The large work at the top left is "Tomatoes Grown in
Clean Water," which won the Kumagai Gumi
Corporate Prize at "the Children's Painting Exhibit
2018: Rice Fields and Water in Your Hometown". The
remaining seven works were created on the theme ofthe environment by children at Tsukudo Elementary
School in Shinjuku, Tokyo.
* Kumagai Gumi supports opportunities to foster a mindset
that treasures nature and the environment in the children
who will lead the next generation. Together with the
Tsukudo Elementary School sited adjacent to ourheadquarters, Kumagai Gumi actively engages inenvironmental learning and cleanup of the local area. The
company also sponsors the above-mentioned Children's
Painting Exhibit hosted by the National Water Earth
Hometown Networks and the Prefectural Water, Earth,and Hometown Networks.

The Kumagai Gumi Group Corporate Report 2019

About the Front Cover

Insight, Onsite, Farsight

The Kumagai Gumi Group

Corporate Report

2019
Kumagai Gumi Co., Ltd.
2-1 Tsukudo-cho, Shinjuku-ku, Tokyo 162-8557
https://www.kumagaigumi.co.jp
Inquiries
Corporate Planning Division
TEL 81-3-3235-8155

Corporate Communication Office

FAX 81-3-5261-3716

E-mail info@ku.kumagaigumi.co.jp

Our Company's Code of Conduct(Mission Statement)

Table of Contents● TRUST:To develop client trust and earn their confidence.
● CONSISTENCY:
To be consistently professional and responsible.
● CO-OPERATION:
To promote cooperation and mutual prosperity.

Management Philosophy● ENVIRONMENT We aim to use our breadth of expertise to
design and construct projects, which are environmentallyfriendly and which will improve quality of life and satisfy theneeds of society.
● CLIENTS We aim to be an innovative and dynamic company,
one that can provide our clients with a comprehensive service
of consistently high standards, tailored to satisfy our clients'
individual requirements.

Kumagai Gumi Group Vision Statement

Insight, Onsite, Farsight
When we build a structure, we are building a community together with the people who will use that space.

Kumagai Gumi constructs and maintains structures where people can congregate andlive fulfilling lives while feeling safe and secure.
This is our job, our mission.
We deliver "Quality that Inspires Happiness" by optimizing construction
for the people who will use the built space.
When putting plans into practice, we apply our unique concept ofWorksite Excellence – the powerful synergy of our technology and human resources.
Our relationship with our structures continues beyond physical completion.
It includes ongoing operation, maintenance, renovation, and restoration.
With this never-ending support, our structures serve as the timeless stage
on which each generation performs its part in life's ever-evolving story.
Insight, Onsite, Farsight
We feel a deep responsibility to our clients – built on mutual trust andcollaboration – that we have nurtured over our hundred-plus-year history.
In this spirit, we are committed to taking on the fresh challenges the future will bring.
Working with people, creating community.
Setting the stage for tomorrow to unfold.

Civil engineering renewal work between Chugoku Expressway Hokubo Interchange and Osa Smart Interchange (inbound lanes)● STAFF We strive to be a progressive and nurturing company,
offering each individual the opportunity for personal growth,
pride, and satisfaction in his or her work.
● REPUTATION We strive to be a responsible corporate citizen,
recognized for our business integrity and social awareness.

Editorial Policy
This Corporate Report is issued with the goal of communicating the
Kumagai Gumi Group's management policies, business strategies,
and CSR efforts to all of our stakeholders.
Taking the Kumagai Gumi Group Vision Statement of "Insight,
Onsite, Farsight" as its approach, the report showcases the Kumagai
Gumi Group's concern for the environment and its efforts to provide
solutions to social issues, to support our contribution to the formationof a sustainable society.
It meets the expectations of stakeholders for information disclosure,and makes reference to various guidelines in order to ensure
objectivity and transparency.
Period of Reporting:
FY2018 (April 1, 2018 to March 31, 2019)
The information in this report includes some information from April
2019 or later, as required.
Scope of Reporting
The scope of this report covers Kumagai Gumi Co., Ltd. and its
seven group companies, six of which are in Japan and one of whichis in Taiwan. The references in this report to "Kumagai Gumi" or "ourcompany" are used in reporting on Kumagai Gumi Co., Ltd. only.
Reports on Group companies mention the specific companies. In
reporting on conservation activities, construction data is provided forthe projects undertaken by Kumagai Gumi in Japan only as well as
for joint venture projects with Kumagai Gumi as the lead company.
Issue Date
August 2019 (Previous edition: August 2018; Next edition: Scheduled
for August 2020)
Referenced Guidelines● Environmental Reporting Guidelines (2018 Edition) by the Ministryof the Environment● IIRC International Integrated Reporting Framework

Kumagai Gumi Group Vision Statement__________ 2
Mission Statement, Management Philosophy
and Editorial Policy_ _________________________ 3
The Kumagai Gumi Group's Business_ __________ 4
The Kumagai Gumi Group's Value
Creation Process _ __________________________ 6
Financial and Non-Financial Highlights _ _________ 8
The Medium-term Management Plan_______ 10__________________
Interview with the President
11(FY2018-2020) ~ Strategies for Accelerating Growth ~Insight _____________________________ 18

Technology Development System______________ 19
Technology to Create Social Value_____________ 20
Diverse Human Resources___________________ 21

Onsite_ _____________________________ 23

Aiming for Safe Workplace Environments________ 24
Quality Control and Environmental
Preservation_ _____________________________ 25

Farsight ___________________________ 30
Involvement with Customers__________________ 31
Involvement with Employees__________________ 32
Involvement with Shareholders and Investors_____ 33
Involvement with Business Partners____________ 33
Involvement with Local Communities_ __________ 34
Evaluation by Society_ ______________________ 35

Governance_ __________________________ 36

List of the Board of Directors__________________ 36
Corporate Governance_ _____________________ 38
Risk Management__________________________ 40

