Presentation of Results
Half Year, FYE June 30, 2018
February 22, 2018

Nippon Koei Co., Ltd.
Representative Director and President
Ryuichi Arimoto

I:

Accounting Report(July 2017 - Dec 2017, FYE18/6 1H)

1

Management Policy and the Market Environment

Management
policy for
FYE18/6

Marketenvironment

Entering into the final phase of the Medium-Term Management Plan(“NK-AIM”), we aim to achieve record net sales and operating income
under our fundamental principles of “Sustainable growth of three corebusinesses,” “Generation and expansion of new businesses,” and“Autonomy and collaboration,” thus paving the way for the next mediumterm management plan.
 Public works expenditures in Japan remain steady at approximately 7 trillion yen (6 trillion
yen original plus 1 trillion yen supplementary). They are allocated on a prioritized basis toinfrastructure development aimed to raise productivity and to disaster prevention/mitigation
measures.
 Regarding the International Consulting segment, Japan’s official development aid (ODA)
project budget was expanded to 2 trillion yen under the government slogan of “Export ofhigh-quality infrastructure.” There is a strong need in the transportation sector for roads
and railroads, making it the largest recipient category of official development assistanceloans from Japan.
 The Power Engineering segment is faced with continuously stronger price competition andcost reduction requests, as evidenced by the growth of competitive ordering. However, thissegment will likely enjoy steady demand for renovations and renewals for the next two to
three years, for activities aimed at the stable supply of electric power. Power system reformand other efforts will diversify electric power, bringing about more market participation
opportunities.
 Urban & Spatial Development segment is seeing rising demand for urban development inemerging countries mainly those in Asia.
2

2Q Results for FYE June 30, 2018
Net sales grew and losses narrowed, driven by International Consulting despite segment gaps.


Orders received decreased year on year due to orders for large projects received in the previous fiscal year, and would
have been flat year on year without these orders.
Net sales grew and operating loss narrowed as the International and Domestic Consulting sectors performed solidly.
Losses would have widened the FYE18/6 1H results had been calculated using the former method, although net sales
would have been flat year on year.

FYE17/6 2Q
Results

FYE18/6 2Q
Results

Orders58,451Net Sales
Gross profit

Reference
YoY Change
ValuesFYE18/6
Amount%2Q *YoY Change
Amount%47,832△10,618

81.8%

-

-

-

26,304

31,233

4,928

118.7%

25,708

△596

97.7%

8,368

9,523

1,155

113.8%

8,024

△344

95.9%

Operating Income△2,747△2,597149-△4,097△1,349-Ordinary income△2,286△2,344△57-△3,843△1,556-

Profit attributable toowners of parent△1,800△1,312488-△2,811△1,010-(Millions of yen)

* Starting FYE June 30, 2018, the Group has changed the primary method of revenue recognition from the completed-contract method tothe percentage of completion method. For this reason, the results for the 2nd quarter of FYE June 2018, which were calculated using theformer method (method used until FYE June 2017), are presented for reference purposes.
3Consolidated Profit and Loss Summary (FYE 18/6 1H)
Selling, general and administrative expenses increased due to growth investments. SG&A ratio improved.
FYE17/6 2Q
Results

Reference
YoY Change
ValuesFYE18/6 Amount%2Q *YoY Change

FYE18/6 2Q
Results(Millions of yen)Amount%Orders58,451

Ratio(vs. sales)

47,832

Ratio(vs. sales)△10,618

81.8%

-

-

-

Net sales

26,304100.0%

31,233100.0%

4,928

118.7%

25,708

△596

97.7%

Cost of sales

17,93668.2%

21,709

69.5%

3,773

121.0%

17,683

△252

98.6%

Gross profit

8,368

31.8%

9,523

30.5%

1,155

113.8%

8,024

△344

95.9%

SG&A

11,11642.3%

12,121

38.8%

1,005

109.0%

12,121

1,005

109.0%

Operating income△2,747△10.4%△2,597

△8.3%

149

-

△4,097△1,349

-

460

1.8%

253

0.8%

△207

55.1%

253

△207

55.1%

Ordinary income△2,286△8.7%△2,344

△7.5%

△57

-

△3,843△1,556-Extraordinary
income/loss

△105

△0.4%

787

2.5%

893

-

787

893

-

△1,800△6.8%△1,312

△4.2%

488

-

△2,811△1,010-Non-operating
income / expenses

Profit attributable toowners of parent*.

Starting FYE June 30, 2018, the Group has changed the primary method of revenue recognition from the completed-contract method to thepercentage of completion method. For this reason, the results for the 2nd quarter of FYE June 2018, which were calculated using the former method(method used until FYE June 2017), are presented for reference purposes.
4Profit/Loss Analysis
Increase due mainly tochange to the percentage
of completion method■Profit factor ■Loss factor

Cost increase comingfrom higher cost ratio(Millions of yen)

Cost increase for accelerating the
expansion of priority businesses
and new businesses

Gain on sales of
non-current assets

△413

△382

＋1,568△347△1,005+1,276△1,312△207△1,800FYE 17/6 2Q
Net Loss

Gain onSales

Cost of
Sales

General andNon-operating Extraordinary
administrative
incomeincomeexpenses

Extraordinary Taxes andlossesother

FYE 18/6 2Q
Net Loss5

Balance sheet• Current assets increased due to the percentage of completion method, and property, plant and equipment decreased due tosales of non-current assets.
• Investments and other assets increased due to investment securities and retirement benefit plan-related assets.
• Current liabilities decreased due to lower notes and accounts payable – trade and advances received, although short-termloans payable increased.
• Net assets increased due to higher retained earnings and foreign currency translation adjustments.

