Bridge Report（1433） March 23, 2023

https://www.bridge-salon.jp/

BESTERRA CO., LTD (1433)

President Yutaka Honda

Company Information
MarketIndustry
President
HQ Address
Year-end
Homepage

TSE Prime Market
Construction businessYutaka Honda
Kiba Park Bldg, 3-2-6 Hirano, Koto-ku, Tokyo, JapanEnd of January
https://www.besterra.co.jp/

Stock Information
Share Price
Share Outstanding (End of the term)¥878
8,990,200 shares
DPS (Est.)
Dividend Yield (Est.)
EPS (Est.)¥20.002.3%¥45.14Market Cap.
¥7,893 million
PER (Est.)
19.5x

ROE (Act.)-1.5%
BPS (Act.)¥493.05

Trading Unit
100 shares
PBR (Act.)
1.8x*The share price is the closing price on March 22. Each number is from the financial results for the FY23/1.

Consolidated Earnings
Fiscal Year
Jan. 2020 (Actual)Jan. 2021 (Actual)Jan. 2022 (Actual)Jan. 2023 (Actual)Jan. 2024 (Forecast)

Net Sales
Operating Income Ordinary Income
3,436
93
97
3,682
124
212
5,966
488
721
5,458
-215
-94
7,800
510
586

Net Income
59
142
1,391
-64
400

EPS
7.29
17.33
165.48
-7.33
45.14

DPS
16.00
16.00
16.00
20.00
20.00

* The forecasted values were provided by the company. Unit: million yen. Net income is profit attributable to owners of parent.

This Bridge Report introduces the earning results for the fiscal year ended January 2023 and other information of BESTERRA CO.,LTD’s.

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Bridge Report（1433） March 23, 2023

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Table of Contents
Key Points
1. Company Overview
2. The Fiscal Year Ended January 2023 Earnings Results
3. Fiscal Year Ending January 2024 Earnings Forecasts
4. The new medium-term management plan, “Action Plan for Decarbonization 2025”
5. Conclusions<Reference: Regarding Corporate Governance>

Key points⚫

In the term ended January 2023, sales decreased 8.5% year on year to 5,458 million yen. This was mainly due tothe difficulty in starting a large-scale demolition project due to the extension of the project schedule. The company
posted an operating loss of 215 million yen. To compensate for the decline in sales, the company prioritized
securing orders and aggressively sought orders with low profit margins, but profit margin declined significantly
due to the posting of a provision for losses on some projects. In addition, SG&A expenses increased 27.3% year
on year due to the posting of a provision for executives' retirement benefits following a major change in the
management structure. Both sales and profit fell short of initial forecasts. However, sales and profit exceeded therevised forecasts announced in December 2022 due to additional orders received as a result of clients' recognitionof the company's work quality and accident-free, disaster-free work.

⚫

For the term ending January 2024, the company expects an increase in sales and moving into the black. Sales areprojected to increase 42.9% year on year to 7.8 billion yen, and operating income is forecast to improve from aloss in the previous year to a profit of 510 million yen. The company expects orders to be firm, and will promote
its new medium-term management plan, "Action Plan for Decarbonization 2025," positioning the current fiscal
year as the start of a turning point toward new growth and improve profitability. The company plans to pay aninterim dividend of 10 yen per share and a term-end dividend of 20 yen per share, unchanged from the previous
year. Payout ratio is expected to be 44.3%.

⚫

In the term ended January 2023, the company's sales and profit fell far short of its initial forecasts, and it
formulated a new medium-term management plan, "Action Plan for Decarbonization 2025," to replace the"Medium-Term Management Plan 2025" it had been implementing since the term ended January 2022. Under
the new management structure, the company has positioned the period from FY 1/2024 to FY 1/2026 as a turning
point for new growth, and has decided to improve profitability by promoting decarbonization management andreforming its corporate culture, taking into account changes in the business environments in Japan and thisindustry.

⚫

Under the basic policy of "improving profitability through decarbonization-oriented management and reform ofcorporate culture," the company will promote three key strategies: “decarbonized demolition solutions(innovation through dismantlement methods),” “DX plant solutions (innovation utilizing IT),” and “humanresources strategy (foundation to generate further innovation).” The company aims to achieve sales of 12 billion
yen, an operating income of 1.2 billion yen, and an ROE of 13% or higher in the term ending January 2026.

⚫

Although the company posted a loss for the first time since FY 4/2013 in the previous fiscal year, it recorded arecord-high amount of orders thanks to the expansion of the plant demolition market and an increase in orders
for dismantlement work as a prime contractor through enhanced sales activities. Orders for recurring (stable andcontinuous) work, on which the company is focusing, are increasing, and the number of business inquiries is steady.

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In addition, there is strong potential demand for “decarbonization demolition solutions (innovation throughdismantlement methods)" and "DX plant solutions (innovation utilizing IT)," which are key strategies in the"Action Plan for Decarbonization 2025," and the business environment is favorable.

⚫

It remains to be seen whether the company can leverage its strengths under the new management structure tocultivate the market as quickly as expected.