Business Overview____________________ 42
Group Strengths_ __________________________ 42
Civil Engineering___________________________ 44
Architectual Construction _ ___________________ 45
Overseas Projects and Other Business _ ________ 46

Financial Information_ ________________ 48

Analysis of Financial andManagement Performance_ __________________ 48
Consolidated Financial Statements_____________ 50
Corporate Information and Stock Information_____ 54
Organizational Chart________________________ 55

Information on the website
https://www.kumagaigumi.co.jp/en/index.html
Notes on the Outlook for the Future
Opinions and other forward-looking statements in this report are
based on data currently available to us and certain assumptions
that we believe are reasonable. Actual results may, therefore, differ
materially from these statements for various reasons.
The Kumagai Gumi Group Corporate Report 20193

The Kumagai Gumi Group's BusinessNew business domains for
future activity
Overseas Projects

Since our foundation in 1898, the construction company Kumagai Gumi has made efforts to contribute to the developmentof society through construction contracting.

The Kumagai Gumi Groupis expanding our sales andmarketing networks in ouroverseas offices, and is striving
to expand our business to securestable sources of revenue. To
enhance the earnings potentialof our overseas business,
we will focus our energies
on the promotion of allianceswithpartnercompanies,
the strengthening of global
human resources, and risk
management.

We deliver Quality that Inspires Happiness so that we can continue to work as a group to satisfy customers through Worksite
Excellence, the powerful synergy of the technology and human resources we have built up for over a hundred years.
With the aim of further securing sustainable growth and stable earnings, we will focus our efforts on the creation of new
businesses and on strategic collaboration with partners.

8

The companies of theKumagai Gumi GroupThe main businesses
that have supported thegroup's development

GAEART Co., Ltd.
K&E Co., Ltd.
Taiwan Kumagai Co., Ltd.

Through the construction of tunnels, bridges, dams, roads,
and other infrastructure that is vital to people's lives,
Kumagai Gumi Group will continue to support the creationof places where people can live in security and comfort.
We will continue to enhance our technological prowess todeal with superannuated infrastructure that is reaching theage of large-scale renewal, as well as increasingly severe
natural disasters.
P44

Technos Co., Ltd.

Architectual Construction

FATEC Co., Ltd.

The Kumagai Gumi Group provides structures for every
application and purpose, including housing, offices,
hospitals, schools, and commercial facilities.
We will continue to build the stages upon which people live
their lives, with consideration of their hopes and dreams.
We will also advance initiatives for environmentally friendly
construction and medium- to large-scale wood structures.

Techno-Space Creates Co., Ltd.
Technical Support Co., Ltd.

P46-47

Tohoku-Chuo Expressway, Yamagatazao Tunnel construction

Civil Engineering

Kumagai Gumi Co., Ltd.

TAIPEI 101 (Taiwan)

Route 9 Eagle's Nest Tunnel (Hong Kong)

Other Projects

Wasabizawa Geothermal Power Plant production and return facilities construction

Park Court Gyoei The Forest

KumagaiGumi
hasaconstructionindustry-leading
track
recordinurbandevelopment projects. Taking
advantage of our know-how
and expertise, we will contributeto urban redevelopment andarea revitalization. We will also
actively undertake projects
that
includeconcessions,infrastructure operation, andrenewable energy.

Inagi City Central Library (PFI project)P46-47
P45► See details of companies on P42-43

Nagoya Campus Taiho, Nagoya Gakuin University

The History of theKumagai Gumi Group

1898 Founding of Kumagai Gumi
1938 Establishment of Kumagai
Gumi Co., Ltd.

1945 Establishment of Architectual
Construction Division

1989 Establishment of FATEC Co., Ltd.

1958 Opening of Toyokawa Factory

1993 Establishment of Kumagai Techno-Space Co., Ltd.

1963 Establishment of Kumagai Road Co., Ltd.
* 1994 Change of company name to Gaeart
Kumagai Co., Ltd.

1974 Establishment of Taiwan KumagaiCo., Ltd.

4* 2000 Change of company name to Techno-Space Creates Co., Ltd.

1995 Technical Support Co., Ltd.
1996 Spin-off of Toyokawa Plant as Kumagai Technos Co., Ltd.
* 2002 Change of company name to Technos Co., Ltd.

Shiraito Highland Way (infrastructure operation project / GAEART Co., Ltd.)

2001 Establishment of K&E Co., Ltd.
2004 M erger of Gaeart Kumagai Co., Ltd. and Tobishima
Road Co., Ltd.
Launch of GAEART T. K. Co., Ltd.
* 2016 Change of company name to GAEART Co., Ltd.

2016 Formulation of the Kumagai Gumi Group Vision2017 B usiness and capital alliance with Sumitomo ForestryCo., Ltd.
The Kumagai Gumi Group Corporate Report 20195

The Kumagai Gumi Group's Value Creation Process

The Kumagai Gumi Group conducts business activities on the basis of its Group Vision
to contribute to the resolution of social issues and be of service to our stakeholders.
The Kumagai Gumi Group is taking on the challenge of creating new value for the future,exerting the group's uniqueness and aligning all members toward the same goals.

The Value We Provide
to Stakeholders

Key issues from the perspective of ESG (Materiality)
Financial constitution

Environment

Total Assets

353.7 billion yen
Manufacturing capital"Yuuei Kyoryoku Kai*"

868 companies

32

Manufacturing sites*A group composed of 868(as of April 1, 2019) partnercompanies of Kumagai Gumi.

