

Business of Kyudenko

Comprehensive energy management as a leading company of “Integrated Utilities Engineering Service (electricity, air and water)”
FY2019 sales

Business overview

Electrical work
Electrical, telecommunications and energy, etc.
OthersPower
distribution
line work

Sales

5%

224.6

billion yen

P28

The division not only provides a comfortable living environment interms of air and water but also safety and security with regard toenvironment through installation of heat and ventilation air conditioning
equipment, plumbing system, and sanitation and disaster-proof
equipment in a wide range of buildings, such as office buildings,
hospitals, hotels and factories. From designing to construction, thedivision thoroughly controls the safety of working sites, quality ofworks, and management of working process, providing high-quality
facilities. In addition, by providing after care services for the HVAC andsanitary facilities and being involved in the entire lifetime of thebuilding, the division supports the safe and comfortable lives of clients.

P29

As a company that undertakes contracted works from Kyushu ElectricPower Transmission and Distribution Co., Inc., it engages in installationand maintenance of overhead distribution equipment, installation ofdrop wires and meters, and installation of communication cables andrelated devices to build a distribution automatic control system.
Specifically, in case of power outage due to natural disasters, etc., theCompany conducts recovery works day and night, fulfilling a social
mission and largely contributing to the local community.

P30

Solar power generation using natural energy is a promising renewableenergy which is also cost effective. Kyudenko has worked to introduce
a solar power generation system since 1992, and has been offering
detailed services including proposal of a construction method suitable
for the location to be installed, management such as proper
maintenance after installation and proposal of attached equipment. We
have also worked on the construction of various renewable energy
generation plants, such as wind power and biomass, to contribute to
the realization of a carbon-free society.

FY2019Sales
HVAC andsanitary
facility work

32%

428.9

Electrical
work

52%

HVAC and sanitary facility work
Air conditioning, plumbing and sanitary, etc.

billion yen

Sales

135.9

Renewableenergy generation 16 %plant work

billion yen

2. Vision and Strategy

11%

P27

The division installs substation equipment in order to receive electricity
from the power company, as well as power source for mechanicalequipment, lighting equipment, switches, plugs, low power equipment,anti-disaster facilities and communication facilities, so that they canbe used safely and conveniently. We meet the diversifying needs of ourcustomers and offer facilities that satisfy our customers, such as
electrical facilities for commercial buildings, office buildings, hospitals,
factories, and educational and cultural facilities, by leveraging our
superb engineering strength and abundant expertise at various sites.

Power distribution line work
Power distribution line and underground distribution line, etc.

Sales

46.9

billion yen

Renewable energy generation plant work
Construction of solar, wind, biomass, and other power generation plants

Sales

66.4

billion yen

25

Kyudenko Corporation

KYUDENKO REPORT 202026

Performance by Business Category

Performance by Business Category

Electrical work

HVAC and sanitary facility work(C)SoftBank HAWKSSAKURA MACHI Kumamoto

JR Hakata City

Domestic terminal, Fukuoka Airport

Business strategy highlights

Engineers and technicians in over 110 offices across Japan will directly grasp issues concerning customers’ facilities and respond totheir needs comprehensively and speedily by making technical proposals.
We will continuously improve profit margins by rebuilding the structure of the Technology Management Department to strengthen theconstruction support system and strictly control cost.
We will strive to increase operational efficiency and execute high-quality construction works by enhancing productivity with the useof VR, AI, and other advanced technologies.
We will enhance our efforts to use BIM in construction works, the needs for which are expected to increase in the future.

The division boasts the sixth largest sales amount in the industry, with competent engineers making fine-tuned proposals on such
issues as air conditioning, ventilation, and plumbing.
We strive to enhance our construction capability as seven years has passed since we resumed recruitment of directly-managed
technicians.
We strive to increase operational efficiency and execute high-quality construction works, setting up a development and execution
team to respond to BIM needs.
With a focus on demand for energy saving and other “energy services” as a new business area, we aim to secure long-term andstable revenue, ranging from construction to after care services.

Orders (Billion Yen)
Sales (Billion Yen)
Sales increased by 1.6% year-on-year to 159.6 billion yen and orders received[excluding renewable[excluding renewabledecreased by 4.9% year-on-year to 154.2 billion yen. The strong sales were mainly energy work]
energy work]
driven by redevelopment projects in the metropolitan area foreseeing the Tokyo
2020 Olympic Games.
Orders received by region were 79.9% in Kyushu, 12.8% in Kanto, Tohoku and164.1 162.1
157.1 159.6
Chubu, 7.2% in Kansai, and 0.1% overseas.
154.2
148.9
146.9

124.1

FY2020 performance outlook

We forecast that sales will decrease by 4.5% year-on-year to 152.4 billion yen andorders received will increase by 13.6% year-on-year to 175.2 billion yen.
Sales are forecast to decrease because we have fewer projects that are expected
to make big progress, like the large-scale redevelopment projects we had in theprevious fiscal year.
Orders received are forecast to increase year-on-year. Near-term concerns include
the impact of COVID-19.

Strengths
Around 100 offices across Kyushu and Okinawa with engineers andtechnicians deployed in each officeHigh visibility established through community-based business operations
and social contribution activities, as well as strong trust relationships withcustomers based on these activities
Operating bases established in the metropolitan area
Industry-leading mobilization capabilities enabled by continuous recruitmentof engineers and technicians, as well as a number of directly-managed
technicians unparalleled by competitors

Opportunities
Ongoing plans for large-scale redevelopment projects (e.g. Tenjin Big Bang,
Hakata Connected, the metropolitan area)
Growth in information and communications works, driven by the spread of
5G and other next-generation communications networks as well as the
Global and Innovation Gateway for All (GIGA) School Program
Participation in community development works in suburban areas induced
by COVID-19

Kyudenko Corporation

135.0

133.0

FY2019 performance trend

Sales increased by 6.5% year-on-year to 134.7 billion yen and orders received
decreased by 15.9% year-on-year to 126.4 billion yen. Sales progressed steadilyon the back of abundant works in hand.
Orders received by region were 66.8% in Kyushu, 23.6% in Kanto, Tohoku andChubu, 5.2% in Kansai, and 4.4% overseas.

126.4

2015

2016

2017

2018

2019

2015

2016

2017

2018

2019

Weaknesses
A tendency for the distribution of the construction workforce to beunbalanced across areas
Lack of experience in apartments and other modular construction works
Need for further introduction of IT and establishment of digital infrastructure

Threats
Loss of opportunities to receive orders with customers cutting back on
capital investments
Declining profit margins due to price competition among industry peers
Difficulties in securing labor due to a fall in the number of workers in theconstruction industry
Challenges associated with handing down technical expertise such as
empirical rules from the past

We forecast that sales will decrease by 9.6% year-on-year to 121.7 billion yen andorders received will decrease by 0.7% year-on-year to 125.5 billion yen.
Sales are forecast to decrease because we have fewer projects that are expected
to make big progress, like the large-scale redevelopment projects we had in theprevious fiscal year.
Orders received are forecast to be flat year-on-year. Near-term concerns include
the impact of COVID-19.

Strengths
Advanced levels of technology capable of handling a wide range of works,
including air conditioning, ventilation, plumbing, and disaster prevention,over the entire process from design and construction to after care services
Strong trust relationships with customers built through community-based
business operations such as HVAC and plumbing facility works forhouseholds, in addition to office buildings and other large-scale projects
Mobilization capabilities enhanced by continuous recruitment of engineers
and technicians

Opportunities
Growing needs for “air conditioning” and “ventilation” driven by abnormal weather
and the COVID-19 pandemic
Increasing global needs for saving and creating energy toward a carbon-freesociety
Ongoing plans for large-scale redevelopment projects (e.g., Tenjin Big Bang,
Hakata Connected, the metropolitan area)

Orders (Billion Yen)
[excluding renewableenergy work]

Sales (Billion Yen)
[excluding renewableenergy work]

FY2020 performance outlook
93.8

2. Vision and Strategy

Business strategy highlights

FY2019 performance trend

27

Photo courtesy of Fukuoka International Airport Co., Ltd.

BOSS E·ZO FUKUOKA

150.2

134.7

126.4

120.2

101.0

93.8 96.2

74.7

2015

2016

2017

2018

2019

2015

2016

2017

2018

2019

Weaknesses
A tendency for the distribution of the construction workforce to be unbalanced
across areas
Competition with existing specialized construction companies in water
treatment and waste disposal facility works
Need for further introduction of IT and establishment of digital infrastructure

Threats
Loss of opportunities to receive orders with customers cutting back on capital
investments
Declining profit margins due to price competition among industry peers
Difficulties in securing labor due to a fall in the number of workers in theconstruction industry
Challenges associated with handing down technical expertise such as empiricalrules from the past

KYUDENKO REPORT 202028

Performance by Business Category

Performance by Business Category

Power distribution line work

Renewable energy generation plant work

Kushima Wind Power Generation Plant

Renatosu Soma Solar Park

Business strategy highlights

By responding promptly to typhoons and other natural disasters utilizing our mobilization capabilities, we will work for the early

We actively undertake renewable energy generation plant works mainly for solar power generation plants, in addition to electrical,

restoration of electricity and contribute to the maintenance of the infrastructure throughout Kyushu.

HVAC, and sanitary facility works, our core businessWe aim to strengthen competitiveness and improve profitability through technology development, enhancement of work efficiency,

We also provide facility management services to ensure that customers’ facilities will generate power stably after construction.

2. Vision and Strategy

Business strategy highlights

securing workers by improving work environments, and further reducing costs.

Leveraging our experience and know-how as a local-based provider of integrated utilities engineering services, our initiatives extend

We will strive to expand sales and profit by acquiring orders not only in Kyushu but also nationwide by utilizing the expertise we haveto wind power and biomass power generation, in addition to solar power generation.

accumulated thus far.

With abundant construction experience not only in Kyusyu but also in Honshu, we will continue to undertake renewable energy
generation plant works across Japan.

FY2019 performance trend

Sales (Billion Yen)FY2019 performance trend

Orders (Billion Yen)

Sales decreased by 1.7% year-on-year to 46.9 billion yen and orders received

Sales increased by 16.4% year-on-year to 66.4 billion yen and orders received

increased by 0.3% year-on-year to 47.5 billion yen.

increased by 288.5% year-on-year to 178.9 billion yen. Sales were strong as

Sales fell slightly due to a decline in construction volume in the second half.

works in hand at the beginning of the year progressed steadily.

46.9 47.4 46.6 47.7

46.9

47.0 47.7 46.5 47.4

47.5

The significant rise in orders received was driven by an order for an ultra-largescale solar power plant work.

FY2020 performance outlook

Sales (Billion Yen)

Orders (Billion Yen)

(Figures in brackets below
represent solar power plant
work)

66.4

[59.3][45.1][48.0]

We forecast sales of 78.0 billion yen and orders received of 29.5 billion yen forresponding to construction volume, cut costs by further increasing operational

solar power plant work for FY2020.

efficiency, and improve safety and construction quality.