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1.Company Overview
As a specialist in plant dismantlement, BESTERRA manages the dismantlement of plants (metal structures) for iron-making, power
generation, gas, petroleum, etc. Its core competence is “the method and technology for dismantling plants,” and it has many patented
methods including international patents. The company concentrates its managerial resources on engineering (proposal, design, and work
planning) and management (supervision and work management), and outsources actual dismantlement work to its affiliates, and so it
does not own heavy machinery or construction teams (the risk of owning assets can be avoided), and it is unnecessary to procure materials,
etc. and make transactions for material production (the inventory risk can be avoided). The Group also has three consolidated subsidiaries,
Hiro Engineering, which provides human resource services for design work, etc. and 3D Visual KK, which handles 3D scan modelingand design work, Yazawa Co., Ltd., which owns advanced technologies for removing asbestos.
The corporate name “BESTERRA” was coined by combining the English word “Best (the superlative of ‘good’)” and the Latin word
“Terra (the earth),” and、infused with the ambition to “create the best earth.” By developing an integrated system for dismantling andrecycling, the company aims to actualize an advanced recycling society and contribute to the earth environment.
1-1 Corporate ethos and the code of conduct
Under the corporate philosophy of "we will contribute to the global environment with flexible thinking, creativity, andtechniques," the company's mission is to "realize the BEST (highest) TERRA (earth)" and "contribute to the development ofan advanced recycling-oriented society (development of vein industries).”
The company has also established a "Basic Sustainability Policy" to contribute to the realization of a sustainable society.
◎ Basic Sustainability Policy
We, Besterra, are committed to both "realization of an advanced recycling-oriented society" and "sustainable corporate growth" basedon our corporate philosophy of "We will contribute to the earth environment with our flexible way of thinking, creativity, andtechnologies using these concepts."
1-2 Characteristics of the business
The company has a single segment consisting of the plant demolition business. For others, it engages in the human resource service
business and the 3D scan, modeling, and design business. In the term ended January 2023, the plant dismantling business accounted
for 96.0% of total sales.
Plant dismantlement businessIn the plant dismantlement business, the company works on all types of plants in the fields of ironmaking, electric power, gas,petroleum, and petrochemicals, etc. The company offers services on overall engineering processes including proposals, designing,
work planning, outsourcing/arrangement of equipment and materials, supervision, safety management, cost management, financial
management, and handling of governmental procedures. It focuses on designing its unique demolition technologies and supervisingdemolition works based on demolition plans and uses specialized subcontractors for demolition works.
The clients for plant dismantlement are leading companies that own plants for ironmaking, electric power, gas, petroleum, etc. In mostcases, the equipment installation companies of the corporate groups of clients or leading general contractors are entrusted withdismantlement, and then BESTERRA serves as the primary or second-tier subcontractor.
Also, in the plant dismantlement business, BESTERRA receives valuable materials generated through dismantlement, such as scrap,
and sells them to scrap handlers. Accordingly, the company estimates the value of valuable materials while comprehensively
considering the material, quantity, price (market price of each material, such as iron, stainless steel, and copper), etc. and negotiateswith clients about the fee for dismantlement work. In accounting, the gain from sale of valuable materials is included in revenue fromdismantlement work and posted as part of sales from completed dismantlement work. In some cases, contractors (clients) dispose of(sell) scrap, etc. by themselves.

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Bridge Report（1433） March 23, 2023

https://www.bridge-salon.jp/*Two standards for posting revenue and seasonality of revenue posting of the company
The standards for posting revenue from contracts can be classified into the completed contract method, in which revenue is posted whenworks are completed, and the percentage-of-completion method, in which revenue is posted according to the progress of works. The
company basically applies the percentage-of-completion method to large-scale projects whose period exceeds 3 months from the term
ending January 2023 (the completed contract method is applied to projects that do not meet the aforementioned criteria). The timing of
posting revenue (the completion of demolition work) from works for which the completed contract method is used is often affected by
the capital investment plans of clients. In the case of BESTERRA, revenue tends to be posted in the first quarter (February to April) andthe fourth quarter (November to January) (the seasonality of revenue posting). However, the variation in quarterly performance may
mislead investors, so the company is expanding the scope of application of the percentage-of-completion method step by step, to equalize
the timings of revenue posting.
OthersIn response to the chronic shortage of skilled construction workers, the company began providing human resource services in January
2013, and in March 2018, it made Hiro Engineering, which handles human resource services such as design work, a subsidiary. In
January 2015, the company began offering a 3D measurement service as well. It established 3D Visual KK in December 2019, and 3D
scan modeling and design business was transferred from INTER ACTION Corporation (securities code: 7725) in February 2020.
1-3 Strengths: an excellent client base, efficient dismantlement management based on plenty of experience, and intellectual
property, such as patented methods
The strengths of the company are excellent client assets, efficient dismantlement management based on plenty of experience, andintellectual property, such as patented methods. Because the clients are basically engineering subsidiary companies of leading
companies in ironmaking, electric, gas, coal oil fields, and major general contractors, which are easily trustable excellent clients, and it
is predicted that they will receive orders continuously. The clients of the leading companies highly evaluate the company’s total
management (low cost and high efficiency) of plant dismantlement that it cultivated experiences for over 40 years, and it elect a barrier
to entry.
The company operates business under the concepts of "unbreakable by its creators (new ideas)," "the only one company
specializing in plant dismantling," and "asset-light management.”
Patented methods, etc.
“Apple peeling demolition method” and fusing robot “Ringo☆Star”
The “apple peeling demolition method” is a method of dismantling a large spherical tank, such as gas holders and oil tanks, by cutting itin spirals from the center of the ceiling of the enclosure part. The cut part spirals down to the ground gradually under the force of theearth’s gravity (natural energy). The method enjoys superiority in a work period, cost, and safety, and has considerable competitive
advantages, realizing “greater promptness, higher cost efficiency, and added safety.” Furthermore, the company offers a robot for thefusing process, “Ringo☆Star,” which automates the “apple peeling demolition method.” (The company is also working to expand therange of applications for “Ringo☆Star” by developing a new attachment).
Environment-related methods
The company has cultivated experiences and business results of a multitude of environment-related demolition works, using the“fireless methods” which do not require the use of fire. For example, although polychlorinated biphenyls (PCBs) are considered as a
toxic substance and therefore totally abolished today, it had been used for many years in transformers and condensers because of its
excellent thermal stability and chemical stability (electric insulation characteristics). In many cases, transformers and condensers aredisposed of in conjunction with plant demolition works; however, because PCBs gasify when they are treated at the high temperature,posing a risk of inhaling the gas so generated, any firearms (such as gas cutting machines) cannot be used in demolition andwithdrawal involving PCBs. The company is skillful at fireless and quasi-fireless methods using saber saws (which cut off objects with
their saw blades moving in a reciprocating manner) that can cut off objects thicker than the thickness, which, in the industry, had been
considered impossible to cut, through numerous devices, including measures against seizure of motors and recycling of blades.
BESTERRA has applied for joint patents with Hitachi Plant Construction, Ltd. for a transformer dismantling method, a transformer
dismantling jig, and a cutting device for dismantling a transformer.
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Windmill demolition works
The number of power-generating wind turbines continues to increase by about 20% annually worldwide, but the demand fordismantling is expected to increase in the future due to wear and tear and economic obsolescence. According to the company's data,
the global wind power generation amount has continued to grow at an annual rate of about 20%, reaching 486,790 MW(about 340,000 onshore units and about 4,000 offshore units). In Japan, there were 2,574 wind turbines as of the end of2021, mostly onshore, but the trend is shifting toward offshore wind power. Meanwhile, as the useful life is approximately 15 to
20 years, and the windmills for power generation established in the early stage are reaching the application limit. Moreover, not a few
plants need to be dismantled due to damage or fatal failure caused by thunderbolts or typhoons.
How to knock down a power-generating wind turbine (international patent application)
As some windmills have been built in mountain districts and on the sea, demolition of them is highly difficult. The company has
devised a method for dismantling wind turbines that does not require scaffolds and has already acquired a domestic patent for “Methodof knocking down a power-generating wind turbine.” International patents are pending for “Method of knocking down towering
structures using their bases” and “Method for dismantling tower-shaped equipment for wind power generation.” Safety of workers canbe improved dramatically, and the work period can be shortened by using these patent-based methods.
Pursuit of the value of the 3D business
Using services such as layout simulation, strain/bending/torsion measurement, comparison of structures before and after improvement,
and video walkthroughs, the company converts physical data taken when plants were established (more than 30 years ago) into thelatest 3D data and uses that to provide detailed information about the dismantling process. They also provide unique 3D measurement
services for dismantling work using the latest measuring technology and simulation systems that are capable of drawing data as 2D
diagrams, handling BIM/CIM modeling, Perfect 3D, and 3D printing, etc.
“Visualize” the dismantling process
Layout simulation
The equipment models produced with 3D CAD are placed in 3D data, and the replacement ofequipment can be simulated. By moving the equipment models, it is possible to check how theyinterfere and collide with one another.
Strain, bending, and torsion It is possible to measure changes in shapes. This is useful for diagnosing frameworks tentatively, tomeasurements
check whether a building got distorted due to an earthquake, deterioration, etc.
Comparison of structures
The shapes of equipment that changes due to heat and vibration, such as pipes, conveyors, andbefore and after installation furnaces, at the time of installation and after operation are compared. With 3D data, it is possible tograsp overall changes intuitively.
Video walkthroughs
Walk-through videos are produced by using synthesized point cloud data. These videos can be utilized
for presentations and publicity videos regarding dismantlement plans and real estate information.
Unique 3D measurement service
Draws a two-dimensional The 3D CAD models based on point cloud data are converted into drawings. It is also possible todiagramproduce drawings directly from point cloud data in a simple manner.
Handles
BIM/CIM Modeling is conducted with 3D CAD based on point cloud data. It is possible to produce models ofmodeling
the parts that require construction or renovation as BIM (building information modeling) data.
Perfect 3D
This is a large-scale 3D data measurement service combining automobile-based MMS (mobile
mapping system), airborne laser measurement, water area measurement, etc.
3D printing
After modeling with point cloud data, data are processed and deformed so that they can be shaped witha 3D printer. It can produce fine structures with a lamination pitch of 15 μm.