Formation ofenvironmentallyconsiderate businessSociety

GovernanceAchievement of motivating
workplaces where diverse
human resources can exert
their capabilities

Strengthening ofcorporate governanceAchievement of sustainablecommunities

Reinforcement of relationships
with stakeholders

73

expenses

2.3 billion yen(non-consolidated)

Human capital

Domestic sites (non-consolidated)

10
Sales offices
34
Technical laboratories
1
Branches

Natural capital
Electric power
Gas
Diesel oil
Kerosene
Water

31,468,000 kWh102,000 m3
23,292 kl
12 kl
399,000 m3

Powerful synergy created from our technologies
combined with our human resources

P18

Farsight
The Kumagai Gumi Groupstays involved in the operation,
maintenance, renovation andrestoration of the buildings
even after the completion of
construction. We continue tosupport our stakeholders
in various ways.
P30

OnsiteWorksite Excellence● Safety and Heath● Quality Control● Environmental Protection

Worksite Excellence createdby "Insight" will bring about the
Kumagai Gumiʼs original values
through construction under
our slogan, "Being No. 1 insafety, quality and theenvironment."
P24

Governance

P36

Domestic civilengineering
sales

111.6

billion yen

Domesticarchitectural
construction
sales

195

billion yen

Overseas projects
sales(including overseas
group companies)

Onsite(non-consolidated)

FY2018 performance● Diversity● Human Resource Development● Workplace Environment● Promotion of the Group Vision

Insight(non-consolidated)

Societal capital

Human Resources● Technological Competitive
Advantages● Research and Development
System● Research Center

Number of employees

2,497(consolidated) 4,032

Insight

Technologies

Kumagai Gumi Group
Vision Statement

Intellectual capital
No. of patents
Research and development

For customers andlocal communities

Farsight

Worksite Excellence
to Farsight● Customer Satisfaction (CS)Activities● Relationships with
Stakeholders● Evaluation from Society

10.8

billion yen

Domestic groupcompanies’
sales

71.7

billion yen

FY2018 performance

Quality That
Inspires HappinessFor employees

Human Resource
Development

For business partners

Coexistence in
Mutual Prosperity

For local communities

Sustainable
Coexistencewith Nature

For shareholders andinvestors

Stable Returns for
Shareholders by Raising
Corporate Value

Corporate governance systems / Risk management / Compliance

6

The Kumagai Gumi Group Corporate Report 20197

Financial and Non-Financial Highlights* The financial information is based on the Kumagai Gumi Group consolidated results, whereas non-financial information is based solely on Kumagai Gumi.
* Amounts less than 100 million yen are rounded.

454 billion yen

Amount oforders received

Sales* Kumagai Gumi only

500 billion yen

381.8
329.5

293.6

300

389.1 billion yen

Dividend per share

500 billion yen

454

400

*Kumagai Gumi only

400

284.7

362.1

389.1

374

344.7

343.6

200

100

100

0

0

35.0%

7.4 billion yen

120 yenPayout ratio 60 %10 billion yen

100

8

FY2015FY2016

Operating income

35.0

Operating income margin 15 %

6.2

7.1

6.8

5

FY2017FY20180

FY2015FY2016FY2017

6.8%

Ordinary profit margin 15 %

26.6

25.4

2

4

7

FY2014FY2015FY2016

7.5

7.4

6.1

6.8

Return on equity (ROE)

13.3 billion yen

10.2%
ROE 40 %Net income

16.4

15

FY2016FY2017

2,000

12.1

22.6

10

20.4

Total assets

2

2.3

FY2015FY2016FY2017FY20180

CO2 emissions (Scope 1, 2) Total Emissions:

Number of female managers 60 persons

Kumagai Gumi Group companies
Kumagai Gumi only
Kumagai Gumi and Group
companies

Intensity

20 Total (10,000 t-CO2)

Intensity (t-CO2/100 million yen) 40

2,497

2,382

49

15
40

39

10

29

26.8

27.1

28.3

9.5

9.3

9.5

3.6

20

29.9
25.5
11.3
3.8

3.2

3.2

9.6

10
5.9

11
FY20150

FY2016FY2017

20

1.8

5

9

30

7.5

6.3

6.1

7.8
0

0

FY2018FY2014FY2015FY2016FY2017FY2018

Capital adequacy ratio

353.7 billion yen

38.1%

Capital adequacy ratio 60 %Total assets

400 billion yen

300

255.5

271.9

255.5

0

FY2017FY201810.2 10

100

0

0

21.0

FY201425.4

FY2015

Numberof patents
100

73Frequency oflabor accidents
1.00

0.70

353.7
37.9

200

15.3

5.5

FY2016

30

20

10.9

8

1.8

2

5

FY2018

333.7

15.8
13.3

FY2015

1.5

2.2

1.3

FY20140

FY20152

2*CO2 calculation method is changed from FY2018

Profit attributable toowners of parent

FY20141549 persons 96 kt-CO

2,305

2,223

2,167

1,000

0

FY20144.2
3.2

FY2018FY2017

Number of employees

FY2014

5

23.1

Number of female managers

2,497 persons

0

20 billion yen

60

Number of employees

3,000 persons

22.7

10

FY2018

Research and development expenses

7.4

4

15.9

12.4

12.7

0

4.3

0

2.3 billion yen

Capital expenditures

30

10

4.4

Research anddevelopment expenses

Ordinary income margin

20

15.7

7.3

FY2014FY2016

Ordinary income

25.8
10

16.1

30 billion yen

23

20

10

FY2015

Ordinary income

26.5

25.1

24.5

FY2014

6.8% 26.6 billion yen

Operating income

4560

FY2018Operating income margin26.5 billion yen
30 billion yen

FY2017

Dividend per share

90

30

FY2014

Capital expenditures

100 yen
90

300

200

Payout ratio

73

45

75

30

50

15

25

0.25

0

0

0

61

38.1

60

64

70

0.70

0.75

0.50

0.72

0.67
0.65

29.5

FY2016FY2017FY2018FY2014FY2015FY2016FY2017FY20180.42

FY2014FY2015FY2016FY2017FY2018The Kumagai Gumi Group Corporate Report 20199

The Medium-term Management Plan (FY2018-2020)~ Strategies for Accelerating Growth ~Interview with the President

Based on the Medium-term and Long-term Management Direction that we set forth in November 2017, we formulated"The Medium-term Management Plan (FY2018-2020) – Strategies for Accelerating Growth –". Its strategic pillars are:
1. Maintain and increase contracted construction businesses; 2. Create new and innovative businesses; and3. Form strategic alliances with other companies.
We are determined to steadily implement these strategies geared toward accelerating growth.