In addition, we will proactively undertake wind power and biomass power
2015

Strengths
Unrivalled mobilization capabilities with over 2,000 workers that enable
speedy restoration in the event of a natural disasterHigh levels of technical capabilities to protect the lifeline of every customer
Over 60 business locations for maintaining power distribution networks
across Kyushu
Ability to develop human resources with advanced technical skills on power
distribution line and electrical works
Development and improvement of tools and construction methods toincrease safety and efficiency of onsite work

Opportunities
Growth in underground distribution line works associated with thereplacement of aged power distribution facilities and the push for removing
utility poles in the future
Increased dispatches across Japan for disaster recovery in light of the drivefor electricity resilience
Orders for power distribution and underground distribution line works fromnew customers in line with the advent of a decentralized energy society

29

Kyudenko Corporation

87.6 84.7[85.7] [60.9]

FY2020 performance outlook

We will enhance our efforts to establish a construction system capable of flexibly

2016

2017

2018

2019

2015

2016

2017

2018

2019

Weaknesses
Construction volume depends on capital investment trends of electric powercompanies
Need of further operational efficiency improvements by promoting
introduction of IT

Threats
Lower capital investments by power companies, stemming from such factors
as promotion of energy saving
Difficulties in securing human resources due to such factors as an aging
population with declining birth rates

generation plant works.

Strengths
Excellent new project development capability generated from local-based
business activities, and tight connections with partners in other industries
Construction know-how accumulated with a top-drawer track record of
construction works in Japan, as well as abundant works in hand
Established systems for long-term operational administration/maintenanceand management

Opportunities
Renewable energy becoming a “main power source” on the back ofincreased environmental awareness
Demand for renewable energy as part of business continuity plans (BCPs)
and as power supply facilities at a regional level
Spreading “Kyudenko EMS” in developing countries overseas

178.9[176.5]57.0
54.6
50.7 [49.4] 51.7 [48.3]

We forecast that sales will decrease by 2.1% year-on-year to 45.9 billion yen andorders received will decrease by 6.2% year-on-year to 44.6 billion yen.

(Figures in brackets below
represent solar power plant
work)

53.7

[50.7]

2015

2016

2017

2018

2019

2015

2016

2017

46.0

[45.3]

2018

2019

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

Threats
Weakening needs for construction of large-scale solar power generation
plants due to a decline in purchase prices under the FIT scheme
Collapse of power generation facilities hit by natural disasters such as aheavy rain

KYUDENKO REPORT 202030

Performance by Business Category
2. Vision and Strategy

Renewable energy generation business

Overseas Business of Kyudenko
Investments in renewable energy generation
business to differentiate ourselves

Renewable energy generation business

Sales (Billion Yen) (Sales of other business)
Solar power (Operated by the Group)Wind power (Operated by the Group)
4.4
4.2
0.9
3.6
1.0
0.9

3.2

2.7

2015

2016

5.1

4.8

0.9

2017

Deals operated by the Group

0.8

Number of
power plants

4.2

3.5

Investment in solar power plants

4.0

2018

49

92MW

87MW

Under construction

—

—

—

Plan

—

—

—

Total

49

92MW

87MW

Deals through investment in equity

Profit (Billion Yen) (Operated by the Group: operating profit, equity investment:
Solar power (Operated by the Group)Wind power (Operated by the Group)
Solar/wind power (Equity investment)

0.7

0.5
2015

0.1

0.9
2016

0.1

0.1

0.0

1.0
0.1 0.0

1.6

1.4

1.9

0.9
0.2

3.1

2.9

1.3

1.4

2017

2018

2019

Operation output (MW) (Plants in operation only)

185
156
53

31

110

261

131

278

Generation
Generation
capacity (thatcapacity (theequal to theentire operation)
equity)In operation

46

402MW

130MW

Under construction

8

825MW

161MW

Plan

—

—

—

Total

54

1,227MW

291MW

Number of
power plants

Generation
Generation
capacity (thatcapacity (theequal to theentire operation)
equity)In operation

5

38MW

38MW

Under construction

—

—

—

Plan

—

—

—

Total

5

38MW

38MW

Number of
power plants

Generation
capacity(the entire
operation)

Generation
capacity(that equal to theequity)In operation

4

80MW

18MW

148

38

38

38

38

38

65

72

85

92

92

2015

2016

2017

2018

2019

Singapore (APECO)

Singapore
APECO in Singapore is aplant engineering company
invested in 2013 andcelebrated its 50th
anniversary last year.
APECO is an engineering
company that provides
facility construction andmaintenance services to various industries, including
electric power, oil and gas, petrochemical, and water
utility industries. With technical capabilities cultivatedover many years, it has earned a high degree of trustfrom customers. APECO has abundant experience inplant construction by oil majors including ExxonMobiland Shell, as well as government-led infrastructure
construction such as pipeline construction, mainly on
Jurong Island in Singapore, which is known as one of
the world’s leading petrochemical complexes. In
addition, a branch office was set up in Bangladesh lastyear. Bangladesh has a population of about 160 million
and enjoys strong economic growth. As demand forelectricity is rising along with economic growth in the
country, we are developing operations with the aim ofentering the maintenance business in the area of power& energy by leveraging our abundant experience andhuman resources in Singapore.
VietnamInvestment in wind power plants

Deals through investment in equity

75

Kyudenko Corporation

Number of
power plants

Deals operated by the Group

1.2

Solar power (Operated by the Group)Wind power (Operated by the Group)
Solar/wind power (Equity investment)
233

Generation
capacity (thatequal to theequity)In operation

2019

non-operating income)Generation
capacity(the entire
operation)

TaiwanAlthough the overseas business entered a period of
temporary stagnation from the 1990s, we established theInternational Business Division in 2011 and decided todevelop business in Southeast Asia, which continues tohave one of the highest growth rates in the world.
Currently, we are developing businesses in eight countries
and regions: Singapore, Malaysia, Vietnam, Thailand,
Indonesia, Myanmar, Bangladesh, and Taiwan.

Under construction

1

65MW

32MW

Plan

1

15MW

3MW

Total

6

160MW

53MW

Malaysia, Vietnam,
Thailand
About eight years havepassed since theestablishment of local
subsidiaries in Malaysia,
Vietnam and Thailand, andthe companies arereceiving orders fromJapanese manufacturers and general contractors forsuch work as new building constructions andrenovations, steadily building up a track record inconstruction work. Leveraging our strengths as anintegrated utilities engineering service company, we also
make proposals on energy saving for facilities in generaland installation of solar power generation facilities.
TaiwanThe main business of Kyulien Environment Improving
Co., Ltd. in Taiwan is the environmental measurement
and analysis of exhaust gas and wastewater released
from factories and waste disposal facilities. It is the firstcompany in Taiwan to receive an environmental

substances’ measurement
and inspection license fromthe Taiwanese governmentand has earned the trust ofcustomers with its highquality services. The
company, headquartered in
Taoyuan with five sales
offices in Taiwan including
Taipei and Kaohsiung offices, provides fine-tuned
services to customers. In addition, in 2018, we invested
in and undertook construction works of the floating solar
power generation project of the Taiwan government,
which is pushing forward its renewable energy
promotion policy. As the construction of solar power
generation facilities is expected to continue there in the
future, we aim to participate in many projects, leveraging
our construction experience in Japan.

2. Vision and Strategy

We construct, own, and operate solar power and wind
power generation plants and engage in the business ofselling electricity using the FIT scheme. We also jointly
participate in the business of generating and selling solar
power, wind power and biomass power through equity
investment and anonymous partnership.

So far, we have invested about 35.0 billion yen in theconstruction of renewable energy generation plants,
operated by the Group. In addition, we have establishedpower generation companies jointly with leasing
companies and solar panel manufacturers to strengthen
alliances, and contributed about 25.0 billion yen for
securities as equity investments.
Given the nature of the business, the business is
expected to stably add to profit in the foreseeable future.
The business is expected to contribute as a base of profit
and cash flow without being affected by the economy forthe next 10 years and beyond.

The overseas business of Kyudenko was launched in 1979. As Japanese general contractors andplant manufacturers expand overseas, Kyudenko has also participated in many projects in areas
including Asia, Africa, the Middle East, and Europe, building up a track record in construction work.

Indonesia

Indonesia
In April 2018, we set up a
representative office inIndonesia. Whereas output
from renewable energy
such as solar power andwind power is subject toextreme fluctuation,“Kyudenko EMS”,
developed by Kyudenko, is an energy management
system that can convert it into a stable form forutilization. The system has been in test operation since
three years ago in Sumba Island, Indonesia. The
introduction of renewable energy is an urgent task forIndonesia, an island nation, with a policy of completely
eliminating internal combustion power generation inremote islands by 2023. By using Kyudenko’s EMS
technology to make renewable energy a “core energy
source”, a challenge that has proven difficult so far, we
are working to spread and commercialize thetechnology.
Myanmar
In 2020, we opened an office in Myanmar. Since thetransfer of power to a civilian government in 2011 in
Myanmar, Japanese companies have set up operationsin the country, launching many project plans, including
those based on official development assistance (ODA)
yen loans. We aim to develop business in Myanmar
focusing on facility work, our core business.
Kyudenko’s overseas business covers a wide range offields, including facility work such as electrical, HVAC
and plumbing, plant engineering business,environmental analysis business, EMS, and renewableenergy business. By bringing together the technicalcapabilities accumulated in Japan as well as knowledge
and experience gained while operating in each country
abroad, we would like to further develop businessoverseas.

KYUDENKO REPORT 202032

2. Vision and Strategy

3. CSR/Corporate GovernanceBusiness Locations

Basic Concept of CSR

Japan

The Company believes its CSR is to contribute to society based on corporate governancethrough the creation of a comfortable environment as well as to practice the “Corporate
Uku Project Development Office
Nagasaki Branch Office
Saga Branch Office
Head Office, Fukuoka Branch Officeand Fukuoka regional office
Kitakyushu Branch Office
Oita Branch Office
Kumamoto Branch OfficeMiyazaki Branch Office
Kagoshima Branch Office
Tohoku regional office
Saitama regional office
Tokyo Head Office andTokyo regional office
Yokohama regional office
Nagoya regional officeKansai Branch Office
Kobe regional office

Philosophy” for the purpose of sustainable growth of Kyudenko.
Toward “specific CSR initiatives” with “consistent values” and “implementation of philosophy”
The Corporate Philosophy has represented the purpose ofbusinesses and the reason of existence of Kyudenko,
even before the concept of “CSR” was recognized by theCompany, and all business activities of the Company arebased on this Corporate Philosophy. In terms of “CSR”, it
can be said that the Company’s Corporate Philosophy
exactly verbalizes the “social responsibilities” that theCompany should take. Accordingly, practicing the
Corporate Philosophy at the site where business activities
are performed is believed to realize CSR of the Company.
In this way, the “Corporate Philosophy” that represents
the purpose of businesses and the reason of existence ofKyudenko, and “Action Guidelines” based on the
Corporate Philosophy are our “consistent values” that will
never change in the future.