6Bridge Report（1433） March 23, 2023

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1-4 ROE analysis
ROE (%)Net Income to Sales Ratio
(%)
Asset
TurnoverRatio(Times)
Leverage(Times)

FY 1/18
11.7
5.87

FY 1/1923.8
12.62

FY 1/202.3
1.75

FY 1/215.6
3.87

FY 1/2240.6
23.32

FY 1/23
-1.5
-1.18

1.11

1.08

0.72

0.67

0.80

0.63

1.80

1.75

1.85

2.14

2.19

2.01

ROE for FY 1/2023 was -1.5% due to losses recorded. The new medium-term management plan, “Action Plan for
Decarbonization 2025” (see below), targets “an ROE of 13% or higher in FY 1/2026.”

2. The Fiscal Year Ended January 2023 Earnings Results
2-1 Consolidated results-18.5%-

Comparison of
the revised
forecasts
+4.0%
-

-

-

-

-

-

-

-

-

-

-

-

FY 1/22

Ratio to sales

FY 1/23

5,966
1,357
868

100.0%
22.7%
14.6%

5,458
889
1,105

100.0%-8.5%
16.3% -34.4%
20.2% +27.3%

488

8.2%

-215

-

721

12.1%

-94

1,391

23.3%

-64

Sales
Gross profit
SG&A
expenses
OperatingincomeOrdinary
incomeNet income

Ratio to sales

Comparison of theinitial forecasts

YoY*Unit: million yen. Net income is net income attributable to owners of the parent company. Comparison of the revised forecast is the ratio to the forecast
announced in December 2022.

Decrease in income and post a loss
In the term ended January 2023, sales decreased 8.5% year on year to 5,458 million yen. This was mainly due to the difficulty in startinga large-scale demolition project due to the extension of the project schedule. The company posted an operating loss of 215 million yen.
To compensate for the decline in sales, the company prioritized securing orders and aggressively sought orders with low profit margins,but profit margin declined significantly due to the posting of a provision for losses on some projects. In addition, SG&A expenses
increased 27.3% year on year due to the posting of a provision for executives' retirement benefits following a major change in the
management structure. Both sales and profit fell short of initial forecasts. However, sales and profit exceeded the revised forecasts
announced in December 2022 due to additional orders received as a result of clients' recognition of the company's work quality andaccident-free, disaster-free work.

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Bridge Report（1433） March 23, 2023

The number of completed works (rough estimates)
FY 1/22
Electric power
1,205
Steelmaking
975
Petroleum/petrochemical
2,008
Gas
57
3D
115
Environment
1,205
Others
172
Total
5,736

https://www.bridge-salon.jp/

Ratio to sales
21%
17%
35%
1%
2%
21%
3%
100%

FY 1/23
734
1,415
1,415
262
105
786
524
5,242

Ratio to sales
14%
27%
27%
5%
2%
15%
10%
100%

YoY
-39%
+45%
-30%
+357%
-9%
-35%
+205%
-9%

*Unit: million yen. Prepared by Investment Bridge Co., Ltd. based on company data.

The company has received many orders for dismantlement work accompanying repairs of blast furnaces at steel mills, while
seeing an increase of orders for recurring dismantlement projects (stable and continuous work, and on-site dismantlement
projects within the same premises). As a result, the proportion of the company's business in the steel industry has increased,creating a well-balanced composition ratio.