We will take on theThree Strategies and Target Numbers

challenge of further

Medium-term and Long-term Management Direction

growth together with● Kumagai Gumi will continue to provide high quality construction services, responding to qualitative andquantitative changes in the construction market.
● Kumagai Gumi will strengthen its ESG management to realize long-term growth and contribute to theformation of a sustainable society.

Three Strategies
for Growth

Strategy-1

Maintain and increase
contracted construction
businesses

Strategy-3

Form strategic allianceswith other companies

our employees, with theaim of being a company

Strategy-2

that exerts a presence.

Create new and innovative
businesses
Kumagai Gumi Co., Ltd.
President
Yasunori Sakurano

FY2022 Goals
Our Four Target Indicators (by FY2020)
Consolidated
Sales

460 Billion Yen

Consolidated
Operating Profits

Sales
500

billionyen

400

500 Billion Yen

Dividend
Propensity

ROE

12%

33 Billion Yen

Consolidated Sales

Consolidated Operating Profits

30%

50 Billion Yen

60-Billion-Yen Growth Investment
Sales
OperatingincomeContinuous Investment

Operatingincome margin
10

Operatingincomemargin%Operatingincome

300

8

60

6

200

40

4

100

20

2

0

0

0

billionyen

FY2018result

FY2019forecast

FY2020plan

FY2022

objectives

Mid-term Management Plan
* Investment income and dividend income are included in operating income.

10

The Kumagai Gumi Group Corporate Report 201911

Interview with the President

Please tell us about the market environment and the results of the first year of the Medium-Term Management Plan.

Compared to the previous term, we achieved increases in both sales and operating
income, and greatly exceeded the operating income target in the Medium-Term
Management Plan. We were able to feel new effects.
For Kumagai Gumi, 2018 was a milestone as the 120th
year since our founding. Along with the start of a new
Medium-Term Management Plan, it was a year in which
we took a great step forward toward further growth.
Based on the Medium-term and Long-term Management
Direction that we put forth in 2017, the Kumagai Gumi
Group formulated a Medium-Term Management Planbuilt on three strategic pillars: "Maintain and increase
contracted construction businesses," "Create new andinnovative businesses," and "Form strategic allianceswith other companies." Having gone through a periodof renewal, the reborn Kumagai Gumi Group is setting"Strategies for Accelerating Growth" as our theme.
Fiscal 2018 marked our first step toward that challenge.
Under favorable conditions in the construction market, ourcompany was able to unite and deliver solid results. Sales
were nearly in line with plans, while operating income
significantly exceeded our target, resulting in an increasein both sales and profits. For me personally, fiscal 2018
was the year in which I was appointed President, andI believe it was a year in which I was able to feel new
Completed work value and gross profit oncompleted work (margin) (consolidated)
500
billion
yen
400
300

362.1

Gross profit on completed work

Consolidated impact

Consolidated impact

Kumagai Gumi only

Kumagai Gumi only

389.1

374

344.7
71

76.2

11.9

11.4

288.2

267.5

100

29
March 201572241.1 8.5

40.2 9.7

45.5 10.1

30.3

32.5

30.6

35.4

Operating income (margin) (consolidated)

%

84

20

* MOM projects Management, Operations and Maintenance projects

March 2018

Operating income

15
10

342

307.1

294.6

March 2017

including landmark architecture in Taipei and the MOM
toll road project in Hong Kong*. Seen overall, however,
we are working to deeper our market and make basic
preparations for our new business. We will also makeefforts toward collaboration with Sumitomo Forestry,
which has strengths overseas, and will aim to secure
profit from the businesses that will support our company's
next era.
While orders are expanding steadily in these contracted
construction businesses, there are also many issues toaddress, including the improvement of productivity. We
will also pursue initiatives in measures to enhance thelevel of our operating income. In fiscal 2018, we wereunable to achieve our targets for safety results. Needlessto say, safety is the most important mission for us. I feelstrongly that this is the theme for improvement that wemust tackle above all else.

25

426

11.4

39.1 8.8
March 2016

Regarding "Maintain and increase contracted construction
businesses," we received orders for a succession ofmajor projects, including construction for the Chuo
Shinkansen maglev line, and we expanded orders in both
civil engineering and construction. Orders received by
Kumagai Gumi alone in fiscal 2018 increased by 18.9%
year on year, the second consecutive year of increases.
We achieved increases in sales and operating income,making a solid start.
This is the result of our strengthening of solutions
capabilities, a measure set forth in the Medium-Term
Management Plan, continuing to bear fruit. I feel that weare steadily building up ability in both civil engineeringand architecture. We will continue to burnish ourunique solutions sales capabilities and technical sales
capabilities.
In overseas business, we continue to deliver results

Profit margin

11.7

10.8

273.7

We received a succession of large-scale project orders.
We also accumulated a large amount of projects carried forward, and were able to
make a solid start.

82

79.4

8.0

200

0

Completed work value

343.6

73.9

effects together with executives and employees.
The environment surrounding the construction industry
remains robust, for reasons including natural disasterreadiness and mitigation projects, projects to addresssuperannuated social infrastructure, and projects todevelop facilities for the Tokyo Olympic and Paralympic
Games. The market is expected to remain robust for thetime being, with continued inbound demand, the full-scale
start of construction on the Chuo Shinkansen maglev line,
and the decision to host Expo 2025 in Osaka.
At the same time, looking outward toward the world,
factors including US-China trade frictions and theUK's Brexit issue are creating uncertainty in the global
economy. Domestically, a major turning point will comefor our company in the near future, for reasons including
a declining market under a shrinking population. To
respond to these changes, further strengthening of ourcore contracted construction businesses, as well as thecreation of new businesses and strategic alliances withother companies, will be vital.