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

3. CSR/Corporate Governance

Chugoku regional office
Yamaguchi regional office
Okinawa Branch Office

Corporate
Philosophy

Consistent value

Action Guidelines

OverseasLong-term Vision

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

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

Kyudenko Vietnam Co., Ltd.

Mid-term Management Plan

Implementation of philosophy

Basic Management Policy for the fiscal yearIR
information

Environmental
and Coexistence with
Quality control activities
and creation Workplace
local
labor
and customerof comfortablecommunities
environment
satisfaction
environment

CSR management

Specific CSR initiatives

Line of business: Electrical works, HVAC and sanitary facility works andconsulting service on construction technology

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

Kyudenko South East Asia Pte. Ltd.
Line of business: Regional headquarter of Kyudenko’s overseas business development
in South East Asia region, operating support to local subsidiaries

Asia Projects Engineering Pte. Ltd.

Line of business: Plant installation works, maintenance and EPC works anddistrict cooling facilities works

Indonesian OfficeLine of business: Diffusion and commercialization of EMS

Myanmar Branch OfficeLine of business: Electrical works, HVAC and sanitary facility works

33

Kyudenko Corporation

Corporate Philosophy

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

Action Guidelines

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

KYUDENKO REPORT 202034

3. CSR/Corporate GovernanceInitiatives for Safety

Workplace and Labor Environment“Safety” takes precedence over everything
Under the Basic Plan for Safety and Health Management, the Kyudenko Group carries out
safety and health activities working together with its subcontracting companies. With thebasic philosophy of “Safety takes precedence over everything”, the Company ensures all
employees thoroughly implement ‘thinking and practicing’ safety on their own to prevent
accidents and takes initiatives for eliminating accidents.
FY2020 Basic Plan for Safety and Health Management
Basic Philosophy
Safety takes precedence over everything‘Safety and health are the foundation for
management and a major premise of all activities’
Goal
Zero-accident
SloganSafety of fellow workers, everyone’s health
Let’s find and reduce risk in the workplace

Improving and strengthening safety and healthactivities (PDCA cycle) under the Occupational
Safety and Health Management System
Under the “Occupational Safety and Health Management
System (OSHMS)”, the Kyudenko Group follows thePlan-Do-Check-Act (PDCA) cycle in carrying out its healthand safety activities.
Each office establishes the annual plan for safety andhealth activities according to its current circumstances,assesses activities every quarter, and makes daily efforts
for improvement.

35

Kyudenko Corporation

Safety and health training by position
At Kyudenko Academy, a training center with a lodging
capacity of 356 persons, the Kyudenko Group provides
training programs throughout the year to develop its
human resources.
In particular, training programs by position provide
health and safety education tailored to attendees’
experience and responsibilities, playing an important rolein creating a workplace that puts safety first.

Safety Heritage Facility
This facility was set up to face the reality of accidents andcommunicate valuable lessons learned from past
accidents so that all employees of the Kyudenko Groupwill learn the tragedy of accidents and the importance of
securing safety. The “Safety Heritage Facility” functions as
a place to create a culture of safety of the Group.

Hazard Experience Training Facility
At this facility, we aim to raise safety awareness andimprove the ability to avoid hazards by experiencing
hazards that can occur in the field. By integrating this witheducation at the “Safety Heritage Facility”, we expect thatsafety and health activities will be invigorated further.

The Kyudenko Group’s definition of work style reform
The Kyudenko Group defines work style reform as a“reform for the Company and its employees to growtogether, aiming to create new values and realize aprosperous life”. Since FY2017, with the Promotion
Committee for Work Style Reform established directly
under the President, we have strived to work in timeeffective ways with the goal of eliminating long working
hours by incorporating innovative technologies and ideas
unhindered by existing modes.
Eliminating long working hours is not the sole purposeof work style reform. We believe it is important to drive thecreation of new technologies and improve operational

efficiency through work style reform, aiming to improve
productivity (quality of work). This will result in eliminating
long working hours, which will in turn enable further
improvement in pay. By making these efforts, we strive togrow into a company that generates sustainable profits sothat employees can enjoy economic affluence.
Furthermore, without long working hours, employees
can make their personal or family time more fulfilling,allowing them to achieve spiritual prosperity and personal
growth. We strive to create a workplace filled with “jobsatisfaction” and “sense of fulfillment”, where each
employee is satisfied both in mind and body.

Main initiatives
Supplying tablets to engineers and introducing a
construction management app
We have successfullyincreased operational
efficiency by enabling
administrative work atworksites and real-timesharing of the details.

Proactive use of web conferencing systems
We have reduced travel
time by meeting via theweb. This has led to theeffective use of the time
freed up and better
coordination between
worksites and branch
offices/the head office.

Encouraging employees to take annual paid leave
We have strived to establish
Average number of annual leave
a workplace environmentdays taken per personthat makes it easier for
9.7
employees to take days off
8.5 8.3
such as by setting company7.0 7.3
wide “Take Annual Leave
Days” on which employees
are encouraged to take leave(five times a year), the systemthat allows employees totake “hourly annual paid
2015 2016 2017 2018 2019leave”, and “office closuredays” aimed at creating consecutive holidays.

Initiatives to promote the active participation of women
We established an action
plan for developing an
employment environment
in which women can
actively participate. We
are working to create aworkplace environment
in which women canwork comfortably and fully demonstrate their capabilities,
by promoting work-life balance, carrying out appropriate
human resource arrangements, and enhancing parenting
and childcare support systems.

Promoting health and productivity management

Initiatives for childcare support

We consider our employees’ health to be an importantmanagement resource, and in FY2018, we establishedthe “Health and Productivity Management Declaration”.
We actively initiate support for our employees’ proactive
health promotion activities and promote organizational
health activities in order to raise employee awareness of“putting health first” as well as achieving “a work
environment with peace of mind” and “creating a happy
and agreeable work environment”.

The Company’s childcare support system, introduced in
1992, is a system that exceeds the standards of theChildcare and Family Care Leave Act. So far, all female
employees who gave birth and are raising children haveused this system and are thriving upon their return,balancing childcare and work. In addition, as one ofinitiatives to promote work-life balance, we have introduced
an “accumulated annual paid leave system”, which allows
employees to accumulate 10 days per year, a maximum of
40 days of annual paid leave, which will expire in two
years. Employees are making use of these leave days on
various occasions, such as for attending children’s school
events, nursing children, and taking childcare support
leave due to spouse’s childbirth.
KYUDENKO REPORT 2020

3. CSR/Corporate GovernanceI. Basic Policy
SafetyTo prevent accidents, thorough implementation of‘thinking and practicing’ safety by all employees
HealthStrive to ‘create a happy, enjoyable workplace’
II. Primary Goals
Safety1. Thorough implementation of ‘thinking andpracticing’ safety on one’s own
2. Safety management activities led by the worksite
3. Thorough understanding and compliance withlaws and regulations
4. Supporting safety activity of Group companies
and subcontracting companies
5. Revitalization of traffic safety activities
6. Initiatives for worksite operation health
Health
7. Improving the workplace environment in line withpromotion of work style reform
8. Enhancing health consciousness

Safety and health activities at Kyudenko Academy

Initiatives for “work style reform”

36

3. CSR/Corporate GovernanceCoexistence with Local Communities

Corporate GovernanceTo contribute to society as a company rooted in our local region through various activities
A community program, dedicating contributing activities to the local community
Kyudenko believes that it is its responsibility as a member of the local
community to participate in social contribution activities. We designatea certain period in mid-October every year as a community program,dedicating contributing activities to the local community. During theperiod, the entire Group engages in contribution activities rooted in thecommunity, such as cleaning activity utilizing its expertise in working inhigh places and facility checks at welfare facilities. In addition, we havecooperated in community activities, such as by donating volunteer
patrol cars equipped with blue revolving lights, crime-prevention
equipment, and emergency goods to cope with disasters. Moreover, in
December 2019, as part of a project in commemoration of its 75th
anniversary, the entire Kyudenko Group conducted cleaning activities atplaces including beaches, rivers, and parks in each region. This year
marked the 52nd round of such activities, which have become familiar
as a core of the Kyudenko Group’s social contribution activities.

A community program,dedicating contributing
activities to the local
community

SportsEnhancing the corporate image of Kyudenko

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

Directors

Major achievements in recent years
2015

World Championships (Beijing)

10,000m (Paul Tanui, 3rd place),marathon (Kazuhiro Maeda)

2016

Rio 2016 Olympics

10,000m (Paul Tanui, 2nd place)

2017

World Championships (UK)10,000m (Paul Tanui, 3rd place)

2019

Marathon Grand Championship

Marathon (Shohei Otsuka, 4th place)

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

System for execution of operations and oversightfunction of the Board of Directors
The Company adopts the Executive Officer system where the Boardof Directors determines important matters and oversees execution

Audit & Supervisory
Board Members

Number of Directors(of which, Outside Directors)
Number of Audit &Supervisory Board Members(of which, Outside Audit &Supervisory Board Members)

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

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

3. CSR/Corporate Governance

Kyudenko Track and Field Team

Participation in Marathon Grand Championship
Competitor Otsuka participated in the Tokyo 2020 Olympic Games Trial
for Men’s Marathon held on Sunday, September 15, 2019. He achieved
an impressive 4th place (2 hours, 11 minutes, 58 seconds), securing
an offer for the position of the first substitute.

Organization form:Company with Audit & Supervisory Board

Corporate governance system

Cleaning a beach in December 2019

Backed by a 67-year history, the Kyudenko Track and Field Team trains
daily aiming to win the Men’s and Women’s All Japan Industrial Teams
Ekiden and produce Olympics athletes, with the purpose of “enhancing
the corporate image of Kyudenko”, “boosting employee morale”, and“contributing to society”, based on close ties with the local community.
In the past, the Kyudenko Track and Field Team has produced Japannational team members of the Olympics and World Athletics
Championships and many other international games. In addition, theTeam has participated in the All Japan Industrial Teams Men’s Ekiden(Gunma) held on January 1 for 45 consecutive years (the longest
record of all participating teams) and has participated in the All Japan
Industrial Teams Women’s Ekiden (Miyagi) 28 times. We will continue
to work hard to produce more Japan national team members and win
the Men’s and Women’s All Japan Industrial Teams Ekiden.
<Number of current members: 13 (long-distance) and 1 (jump) in totalof 14 men and 11 women (long-distance), 25 members in total>

Basic policy

Overview of corporate governance system
General Meeting of Shareholders
Election

Election

Election
Audit

Accounting Auditor

Cooperation

Audit & Supervisory Board

Auditors’ Office
Accounting audit

Board of Directors
Nomination
Advisory
Committee

ReportRemuneration
Advisory
Committee

ReportAppointment and oversight

Audit

Representative Director and President
Cooperation

Cooperation

Internal Control Committee

Compliance Committee

Cooperation

Preliminary consideration/arrangement

Management Meeting

Contributing to local community

Sports Class for Children
As part of “a community program, dedicating contributing activities tothe local community”, members of the Kyudenko Track and Field Team
provide local-based sports events to children every April. The planned
10th round of the event in this year had to be cancelled due to the
spread of COVID-19. Every year, we coordinate with the track and fieldteams in Fukuoka City and the track and field team of Fukuoka
University for the event, attended by about 300 children.