(Millions of yen)

FYE17/6 2Q
Results

FYE18/6 2Q
Results

YoY

Assets

113,878

120,264

6,385

Current assets

58,40060,871

2,470

Property, plant andequipment

24,60923,238△1,371Intangible assets

13,20514,006800

Investments and otherassets

17,66322,148

4,485

Liabilities

67,091

66,459△632

Current liabilities

38,98638,490△496

Non-current liabilities

28,10527,969△136

Net assets

46,78653,804

7,018
6

Cash Flows• For net cash provided by (used in) operating activities, advances received decreased.
• For net cash provided by (used in) investing activities, mainly sales of property, plant andequipment.
• For net cash provided by (used in) financing activities, loans payable decreased.

(Millions of yen)

Net cash provided by(used in) operating
activities
Net cash provided by(used in) investing
activities
Net cash provided by(used in) financing
activities
Net increase(decrease) in cash andcash equivalents
Cash and cash
equivalents at the endof period

FYE 17/6 2Q
Results

FYE 18/6 2Q
Results

YoY△7,337△15,319△7,981△2,078

2,504

4,582

10,758

6,833△3,925933△5,848△6,782

10,334

11,234900

7

Results by Business Segment (Orders/Net Sales)
2Q Net Sales

2Q Orders(Millions of yen)

58,451

31,233
26,30447,832

6,209

Urban &
SpatialDevelopment

5,608

Power
Engineering

12,731

International
Consulting

6,335

Domestic
Consulting

5,356

38,245

6,598

20,336

14,197

21,675

2016

2017

2018

 For FYE17/6, the Company recorded orders for large
projects received (Cairo subway/domestic projects 2.0
billion yen and overseas projects 8.0 billion yen)
 Steady progress compared to FYE16/6, rising by 25.0%

2016

2017

2018

 Domestic and International Consulting Operations faredstrongly As of 2Q, many orders were recorded on the former
method basis■Domestic Consulting ■International Consulting ■Power Engineering■Urban & Spatial Development ■Real Estate Leasing ■Others
8

Domestic Consulting
 Orders received were in line with the plan, but decreased year on year due to orders received for the previous fiscal year by Nippon
Koei Group companies for large projects as well as to declining orders for earthquake-related projects.
 Net sales increased as work completions grew due to rising national government-related and private-sector orders received by Nippon
Koei on a non-consolidated basis.
 Operating income was flat year on year on the former method basis due to higher net sales despite the increase in rent.

FYE17/6 2Q
Results

FYE18/6 2Q
Results

OrdersRatio
23,951(vs. sales)

Ratio
21,675(vs. sales)

Net sales (*)

4,237

100.0%

6,335

3,733

88.1%

Gross profit504

SG & A(Millions of yen)

Cost of sales

Operating income■2Q Orders

YoY Change

Reference
ValuesFYE18/6 2Q *YoY Change

Amount%△2,276

90.5%

-

-

-

100.0%

2,097

149.5%

4,635

397

109.4%

5,343

84.4%

1,610

143.1%

4,037

304

108.2%

11.9%

991

15.6%

487

196.6%

597

93

118.5%

3,986

94.1%

4,163

65.7%

177

104.4%

4,163

177

104.4%△3,482△82.2%△3,172△50.1%

309-△3,566△84-■2Q Net sales■2Q Operating income

Amount%* Reference values determined by calculating the results for FYE18/6
2Q using the former method

Progress of business strategy✓ On a non-consolidated basis, Nippon Koei steadily
secured orders received due to higher orders received
from national government-related, private-sector andwest Japan area customers✓ Orders received through engineering proposal-based
competitive tenders increased significantly (proposal
specification rate rose by 5 percentage points)✓ Strong performance was shown by priority businesses
such as dam rehabilitation, maintenance-management
and traffic safety measures
9Project Case Study / Domestic Consulting
Autonomous driving demonstration experiment

Base: Michi-no Eki

Michi-no Eki Hitachi Ota autonomous driving demonstration
experiment

Running route (3.2 km)

Autonomous running without driver (0.5 km)Experiment area: Hitachiota-shi, Ibaraki Prefecture,Japan
A demonstration experiment using Michi-no Eki as its
base. Nippon Koei received orders for three sites out of
18 sites nationwide.
The Company formulated plans for the demonstration
experiment while conducting the examination andanalysis toward implementation.

Autonomous running
while being monitored by
the driver (1.3 km)

Survey of expressway autonomous driving running
performance

Collect
agricultural
products

Experiment area: Shin-Tomei Expressway Hamamatsu
Hamakita interchange (IC)A demonstration experiment on truck convoy driving thatutilizes a system designed to keep vehicle-to-vehicle
distance fixed.
The Company conducted an examination and analysis
intended to ascertain the movements of convoy trucks
and ordinary vehicles.
Pedestrian-accident reduction demonstration experimentWith the aim of preventing cognition errors, the Company
reviewed the effectiveness of a pedestrian
communication device equipped with pedestrian-vehiclecommunication technology and location measurement
technology.

Video examination screen image

Key point

Tapping into consulting skills and knowledge fostered to date
for traffic system technologies and community building.
10

Project Case Study / Domestic Consulting
Developed an embankment maintenancecontrol system
Through a joint study with JAXA, Nippon Koei
developed a system which maintains and controls
embankments efficiently through utilizing satellite
data to simultaneously screen hazardous
embankment spots, a task currently performed byvisual observation.