What sort of effects do you feel from the goal of "maintain and increase contracted construction
businesses," as set forth in the Medium-Term Management Plan?

March 2019

48.4 10
38.4

March 2020
(forecast)

50Operating income margin

Consolidated impact
Kumagai Gumi only

30
billion
yen

24.5

22.5

4.6

0

12

7.3

19.9

10

%

5

5.4

6.8

6.2
21.1

8

21.1

6.6
23

6
4

17.9

13

March 2015

28

26.5

5.1

3.1

4.4
7.5

23

4.1

7.1

16.1
15

25.1

2

March 2016

March 2017

March 2018

March 2019

March 2020
(forecast)0

The Kumagai Gumi Group Corporate Report 201913

Interview with the President

Please tell us about initiatives to "create new and innovative businesses."

Projects are underway in a variety of fields.
For growth in our next era, we plan to actively take on challenges aimed at thecreation of businesses.
Our initiatives to "create new and innovative businesses"
can be broadly divided into two directions. There are
initiatives that we undertake with ourselves as theoperating body, and initiatives in which we sell products
created from technologies we have developed. In theformer initiatives, we are promoting projects including
PPP, PFI, and concession projects. These projects are anarea in which we can leverage our accumulated knowhow and our distinctness as a construction company, andwe intend to work at actively developing them further.
Moreover, in urban redevelopment projects, we are
seeking to expand orders under collaboration between
headquarters and branch offices. In renewable energy
projects and medium- and large-scale wooden architecture
projects, we will undertake a full-scale expansion ofbusiness in collaboration with Sumitomo Forestry.
In the latter initiatives to sell products developed fromour technologies, we are advancing commercializationof the "Cotter Floor slab method for bridges" developed
jointly by four companies, including GAEART Co.,
Ltd. This method is a technology used in traffic bridge
floor slab replacement. It can shorten work time toabout half that of conventional methods. In Japan, thedeterioration of bridges constructed during the era ofhigh economic growth has become a social issue, andwe expect significant expansion of demand for floor slab
replacement. Technos Co., Ltd. is strengthening theoverseas expansion of its leasing business for "ACE UP",a jig used in steel frame construction.
As an expansion of its business domain and technologicaldevelopment to address changes in society, the company
has also developed the independent walking aid "FLORATENDER". At present, we are creating a product aimed
at home nursing care and other markets through FATEC
Co., Ltd. The product targets markets that are not familiar
to our company and thus entails difficulties. It is worth
undertaking from an ESG perspective, however, and I
really hope to commercialize it.
With contraction of Japan's construction market
forecast in the future, the creation of new businesses is
an indispensable strategy for Kumagai Gumi in achieving
sustainable growth. I believe that particularly now, when
the contracted construction businesses is robust, we musttake on the challenge of working toward the next era.

What sort of developments took place in "strategic alliances with other companies"?

Our collaboration with Sumitomo Forestry is close to the stage of commercialization.
We will strengthen this partnership and move forward with a variety of collaborationsin Japan and overseas.
In our collaboration with Sumitomo Forestry, we haveestablished and are working through eight subcommittees
in five fields of focus. One of these is "Mocca" or woodbuilding promotion and green-related construction
projects, in which we took a strong step towardcommercialization by establishing a joint team in April 2019
to undertake design and construction of wood buildings.
Moreover, Kumagai Gumi Group company K&E Co.,
Ltd. and Sumitomo Forestry Group company Sumitomo
Forestry Home Tech Co., Ltd. have collaborated on sales
activities for building redesign and renovation, with results
beginning to show.
In renewable energies, we are investigating theoperation of joint projects for biomass-based power
generation in Japan. In overseas business, we areconsidering participation in the development of highquality condominium complexes in Thailand andIndonesia, among other projects.
A unique project in the area of joint research anddevelopment is joint research with the Japan Aerospace
Exploration Agency (JAXA). This project developed out of
research into automation for forestry machinery systems
by Kumagai Gumi, Sumitomo Forestry, and two othercompanies. Our aim is future application to structures on
the moon, transport of materials, installation, and more.

We are moving ahead with joint research in a wide rangeof other fields as well.
Recently, there has been renewed awareness of thepotential of wood as a construction material. Survey
research has suggested that 3% to 4% of reinforced
concrete or steel frame structures will be replacedby wood, with 300 to 400 billion yen as the expectedmarket scale. Sumitomo Forestry is advancing the W350
Project, a super high-rise wood building development
concept. Fused with the high-rise construction and woodconstruction know-how of Kumagai Gumi, this may open
up a large new market.
Our partnership with Sumitomo Forestry is a powerful
one that has extended to a capital investment relationship.
Through the creation of synergies and the development
and strengthening of a long-term partner relationshipbetween the companies, we believe that the partnershipwill contribute to greater corporate value.
At the same time, we are studying the creation ofbusinesses with other companies, too, through our civilengineering, architecture, technology development, andother divisions. We will move ahead with open alliancesin diverse domains, and will take on the challenge ofcreating new businesses that will lead us in the next era.

What sort of initiatives and issues face the company in fiscal 2019?

Fiscal 2019 is an important year for achieving the goals of our Medium-Term Management Plan.
We will continue to promote our three strategies, and will make efforts to improve our level ofoperating income.
In fiscal 2019, the second year of our Medium-Term
Management Plan, we are also going to work at promoting
our three strategies and achieving our plan. We haveabundant projects on hand, and the achievement of our
Medium-Term Management Plan's fiscal 2020 targets –consolidated sales of 460 billion yen and consolidated
operating income of 33 billion yen – has come into view.
However, there are unquestionably still many issues that
we must address. In "maintain and increase contracted
construction businesses," we tend to active expansionof orders. However, as I noted, there are also many
productivity improvements we need to make, including
reductions of costs and labor. Precisely because orders
are robust now, we will focus on promoting measures to14enhance our level of operating income. Regarding safety,
which was an issue in fiscal 2018, we are continuallystrengthening efforts to "Be No. 1 in Safety, Quality andEnvironment Management."
Regarding our goals of "create new and innovative
businesses" and "form strategic alliances with othercompanies," we will focus on creating a structure forquickly advancing commercialization and steadily
generating profits. I believe that fiscal 2019 is an important
period that holds the key to achieving the next MediumTerm Management Plan and the Medium-term and Longterm Management Direction, which sets targets of 500
billion yen in sales and 50 billion yen in operating income
for fiscal 2022.