37

Kyudenko Corporation

ReportDirector and Executive Officer in charge
President’s Office

General Affairs DivisionInternal audit
Development of compliance system
Compliance education

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

Execution of operations

KYUDENKO REPORT 202038

3. CSR/Corporate Governance

The Compliance Committee and Internal Control Committee arealso established to supplement the functions of the Board of
Directors. The Meeting of Branch Office General Managers isestablished as a body to make reports on execution of operations,raise management issues, discuss measures to be taken, andfacilitate the sharing of information concerning the management
policy and plans, and is held 11 times a year.

management measures, in accordance with audit policies and plans
stipulated by the Audit & Supervisory Board. They also study thestatus of operations and assets of the subsidiaries to monitor andsupervise the overall Group. The Audit & Supervisory Board receives
reports on important matters for audit to be discussed or resolved,
and is held at least every three months in principle, and whenevernecessary. (11 meetings were held in the fiscal year ended March
31, 2020)The Audit & Supervisory Board has three Outside Audit &Supervisory Board Members, and two of them are designated as
Independent Audit & Supervisory Board Members.
The Auditors’ Office is established to assist duties of Audit &Supervisory Board Members and the Audit & Supervisory Board, anddesignated employees are assigned to the Office so that efficient
audit activities by Audit & Supervisory Board Members can be
conducted. The Audit & Supervisory Board receives an advanced
notice on personnel transfer of designated employees from the
Director responsible for human resources, etc., and may request forchange of the designated employees by submitting the reason.

Remuneration Advisory Committee

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

Nomination Advisory Committee
Internal audit

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

The President’s Office that is responsible for conducting internal
audits, reviews and evaluates whether management activities ofeach department/division are performed according to the
management policy, and audits whether such activities areappropriately processed according to internal rules such as
regulations, administrative authority, and manuals to report theaudit results to the Internal Control Committee chaired byRepresentative Director and President. The Directors in charge, etc.,
who receive the report of the internal audit results formulate ameasure for improvement, and submit it to the Board of Directors,
etc., as necessary. The President’s Office not only gives advice andrecommendations to audited bodies but also requests them tosubmit a report for improvement measures, and conducts a followup audit as necessary.

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

Establishment of voluntary committees, structure of committee members and description of Chairperson
Name ofCommittee

39

Number of
Number of full-time Number of Internal Number of Outside Number of Outside Number of other
Chairperson ofCommittee members Committee members
Directors
Directors
experts
Committee members
Committee(persons)(persons)(persons)(persons)(persons)(persons)

Voluntary committee
equivalent toRemuneration
Committee

Remuneration
Advisory
Committee

5

0

3

2

0

0

Internal
Director

Voluntary committee
equivalent toNomination
Committee

Nomination
Advisory
Committee

5

0

3

2

0

0

Internal
Director

Kyudenko Corporation

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

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

Outside Directors/Audit & Supervisory Board Members
The number of Directors of the Company is 12, of which two areelected as Independent Outside Directors. The Independent Outside
Directors, as directors who do not engage in the execution ofoperations, give advice on management policies and management
improvement, oversee management and conflict of interest, andreflect opinions of stakeholders to the Board of Directors.
In addition to legal requirements, the Company establishes anddiscloses its own “Independence Standards for Outside Directors/
Audit & Supervisory Board Members”, and the Independent Outside
Directors are elected based on the Independence Standards.
The number of Audit & Supervisory Board Members is five, of
which three are elected as Outside Audit & Supervisory Board
Members. Outside Audit & Supervisory Board Members account for
more than half of Audit & Supervisory Board Members. Although
independence is not required for Outside Audit & Supervisory Board
Members, the independence is evaluated if necessary based on the“Independence Standards for Outside Directors/Audit & Supervisory
Board Members”.
In order for Outside Directors/Audit & Supervisory Board
Members to properly execute their roles and operations, the holdingof concurrent positions as officers of other listed companies shall belimited to the minimum extent, and their concurrent positions aredescribed in the Corporate Governance Report and notice of general
meeting of shareholders. The Company has entered into anagreement with all Outside Directors and Outside Audit &Supervisory Board Members to limit their liability for damages
pursuant to Article 423, Paragraph 1 of the Companies Act to theamount stipulated by laws and regulations.

Independence Standards for Outside Directors/
Audit & Supervisory Board Members
An Outside Director or Outside Audit & Supervisory Board Member(hereinafter referred to as “Outside Director/Audit & Supervisory
Board Member”) is determined to be independent by the Company ifnone of the following attributes applies to:
the Outside Director/Audit & Supervisory Board Member
himself/herself, his/her spouse, or his/her relative within thesecond degree of kinship:(1) A person who is an executive of the Company or a groupcompany of the Company or was an executive of the Company
or a group company of the Company within the past 10 years
prior to his/her appointment as an Outside Director/Audit &Supervisory Board Member.
(2) A person who is an executive of a corporation that is abusiness partner of the Company, and in any of the mostrecent three past fiscal years of the Company, has madepayments to the Company representing more than 2% of
non-consolidated net sales of the Company in that fiscal year;
or a person who is an executive of a financial institution, which
provides indispensable financing to the Company, and cannot
be easily replaced because of the Company’s reliance on thefinancing from such institution.
(3) A person who is an executive of a corporation of which theCompany is a business partner, and in any of the most recent
three past fiscal years of the Company, has received paymentsfrom the Company representing more than 5% of nonconsolidated net sales of such corporation in its most recent
fiscal year.
(4) A person who received remuneration exceeding 10 million yen
directly from the Company in any of the most recent three pastfiscal years of the Company for providing professional services
concerning law, accounting, tax affairs, or consulting services
to the Company (excluding compensation as a Director or an
Audit & Supervisory Board Member of the Company) (If therecipient of such remuneration is an organization, a person
who is affiliated with such organization)(5) A person who belongs to an organization or an entity thatreceived a donation or aid exceeding 10 million yen per year
on average over the most recent three past fiscal years of theCompany.

KYUDENKO REPORT 2020

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

Compliance system40

3. CSR/Corporate Governance(6) A person who is an executive of a corporation, etc. that is ashareholder of the Company which substantially owns 10% ormore of the voting rights of the Company.

2

3

Outside Directors

Outside Audit & Supervisory
Board Members(out of 12 Directors)(out of 5 Audit & Supervisory Board
Members)

Incentive matters

Internal control system
The Company establishes a system to comply with laws andregulations and the Articles of Incorporation in the execution ofduties by Directors, and ensure appropriate operations by the
corporate group consisting of the Company and its subsidiaries.
1. System to ensure compliance with laws andregulations, and the Articles of Incorporation in theexecution of duties by Directors and employees(1) Representative Director and President ensures compliancewith laws and regulations and social ethics as assumptions
for corporate activities by establishing the Kyudenko Charterof Behavior and repeatedly communicating the spirit of theCharter to officers and employees.
(2) The Compliance Committee chaired by Representative Director
and President deliberates on important issues for compliance,and reports the outcome to the Board of Directors.
(3) The General Affairs Division, which serves as a division in
charge of compliance, works on company-wide developmentof a compliance system and identification of issues, andensures dissemination of manuals through offering education.
In addition, each department/division and branch officedevelops a system for promoting compliance activities to planand implement specific activities for compliance.

41

Kyudenko Corporation

5.

(1)

(2)

(3)

6.
(1)

(2)

7.
(1)

(2)

8.

(1)

(2)

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

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

KYUDENKO REPORT 2020

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

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

42

3. CSR/Corporate Governance

Disclosure of information to and communication
with shareholders and investors
Disclosure system
The Company fully realizes that disclosing corporate information toinvestors in a timely and appropriate manner constitutes afundamental part of a healthy securities market, and strives for theenhancement of internal systems to appropriately disclose corporate
information speedily, accurately and fairly in accordance with the
Fair Disclosure Rule.

43

Kyudenko Corporation

Enhancement of communication
The IR activities of the Company are conducted mainly by the
Finance Division in cooperation with the President’s Office, General
Affairs Division and Corporate Strategic Planning Division to promote
communication with stakeholders including shareholders.
Representative Director and President and Officer responsible forfinance hold a financial results briefing for analysts and institutional
investors twice a year, and materials for the briefing are disclosed
on the Company’s website. The Company also appropriately holds
individual briefings and responds to interviews for analysts,
institutional investors and individual investors.
The outcome of such financial results briefings and individual
briefings is reported at the Management Meeting and the Board of
Directors meeting to share the information with Directors and Audit& Supervisory Board Members.

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

Explanation on business risks
Business risks
The major risks that may affect the Group’s business performanceand financial conditions are as follows.
Any forward-looking information stated herein are based on
judgments by the Group as of the end of the fiscal year underreview.
With the recognition of possible occurrence of these risks, theGroup makes efforts to avoid the occurrence and appropriately andquickly respond to them in case of the occurrence.
The following factors are specific examples of major expectedrisks in continuing the Group’s business, but not limited thereto.
1. Economic conditions, etc.
Given that facility works of the Group are subject to capital
investment trends of Kyushu Electric Power Transmission andDistribution Co., Inc., as well as domestic private companies andgovernmental agencies, restraint of such capital investment may
affect the Group’s business performance, etc.
In power distribution line work, the Group continues to work on
the improvement of systems and contracts that enable more
efficient and stable maintenance of power distribution networks inclose communication with Kyushu Electric Power Transmission andDistribution Co., Inc. In general construction, the Group is working
on increasing projects that are less affected by changes in
economic conditions such as small-scale prime construction
contracts through community-based sales activities andmaintenance and renewal contracts for projects it worked on. The
Group also strives for the expansion of customers and diversificationof construction types.
2. Changes in costs of construction materials and labor
When costs of construction materials and labor significantly
increase, and such costs are not able to be reflected in contract
prices, the increased costs may affect the Group’s businessperformance, etc.
For large-scale works that span long periods of time, the Group
always applies front loading, ordering materials, selecting
contractors and making arrangements at early stages of projects, inorder to avoid risks. For costs of construction materials, the Groupseeks economies of scale by using its dedicated materialpurchasing company Q-mast Co., Ltd. and accumulates expertise inmaterial procurement in the Group to propose, for example,
alternative materials. For labor costs, the Group is increasing thenumber of in-house technicians while developing multi-skilledworkers to reduce risks arising from external factors.
3. Credit risk
Although the Group sets a credit limit according to clients’ financial
conditions and continuously reviews their credit status to prevent
bad debts, any deterioration in management or financial conditionsof clients may affect the Group’s business performance, etc.
The Company checks long-term accounts receivable at monthly
meetings of Branch Office General Managers to avoid tradereceivables from becoming bad debts. The Company practices ashort-term, performance-based billing on a regular basis to reducerisks and holds a company-wide collection campaign twice a year toraise awareness about collection management.
4. Risk associated with the Group’s assets
The Group holds assets such as real estate and securities related tobusiness activities, and any significant decrease in the market valueof the assets held or profitability of real estate for commercial use
may affect the Group’s business performance, etc.
In general, facility works, excluding power distribution line work,
do not require large capital investment. When expanding into newareas, the Group usually rents facilities. For power distribution line
work, the Group holds real estate in the entire Kyushu region andresponds to emergency works and others. However, as new capital
investments have been largely completed in prior periods, theCompany now invests only in maintenance and upgrade of existing
facilities and works associated with office relocation.
5. Risk associated with business other than non-facility work
In addition to its core business of facility works, the Group is
working to expand its business fields to include real estate sales,
renewable energy generation, temporary staffing service, softwaredevelopment, environmental analysis and measurement, medicalrelated business, golf course management, business hotelmanagement, and planning and operation of commercial facilities
by effectively utilizing its management resources and network.
These businesses may affect the Group’s business performance incase of changes in the business environment, such as theadvancement of competition with competitors.