Due to the seasonality of the company's business according to the capital investment plans of its clients, the amount ofcompleted work tends to increase in the second half of each fiscal year. The company's sales strategy is to expand work they
undertake as a prime contractor with high profit margins. However, in the case of new clients, the company sometimes
prioritizes securing orders and lower the fee for their dismantlement work, which resulted in a temporary decrease in profit
margin for the term ended January 2023.
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Breakdown of SG&A
FY 1/22
434

Ratio
7.3%

13
69

FY 1/23
673

Ratio
12.3%

0.2%
1.2%

16
79

0.3%
1.4%

24

0.4%

18

0.3%

8
0

0.1%
0.0%

30
4

0.5%
0.1%

317
868

5.3%
14.6%

281
1,105

5.1%
20.2%

Personnel cost
R&D cost
Commissions andremunerations
paid
Recruitment cost
Advertisement
Education andtraining cost
OthersTotal SG&A
expenses

YoY
Major change factors+55.0% Increase in headcount of
main employee, provision
for director’s retirement
benefits+15.5% The development of robot+15.2%
Sales cooperation, system
improvement-23.6% Advertising media,
referral commissions+272.4% Branding, exhibition+613.5% Employee training,getting certified-11.2%+27.3%-*Unit: million yen . Ratio is ratio to sales.
Personnel expenses augmented due to the posting of allowance for retirement benefits for executives as a result of changes in
the management structure to complete the new medium-term management plan.

Through active recruitment, the number of dismantlement supervisors has reached 50 as originally planned. For the term
ending January 2024, the company plans to increase the number of dismantlement supervisors by 18, and is already expected
to employ 10 more supervisors by April.
2-2 Orders received and the backlog of orders
FY 1/22
The backlog of orders at the
2,545
beginning of the term
The amount of works
4,785
received
The amount of completed
5,736
works
The backlog of orders at the
1,594
end of the term

FY 1/23

YoY
1,594-37.4%

7,000+46.3%

5,242

-8.6%

3,352

+110.3%*Unit: million yen

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As a result of the expansion of the plant dismantling market and increased orders for dismantlement work as a prime contractor
due to strengthened sales activities, the company has recorded the highest level of order receipt to date. Orders for stable andcontinuous dismantlement work, on which the company is focusing, are increasing, and the number of inquiries is steady.
Orders received by sector (Amounts are approximate.)
FY 1/22
Ratio
Electric power
271
17%
Steelmaking
383
24%
Petroleum/petrochemical
622
39%
Gas
Environment
255
16%
Other
64
4%
Total order received
1,594
100%

FY 1/23

Ratio
302
335
2,480
34
168
34
3,352

YoY

9%
10%
74%
1%
5%
1%
100%

+11%
-12%
+299%
-34%
-47%
+110%

*Unit: million yen

In the term ended January 2023, the company's active sales efforts as a prime contractor resulted in the receipt of orders forlarge-scale projects in the petrochemical industry, causing a temporary increase in its proportion of order backlog. However,the company has many promising potential orders in various industries, not limited to the petrochemical industry.
2-3 Financial condition and cash flow（CF）
Financial condition
January
2022
Cash
2,122
Trade receivables
2,212
Current Assets
4,561
Investments, Others
3,905
Noncurrent Assets
4,391

January
2023
1,337
1,761
3,568
4,435
4,859

PayablesBorrowings and Bonds
Liabilities
Net Assets
Total Liabilities, Net Assets

January
2022
1,199
2,389
4,674
4,278
8,953

January
2023
786
2,426
4,048
4,379
8,427

*Unit: million yen. Trade receivables include notes and accounts receivable, accounts receivable from completed construction contracts, and contract assets.

Total assets stood at 8.4 billion yen, down 500 million yen from the end of the previous term, due to a decrease in cash and tradereceivables.
Total liabilities decreased 600 million yen from the end of the previous term to 4 billion yen, due to a decrease in trade payables.
Net assets remained almost unchanged at 4.3 billion yen.
Capital-to-asset ratio increased 4.2 points from the end of the previous term to 51.8%.
Cash Flow（CF）
FY 1/22
Operating Cash Flow(A)Investing Cash Flow(B)Free Cash Flows (A + B)
Financing Cash Flow
Cash and Equivalents at Term End

FY 1/23
537
-32
505
250
2,122

YoY
-354
-515
-869
85
1,337

-892
-482
-1,374-164-784*Unit: million yen

Operating CF and Free CF turned negative due to loss before income taxes and minority interests.
The cash position worsen.

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2-4 Topics(1) New Management Structure Announced
They advanced the selection and concentration of the company's businesses to respond to the rapid change in the businessenvironment, established the "Action Plan for Decarbonization 2025" to contribute to a decarbonized society more clearly,
and strengthened their execution system through changes in executive personnel, including the president and representative
director.
On February 1, 2023, Mr. Yutaka Honda, Head of the Planning Department, assumed the position of President andRepresentative Director, responsible for the overall management strategy of the company. Mr. Yasuharu Cho, Executive
Officer and Business Unit Director, will oversee business execution in accordance with the Action Plan for Decarbonization.
Mr. Cho was appointed as a Senior Managing Director after resolution at the 50th Ordinary General Meeting of Shareholders
and the meeting of the Board of Directors, in late April 2023.
(2) Transition to a Company with an Audit Committee
The company has decided to transition to a company with an audit committee in order to improve the transparency of corporate
management by strengthening corporate governance functions and to strengthen its response to changes in the businessenvironment by accelerating decision-making.
The company plans to transition to a company with an audit committee after obtaining approval for necessary amendments to
the Articles of Incorporation and other related proposals at the 50th Annual General Meeting of Shareholders held in late April
2023.

3. Fiscal Year Ending January 2024 Earnings Forecasts
3-1 Full-year consolidated earnings forecast
FY 1/23 Act.
Sales
5,458
Operating income-215
Ordinary income-94
Net income-64

Ratio to sales
100.0%-

FY 1/24 Est.
7,800
510
586
400

Ratio to sales
100.0%
6.5%
7.5%
5.1%

YoY
+42.9%-*Unit: million yen

Expected increase in sales and moving into the black
For the term ending January 2024, the company expects an increase in sales and moving into the black. Sales are projected to increase
42.9% year on year to 7.8 billion yen, and operating income is forecast to improve from a loss in the previous year to a profit of 510
million yen. The company expects orders to be firm, and will promote its new medium-term management plan, "Action Plan for
Decarbonization 2025," positioning the current fiscal year as the start of a turning point toward new growth and improve profitability.
The company plans to pay an interim dividend of 10 yen per share and a term-end dividend of 20 yen per share, unchanged from theprevious year. Payout ratio is expected to be 44.3%.