The Kumagai Gumi Group Corporate Report 201915

Interview with the President

Why did the company formulate a new ESG Initiative Direction?

Do you have a message for shareholders and investors regarding capital policy or other topics?

To align the ESG-related vectors across the company and clearly communicate ourstance and initiatives to society, we formulated our ESG Initiative Direction.
Within the Medium-term and Long-term Management
Direction that we formulated in November 2017, theKumagai Gumi Group has included strengthening ofmanagement from an ESG perspective. We are moving
ahead with addressing ESG issues as a key strategy in thecurrent Medium-Term Management Plan. The emergenceof global societal issues is bringing about changes in the
behavior and thinking of companies' stakeholders. The
creation of business opportunities and risk management
matched to changes in stakeholders will be important forcompanies in achieving sustainable growth.
In response, Kumagai Gumi formulated our ESG
Initiative Direction in April 2019. This aligns ESG-related
vectors across the company, and clearly communicates
our stance and initiatives to society. We have set five
key issues (materiality) from the three perspectives ofEnvironment, Social, and Governance, and are identifying
issues related to each of these. These issues were clearly
identified on the basis of consideration under the Mediumterm and Long-term Management Direction and MediumTerm Management Plan.
Taking "the realization of motivating workplaces where
diverse human resources can exert their capabilities" as

an example of an initiative, we established the Workstyle
Reform Promotion Committee, which I chair, and areundertaking six tasks. Regarding individual issues suchas "securing and developing human resources," I hope tomake efforts that extend to the construction of governancesystems that operate from a single high-level perspectiveof these issues.
I see in ESG the same sort of spirit that is behind thefounding of Kumagai Gumi, and I consider it somethingthat we have always practiced throughout our 120 yearsof history. The business in which we are engaged,
construction, is work that supports society, and thesustainable growth of society connects to the future of theKumagai Gumi Group. Looking ahead, I hope to clearlycommunicate to stakeholders the stance and initiativesof the Kumagai Gumi Group that will contribute to thesustainable growth of society.
The new ESG Initiative Direction seeks to promote
ESG with all employees aligning their visions. We will
work to create an environment in which every employee
is consciously involved in ESG and is able to work withpride and enthusiasm.

ESG issues
Perspectives

Environment

SocialGovernance16

Key issues (materiality)

Specific issues

Creation of businesses
with consideration of theenvironment

Addressing climate change risks
Achievement of zero emissions
Initiatives with consideration of biodiversity
Initiatives for the wooden architecture businessInitiatives for the forest conservation business
Development of environmentally consideratetechnologies
Initiatives for the renewable energy business

Achievement ofmotivating workplaces
where diverse humanresources can exert theircapabilities

Securing and developing human resources
Succession of technology
Promotion of diversity
Achievement of work-life balance
Promotion of worker health and prevention ofoccupational accidents

Achievement ofsustainable communities

Contribution to communities
Response to natural disasters
Development of technologies that lead toresolution of social issues

Strengthening ofcorporate governanceImprovement of the effectiveness of the Boardof Directors
Enforcement of compliance
Strengthening of risk management

Strengthening ofrelationships withstakeholders

Active dialog with investors
Improvement of CS
Promotion of CSR procurement

Related SDGs

We are moving in line with forecasts in terms of ROE and dividend propensity.
We will work to optimize the balance between investment for growth and return to shareholders.
Under the Medium-Term Management Plan, we plan 60
billion yen in growth investments over the plan's three
years, and aim to create 7 billion yen in profits in 2022,
five years from now. In addition, we have set ROE of
12% as a numerical target for fiscal 2020, the last yearof the plan, and have already come close to that level.
In dividend propensity, too, we are moving as planned
toward our goal of 30%.
We will to continue to optimize the balance between
investment for growth and return to shareholders, and,with the understanding of shareholders and investors, toachieve solid growth to meet these targets.
In fiscal 2018, Kumagai Gumi held its first overseas
institutional investor meetings in Singapore and HongKong. For me, it was a very valuable experience that letme convey in person what is unique about our company,and directly hear numerous comments. Looking ahead,
we will work to communicate with shareholders andinvestors at every opportunity, and to speedily reflect thiscommunication in management.

Looking toward the future, what sort of vision do you seek for the company?

I want to share with employees the same vision for the future,and create an ideal form of company that is unique to Kumagai Gumi.
As I noted at the outset, Japan's construction market is
expected to remain robust for the time being. Looking
further ahead, however, it is certain that drastic changes
will come, including shrinking of the market as a resultof the declining population, checks on public investment
due to financial constraints, and an accelerated decreasein the number of construction engineers and skilledworkers. The surrounding environment will change as
well, including the evolution of technologies such as AI
and the IoT.
In order for the Kumagai Gumi Group to continue
growing sustainably, we need to accurately foreseesuch long-term changes and further strengthen ourmanagement from an ESG perspective.
In this ESG-conscious management, I believe that what
is most important is human resources. The only way by
which we can get through the turning points coming soonand create new business opportunities will be to secureand develop outstanding human resources who will act
as the driving force in these activities. We will also makeefforts to promote diversity, with greater activity by womenand more hiring of foreigners.
Since October 2018, we have held round-tableconferences with employees in branches around thecountry and in headquarters. This is something that I
myself proposed and began, with the aim of creating amore energetic Kumagai Gumi. In the first year, I spoke
face-to-face and exchanged ideas with many employees,on the theme of "My ideal company (workplace)." Specificrequests from employees included wishes for more clear

evaluation systems, the consideration of compensation
systems that reward reductions in overtime work, andthe institutionalization of telecommuting programs. In thisway, I want to create an ideal company form that is uniqueto Kumagai Gumi and that has a presence in society,sharinging with our employees the same wishes for the
future.