6. Risk associated with renewable energy generation business
As projects in the renewable energy generation business generally
require a long period of time, any significant changes in thebusiness environment or occurrence of material disasters or
accidents in business operations may lead to a decrease inprofitability. In addition, projects not in operation yet, including the
Ukujima mega solar plant, may affect the Group’s businessperformance, etc. as a result of a delay in business plans due to theoccurrence of unexpected issues.
The Group adopts projects after conducting sufficient preliminary
study and consideration, and for major power plants, it takes
measures to avoid or minimize expected risks, such as byconcluding insurance contracts.
7. Risk associated with overseas businessIn overseas business activities, any changes in political or economic
conditions or amendments to laws, regulations, and rules in local
countries may affect the Group’s business performance, etc.
To speed up information collection and crisis management, theGroup has established a regional headquarters in Singapore and its
Japanese staff works to ensure risk management.
8. Retirement benefit obligation
When the performance results of pension plan assets of the Groupdiffer from assumptions, actuarial differences are expensed over acertain period from the following year of occurrence. As such, any
deterioration in yields or decline in discount rates for pension plan
assets may affect the Group’s business performance, etc.
The Pension Management Committee evaluates investment
products every year while making efforts to maximize theinvestment efficiency in consideration of expected returns and risks.
The Group works with external consultants to build a medium-term
portfolio that reflects a duration from premium collection to benefit
payment.
9. Occurrence of natural disasters and epidemic of plague
When large-scale natural disasters or epidemic of plague occur,suspension or significant delay of construction work due todisrupted supply chains or business closure requests from
authorities, damage to the Group’s facilities or decrease in thenumber of workers may affect the Group’s business performance,etc.
10. Risk associated with measures and legal procedures byregulatory authorities
The Group is subject to restrictions under various laws andregulations including the Construction Business Act, and any
administrative dispositions, etc. in case of conflict with these laws
and regulations may affect the Group’s business performance, etc.
To completely eliminate this risk, the Group has set “Reform ofGovernance” as a priority theme of the Mid-term Management Plan
to create a clean and transparent corporate culture.

KYUDENKO REPORT 2020

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

44

3. CSR/Corporate GovernanceInterview with Outside Directors
To enhance the effectiveness of corporate governance and the Board of Directors, we will work to further
improve the cooperation between the Board of Directors and concerned bodies and strengthen thefunctions of Outside Directors to advise and oversee management.

Q

In the previous year’s interview, some of theOutside Directors pointed out the need for livelier
discussions.
How do you see the deliberations that are currently
taking place at the Board of Directors meetings?

Outside Director Sumio Kuratomi
June 2008
June 2011
June 2013
June 2016
June 201645

Director and Executive Officer, General Manager, City
Development Business Div., NISHI-NIPPON RAILROAD CO., LTD.
Director and Managing Executive Officer, General Manager,
Corporate Planning Div., NISHI-NIPPON RAILROAD CO., LTD.
Representative Director and President, NISHI-NIPPONRAILROAD CO., LTD.
Representative Director and President Executive Officer,
NISHI-NIPPON RAILROAD CO., LTD. (to the present)
Director (part-time), the Company (to the present)

Kyudenko Corporation

Q

June 1996

Director, TOYOTA MOTOR CORPORATION

June 1998

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

June 2001
June 2002

June 2011

Managing Director, TOYOTA MOTOR CORPORATION
Representative Director and President, TOYOTA MOTOR KYUSHU,
INC.
Representative Director and Chairman, TOYOTA MOTOR KYUSHU,
INC.
Advisor to TOYOTA MOTOR KYUSHU, INC.

June 2011

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

June 2008

a key for successfully carrying out the new Mid-termManagement Plan. I totally agree with his view. Pursuitof economic value should not be the utmost goal.
Doing “what Kyudenko should do” and achieving“establishment of the management base” will naturally
lead the Company to the defined targets. So, the firstand foremost goal should be “establishment of the
management base.” From that perspective, I believe it
would had been even better if the Company had
included qualitative index in the plan to evaluate how
well it utilizes its people, an important asset within the
management base.

Please let us know your take on the new Mid-termManagement Plan that started in FY2020.

Watanabe The targets set in the plan are aggressive, but
attainable. To attain them, however, the Company
needs to identify cross-departmental issues and sharethem among departments. This requires a process inwhich each department clearly understands its targets,
thinks through what needs to be done to attain them,and doing it together. In that sense, the most important
thing in pursuing the Mid-term Management Plan
might be to take the challenging targets asopportunities to grow, and increase the resilience ofmembers and organizations by tackling andovercoming various difficulties in achieving them.
Kuratomi I would like to give credit to the Company forcontinuing to uphold “establishment of the
management base” as a main theme of the new
Mid-term Management Plan, despite the solid successin the previous plan. Director Watanabe said thatbuilding the resilience of members and organizations is

Q“Reform of Governance” is one of the threereforms prescribed in the new Mid-termManagement Plan. What is your view on Kyudenko’s
governance and compliance?

Watanabe Kyudenko still has many issues in this arena.
Compliance should be at the center of its management.
This requires the Company to focus more on how to
cultivate a corporate culture that respects compliance. It
may sound harsh, but its corporate culture might have
served as a root cause of the recent misconduct. Afterthe incident, an investigation committee in which I and
Director Kuratomi took part developed measures toprevent recurrence. In order that those recurrence
measures will not be reduced to a formality, we intend tofollow up on them to make sure that they stay effective
and advise Directors to surely report to the Board of
Directors meetings, from the standpoint of an Outside
Director.
Kuratomi As represented by the move to strengthen the
Corporate Governance Code, the business environment
as a whole is changing rapidly. In this context, however,I think there are still some gaps not only between
Kyudenko and society, but also between the industry
as a whole to which Kyudenko belongs and society interms of governance and compliance. What should theCompany do to fill these gaps? As Director Watanabe
said, the Company has already carried out a thoroughinvestigation and formulated a plan to prevent
recurrence. The next step would be to follow the PDCA
(plan-do-check-act) cycle, sharing lessons learned with
employees and raising the level of the whole processeven further. I believe the Company must follow a flow
like this even more thoroughly.

Q

Kyudenko will celebrate its 100th anniversary in
2044. Toward “100 Years of Sustainability,” what
are the issues that Kyudenko must tackle andwhat is your expectation of the Company?

3. CSR/Corporate Governance

Watanabe I think the effectiveness of the Board of Directors
meetings has increased significantly. For example,
since the beginning of 2020, we have started toreceive information on questions and answers
exchanged at the Management Meeting, which is abody that holds working-level discussions on important
agenda items that require discussion prior to the Boardof Directors meetings. The Investment and Loan
Committee chaired by Vice President Kazuyuki
Ishibashi has also shared with us its discussion
process at its meetings. So, my honest impression isthat it has become easier for Outside Directors toparticipate in discussions.
Kuratomi As Director Watanabe said, since we now have more
information about the discussion processes atconcerned bodies, I believe that the meetings of theBoard of Directors have become livelier, especiallysince last year. We, Outside Directors, also have more
opportunities to gain a deeper understanding of theCompany’s situation. Nevertheless, although the levelof deliberations and agenda items is rising, I believe it
can be enhanced further by including topics, forexample, on CSR and safety in the discussions at theBoard of Directors meetings.
Watanabe Safety and compliance have been the hottest topics.
We should discuss more on these issues. As we said
earlier, since we now have a broader view on the
Company’s situation, going forward, we would like toprovide more advice and recommendations on a wider
range of management topics from an outside
perspective.

Kuratomi In terms of enhancing the effectiveness of the Board of
Directors, it is important to bring up CSR, afundamental component of management, as a
discussion topic. For this purpose, it would be nice if
the Company would give us, Outside Directors, theopportunities to visit work sites, in order to see forourselves from an objective perspective and makesound decisions. We cannot understand the whole
picture just by reading papers. Looking at people
working hard at work sites or engaging in training will
enable us to make relevant recommendations andcomments from an outside perspective.

Outside Director Akiyoshi Watanabe

Watanabe Looking at the current situation holistically, I think it is
the best timing for executives and employees ofKyudenko to together create long-term visions byquestioning themselves “what the Company should aimfor” and “what they want the company to be” over the
next 24 years to the 100th anniversary. Precisely
because we live in an uncertain time, I would like theyounger employees to envision what they want thecompany to be and go for it because they are the ones
who will be playing a central role when the Company
marks its 100th anniversary. Of course, there will bemany twists and turns. But I believe they will tackle themwith agility and a fresh mindset and overcome them withthe best possible solutions at the time. I hope they keep
moving forward with the long-term vision leading to the100th anniversary as their guiding principle.
Kuratomi Considering the recent movements in terms ofsustainability, I think Kyudenko’s business and thedigitalization trend go together well. The nation-wide
digital transformation (DX) accelerated by the planned
creation of the Digital Agency will also benefit
Kyudenko. With experts in the field, Kyudenko has apotential to become a brand synonymous with DX in
the Kyushu region. In October 2020, the Company
established the DX Promotion Department, anorganization dedicated to working on DX. Since thepromotion of DX can lead to increased productivity andthe realization of construction works that contribute toSDGs, we see it as a favorable and promising trend.
KYUDENKO REPORT 202046

4. Data section

Management Team of Kyudenko
Directors

Audit & Supervisory Board Members

Matsuji Nishimura

Naofumi Sato

Isamu Ogata

Shinji Kato

Director and Chairman

Representative Director and President

Audit & Supervisory Board
MemberAudit & Supervisory Board
Member

Hideki Takei

Kazuyuki Ishibashi

Yasuyuki Fukushige

Michiaki Uriu

Representative Director and Vice
President Executive Officer

Director and Vice President Executive
Officer

Audit & Supervisory Board
Member (part-time)

Audit & Supervisory Board
Member (part-time)

Representative, Tokyo Head Office

Responsible for overall business administration
and CSR

Masaaki Jono

Yasuhiro Yamamoto

Yukinori Michinaga

Director and Vice President Executive
Officer

Director and Senior Managing
Executive Officer

Audit & Supervisory Board
Member (part-time)

Responsible for overall technology and overall
sales

General Manager, Sales Div.