SAR satellite automatic analysis tool
Earth observation satellite ALOS-2

Unmanned aerial vehicle UAV

Detect an embankment
deformation in a wide areaby using information
measured by a satellite

Use UAV to take photographsof viewable images andmeasure the terrain concerning
hazardous spots identified

Key point
Contributing to labor-saving efforts for the inspection
and survey of the embankments of Japan’s rivers
which run over 120,000 km in total.
JAXA

Luce Search Co., Ltd.

Created a system with which to identify hazardous spots
quantitatively and provide the inspection result

Ministry of Land, Toyooka Office of River and National Highway

11

International Consulting
 Orders received were strong mainly in the transportation and water supply and sewage sectors while decreasing year on year due
to orders for large projects recorded during the previous fiscal year.
 Net sales increased year on year even on the former method basis as large projects in South Asia progressed steadily.
 Operating income increased year on year even on the former method basis as the Company continued efforts to bolster its
earnings structure through rigorous cost control and enhanced project risk control.

(Millions of yen)

FYE17/6 2Q
Results

FYE18/6 2Q
Results

Amount%△8,032

63.9%

Reference
ValuesFYE18/6
2Q *YoY Change
Amount%Orders22,229

Ratio(vs. sales)

Net sales (*)
Cost ofsales
Gross profit

7,959

100.0%

12,731100.0%

4,771

159.9%

9,309

1,350 117.0%

5,749

72.2%

8,986

70.6%

3,237

156.3%

6,577

828 114.4%

2,210

27.8%

3,745

29.4%

1,534

169.4%

2,732

521 123.6%

2,009

25.2%

2,347

18.4%

337

116.8%

2,347

337 116.8%

201

2.5%

1,397

11.0%

1,196

694.8%

384

183 191.3%

SG（単位：百万円）&A
Operatingincome■2Q Orders■2Q Net sales

14,197

Ratio(vs. sales)

YoY Change■2Q Operating income

-

-

-

* Reference values determined by calculating the results for FYE18/6 2Q
using the former method

Progress of business strategy✓✓✓

Net sales by Nippon Koei Group companies
grew to account for slightly over 40% of thesegment due to their steady growth andenhanced collaboration
Foster group company employees through theRegional Engineer Program
Make thorough efforts to review risks whentendering and manage risks during project
implementation
12

Project Case Study / International Consulting
Bago Bridge Construction Project
Location: Myanmar

Contract work term: From 2017 to 2022
Contract value: Approximately 660 million
yenService description: Creation of tender
documents, tenderassistance and work
supervision
Scheme: Yen loan
Construct a 3.57 km-long bridge over Bago
River connecting Yangon City to theThilawa Special Economic Zone. Create
and bolster smooth traffic and logistic
networks, contributing to the sustainable
development and growth of the Yangon
area.

Key point
The Nippon Koei Group has been building
on its achievements in the transport
segment in Myanmar. Through this project,
we will solidify our presence in the country,
paving the way for winning ODA-relatedorders in the country’s transport segment,
an order category that will likely grow further
in the future.
13

Project Case Study / International Consulting
Mamelles Seawater Desalination Project
Location: Senegal
Contract work term: From 2017 to 2023
Contract value: Approximately 1,300 million yen
Service description: Design and work
supervision
Scheme: Yen loan
Nippon Koei will construct a seawater
desalination plant with a production capacity of
50,000 cubic meters per day in Dakar, thecapital of Senegal, as the nation’s first-everfacility of this kind. This project will help
enhance the water supply network in the city,
diversify local water sources, and bolster thewater supply capacity, thus contributing to
improving the living environment there.
Key point
A seawater desalination project is a segment for
which the provision of ODA will likely grow in the
future as an area for which Japanese technologies
can be properly utilized. We would like to use theresults of this project for paving the way for
winning orders for seawater desalination projects
in other countries.
This project aims to reduce water waste (leakedwater from pipes and water stolen due toillegitimate use), so we also expect to expand into
the water waste reduction business.

Conceptual diagram of the plant

Water intake spots

N
Rufisquezone
ルフィスクゾーン
Dakar
zone 2
ダカール２ゾーン

Mamelles Seawater
マメル海水淡水化施設
Desalination Plant

Dakar
zone 1
ダカール１ゾーン14

Project Case Study / International Consulting
Hartha Thermal Power Station
Rehabilitation Project
Location: Basra Province, Iraq
Contract work term: From 2017 to 2020
Contract value: Approximately 1,100
million yen

Nippon Koei won the order for arehabilitation project for one of Iraq’s
biggest gas or oil thermal power
generation station through international
competition. This will support the nation’s
economic activities by helping meet
power demand in Iraq, a country forwhich securing stable power supply is apressing challenge.

素材待ち

Key point
Thermal power station construction is abusiness category in which the Company
can exercise its strength of being acomprehensive consultant covering mainbuilding renovation, peripheral infrastructure,and environmental impact assessment.
We will deliver services in a manner thatleverages our comprehensive capabilities.
15

Power Engineering

Orders received were flat year on year due to lower power transformer orders, although the Company won orders postponed fromthe end of the previous fiscal year.
Net sales decreased year on year due to a delay in the conclusion of contracts on large projects.
Operating income decreased, affected by lower net sales, a rise of competitive ordering, and requests from customers to cut
costs.