4. New medium-term management plan “Action Plan for Decarbonization 2025”
In the term ended January 2023, both sales and profit were significantly below initial forecasts. Thus, the company has
formulated a new medium-term management plan, Action Plan for Decarbonization 2025, in place of the Medium-Term
Management Plan 2025, which it has been implementing since the term ended January 2022. Under the new management
system, the company will position the term ending January 2024 to the term ending January 2026 as a turning point for further
growth. The company decided to improve profitability by promoting decarbonization-oriented management and reforming its
corporate culture, taking into account changes in the business environment in Japan and within this industry.
4-1 Review of Medium-Term Management Plan 2025
In the term ended January 2022, earnings exceeded the forecast, but in the term ended January 2023, both sales and profit
were significantly below the forecast.
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On the other hand, the company accomplished the following achievements with various measures. It will also focus on andpromote the Action Plan for Decarbonization 2025.

(Source: The company)

4-2 Business environment analysis(1) Japan
Toward the realization of carbon neutrality in 2050, the demolition market is expected to expand further, with demolition
progressing mainly for buildings in which 50 years or more have passed since their construction.
In the electric power market, the diversification of the energy mix will be significantly reviewed toward 2030, and a significant
reduction of low-efficiency coal-fired power plants is expected.
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In the steel manufacturing market, due to the progress of corporate restructuring and aging, it is necessary to remove andrepair redundant facilities.
In the petroleum and petrochemical markets, many industrial complexes were built during the high economic growth period.
Therefore, it is expected that facilities will be upgraded and reorganized from the perspective of international competitivenessand excessive production capacity.
In other manufacturing markets, facilities are expected to be renovated and dismantled due to the evolution of technology
known as the 4th industrial revolution and the impact of business rationalization due to changes in domestic supply anddemand.
The company estimates the size of each market as follows.
MarketElectric power
Steel
Petroleum/Petrochemicals
Other manufacturing industries

Size
About 13 trillion yen
About 2 trillion yen
About 8 trillion yen
About 20 trillion yen + α*Company’s estimates(2) Industry
The following changes in the business environment and needs can be seen.
Increase of separate orders for dismantling

When a client (facility owner) places an order with a company specializing indemolition, there are many cases in which the reliability of the demolition
company as a new business partner becomes a problem, as it is necessary to place
an order with a company that complies with all laws and regulations and meetsthe high safety standards of each plant. In order to receive direct orders, thedemolition company needs to be a listed company with high creditworthiness andpossesses technologies that do guarantee not only safe demolition, but are also
safe for the environment.
In conventional plant demolition work, there were many cases in which a client(facility owner) ordered the demolition of old facilities and the construction of
new ones together. Due to the increase in demolition work that does not involve
renewal and the rising difficulty of demolition work due to various laws andregulations, the orders for demolition work to specialized construction companies
are increasing.

Adopting computer-aided construction

New needs for decarbonized work

Due to the labor shortage in the construction industry because of the declining
birthrate and aging population, efforts to computerize construction have become
an issue for the industry.
Clients (facility owners) in the manufacturing industry are demanding
environmental considerations and improved recycling rates not only in the
manufacturing process but also in construction.

(3) Company’s strengths
The company has a superior position as a plant demolition specialist (a rich track record), technological capabilities(decarbonized demolition®, patented methods, technology development, initiatives for DX), business alliances (Solutionoffering capabilities for the entire venous industry), reliability, comprehensive plant demolition management (demolition
method proposals, complying with environment-related laws and regulations, ability to purchase valuable materials,
appropriate treatment of industrial waste, ability to mobilize companies, etc.). In response to the above needs and changes, itwill harness these strengths to capture demand.
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https://www.bridge-salon.jp/

4-3 Overview of Action Plan for Decarbonization 2025
(1) Basic policy
The company's basic policy is to improve profitability through decarbonization-oriented management and transformation of
the corporate culture.
Seeing changes in the business environment as an opportunity, the company will promote decarbonization-oriented
management and reform its corporate culture to improve profitability, and it has positioned the three years from the term
ending January 2024 to the term ending January 2026 as a turning point toward further growth.
(2) Numerical targets
The group has set the following numerical targets.
For the term ending January 2026, both sales and profit have been revised upwardly from the previous medium-term
management plan.
The company aims to recover ROE to double digits as soon as possible.

Sales trends for the key strategies of "decarbonization solutions (innovation through construction methods)" and “DX plant
solutions (innovation through IT)" are shown below. Sales of both solutions are expected to grow rapidly.
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Bridge Report（1433） March 23, 2023

https://www.bridge-salon.jp/(3) Strategies and measures
To achieve the basic policy, the company will promote the following strategies and measures.
The three key strategies are decarbonized demolition solutions (innovation through demolition methods), DX plant solutions(innovation through IT), and personnel strategies (foundation for further innovation).
The company has newly established the Decarbonized Business Promotion Department in order to improve corporate value
and brand through decarbonization-oriented management.
The company will promote "the development of demolition methods that contribute to decarbonized demolition®, theimprovement of the reuse and recycling rate in demolition work, the reduction of GHG emissions and its visualization, andthe creation of new businesses linked to decarbonization-oriented management.
①Overview of key strategies: Decarbonized demolition solutions
The company will develop various demolition methods that are environmentally friendly and provide pioneering demolition
solutions that achieve decarbonized demolition.