Yasuhiro Kashima

Keizo Fukui

Director and Managing Executive
Officer

Director and Managing Executive
Officer

Responsible for the President’s Office, humanresources and labor affairs, general affairs,
compliance, and internal control

Responsible for corporate strategic planningand finance

4. Data section

Executive meeting arrangements
To prevent the spread of COVID-19, we are taking the following measures:
Arrange meeting rooms to practice social distancing (e.g., avoid physical contact among participants,
avoid placing seats directly facing each other)
Use larger venues than normal meeting rooms
Divide the venue into multiple rooms and live-broadcast the meetings online

Takahiro Hokahori

Kazuhiro Suyama

Director and Senior Executive Officer

Director and Senior Executive Officer

General Manager, Electric Power Div.
Responsible for safety

General Manager, Technology Div.
Responsible for procurement

Akiyoshi Watanabe

Sumio Kuratomi

Director (part-time)

Director (part-time)

Ensure sanitization at entry points, mask wearing, and ventilation

Board of Directors meeting

47

Kyudenko Corporation

Branch Ofﬁce General Managers meeting

KYUDENKO REPORT 202048

4. Data section

Financial and Non-financial Highlights
Gross profit (consolidated) (unit: million yen) Gross profit ratio (consolidated) (unit: %)Sales (consolidated) (unit: million yen)
408,143
315,949

311,346

341,771428,939

360,872

2016.32017.32018.32019.32020.3Operating profit (consolidated) (unit: million yen) Operating profit ratio (consolidated) (unit: %)
9.0

8.1
5.3
25,19730,732

9.6

34,726

9.0
36,747

8.4
36,022

15.7

14.8

2016.3

51,9512017.314.0

60,561 60,093

56,6592018.32019.32020.3

Ordinary profit (consolidated) (unit: million yen) Ordinary profit ratio (consolidated) (unit: %)
10.3
9.8
9.4
9.0
8.8
5.7
27,55132,18739,92437,342

38,643

8,985

2015.3

8,976

2016.3

9,287

9,843

2017.32018.3

9,954

2019.3

10,0182020.3Results of periodic recruitment (non-consolidated) (unit: persons)Engineers

Technicians

371

362

360

2016.32017.32018.32019.32020.3

Profit attributable to owners of parent (consolidated) (unit: million yen) Ratio of profit attributable to owners of parent (consolidated) (unit: %)
6.5

7.0

6.5

5.7
3.6
17,901

22,29725,296

26,691

2015.32016.32017.32018.32019.32020.3

Orders (consolidated) (unit: million yen)

6.1

507,025
324,123

363,564

377,769

2019.42020.4

384,757

405,903

9.0

532

Technicians

8.1

8.2

8.4

8.4

8.6

477

494

527

539

538

2018.32019.32020.32016.32017.32018.32019.32020.3

17.8

16.8

15.6

186

14.0
11.9

13.0

13.2

13.1

2017.32018.32019.32020.3

Cash dividends and dividend ratio (consolidated)(unit: cash dividends/ yen, dividend ratio/ %)

25.2

26.7

21.4
14.3

16.5

90

100

2015.32016.32017.32018.32019.32020.3

5,725

5,870

6,095

6,195

6,287

2016.32017.32018.32019.32020.3

Technicians
94.7
86.0
74.6

Salespersons, administrative staff, etc.
100.0
81.6
82.1

100.0
92.1

Average for all retired employees
88.9

76.9

81.8
75.0

85.2
84.2
81.8

83.8

86.0

82.0

84.2

2015.32016.32017.32018.32019.32020.3

Number of employees posted overseas (unit: persons) and their ratio (unit: %) (non-consolidated)
(FY)

0.4

0.4
0.3
0.2

2017.32018.32019.32020.3

4,245

4,353

4,148

2018.32019.32020.3

Number of participants

204

199

191

4,533

4,482

4,398

2017.32018.32019.3

169

11.7

8.5

2016.32016.3

Number of training held
(FY)

11.9

2015.32015.3

38.7

2015.30.2
132016.30.3
25

17

2017.32018.322

2019.325

2020.3

Number of training held at Kyudenko Academy (unit: times) and number of participants (unit: persons)

ROIC (consolidated) (unit: %)ROE (consolidated) (unit: %)16.7

2015.338.8

4. Data section2017.3

39.5

80.3

10
2016.340 to 49

76.0

11,5172015.3

40.1

2015.385.0

2021.4 (plan)

Salespersons, administrative staff, etc.

60 and above

5,719

88.5

418

Number of female employees (unit: persons) and their ratio (unit: %) (non-consolidated)
Engineers(FY)

26,2452018.450 to 59

40.4

67.5

2017.430 to 39

Re-employment rate of retired employees (non-consolidated) (unit: %)282

2016.420 to 29

40.7

Engineers(FY)

Salespersons, administrative staff, etc.

412

10 to 19(FY)

18,163

16,7572015.32015.345,175

Average age of employees (non-consolidated) (unit: years of age)
Number of employees by age (non-consolidated) (unit: persons)

(FY)

11.7

37,111

2015.315.2

14.5

Number of employees (consolidated) (unit: persons)

4,020

3,916

2015.32016.3200
4,845

2020.3

Capital investment (consolidated) (unit: million yen)

27.0

7,600

7,469
6,127

100

70
45

25
2015.349

2016.3

Kyudenko Corporation2017.32018.32019.32020.32015.32016.32017.3KYUDENKO REPORT 202050

4. Data section

10-year Financial Summary
Financial item
(Unit: Million Yen)

2011.32012.32013.32014.32015.32016.32017.32018.32019.32020.3

248,577

246,660

239,282

279,310

315,949

311,346

341,771

360,872

408,143

428,939

Operating profit

6,186

1,821

4,371

7,136

16,75725,19730,732

34,72636,74736,022

Ordinary profit

7,874

3,278

5,744

8,908

18,16327,55132,18737,34239,92438,643

Profit attributable to owners of parent

3,776

1,351

2,882

3,681

11,517

17,901

22,29725,296

26,691

26,245

Capital investment

4,935

7,046

6,034

14,226

7,606

6,127

7,469

4,245

4,353

4,148

Depreciation and amortization

3,327

3,303

3,631

4,305

5,262

5,475

5,449

5,512

6,074

5,961

Research and development costs

266

263

275

313

288

255

235

286

326

290

Cash flows from operating activities

754

6,267

4,871

12,767

19,117

10,77614,18730,016

26,054

38,222

Cash flows from investing activities(3,796)(622)(6,103)(14,456)(11,816)(13,597)(17,951)(3,830)(11,298)(12,136)

Free cash flow

(3,041)

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

26,185

14,75526,086

743

733

730

733

1,190

2,295

3,732

5,635

7,108

7,099

Net assets

92,38692,72095,95094,438104,658

113,199

141,503

164,139

182,176

197,442

Total assets

219,207

195,393

211,944

225,727

254,861

261,985

300,261

324,919357,271368,482

Interest-bearing debt

25,512

8,619

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

Sales

Cash dividends paid

(Unit: yen)

51.05

18.41

39.46

51.95

174.54272.45327.22356.89375.17370.00Net assets per share

1,245.70

1,251.69

1,300.23

1,405.38

1,555.33

1,693.45

1,995.00

2,269.48

2,534.46

2,761.07

Cash dividends per share

10

10

10

13

25

45

70

90

100

100

Operating profit ratio (%)

2.5

0.7

1.8

2.6

5.3

8.1

9.0

9.6

9.0

8.4

Net profit margin (%)

1.5

0.5

1.2

1.3

3.6

5.7

6.5

7.0

6.5

6.1

Gross profit margin (%)

9.3

7.7

9.1

9.1

11.7

14.5

15.2

15.7

14.8

14.0

Return on equity (ROE) (%)

4.2

1.5

3.1

3.9

11.9

16.7

17.8

16.8

15.6

14.0

Return on asset (ROA) (%)

1.7

0.6

1.4

1.6

4.7

6.9

7.9

8.1

7.8

7.2

Return on invested capital (ROIC) (%)

3.1

1.0

2.5

3.9

8.5

11.9

13.0

13.2

13.1

11.7

Equity ratio (%)

41.7

47.0

44.8

41.1

40.3

42.4

46.6

49.7

50.5

53.1

Total asset turn over (times)

1.1

1.1

1.1

1.2

1.3

1.2

1.2

1.1

1.1

1.2

Payout ratio (%)

19.6

54.3

25.3

25.0

14.3

16.5

21.4

25.2

26.7

27.0

Kyudenko Corporation

KYUDENKO REPORT 2020

4. Data section

51

Net profit per share52

4. Data section

Report on Financial Results and Financial Analysis
Facility work
Sales increased by 19,179 million yen (4.9% increase) to 407,506
million yen as compared to the year ended March 31, 2019, due tothe steady progress of the opening amount of work in hand, which
increased year on year.
Segment income (operating profit) decreased by 1,179 million
yen (3.4% decrease) to 33,770 million yen as compared to the year
ended March 31, 2019, reflecting factors, including a decline inprofit margin for large-scale projects.
Other business
Sales increased by 1,616 million yen (8.2% increase) to 21,432
million yen as compared to the year ended March 31, 2019, due tofactors such as an increase in sales business of constructionrelated materials and equipment.
Segment income (operating profit) increased by 339 million yen(19.5% increase) to 2,077 million yen as compared to the year
ended March 31, 2019, with the increase in sales from business ofconstruction-related materials and equipment sale.
(2) Overview of financial position as of March 31,
2020
Overview of assets, liabilities and net assets
AssetsCurrent assets increased by 10,001 million yen to 216,269 million
yen as compared to March 31, 2019, as a result of factors such as
an increase in cash on hand and in banks.
Fixed assets increased by 1,209 million yen to 152,212 million
yen as compared to March 31, 2019, as a result of factors such as
an increase in investments in securities.
As a result, total assets increased by 11,210 million yen to368,482 million yen as compared to March 31, 2019.
Liabilities
Current liabilities increased by 578 million yen to 142,723 million
yen as compared to March 31, 2019, as a result of factors such as
an increase in advances received on uncompleted construction
contracts.
Long-term liabilities decreased by 4,633 million yen to 28,316
million yen as compared to March 31, 2019, as a result of factors
such as a decrease in liability for retirement benefits.