(Millions of yen)

FYE17/6 2Q
Results

YoY Change

FYE18/6 2Q
Results%

AmountOrders

6,690

Ratio
(vs. sales)

Net sales (*)
Cost ofsales
Gross profit

7,738

100.0%

5,608

100.0%△2,129

4,921

63.6%

3,859

68.8%

2,816

36.4%

1,749

SG & A

1,373

17.8%

Operatingincome

1,442

18.6%

■2Q Orders■2Q Net sales

6,598

Ratio
(vs. sales)

△91

98.6%

Reference
ValuesFYE18/6
2Q *YoY Change
Amount

%

-

-

-

72.5%

5,283

△2,45468.3%△1,062

78.4%

3,614

△1,307

73.4%

31.2%

△1,066

62.1%

1,669

△1,147

59.3%

1,509

26.9%

135

109.9%

1,509

240

4.3%

△1,20216.7%■2Q Operating income

159

135 109.9%△1,282

11.1%* Reference values determined by calculating the results for FYE18/6 2Q
using the former method

Progress of business strategy✓

Continue efforts to lower costs by revising
designs and specifications and streamlining
operations in response to price competition andrequests to cut costs✓

Aggressive sales endeavors are now underway
for electric power companies other than Tokyo
Electric Power, government agencies, andprivate-sector customers✓

Orders received from priority sectors such as
thermal power generation are steady16

Project Case Study / Power Engineering
Oyu Power Plant Water Turbine Generator
Renewal WorkA project for renewing a Mitsubishi Materials Corporation
power plant that went into operation in 1920.
This is an FIT-applied full-scale facility renewal and allelectricity generated is intended to be sold.
Key point
Cooperation was provided by the Production Department, theFukushima Works, and the Construction Department.

Waterway Tunnel Preservation Work
Many existing hydroelectric power stations were constructedfrom several decades to nearly a century ago, meaning
facility preservation measures must urgently be taken.
If any cavity is found to exist in the upper part of a waterway
tunnel, we put filling materials into the cavity and reinforce
the tunnel steel frame, among other safety measure works,
thus lowering the risk of road subsidence and securingsafety.

Water turbine under assembly
Reinforce the steel
framework

Put filling materials
into the tunnel

Key point

Assess soundness and forecast erosion progress according toaccumulated preservation data. Propose methods forcountermeasure works and monitoring in consideration of water
circulation and water supply suspension plans.

Watertunnel17

Project Case Study / Power Engineering
Conducted a Power Generation Project with the
Okura-mura Municipal Government, Yamagata, Japan
Nippon Koei set up a special purpose company (SPC) jointlywith the Okura-mura Municipal Government and a local
enterprise, and this SPC engaged in small hydroelectric power
generation operations by using the sand control dam of the
Dozan River in Yamagata, Japan.
Power station: Okura Mazudama Hydroelectric Power Station
Annual power generation: Approximately 3,500MWh
Equivalent to power consumption by
about 1,200 ordinary households
Construction start: April 2018
Key point Local community vitalization through small hydroelectric power
generation
Municipality plus, local enterprise and private-sector company (KOEI
Energy Co., Ltd.*).
Utilizing abundant water resources to deliver a self-supporting energy
profile while rejuvenating the local community (KOEI Energy Co., Ltd. is awholly-owned subsidiary of Nippon Koei).

 Utilization of non-recourse loan
Formed a non-recourse financing (project financing) scheme utilizing a
program loan service from the Yamagata Prefectural Government, which
was made available in recognition of the results of small hydroelectric
power generation run by the Nippon Koei Group in six locations in Japan.
It was rare for a hydroelectric power generation borrower to procure funds
through a non-recourse financing scheme.

 One-stop engineering service
Provided one-stop service from design to construction to operation byleveraging the strength of having the consulting and power engineeringbusiness units.
18

Urban & Spatial Development


Orders received were more or less flat year on year and in line with plan.
Net sales grew due to steady contributions from the Westminster renovation and other projects.
Operating income declined due to higher selling, general and administrative expenses such as rent.
* Depreciation and amortization of approximately 1.0 billion yen for FYE18/6 (approximately 0.4 billion yen for goodwill
and 0.5 billion yen for other intangible non-current assets)(Millions of yen)Orders
Net sales (*)
Cost of sales
Gross profit
SG & A
Operating income

FYE17/6 2Q
Results

FYE18/6 2Q
Results

5,555
5,993
3,299
2,694
2,617
76

5,356
6,209
3,346
2,862
2,873
△10

Ratio (vs. sales)

100.0%
55.0%
45.0%
43.7%
1.3%

YoY Change
AmountRatio (vs. sales)

100.0%
53.9%
46.1%
46.3%
△0.2%

△199
216
47
168
255
△87

%

96.4%
103.6%
101.4%
106.3%
109.8%-* Actual rate for FYE18/6 2Q: 148.37 yen to the pound sterling (projected rate for FYE18/6: 139.56 yen to the pound sterling)* The results of BDP for the April to September 2016 period were consolidated into the results of the Urban & Spatial Development segment for FYE17/6 2Q.
* The revision to the method of revenue recognition did not affect the Urban & Spatial Development segment since BDP had previously been applying the percentage of completion method.

■2Q Orders■2Q Net sales■2Q Operating income Progress of business strategy✓ The Company has yet to record orders received forthe main building of the Westminster renovation
project as Parliament deliberations were in
progress. However, progress was made by related
projects such as relocation destination site
renovation.
✓ Preparations were underway for establishing local
subsidiaries in Singapore and Canada.
✓ Made sales pitches in six ASEAN countries, ending
up winning orders for five projects as the Nippon
Koei Group.
19

Project Case Study / Urban & Spatial Development
AstraZeneca Headquarters Renovation Project
Order value: Approximately 6,760 million yen (cumulative)
Contract term: From 2015 to 2019
BDP won an order for the renovation project for
AstraZeneca’s global R&D center and headquarters.
Key point
BIM was shared by all entities involved, from the ordering
customer to the contractor.