Scene from round-table conference with the President

The Kumagai Gumi Group Corporate Report 201917

Insight

Insight
Advance Technology and Make theBest Use of Human Resources

The Kumagai Gumi Group will contribute to the formation of a sustainable society andstrive to develop technology that enhances safety, quality, and productivity.
At the same time, we aim to become an energetic company that leverages
the personal qualities and abilities of each employee.
"Technology Strength" and "Human Resources" ―In order to provide places where people can gather, interact, and enrich their lives witha sense of safety, we will maintain and improve our "Worksite Excellence"
through Technology Strength and Human Resources.

Advance Technology and Make the Best Use of Human Resources

OnsiteFarsight

Technology Development System
In order to provide high-quality construction services, contribute to
the formation of a sustainable society, and strengthen the solutions
capabilities of the Kumagai Gumi Group and contribute to theenhancement of productivity in construction, Kumagai Gumi is working
primarily through its Technical Research & Development Division
to promote technology development in cooperation with the Civil
Engineering Management Division, the Architectural Management
Division, and the Safety, Quality and Environment Division. The
Technical Research & Development Division undertakes technology
development in three areas: adaptation to a recycling-oriented society,research and development to meet societal needs, and technology
development to improve productivity and safety.
Technology Development System
Planning and Research Group

Planning Group

Administration
Intellectual Property Group

Technical
Research &Development
Division

Base Technology Lab

Technical Research& Development
Institute

Disaster Prevention Technology Lab
Environmental Engineering Lab
Global Environment Lab

New Technology
Innovation Center

Development Group 1
Development Group 2
Development Group 3

Technical Research & Development
Institute ― Toward a new stage
On July 26 of 2018, we held a commemoration to mark the120th year of Kumagai Gumi and the 30th year of the TechnicalResearch & Development Institute. We invited the presidents
of group companies and President Ichikawa of Sumitomo
Forestry, a company with which we have a business andcapital partnership, and conducted a ceremonial tree planting.
The tree was a type of cherry tree called taikochiyoshidare,
propagated from a cherry tree at Daigo Temple in Kyoto by
Sumitomo Forestry using cloning technology.
As of April 2019, there are about 50 regular staff persons
at the Technical Research & Development Institute, including
28, or over half of all staff, in their 20s and 30s. These young
staff persons engage in active communication, throughmeans including study groups. We believe that innovativeideas may be born from venues like these study groups.

Patent-related measures
Kumagai Gumi's patent applications began with an earthand sand unloading device in September 1955 ("Title
of Invention: Coarse-Grain Powder Loading Device").
Patent applications were rare in the construction industry
at that time, and the stance of using the patent system asa means of protecting technology and asserting originality
showed foresight. So far, our company has submitted
over 5,000 patent applications. In recent years, ourapplications have been on an upward trend in line with thestrengthening of our technology development structure.
Our patent applications are characterized by animportance placed on ideas, and we submit applications
for the proposed technologies with as few restrictions as
possible. We naturally seek to actively submit applications
for those technologies that are prioritized by management,
as well as technologies that are advanced or unique, even
if difficult to achieve at the time or if extending outsideof our industry. We have also prepared mechanisms
for adapting to improvement and reform technologies
that stem from worksites, and submit applications fortechnologies that are directly connected to on-site work.
When submiting applications, we seek to collaborate
with engineers from the initial stages of technologicaldevelopment, in order to improve quality and avoid
infringing on other companies' patents.
The main fields in which we made applications forpatents in FY2018 covered a wide range not appreciablefrom the number of applications alone. They encompassed
worksite efficiency improvements, IT and robotics
technologies for reducing labor, nursing care support
aimed at new business areas, wooden structure-related
technologies, recycling for the realization of a recyclingoriented society, technology for the efficient use of energy,
and sound environment technology to improve the qualityof housing.

The first patent of Kumagai Gumi

The Kumagai Gumi Group Corporate Report 201919

Insight

Insight

Advance Technology and Make the Best Use of Human Resources

OnsiteFarsight

Technology to Create Social Value

Development of human resources

Improvement of facilities to promote ICTThe Technical Research & Development Institute, whichreached its 30th year in 2018, has established a mainbuilding and nine other facilities on about 490,000 square
meters of ground, where it engages in basic and appliedresearch.
In addition to our ongoing basic research, from FY2017
we have improved the facilities to meet the need toresearch and develop technologies for informatization,
labor-saving construction, and open innovation.

Improvement of the outdoor experiment yard
We improved the outdoor test yard that has been usedin the development of technologies for contaminated soil
purification, pile construction, tunnel boring, and more,along with the adjacent retention pond, enabling their use
for experiments related to the development of information
mechanized construction technologies such as unmanned
construction machinery.

Diverse Human Resources

Expandable high-function remote control room
The expandable high-function remote control room set up
in the outdoor experiment yard was already used in thedevelopment of next-generation technologies, and was
prepared for quick mobilization to worksites in the eventof disaster.
To operate many vehicles at a site of disasterreconstruction, the communications system had becomecomplex, and incorrect wiring, equipment malfunction, andother troubles occurred easily when setting up the room.
As a solution, we developed a high-performance
operation unit room equipped with a built-in networkenabled digital transmission device and a built-in
operation monitor.
Furthermore, with the scale of disasters increasing inrecent years, there was a need for flexible accommodationof an increasing number of construction machinery units
operated simultaneously through remote control. In
response, we developed the expandable high-function
remote control room that allows expansion up to threeunits. This has increased the flexibility, expandability, andreliability of the system overall.