As a result, total liabilities decreased by 4,055 million yen to
171,039 million yen as compared to March 31, 2019.
Net assets
Total net assets increased by 15,266 million yen to 197,442 million
yen as compared to March 31, 2019, as a result of factors such asrecording profit attributable to owners of parent.
(3) Overview of cash flows for the year ended March
31, 2020
Cash and cash equivalents (hereinafter referred to as “Cash”) as ofMarch 31, 2020 increased by 14,771 million yen to 54,964 million
yen from March 31, 2019.
Cash flows from operating activities
Cash provided by operating activities was 38,222 million yen (anincrease of 12,168 million yen in cash inflow as compared to theyear ended March 31, 2019).
This was mainly due to profit before income taxes and notes andaccounts receivable on completed construction contracts collectedexceeding notes and accounts payable on construction contracts
settled and income taxes paid.
Cash flows from investing activities
Cash used in investing activities was 12,136 million yen (anincrease of 838 million yen in cash outflow as compared to the year
ended March 31, 2019).
This was mainly due to purchase of investments in securities andpurchase of property and equipment.
Cash flows from financing activities
Cash used in financing activities was 11,250 million yen (anincrease of 2,229 million yen in cash outflow as compared to theyear ended March 31, 2019). This was mainly due to cash dividends
paid.

postponement of the Tokyo 2020 Olympic and Paralympic Games,
the Group assumes that certain issues concerning construction
work delays and the securing of proper construction work periods
will arise. These include a delay and review of the launch of new
urban development projects and their construction periods, ashortage of construction workers and an increase in labor costs ormaterial procurement delays associated with work style reform anda rise in the number of persons infected with COVID-19. There arealso concerns for the downsizing and postponement of capital
investment plans in response to a significant deterioration ofbusiness confidence in the service and other industries and sluggish
production activities in the manufacturing industry.
Based on its awareness for such an environment, the Group will
work to win orders and advance construction works with the aim of
improving its profit margin. For small- and medium-sized projects,
the Group will work to expand its customer base by proactively
undertaking design and proposal activities for customers. For largescale projects, the Group will identify target projects, taking
construction periods and human resources into consideration, andwork to improve the profit margin and work efficiency by continuing
specific measures including front-loading, which is to examine
measures for improving the entire working process during the stage
before order receipt and during the initial stage of construction
work. For power distribution line work, the Group will communicate
closely with Kyushu Electric Power Transmission and Distribution
Co., Inc., and promote work efficiency improvement and work stylereform. At the same time, the Group will develop a construction
system in agreement with plans for medium- and long-term
investments in power distribution facilities.
4. Data section(1) Overview of financial results for the year ended
March 31, 2020
Looking at the environment surrounding the construction industry inthe year ended March 31, 2020, the shortage of construction
workers associated with tight construction schedules arose as aserious issue, amid a situation where works on large-scale projects
for the Tokyo 2020 Olympic and Paralympic Games that werescheduled for delivery by the end of the fiscal year were reaching apeak.
As for the Group as well, a decline in profit margin became
evident due to factors including the appreciation of labor costs in
response to the tightening of the construction labor market and theoccurrence of additional labor costs associated with construction
schedule delays, mainly for large-scale projects in the metropolitan
area with long construction schedules.
In such a business environment, the Group has defined this year,
the final year of the Mid-term Management Plan (covering five years
from FY2015 to FY2019), as a year of “completion andsummarization.” After verifying and analyzing the results up to thispoint and sorting out issues, the Group worked to transform itself
into a company capable of achieving sustainable growth.
In addition, the Group devoted its energies to analyzing thecauses of the profit margin decline and implementing measures for
improvement, in addition to taking initiatives that include theexpansion of business fields and areas, enhancement of profitability,
improvement of the probability of receiving orders, and thestrengthening of on-site capabilities. In terms of orders received,orders from government and municipal offices that centered on
small- and medium-sized projects decreased due to designationsuspension and business suspension orders that the Group received
as a result of the legal violations of its employees. However, by
combining the Group’s knowhow in construction related torenewable energy and community-based sales capabilities, theGroup was able to receive an order for an ultra-large-scale solar
power plant project, whose per-project order amount was thelargest on record, and initiated its construction work.
Results by business segment are as follows.

(4) Future outlook
As for the future of the construction industry, no major decline inconstruction demand had been assumed, based on factors including
the continuously steady office market conditions, private capital
investment following the introduction of 5G, and initiatives led by theJapanese government to increase national resilience and develop
infrastructure. However, due to the spread of COVID-19 and the(unit: million yen, lower row is composition ratio)(unit: million yen, lower row is composition ratio)

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

53

Kyudenko Corporation

408,143

428,939(100.0%)(100.0%)60,56160,093(14.8%)(14.0%)

36,74736,022(9.0%)(8.4%)

39,92438,643(9.8%)(9.0%)

26,691

26,245(6.5%)(6.1%)

375.17 yen

The year ended March 31, 2020
Year-on-year
Plancomparison
418,000
105.1%(100.0%)

99.2%
98.0%
96.8%
98.3%

370.00 yen

62,700(15.0%)

38,000(9.1%)

40,700(9.7%)

27,200(6.5%)

Progress
102.6%

Current assets
AssetsResults

Fixed assets

95.8%

Total assets

94.8%

Current liabilities

94.9%

Liabilities

Sales

The year ended
March 31, 2019

Long-term liabilities
Total liabilities

96.5%
Total net assets

382.31 yen

Total liabilities andnet assets

March 31, 2019
206,268

March 31, 2020
216,269(57.7%)(58.7%)

151,002152,212(42.3%)(41.3%)

357,271368,482(100.0%)(100.0%)142,144

142,723(39.8%)(38.7%)

32,94928,316(9.2%)(7.7%)

175,094

171,039(49.0%)(46.4%)

182,176

197,442(51.0%)(53.6%)

357,271368,482(100.0%)(100.0%)

Increase/decrease

Major reason for increase/decrease

10,001

Cash on hand and in banks +14,834

1,209

Investments in securities +2,257

11,210578(4,633)

Advances received on uncompleted construction contracts +10,531, notes payable,accounts payable on construction contracts and other accounts payable (14,776)
Long-term debt (1,769)(4,055)
15,266

Retained earnings +18,241

11,210KYUDENKO REPORT 202054

4. Data section

Consolidated Statement of Income

Consolidated Balance Sheet(Unit: million yen)March 2019

March 2019

March 2020

Cash on hand and in banks

41,01755,851

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

150,612

139,746

Notes payable, accounts payable on
construction contracts and otheraccounts payable
Electronically recorded
obligations

408,143

428,939

Construction contracts

331,391

351,520

Other

16,191

17,325

Total cost of sales

347,582

368,845

Construction contracts

56,93555,986

Other

3,625

4,106

Total gross profit

60,56160,093

Selling, general and administrative expenses

23,81324,071

Operating profit

36,74736,022

1,799

Costs of uncompleted
construction

5,106

7,285

Income taxes payable

8,412

6,257

Merchandise

1,765

1,527

12,90923,440

—

12

979

1,145

Advances received on uncompleted
construction contracts
Provision for loss on
construction contracts

Other current assets

6,791

9,723

Other current liabilities

9,377

9,734

Allowance for doubtful
accounts

(23)

(18)

Total current liabilities

142,144

142,723

Total current assets

206,268

216,269

69,346

21,432

Total net sales
Cost of sales

1,990

66,155

19,81627,894

Short-term borrowings

Buildings and structures

388,327

21,094

1,007

Property and equipment

Gross profit

Non-operating incomeLong-term liabilities

Interest income

6266Long-term debt

13,66011,890

Dividend income

564

662

Lease obligations

2,596

3,016

Equity in earnings of affiliates

754

685

Gain on investments in partnership

976

1,117

312

323

Provision for retirement benefits for
directors and audit and supervisoryboard members

324

Liability for retirement benefits

13,936

10,714

337

Rent income

1,251

570

Total non-operating income

3,921

3,426

Interest expenses

372

385

Extra retirement payments

80

60

Provisions of allowance for doubtful accounts of subsidiary

153

92

—

129

Other

137

137

Total non-operating expenses

744

804

39,92438,64341,095

Land

28,87428,911Other long-term liabilities

2,432

2,357

Non-operating expenses

Leased assets

6,126

7,043

Total long-term liabilities

32,94928,316

Construction in progress

1,757

772

Accumulated depreciation(60,259)(64,158)

Total property andequipment

83,75082,625Intangible assets

Total liabilities

175,094

171,039

Net assets

Compensation expenses

Shareholders’ equity
Common stock

12,561

12,561

Goodwill343

182

Capital Surplus

13,012

12,982Other intangible assets

986

1,465

Retained earnings

159,401

177,642

Total intangible assets

1,329

1,648

Treasury stock

(10)

(8)

Investments andother assets

Total shareholders’ equity

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

Kyudenko Corporation

5,291

247

Loss on disposal and sales of fixed assets

553

172

Loss on sales of investments in securities

15

0

745

Impairment loss on investments in securities

186

294

(540)

Loss on valuation of utility rights

13—

Total extraordinary loss

768

467

Profit before income taxes

39,26038,423

Income taxes – current

12,001

11,805

Income taxes – deferred

569

295

Total income taxes

12,57012,100

Profit26,68926,322

203,179

212

4,844

(7,988)(7,985)847(1,688)(1,534)65,922

67,938151,002152,212357,271

104

179

1,209

Other

Total extraordinary income

Retirement benefit liability
adjustments
Total accumulated othercomprehensive loss

1,179

5,720

241

Translation adjustments

Long-term loans receivable

Deferred tax assets

6

40

6,539

56,0301,646

63Gain on sales of investments in securities

3,585

53,772

368,482

Non- controlling interests
Total net assets
Total liabilities and net assets(423)(4,647)(7,567)

1,858

1,831

182,176

197,442357,271

Extraordinary income
Gain on sales of property and equipment

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

Investments in securities

Asset for retirement benefits

184,965

Ordinary profit

368,482

4. Data section

Other

Machinery, vehicles, tools,
furniture and fixtures

40,709407,506

Construction contracts
Other73,58420

Fixed assets

FY201988,360

Short-term investments

Raw materials and supplies

FY2018Net sales

Current liabilities

Current assets(Unit: million yen)March 2020

Liabilities

Assets55(Unit: million yen)

Extraordinary loss

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

(1)

76

26,691

26,245KYUDENKO REPORT 202056

4. Data section

Consolidated Statement of Cash Flows

Corporate Profile
Corporate Profile
Corporate Name

Kyudenko Corporation

Established

December 1, 1944

Head Office

Kagoshima Branch Office

Head Office

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

Tokyo Head Office

Kumamoto Branch Office

Fukuoka Branch Office

Nagasaki Branch Office

Kitakyushu Branch Office

Saga Branch Office

Oita Branch OfficeKansai Branch OfficeMiyazaki Branch Office

Okinawa Branch Office(Unit: million yen)

FY2018Cash flows from operating activities
Profit before income taxes
Depreciation and amortization
Increase (decrease) in allowance for doubtful accounts
Decrease in liability for retirement benefits and provision for retirement benefits for
directors and audit and supervisory board members
Increase in provision for loss on construction contracts

38,423

6,074

5,961

575

(13)

(3,295)(3,319)—12

Loss on valuation of utility rights

13—

Gain on investments in partnership(976)(1,117)

Interest and dividend income

(626)

(729)

Interest expenses

372

385

Foreign exchange loss

22

46

(541)

(306)

Equity in earnings of affiliates(Gain) loss on sales of property and equipment, net

(63)

25

Loss on disposal of fixed assets

553

140

Impairment loss on investments in securities

185

294

Gain on sales of investments in securities(Increase) decrease in notes and accounts receivable on completed construction
contracts(Increase) decrease in costs of uncompleted construction contracts

(24)

(240)

(23,007)

11,011

1,585(2,302)(Decrease in inventories

3,597

71

Increase (decrease) in notes and accounts payable on construction contracts

10,751(7,981)

Increase in advances received on uncompleted construction contracts

6,073

10,678

Increase in long-term accounts payable

20

26

Increase (decrease) in consumption taxes, net(1,896)

1,566

Other, net(2,866)(976)

Subtotal

Capital12,561 million yen

Number of Employees(Consolidated) 10,018(Non-consolidated) 6,287
Approved by Minister of Land, Infrastructure, Transport
and Tourism (Sp.29) No.1659
Electrical Contracting Work Civil Engineering BusinessTelecommunications
Architectural andEngineering
Construction Business
Firefighting Facilities Work
Paving Work
Plumbing Work
Scaffolding and Excavation
Machinery, Equipment, and Business
Facility Work
Steel Structure Work
Water Supply Facilities Work Interior Finishing Business
Sanitation Facilities Work

Construction Business
LicenseConstruction work
Electrical and plumbing work

Kakusokukeisou Co., Ltd.