20

Project Case Study / Urban & Spatial Development
Great Ormond Street Children’s Hospital
Order value: Approximately 1,320 million yen
Contract term: From 2018 to 2022
BDP won an order for a children’s hospital redevelopment project in the U.K.
The firm will conduct a full renovation of the facility, and newly build anddevelop a clinical space consisting mainly of examination rooms and patient
rooms, as well as a doctor training room, school, teenage patient area androoftop garden.
Key point
Used a design allowing sunshine to reach all patient rooms, at the request of the ordering
customer.

21

II: FYE 18/6 Forecast

22

FYE June 2018 Forecast
No changes have been made to the forecast for the entire FYE June 2018 period.
Securely achieve targets in line with the period-start plan, paving the way for the final phase of the Long-Term Management Plan.

(Millions of yen)

FYE18/6
Forecast

YoY Change

FYE17/6
Results

Amount103,000
114,000
47,20031,80021,20012,000
1,800
7,700
3,500
2,400
3,500
50
- 1,750
7,800
4,900

117,442
101,338
43,51624,491
17,577
14,347
1,405
5,464
3,298
1,887
2,683
81
- 2,485
5,958
3,288

Operating margin (%)

6.8

5.4

ROE (%)

8.7

6.2

Orders
Net sales
Domestic Consulting
International Consulting
Power Engineering
Urban & Spatial Development
Energy/Real Estate/Others

Operating Income
Domestic Consulting
International Consulting
Power Engineering

Urban & Spatial Development
Energy/Real Estate/Others

Ordinary Income
Profit attributable to owners of parent

FYE18/6
Reference*%- 14,442

87.7%

12,662112.4%

3,684

108.4%

7,309

129.8%

3,623

120.6%- 2,347

83.6%

395

128.1%

2,236

140.9%

202

106.1%

513

127.1%

817

130.4%

- 31

61.7%

735

-

1,842

130.9%

1,612

149.0%

103,000
104,000
43,00028,20019,10012,000
1,700
5,800
2,700
2,000
2,800
50
- 1,750
6,000
3,600

* Estimated budget target June 2018, based
upon previous standard (completed-contract
method)23

III: Initiatives in the Second Half of the
Fiscal Year Ending June 30, 2018
and Beyond

24Initiatives from FYE 18/6 3Q - to achieve NK-AIM Domestic Consulting
Outstanding orders (JPY million)– Ensure to win orders for engineering competition-based projects to be publicly
announced from February 2018 onwards– Achieve improved customer satisfaction and acquire high evaluation scores andawards by raising the quality of deliverables to be delivered by the end of March
2018– Attain improved price competitiveness by discovering new regional partner
vendors and promoting local joint venture (JV) formation– Expand our customer base by making sales pitches to municipalities by utilizing
previously-ordered projects as well as the results of ministry head office projects

International Consulting
Outstanding orders (JPY million)– Ensure to win orders for large projects and bolster the execution structure throughappropriate risk management– Launch the operation of the Regional Engineer Program* (approximately 70
employees at present) and promote its utilization– Enhance education and training for raising management capabilities (contract,
process, safety, and profits)– Raise the capabilities of our group companies and promote collaboration with them
– Continue thorough safety measures* A program in which selected Nippon Koei Group employees are developed to serve in a project otherthan those in the country of their residence, and dispatched for projects underway at different
companies in the segment.
25

Initiatives from FYE 18/6 3Q - to achieve NK-AIM Power Engineering
Outstanding orders (JPY million)– Secure orders designed to generate sales within the current fiscal year by making
an aggressive sales pitch to all electric power companies, government agencies,
and private-sector customers, and discovering prospects– Secure proper profits by revising our production system and making thorough cost
reduction efforts– Strive to develop product technologies with a focus on onsite-based technology
development and product core technology development– Expand new domains for the electric equipment consulting business (thermal
power, road-intelligent transportation system (road ITS), backbone communication
network, water supply, sewage and drainage pump station)

Urban & Spatial

Outstanding orders (JPY million)– Develop our operations execution system for the Westminster Palace renovation
project– Establish the Singapore base within the current period. Aim to accelerate its
collaboration with Nippon Koei Group entities and improve productivity while serving
expanded markets in ASEAN countries. Aim to permeate the BDP brand.
– In its BIM development initiative, BDP will develop Level 3 (a level at which project
personnel design by accessing one single integrated database in which data
updating histories are managed). Nippon Koei and BDP will continue to engage inpersonnel interaction and joint technology development such as for BIM.

26

Medium-Term Management Plan/Long-Term Management Strategy
Tackle in NK-AIM and expand in the next medium-term plan(i) Step up efforts to cater to railroad projects showing strong demand
Step up our production structure through internal and external collaborations and merger
and acquisition (M&A) activities
Bolster our group collaboration and sales though the IT system and support framework ofheadquarters business units

Long-Term Management
Strategy¥140 billion
Operating income ¥14 billion
Net sales(ii) Establish the energy management business

Breakdownof net sales

Build a business model by refining our knowledge in energy management and mini griddevelopment in preparation for the post-power generation-transmission unbundling(iii) Global engagement in the construction area
Discover new market segments through integration with the civil engineering side
Put the BDP Asia engagement plan into action■Three core businesses■New businesses ■Overseas markets

Continuation andexpansion domains

FY2015Current Medium-Term Management Plan “NK-AIM”
New Medium-Term Management
 Sustainable growth of three core businesses
Plan (under formulation)
 Generation and expansion of new businesses
 Autonomy and collaboration
FY2018 FY2019
Continue to evolve into a global consulting and engineering firm