(Source: The company)

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Bridge Report（1433） March 23, 2023

https://www.bridge-salon.jp/(Main decarbonized demolition solutions)◎ Decarbonized Demolition®
The company offers demolition work that excels in terms of demolition period, cost, and safety and has a highly competitive
advantage. The company dismantles various plants using various environmentally friendly demolition methods, such as theapple peeling method, which cuts spirally from the center of the outer shell ceiling like peeling an apple when dismantlingspherical storage tanks such as gas holders and oil tanks.
Starting with the apple peeling method and the overturning method, the company holds and is applying for a number oftechnical patents in regard to buildings and areas the company works on, such as tanks, boilers, chimneys, cranes, 3D, andwindmills.
The company will propose dismantling methods using competitive patented methods that achieve safety, cost reduction,shortening of the dismantlement period, and reduction of CO2 emissions, which will lead to practical applications.
◎ Overturn dismantlement method
Steel structures such as chimneys, towers, and tanks have a tipping axis that is the center of gravity fixed by a solid concrete
foundation and anchor bolts.
The company's overturning method is a dismantlement method that can reliably control the overturning direction and safely
overturn in a predetermined direction by carefully calculating the overturning axis and cutting the concrete foundation.
In addition, it is possible to reduce costs and shorten the demolition period caused by transporting and assembling large cranes.
Therefore, it can reduce CO2 emissions up to 1/10 compared to the method of dismantling while lifting with a regular crane.
◎ Dismantling of wind power generation facilities
The amount of wind power generated in the world is 486,790 MW, which is increasing by about 20% every year, and there isa shift to offshore wind power generation, which generates more power.
In Japan, most of them are also land-based, but there is a shift to offshore types. Land-based wind turbines have a useful lifeof about 15 to 20 years, and the wind turbines for power generation that were installed in the early stage have reached thelimit of their use. Furthermore, it is assumed that a considerable number of them need to be dismantled due to damage or fatal
failure due to lightning strikes, typhoons, etc.
In such a market environment, the company concluded a licensing agreement with Hitachi Power Solutions Co., Ltd. for thecompany's patented dismantling method for dismantling domestic onshore wind power generation facilities.
By combing Hitachi Power Solutions Co., Ltd.'s strengths (achievements as a Hitachi Group, abundant technology related towind power generation equipment, advanced technology for power plant design and maintenance) and the company's strengths(unique demolition methods and know-how, extensive experience in demolition of plants, rich experience in environmentrelated work), the company has established superiority in terms of shortening the dismantlement period, reducing CO2
emissions, and ensuring safety. The company will strive to capture demand in the wind power generation facility dismantlingmarket.
◎ Fire-free dismantling method
The company's non-fire dismantling method, which does not use fire, captures demand for demolition work in plant premises
where the use of fire is limited and dismantling work, such as transformers containing hazardous substances (PCB), and is
producing great results.
With the company's unique know-how, it is possible to cut large equipment with a thickness that exceeds the standard in theindustry, and it is expected to be used in the decommissioning of nuclear power plants in the future. The company is also
developing new cutting blades for this method.

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Bridge Report（1433） March 23, 2023

https://www.bridge-salon.jp/◎ Handling PCB and asbestos-Stripping of PCB containing films
PCB (polychlorinated biphenyl) is one of the chemically synthesized organochlorine compounds. It is colorless, transparent,
chemically stable, heat-resistant, insulating, and non-water-soluble, so it has various applications such as an insulating oil forelectrical equipment such as transformers, capacitors, and ballasts, and a solvent for pressure-sensitive paper, paints, andprinting inks. However, its production was discontinued in 1972 because it was easily absorbed into the body, highly persistent,
and was associated with chronic toxicity, such as skin disorders.
When the Ministry of the Environment investigated the use of PCBs in buildings (chemical plants, oil storage tanks, gas tanks,
bridges, etc.), the surveyed facilities were constructed or repainted between 1966 and 1974. Of these, it was estimated that
1%, or about 90 billion yen, requires proper disposal of PCB coatings. Since the survey subject was mainly public structures
owned by local governments, the demand for private facilities is expected to increase in the future.
The company has concluded a business alliance agreement with Mitani Sangyo Co., Ltd. for surface coating removal workwhen dismantling spherical gas holders. The company has established technology for safely removing PCB-containing
coatings that are difficult to remove by combining Mitani Sangyo's shot blasting (surface paint stripping) technology with thecompany's dismantling technology.
- Asbestos removal
Asbestos is a fibrous silicate mineral that is naturally produced, and because its fibers are extremely fine, unless necessary
measures are taken when using it in facilities such as grinders and cutting machines, the asbestos will scatter and be inhaledby humans, potentially causing lung cancer and malignant mesothelioma.
Asbestos-related laws and regulations were revised in April 2022, strengthening measures to prevent the scattering of asbestos
during the demolition work of buildings.
In anticipation of the expansion of the asbestos removal market, the company made Yazawa Co., Ltd., which has advanced
technology for asbestos removal, a group company in December 2021, to conduct asbestos removal work in-house.
◎ Work against soil contamination
Soil pollution means soil being contaminated with hazardous substances (heavy metals, volatile organic compounds,chemicals, oil, etc.). Owners of land with facilities that use hazardous substances that have been abolished, such as factories,
are obligated to detoxify soil contamination based on investigations by designated organizations.
The plants to be dismantled by the company cover a large area, and appropriate treatment of soil contamination is required.
The company anticipates that there will be many projects for coping with soil contamination associated with the renovationand decommissioning of facilities in the future.
(Main measures/policies)
The company will promote the following measures to expand carbon-free demolition solutions.
◎ Enhancement of bases
In order to acquire recurring revenue-type orders (continuous orders from customers, permanent work on the same premises)
and receive more orders nationwide, the company opened an office in Kitakyushu City, Fukuoka Prefecture, which is close to
the Kitakyushu factory area. Moreover, the company is expanding its bases in western Japan, including the establishment of
a new workshop in Kurashiki City, Okayama Prefecture.
The company is also considering opening offices in Nagoya, Osaka, and Sendai.
◎ Strengthening cooperation with partner companies
The company will build a platform for plant dismantling technology for decommissioning-related business by promoting
partnerships with other companies that make the most of each other's strengths.

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https://www.bridge-salon.jp/

Main partners
Company
Hitachi Plant Construction Co.,Ltd.