Electrical work

Jinnouchikoumutenn Co., Ltd.

Civil engineering, power transmission line, and electrical work

Fukuoka densetsu.Co., Ltd.

Electrical and plumbing work

Fukuto densetsu Co., Ltd.

Electrical, telecommunications, and facility work

Chikugo densetsu Co., Ltd.

Electrical and telecommunications work

762

Interest expenses paid

(384)

(385)

Fukusetsu Co., Ltd.

HVAC and plumbing work

(9,952)(13,812)

Kitasetsu Co., Ltd.

Electrical, HVAC and plumbing work

38,222

Oita densetsu Co., Ltd.

Electrical work

Fusokogyo Co., Ltd.

Facility work and air conditioning equipment sales

Miyaei Co., Ltd.

Electrical and plumbing work

Minamikyushu densetsu Co., Ltd.

Electrical work

Kaei densetsu, Co., Ltd.

Electrical work

Cash flows from investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of property and equipment(644)(1,014)488

954(2,877)(3,998)Proceeds from sales of property and equipment

211

279

Kyukinsetsubikogyo Co., Ltd

Facility work

Payments of disposal of property, plant and equipment

(501)

(78)

(9,334)(8,649)Yuei densetsu Co., Ltd.

Electrical work

Purchase of investments in securities
Proceeds from sales of investments in securities

2,405

1,076

Kuma densetsu Co., Ltd.

Electrical, plumbing, firefighting facilities, andtelecommunications work

Payments of long-term loans receivable

(289)

(381)

Higo-setubi Co., Ltd.

HVAC and plumbing work

Collection of long-term loans receivable

181

222

Choei Co., Ltd.

Electrical, plumbing, machinery, equipment, and facility work

Other, net

(938)

(546)

(11,298)(12,136)

Chohoku densetsu Co., Ltd.

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

Net cash used in investing activities
Cash flows from financing activities
Net increase (decrease) in short-term borrowings
Proceeds from long-term debt
Repayments of long-term debt

(348)

3

7,496

—

Kyudenko south east asia Pte. Ltd.

Regional Headquarters for Subsidiaries in South East Asia

Design and estimation
Quatec corporation Co., Ltd.

DesignFacility maintenance and inspection
Setsubihoshu center Co., Ltd.

Maintenance of buildings and environmental facilities

Material sales
Q-mast Co., Ltd.

Sales of industrial materials, machinery, and equipment forelectric and HVAC facility

Rearun Co., Ltd.

Manufacture and sales of high-efficiency lighting equipment

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

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

Kagoshima solar farm, Co., Ltd.

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

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

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

Ariake densetsu Co., Ltd.

Electrical, telecommunications, civil engineering, andplumbing work

Software development

Kyutie Co., Ltd.

Electrical work

Automation technology Co., Ltd.

Building information and telecommunication system, and researchand development

Systec Co., Ltd.

Development and sale of transportation service management
supporting system equipment(1,963)(998)

Syoueidensetsu Co., Ltd.

Electrical facility work

(7,108)(7,099)Sanyudensetsu Co., Ltd.

Cash dividends paid to non-controlling shareholders

(6)

(4)

Electrical facility, telecommunications, firefighting facilities, andplumbing work

Proceeds from share issuance to non-controlling shareholders—

8

Kyukousogosetsubi Co., Ltd.

Facility work

Repayments to non-controlling shareholders

(22)

(22)

Ergotech Co., Ltd.

Facility work

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

(0)

(46)

Koteradengyo Co., Ltd.

Electrical facility work

Other, net(as of March 31, 2020)

Facility and plumbing work

(1)

Cash dividends paid

OfficeKyusetsukougyou Co., Ltd.

(8,040)Purchase of treasury stock

Uku Project Development

Temporary staffing service
Portal Co., Ltd.

Temporary staffing service, fee-charging employment placement
service, education consulting, events, and banquet business(988)(1,125)

Kawachikougyou Co., Ltd.

Facility, plumbing, and electrical work

(9,021)(11,250)

Seiwakougyou Co., Ltd.

HVAC work

(48)

(2)

Electrical and plumbing work

Kyudenko friendly Co., Ltd.

Net increase in cash and cash equivalents

5,686

14,833

Ryuhou Engineering Corporation

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

34,50540,192

Kyulien environment improving
Co., Ltd.

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

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

Net medical center Co., Ltd

Asia projects engineering Pte. Ltd.

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

Remote medical image diagnosis support service using
telecommunication system

Three in Co., Ltd.

Management of a business hotel, “Hotel Urbic Kagoshima”

Kyudenko vietnam Co., Ltd.

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

kyudenko hokuzan kanko Co., Ltd.

Management of a golf course, “HOKUZAN Country Club”

Bayside place hakata Co., Ltd.

Management of “Bayside Place Hakata”

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

Kyudenko Corporation

1

(61)

40,19254,964

Kyudenko malaysia Sdn. Bhd.

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

Kyudenko (Thailand) Co., Ltd.

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

4. Data section

51,657604

26,054[Japan]Regional Headquarters in South East Asia

Meikousha Co., Ltd.

35,786

Net cash provided by operating activities

Major Offices

Kyudenko Group (major subsidiaries)

Interest and dividend income received
Income taxes paid

57

FY201939,260(as of March 31, 2020)

OthersKYUDENKO REPORT 202058

4. Data section

Stock Information
Stock information

List of Reference for Key Information(as of March 31, 2020)

Fiscal year

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

Annual general meeting ofshareholders

Held every year in June

Record date of dividends
payment

Year-end March 31
Interim September 30

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

Status of shares(as of March 31, 2020)

Total number of authorized shares

250,000,000 shares

Total outstanding shares

70,864,961 shares
7,133

Number of shareholders

Major shareholders(as of March 31, 2020)
Number of shares held
(thousand shares)

Name

15,98022.55

Japan Trustee Services Bank, Ltd.
(trust account)

5,230

7.38

THE NISHI-NIPPON CITY BANK, LTD.

3,249
3,133

4.58
4.42

Stock exchange listingFirst Section of Tokyo Stock Exchange
Fukuoka Stock Exchange

Stock index

JPX-Nikkei Index 400

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

2,970

4.19

Securities code

1959

Kyudenko Employees Shareholding Association

2,001

2.82

Category of business

Construction

2.15

100 shares

NORTHERN TRUST CO. (AVFC) RE MONDRIANINTERNATIONAL SMALL CAP EQUITY FUND, L.P.

1,527

Trading unit of shares
Shareholder registryadministrator

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

Kyudenko Labor Union

Office of administrator

Stock Transfer Agency Business Planning Dept.,
Sumitomo Mitsui Trust Bank, Limited
http://www.smtb.jp/personal/agency/

1,300
1,253
1,142

1.83
1.76
1.61

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

THE BANK OF NEW YORK MELLON 140044
Nishi-Nippon Railroad Co., Ltd.

Management strategy

Business features andstrengths
Performance by Business Category

Foreign individuals
274
13,511 thousand shares (19.1%)

Securities companies
39
622 thousand shares (0.9%)

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

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

Value Creation Process
Treasury stock 1
0 thousand shares (0.0%)

Initiatives for Safety

Workplace and Labor Environment

2016.32017.32018.32019.32020.32021.3(forecast)Interim dividends

20 yen30 yen40 yen50 yen50 yen50 yenYear-end
dividends

25 yen40 yen50 yen50 yen50 yen50 yenTotal

45 yen70 yen90 yen

100 yen 100 yen 100 yen

Rating information
Name of rating institution

Rating and Investment Information, Inc.

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

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

CSR > Coexistence with local communities

Relationship withstakeholders

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

Coexistence with Local Communities

Kyudenko initiatives > social contribution and environmental activities
https://www.kyudenko.co.jp/approach/philanthropy/(as of March 31, 2020)
Name of rating

Ratingissuer rating

A-

Corporate Governancehttps://www.kyudenko.co.jp/ir/governance/

Interview with Outside Directors

Financial and Non-ﬁnancial Highlights

Nikkei 225 stock price(Yen)

IR information > Corporate governanceCorporate governance

Trend of stock price/volume
Kyudenko stock priceBusiness fields
https://www.kyudenko.co.jp/service/

Basic Concept of CSR
Creating and increasing
corporate value

Trend of dividends(R&I)

Corporate information > Greetings
https://www.kyudenko.co.jp/company/greeting.html

4. Data section

strengthening our management base to improve performance andsecuring internal reserves necessary for further business expansion.
With respect to dividends, we will meet the expectations of ourshareholders by maintaining continuous and stable dividend payment,
based on a consolidated payout ratio target of 25%, comprehensively
considering the business environment, performance, and ﬁnancial
condition.

Details of Mid-term Management Plan

Business of Kyudenko

Initiatives for Safety

With respect to proﬁt distribution, we will strive to maintain a soundﬁnancial position and make appropriate returns to shareholders while

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

Investment in Business and Human
Resources and Financial Strategies

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

Corporate information > Corporate Philosophy(as of March 31, 2020)

Individuals and others
Other domestic corporations
6,649
108
10,681 thousand shares (15.1%) 21,633 thousand shares (30.5%)

Financial institutions
62
24,415 thousand shares (34.4%)

Corporate Philosophy

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

Message from the President

Note: Shareholding ratio is calculated excluding treasury stock (18,870 shares).

Distribution of shares

Corporate Philosophy

Information found in this report

Shareholding ratio(%)

Kyushu Electric Power Company, Incorporated

The Bank of Fukuoka, Ltd.

Contents

(Yen)

6,000

30,0004,000

20,0002,000

10,00000

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

Financial data
Data Section

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

Volume(Thousand shares)

1,200
600
0
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
2014
2016
2017
2018
2019
2020
2015

59

Kyudenko Corporation(year)KYUDENKO REPORT 2020

60

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