FY2021 FY2022

27

Acceleration of NK-AIM
Domestic Consulting
 Achieve higher production capability and productivity by building a production structure designed to address expanding
businesses and the market environment Accelerate moves to expand our operations under a clear-cut business strategy while consolidating segments sharing acommon strategy
 Generate new businesses strategically in a manner that expands operations beyond conventional market boundaries
 Reinforce our sales capabilities intended to drive the above-mentioned efforts

International Consulting Bolster our corporate structure in response to growing overseas projects such as for high-speed railroads as well as
customer needs
 Engage in cross-sectional collaboration designed to cater to a packaged infrastructure project in which to develop railroad
stations and station zones in an integrated fashion
 Foster Nippon Koei Group companies, develop technologies in collaboration with the Technology Headquarters (R&D
Center) and pursue sales activities jointly with the Global Strategy Headquarters with the aim of securing sustainableearnings capabilities through production structure reinforcement
 Continue management education in order to raise management capabilities

Power Engineering Collaborate with the Global Strategy Headquarters and overseas Nippon Koei Group companies for the purpose of
capturing overseas infrastructure demand mainly in emerging countries
 Accelerate winning orders on the strength of our one-stop service delivery
 Consider rebuilding an optimal supply chain that integrates domestic and overseas production bases
 In Japan, step up sales to all electric power companies, government agencies, and private-sector customers while
continuing to provide solution proposals for power transformer products28

Acceleration of NK-AIM
Urban & Spatial Development
Advance the generation of synergy for the technology field as well as engagement areas and key customers by means ofcollaboration between the two companies
 Projects involving collaboration between the Nippon Koei Group and BDPRiverfront development master plan (PPP project)

BDP
NK

Construction: Designing of a riverside promenade, shopping
facilities, and underground shopping areas
Civil engineering: Pier, underground bypass, pedestrian bridge andunderground area structure

Regional airport development plan (PPP project)High function hospital and health center design in Vietnam

BDP
NK

Private-sector project. Nippon Koei and BDP wereinvited to participate in the design competition andwere awarded the runner-up prize in recognition of
the superior design features of the proposal.

Super high-rise building concept design in China

BDP

Construction: Concept and design of terminal building

BDP

NK

Civil engineering: Overall airport planNK

Private-sector project. BDP delivered concept design
service for a super high-rise building on the back ofcustomers’ confidence in Nippon Koei.

 Establishment of the Singapore base Bolster the collaboration between BDP and three Nippon Koei bases
Expand business in ASEAN countries showing significant private-sector
growth, by tapping into BDP’s high-level capabilities and results
 Enhance production capabilities, by utilizing Delhi and Shanghai offices
 In Singapore, it is mandatory to use BIM in construction areas
Make the most of the advantageous situation for BDP, a player retaining
leading-edge techniques

29Efforts under the Current Medium-Term Management Plan NK-AIM toward
the New Medium-Term Management Plan
Energy management
Decarbonization as a counter-climate warming measure
Electric power liberalization and power generationEnergy
market trend transmission unbundling
Grid stabilization programs

Business engagement with energy storage as thecore in the form of creation, storage andconservation of energy

2017
2018

2020

2025

U.S. and Europe
Enter the ancillary power storage
business and the mini grid and
VPP business
Asia
Engage in businesses related
to power storage anddiversified power sources
Japan
Engage in businesses related to
power storage and diversified
power sources and VPP Expansion of renewable energy (diversified energy)
 Japan: From 2016 to 2020; U.S. and Europe: 1990s
 Japan: System under consideration;
U.S. and Europe: Battery use in progressEnter the U.K. energy management market
Nippon Koei’s Fukushima Works developed the storage
battery control system for power frequency adjustment (NKEMS). Starting from February 2018, the Company began toprovide the frequency adjustment service to National Grid
UK, an electric power company in the U.K.
We adjust supply-demand balance and maintainfrequencies in the country’s power grid.

Useknowhow

30

Efforts under the Current Medium-Term Management Plan NK-AIM toward
the New Medium-Term Management Plan
Technology policies
 Engage in research and development from a medium- to long-term
perspective with a focus on themes appropriate to changes in themarket environment and needs
 BIM has been incorporated into our production process and is now
underway in multiple domestic projects
 Promoting our BIM-incorporated PM-IT (a technology to integrate andoversee project data for design, work and maintenance-control) as ameasure to raise the productivity of our overseas projects, which is
gradually leading to favorable results

PM-IT: Allows 3D designing as well as construction fee
and progress management.

Human resources policies
 Completed developing human resources schemes and employee development schemes, and entered into the operationphase Work on recruitment and employee development, globalization and diversity in a manner befitting the expanding groupbusiness size, corresponding to our future growth strategy, and the changing job market

Organization policies


Reinforce governance across the entire group by streamlining the business management platform such as for global
accounting

Investment policiesExpand investing in priority areas comprising railroads, energy management, and construction
Continue to actively participate in domestic and overseas concessions
31Capital Policy/Dividend Policy
Dividend policy
 Pay dividends steadily for intended payout
ratio of 30% and enhance returns forshareholders in a manner commensuratewith rising levels of income

Dividends (yen)Payout ratio (%)✓ Planning to pay a dividend of ¥75.0 for FYE 18/6.
FYE 16/6

FYE 17/6

FYE 18/6(Plan)*Past dividends are recalculated based on the ratio after share consolidation.