Dai-Ichi Cutter Kogyo K.K.
Rever Corporation

Strengths and Characteristics
・ Sales/on-site management/work for nuclear power plants(decommissioning, repair, etc.)
・Demolition work using dismantling technologies such as a large
band saw
・Radiation control
・Provision of diamond and water jet technology
・High work quality
・Material recycling (Major Venous)
・Industrial waste treatment

Business Partnership
July 2018

September 2018
September 2019

◎ Increase of orders received as a prime contractor
The company aims to improve profitability by increasing direct orders received and the ratio of projects the company
undertake as a prime contractor and public projects. In order to strengthen the system for projects the company undertake asa prime contractor, the company is working on promoting the qualification acquisition system, increasing the number of sales
support personnel, and reforming the personnel system.
②Overview of key strategies: DX plant solutions
The group companies, 3D Visual K.K. and Hiro Engineering Co., Ltd., will create new services with their unique know-how
and the latest technologies to provide solutions that utilize DX technologies.

(Source: The company)(Main Efforts)◎ 3D measurement and modeling (reform of design and processes)
The company will provide demolition work that "visualizes" the process by converting the paper data at the time of
construction more than 30 years ago into the latest 3D data.
◎ Remote and robotized work
Combining the company's unique demolition technology and robot control technology, the company will adopt human-robot
collaborative work that can be carried out remotely and robotized at work-sites.
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Bridge Report（1433） March 23, 2023

https://www.bridge-salon.jp/◎ Expand sales of piping and plant design system AUSE/V3
The number of users of AutoCAD provided by AUTODESK® is about 700 million worldwide, and it has built the largest
community in CAD software.
3D Visual K.K., a group company, developed AutoCAD add-on software, AUSE, to further improve functions, enhancecompatibility, strengthen product appeal, and expand sales through a subscription model.
◎ Crane rail inspection robot (innovation of inspection methods)
Overhead cranes, which are installed in plants and factory facilities and used to transport heavy objects and parts, are subject
to distortion due to deterioration over time and, if left unattended, can lead to serious accidents. Therefore, the Safety
Regulations for Cranes by the Industrial Safety and Health Act require crane installation companies to conduct self-inspections
annually and monthly.
However, conventional visual inspections had challenges, such as the risk of accidents due to workers climbing up the ceiling,
unevenness due to visual inspection, and opportunity loss due to the suspension of factory operations during the inspection.
In order to carry out this periodic inspection safely and efficiently, the company has jointly developed with iXs Co. Ltd. arobot that runs on crane rails and performs inspections.
The robot provides crane installation companies with advantages such as less risk of workers getting into accidents, always
acquiring accurate and precise data, inspections being done in a short time, and inspections being possible in spare time.
◎ Capital and business alliance with Crassone Co., Ltd.
In September 2022, the company signed a capital and business alliance agreement on demolition DX technology with Crassone
Co., Ltd., which operates a platform for demolition work.
By establishing a system where both companies provide their different fields of expertise, such as the company's know-how
related to actual work and recycling of waste material processing that it has cultivated over many years in the demolitionbusiness and the knowledge of IT and online services that Crassone has accumulated in the matching platform business,
Besterra aims to expand the business of both companies through bringing DX to the demolition business, which is expected
to increase in the future.
③Overview of key strategies: Personnel strategy
The company will promote HR transformation. The company will transform the corporate culture by increasing employee
engagement to trigger further innovation.

(Source: The company)

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Bridge Report（1433） March 23, 2023

https://www.bridge-salon.jp/(Main Efforts)◎ Improving recruitment
As an investment in the future, the company will actively promote the hiring of demolition supervisors. It will also increase
the number of recruiters to improve the hiring system, and it will promote diversity by increasing the number of women hired.

(Source: The company)◎ Establishment of training programs
The company will establish an advanced demolition engineer training program which is a system for passing on skills fromexperienced engineers to less experienced engineers.
After training for joining the company and acquiring qualifications in follow-up training, employees will select a course of
professional or management positions in mid-career training. After that, the company can foster an entrepreneurial spirit
through management training.
The company will formulate and operate a personnel system that focuses on individual work styles.
◎ Knowledge management
The company will transform the tacit knowledge and technology, which are based on the experience and knowledge ofindividuals unevenly distributed within the company, through the creation of information databases and the use ofcommunication tools, into explicit knowledge shared throughout the organization. By visualizing and efficiently using thisexplicit knowledge, the company will eliminate information asymmetry and promote organizational growth.
◎ Adoption of a commendation system
The company has adopted a regular commendation system (monthly MVP commendation, etc.) that applies to all employees
and recognizes employees who embody the corporate culture and those who have achieved outstanding results monthly andyearly to enhance the corporate culture of praising and appreciating employees who take the initiative.
◎ Establishment of an environment in which employees can work for a long time with peace of mind
The company is making efforts to improve the working environment, by offering the highest level of income insurance inJapan, a retirement allowance system, generous subsidies for employee stock ownership associations (incentives are 15% of
the accumulated amount), special paid leave (80 days, which exceeds the maximum number of days allowed under the Labor
Standards Act: 40 days).
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https://www.bridge-salon.jp/(4) Investment plan
In order to accelerate the growth speed, the company will actively invest a total of 3.5 billion yen over three years, mainly in
DX plant solutions.

(Source: The company)(5) Shareholder Returns
The company will pay stable dividends with a target payout ratio of 40%.
In the term ended January 2023, the company changed (expanded) its shareholder benefits and established the "Besterra
Premium Benefits Club."For details of the "Besterra Premium Benefits Club," please refer to the following URL:
https://besterra.premium-yutaiclub.jp/

5. Conclusions
Although the company posted a loss for the first time since FY 4/2013 in the previous fiscal year, it recorded a record-high amount oforders thanks to the expansion of the plant demolition market and an increase in orders for dismantlement work as a prime contractor
through enhanced sales activities. Orders for recurring (stable and continuous) work, on which the company is focusing, are increasing,and the number of business inquiries is steady.
In addition, there is strong potential demand for “decarbonization demolition solutions (innovation through dismantlement methods)"
and "DX plant solutions (innovation utilizing IT)," which are key strategies in the "Action Plan for Decarbonization 2025," and thebusiness environment is favorable.
It remains to be seen whether the company can leverage its strengths under the new management structure to cultivate the market as
quickly as expected.