Capital policy•

Enhance corporate value through the improvement of capital efficiency and businessexpansion by making investments for future growth

Securing offinancialsoundness

Enhancementof corporate
value

Improvement of
capital efficiency

Stable dividends/
enhancement ofshareholder return

Investments for
future growth32

Act with integrity and contribute to society through technology and engineering.

This presentation is provided for informational purposes only and is not intended to solicit any action. Nippon Koei prepared thispresentation (including forecasts of financial results) based on credible information available at the time of publication and certain
assumptions the Company believes to be reasonable. Various factors may cause actual results to differ materially from the projected
results or other expectations implied or expressed in this presentation.

IR-related inquiries
Nippon Koei Co., Ltd.
Corporate Communication Office Corporate Planning Divisionkoei-ir＠n-koei.co.jp
www.n-koei.co.jp/english/

33

(Reference) On changes in calculation standards for Sales (from June 2018)* Effective from the Fiscal Year Ending June 30, 2018, the Group has changed the primary methodof revenue recognition from the completed-contract method to the percentage-of-completion
method.

Calculation by “Percentage of Completion Method”(Sales Amount) = (Estimated Total Revenue) x Progression Rate - (Cumulative Sales by the End ofPrevious Period)

Progression Rate =Costs occurred (labor cost, subcontract cost, costs, etc.)
Total Estimated Costs

Sales Recording by “Percentage-of-Completion Method”
Case: Project of 3-year contract period, JPY 30-million value
1st year
2nd year
3rd year
Progression Progression Completion
Rate: 25% Rate: 70%

Total

Project carried forward from theprevious year
FormerSales amount is bookedat the end of the Project

Completedcontract method

0

0

3,000

3,000

Project started in current year
Sales amount is bookedin proportion to the progress% of completion
method

750

1,350

900

3,000

New

3,000 x 25%

3,000 x 70%ｰ750

3,000 x 100% - 750 - 1,350* For projects that were awarded or started before FYE June 30, 2017, the completed-contract method is used.
* For the amount of effect, see “Changes in accounting policies” on p.9 of the Summary of Financial Reports .
34

IV: Reference

35Corporate Profile
Corporate NameNIPPON KOEI CO., LTD.

 FounderDate of Foundation

June 7, 1946

Capital¥7,393 million

Number of Employees

4,566 (consolidated)

Before WWII, Yutaka Kubota was engaged
in the development of hydropower
resources (e.g. Suiho Dam/700MW, in the
Korean Peninsula, one of the world’s
largest at that time).

Consolidated Subsidiaries 16

Businesses Domestic Consulting
International Consulting (ODA, etc.)
Power Engineering
Urban & Spatial Development

Yutaka Kubota (1890-1986)

After the War, in a bid to work toward therestoration of Japan and reconstruction ofcountries damaged by the War, he founded
the Company at the age of 56.
Known as the “Father of Overseas Engineering Cooperation”, hewas awarded the Grand Cordon of the First Order of the Rising
Sun in 1985.

Management Philosophy
Act with integrity and contribute to society throughtechnology and engineering.

He directed projects in many countries throughout the world until
he was 90 years old, contributing to development in developing
countries.

Transition of Operating Income (consolidated, ¥ million)

Transition of Sales (consolidated, ¥ million)(Plan)(Plan)
36

Business Development
Domestic Consulting

International Consulting

Power Engineering

Nippon Koei has implemented approx. 3,000
projects/year to underpin the foundations ofpeople’s daily lives, such as development andmaintenance of social capital including rivers,
roads, etc., and regional reforms to realize
prosperous and safe living.

Nippon Koei has supported the growth ofdeveloping countries in Africa, the Middle
East, Latin America and, especially, in Asia
by providing support in a broad range of fields
including water resources, energy, urban
development, transportation, agriculturaldevelopment, and environment control.

Nippon Koei has worked on the developmentof power sources and the promotion ofbusiness accommodating electricity demand inJapan and overseas. The Company has
engaged in new construction and repairs of
substations, switching stations, power stations,the formation of dam management systems athydroelectric power plants, etc.

Urban & Spatial

FY17/6 Sales distribution ratio

Real Eatate 473（0.5%）
Others 931（0.9%）(Millions of yen)

Nippon Koei strives to create multifunctional,
well-organized, barrier-free, eco-friendly andbeautiful life space in emerging economies in
Asia and other developing countries/regions
through development projects of social
infrastructure design, such as of railway
stations, airport buildings, rearrangement of thestreetscape, etc.

FY17/6 Sales by Geographical Location

Urban & Spatial
14,347（14.2%）
Domestic
43,516
International（42.9%）
24,491（24.2%）

Power
17,577（17.3%）

Others%Latin America%
Africa%Middle East%

Europe
14%

Asia
15%

Japan
%

37

Job Description for Civil Engineering Consultants
Domestic: Mainly involved through the design stage. Core customers are primary government organizations including the
Ministry of Land, Infrastructure, Transport and Tourism, and secondary government organizations including prefectural andother local governments.
Overseas: Involvement varies by project, and can range from planning and construction to construction supervision andmanagement. Core customers include the Japan International Cooperation Agency (JICA), other governmental agencies,
the United Nations and the World Bank.

Planning

DesignPlan and draft,
Basic engineering,feasibility studies Detailed engineering

Construction
Competitive bids,
Providing
Proposals

Bid evaluation and support
for supplier selection

Operation/
Management

Contract supervision and management Operational consulting
Construction supervision andManagement consulting
management

Domestic

Consultant (NK)Construction (General Contractors, etc.)

Overseas

Consultant (NK)Surveillance (NK)Construction (General Contractors, etc.)

Example: Chronic traffic congestion problems in Region A
Planning

DesignConstruction

Provide engineering services forstudies, planning, design, and otheractivities.

Supervise the work of contractors on behalfof the client (supervision and management)

Completion ofroad・ Should roads or subways be constructed?
・ Is the project economically viable?
・ Propose the optimum construction
methods given the terrain.

(General contractors, manufacturers, etc.)
Execution of construction work according to thespecifications agreed upon by the contractee andcivil engineering consulting firm

Provided as aservice toresidents
38

Nippon Koei’s Development Along with Social Progress
NipponKoei
XSocietyBusiness
Development

Formulation of business base,
Fostering positive relationshipwith foreign governments

Comprehensive strength anddevelopment capability toencompass various fields

Flexible responses tochanges in environmentand social needs

Stable supply of electricity
Development of infrastructure
for daily life

Establishment of foundation
for industrial growth

Realization of sustainable
society

Dam

Electricity
Production

Rivers anddrainageTransportation

Environmental
systemLong-termManagement
Strategy

NK-AIM
Urban & spatial
development

Maintenanceandmanagement

Building
National
Resilience
Longer operating
lives of infrastructure
Environmental
responses

Advances

Deregulation ofelectricity
business

Infrastructure
exportEstablishment ofsocial capital
Restoration of
infrastructure fordaily livings

Human
Resources

Provision of employment
opportunities for engineers whocame back alive from overseas
territories

Improvement in quality ofengineers,
Training of engineers in extensive
industrial fields

Improving social reputation ofengineering consultants
Transfer of technologies todeveloping countries

Stage

Foundation stage

Growth stage

Maturation stage

Innovation stage

Era

Restoration in the postwar
period1946-1960s

High economic growth
Population increase
1970s-1990s

Collapse of bubble economy
Global warming
1990s-2000s

Great East Japan Earthquake
Urban problems
2011-Present

Recruitment of regional engineers
Paying attention to work-life balance

39

Strengths of Nippon Koei
(1) Sustainable business model developed
along with progress in society(Win-win relationship between society and theCompany)

Implementation of transformation to meetmarket needs(2) Japan’s leading engineering consultant(Business domains, technologies, and humanresources)

Comprehensive strength: Capable of solving
sophisticated or complex issues
Human resources: Has the largest number ofengineers in the industry

Commercialization of solutions on social
issuesConsolidated
net sales:¥101.3 billion

No. ofcountries inwhich businessis undertaken:
160

Technologies: Equipped with in-house R&D
facilities and a number of patents

No. of orders
per year: over
4,500

No. of patents
acquired:82

No. of
Professional
Engineers*:
1,534*Certified by the Japanese government

Provide solutions on needs of the era and realize sustainable business expansion
and profitability growth40Position in Industry
Nippon Koei is Japan’s leading civil engineering consultant.
Rank

Sales (Millions of yen)Company

Segment ofConst. Consultation

Corporate
Total

1

Nippon Koei

44,21460,327

2

Pacific Consultants Co.,LTD.

40,47742,511

3

CTI Engineering Co., Ltd.

32,62634,256

4

Yachiyo Engineering Co., Ltd.

19,426

19,6685

JR East Consultants Company

18,044

20,134

6

Oriental Consultants Co., LTD.

17,41917,644

7

Nihon Suido Consultants Co., Ltd

17,134

17,3658

KOKUSAI KOGYO CO., LTD.

16,32535,022

9

Eight-Japan Engineering Consultants Inc.

15,362

17,531

10

NEWJEC Inc.

15,14915,61320

Tamano Consultants Co., Ltd. (strong point: urban planning)

9,779

11,49987

NIPPON CIVIC CONSULTING ENGINEERS CO.,LTD(strong points: underground spatial planning, tunnels)

1,899

1,933

※ Source: Nikkei Construction, May 8, 2017 edition. Ranking by engineering consultant division sales (according to published financial results)
41

Domestic Consulting
Nippon Koei’s Operating Results in Domestic Consulting(¥ million)

Public Works Expenditures (¥ trillion)

 Initial budget  Supplementary

FY 2012FY 2013

FY 2014

FY 2015

FY 2016

FY 2017■Orders

FYE
12/3

FYE
13/3

■Net Sales

FYE
14/6

FYE
15/6

■Operating Income

FYE
16/6

FYE
17/6

FYE
18/6
(Plan)
42

International Consulting
Initial ODA Budget in the General Account(¥ billion)

Nippon Koei’s Operating Results in International Consulting(¥ million)■Orders

FY 2012FY 2013

FY 2014

FY 2015

FY 2016

FY 2017

FYE
12/3

FYE
13/3

■Net Sales

FYE
14/6

FYE
15/6

■Operating Income

FYE
16/6

FYE
17/6

FYE
18/6
(Plan)
43

Power Engineering
Repair Expenses and Facility Investment and Its
Distribution for Tokyo Electric Power Co., Ltd. (¥ billion)■ Repair Exp.

Nippon Koei’s Operating Results in PowerEngineering Business (¥ million)■Orders■Net Sales■Operating Income■ Facility Inv.

FY 2011

FY 2012FY 2013

FY 2014

FY 2015

FY 2016

FYE
12/3

FYE
13/3

FYE
14/6

FYE
15/6

FYE
16/6

FYE
17/6

FYE
18/6
(Plan)44

Urban & Spatial Development
Sales Trend of Top 164 Research and Designing Companies(Billions of dollars)

Sales of top 164 firms in 2015 by sector(Billions of dollars)■Architecture■Transport■Other

Source of data: ENR Magazine (issued in August 2017)45