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https://www.bridge-salon.jp/<Reference: Regarding Corporate Governance>◎ Organization type and the composition of directors and auditors
Organization typeCompany with a board of company auditors
Directors
6 directors, including 3 outside ones
Auditors
3 auditors, including 3 outside ones
◎ Corporate Governance Report Update date: January 16, 2023
Basic policy
In order to promote sound business administration and win social trust sufficiently, our company recognizes corporate governance as
the most important issue, puts importance on the improvement of the soundness, transparency, and fairness of business administration,and complies with laws and regulations thoroughly, and all executives operate business while keeping in mind that “the violation of laws
or regulations would lead to management responsibility.” In detail, our company disseminates and executes business pursuant to laws,
regulations, and in-company rules thoroughly, by developing appropriate systems for making decisions about business administration,
fulfilling duties, supervising work, conducting internal control, etc.
It is also important to reform management systems for “achieving appropriate share price” and “increasing share price sustainably” toemphasize shareholders and strengthen the function to check business administration, to establish global-level corporate governance.
The results of such efforts would win the trust of society, increase corporate value, and satisfy shareholders.
＜Reasons for Non-compliance with the Principles of the Corporate Governance Code (Excerpts)＞
The stated information is based on the Code revised in June 2021.
【Supplementary Principle 4-1-3】
We do not have a concrete plan regarding the successor of the CEO. As for the Board of Directors, the policy regarding the selection of
successors is to take into consideration the personality, insight and accomplishments of each candidate and select a suitable person. In
case of formulating and conducting a plan regarding the successor, we shall ensure the fairness, transparency and objectivity of thedecision process and appropriately proceed with the selection by involving the Nomination and Compensation Committee, an advisory
institution to the Board of Directors where outside directors account for the majority, alongside proactive involvement of the Board of
Directors.
【Supplementary Principle 4-3-3】
While we have not clearly established objective, timely and transparent proceedings for the dismissal of the President or CEO, we assess
the effectiveness of the Board of Directors every year and shall progress with objective, timely and transparent proceedings through the
involvement of the Nomination and Compensation Committee, where outside directors account for the majority, in regard to thenomination and compensation of directors.
＜Disclosure Based on the Principles of the Corporate Governance Code (Excerpts)＞【Principle 1-4 Strategically held shares】
From the viewpoint of business expansion based on maintaining and strengthening long-term, stable partnerships with business partners,
etc., we will acquire and hold the shares of business partners, etc., if we judge that this will contribute to the improvement of our mid/longterm corporate value. For equity investments premised on forming business alliances, the management meets with and receives
explanations of the operating environment, business strategy, and purposes of the capital alliance from representatives of the other party.
Based on this, the Board of Directors comprehensively evaluates the appropriateness of the stock valuation report and judges whether
the deal should take place. For strategically held shares, the Board of Directors constantly checks whether the holding of such shares willcontribute to the improvement of our corporate value and confirms the purpose and rationality of said holding based on that check. Our
company will appropriately buy/sell shares and exercise voting rights in accordance with relevant regulations, based on a comprehensive
evaluation from the viewpoint of improving our corporate value.

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Bridge Report（1433） March 23, 2023

https://www.bridge-salon.jp/【Supplementary Principle 3-1-2 Information disclosure in English】
Our company has been disclosing information in English since the brief financial report at the end of the term ended January 2022.
Moreover, we have been disclosing the notice of the convocation of general shareholder meetings translated in English on the company
website since the 49th regular shareholder meeting held in late April 2022. Having said that, we shall take into consideration the ratio ofinternational investors and forge ahead with enriching the disclosure in regard to disclosure and provision of necessary information statedin other disclosure documents in English.
【Supplementary Principle 3-1-3】
Our company discloses initiatives concerning sustainability in the mid-term management plan and on our website. Moreover, in orderto clarify initiatives for sustainability, we shall set up a Sustainability Committee as an advisory institution of the Board of Directors tocontrol and manage the initiatives in addition to establishing the basic sustainability policy. Furthermore, we view the recruitment andeducation of human resources as an important challenge for improving our corporate value in the mid- to long-term and we shall createa system which will allow for independent building of career and build a free and lively corporate culture based on diversity to seek thereinforcement of human capital.
As for risks and opportunities for gaining income related to climate changes, we shall respond to the proposal by TCFD in expressing
the endorsement of TCFD and participating in TCFD Consortium, and we shall proactively engage in enriching the quality and quantityof disclosures based on TCFD and equivalent frameworks and forge ahead with the enrichment of disclosure on our company website,
etc.
【Supplementary Principle 4-11-1 Stance on the balance, diversity and scale of the Board of Directors and visualization of skills thereof】
The Board of Directors bears in mind the balance of the knowledge, experience, ability, etc. in regard to each business and strives toinclude members thought to be suitable with the number of directors at 9 or less and the number of auditors at 3 set out in the Articles ofIncorporation. Our stance regarding the overall balance, diversity and scale lies in the consideration of knowledge, experience, ability,
etc. necessary to promote the policies of the management philosophy, etc. when selecting director candidates. In order to further improvethe effectiveness of the Board of Directors and visualize the composition balance, we shall consider skills necessary for members
comprising the Board of Directors and create and disclose the skill matrix of all directors including independent outside directors in
addition to evaluating the effectiveness of the Board of Directors every year and elevating the effectiveness of the Board of Directors.
Moreover, we shall progress with appropriate selection of independent outside directors, including members who have management
experience in other companies.
【Principle 5-1 Policy on constructive dialogue with shareholders】
Regarding requests from shareholders for dialogue (interviews), our company believes that we should express a positive attitude withina reasonable scope in order to contribute to sustainable growth and medium- and long-term improvement of the corporate value of ourcompany. Aiming to promote constructive dialogue with shareholders, with the planning department designated as a department incharge of IR activities, our company holds financial results briefings targeted at financial institutions and investors semiannually anddiscloses corporate information as needed on our website and through the system of optional disclosure offered by Tokyo Stock
Exchange.

This report is not intended for soliciting or promoting investment activities or offering any advice on investment or the like, but for providing information
only. The information included in this report was taken from sources considered reliable by our company. Our company will not guarantee the accuracy,
integrity, or appropriateness of information or opinions in this report. Our company will not assume any responsibility for expenses, damages or the likearising out of the use of this report or information obtained from this report. All kinds of rights related to this report belong to Investment Bridge Co., Ltd. The
contents, etc. of this report may be revised without notice. Please make an investment decision on your own judgment.
Copyright(C) Investment Bridge Co., Ltd. All Rights Reserved.

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