Construction machinery

KUMA-DECS
The outdoor experiment yard and expandable high-function
remote control room are used not only for development andexperimentation concerning next-generation technologies
but also for KUMA-DECS unmanned construction operator
training and for the transfer of skills from experienced
operators to the next generation. (See P44)

Aiming to develop human resources under the idea of"Enrich the self, create the future, and support people,"
Kumagai Gumi is engaged in a variety of initiatives. In April
2019, we formulated the Human Resources Development
Plan that sets our directions in this area.
(1) Job rotation
Our company performs job rotation to let employees
acquire wide-ranging knowledge and ways of thinking
through experience in different work duties at multiple
workplaces.
We form career paths through systematic and stepwise
transfers, drawing on employees’ careers, desired future
job duties, and individual aptitudes.
(2) OJT
Through daily work, superiors and senior employees
guide and train subordinates and junior employees
by consciously, systematically, methodically, andcontinuously providing the knowledge, skills, and attitudes
necessary for executing work duties. Carrying out faceto-face discussions on goal setting and confirmation ofachievements, they check the status of the employees’
acquisition of skills in line with our vision for humanresources.
(3) Group training
We conduct planned education drills and training tocomplement OJT, drive self-development, and provide
expert knowledge. We set guidelines for the skills that
employees should acquire, and every year conduct fieldspecific training and hierarchy-specific training employees
to enhance expert knowledge.

Current state of employment* Kumagai Gumi only

Number of employees, ages, and length of service
2015

2016

2017

2018

Fiscal Year

2014

Number of employees

2,167 2,223 2,305 2,382 2,497

Average age

45.2

45.4

45.2

45.2

44.8

Average years of service

21.9

20.9

20.7

20.5

19.9

* The number of employees is the number of employed persons.

Composition of personnel * Kumagai Gumi only
Other employees
486 (19.5%)

Executive officers
18 (0.7%)
Number of
employees
2,497

Full-time
employees
1,993 (79.8%)(As of March 31, 2019)

Status of employment of older workers
We operate systems under the assumption of employment
after the formal retirement age until the age of 65. We
are expanding employment of older workers who have an
ambition to work and high skills. We seek to seamlessly
hand down the technical and sales capabilities of older
workers to the next generation, energizing employees
and organizations alike. As of April 2019, 330 employees
who have passed the formal retirement age are working
in the company.

(4) Support for self-development
We encourage the acquisition of official qualifications
such as Professional Engineer and 1st-Class Architect,conduct supplementary lectures and mock examinations
for examinees, and support and promote self-developmentthat leads to employees’ skill advancement.

Outdoor experiment yard

In the improved outdoor experiment yard is the highfunction remote control room, which serves as a control
tower for remote operation. It is able to remotely control
multiple construction machinery units simultaneously,
and is used in the development of technology related toautomatic operation.

20

The Kumagai Gumi Group Corporate Report 201921

Insight

Status of employment of persons with disabilities
We are promoting the employment of persons withdisabilities, with the aim of creating workplaces that are
motivating to all. As of June 2019, our employment rate
for persons with disabilities is 2.12%. We will continue
developing workplaces and improving environments thatfacilitate work by persons with disabilities.
Employment rate of persons with disabilities
2.50 %

2.22
2.00

2.04

2.01

2.00

2.12

June
2016

June
2017

(From April 1, 2018)

June
2018

June
2019

Number of female managers
In July 2019, the number of female employees who took
management positions through transition from regionlimited clerical positions to region-limited overseer positions
was 5, by which the number of female management
positions in our company increased to roughly 5 times thesame number (11) at the time of formulation of the General
Employers Action Plan under the Act on Promotion of
Women's Participation and Advancement in the Workplace.

Initiatives for the promotion of diversity
With a management philosophy of "We strive to be a
progressive and nurturing company, offering each individual
the opportunity for personal growth, pride, and satisfaction
in his or her work," Kumagai Gumi recognizes the diversityof employees and has promoted the creation of workplaceenvironments that are places for self-actualization. We willcontinue to actively promote diversity.

Health management
Health support structure
Kumagai Gumi views the health of employees as the mostvital of our management resources. We have establisheda health promotion office staffed by general industrial
physicians and health nurses in the Human Resourcesand General Affairs Department in Headquarters, andhave readied systems for the comprehensive supportof employees' health with the cooperation of industrial
physicians and health promotion managers at all
branches. Every fiscal year, we formulate an employee
health promotion plan as part of our programs for mental
and physical health promotion, and carry out healthpromotion activities.
22(FY2019)(1) Support for employees experiencing health issues(2) Prevention of damage to health from long
working hours(3) Appropriate conducting of health checkups(4) Prevention of mental health disorders(5) Initiatives to maintain and promote mental andphysical health(6) Active use of industrial health care resources

Statutory employment rate 2.20%

1.50

June
2015

Annual Plan for the Promotion of Employee Health

For three consecutive years since 2017, we have beenrecognized by the Health and Productivity Management
Organization Recognition Program ("White 500") of the
Ministry of Economy, Trade and Industry and the Tokyo
Stock Exchange, as a corporation that practices excellent
health management. In addition, our company put forth
the greatest number of participants (393) in the walking
event held by the National Health Insurance Association/
Society of Engineering and Construction Contractors.
We were presented with a letter of appreciation from thatorganization for our major contribution to the domestic
relief fund of the Japanese Red Cross Society through theevent. These initiatives of ours received commendationfrom the Japan Construction Occupational Safety and
Health Association at its 55th national convention for theprevention of industrial accidents in the industry, an event
which also featured the first platform presentation at theseconventions by an industrial physician from our company.
We intend to continue strengthening measures for thehealth of workers at Kumagai Gumi worksites.

Initiatives toward high-risk persons
All employee health checkup results are checked byindustrial physicians. For those persons requiring
follow-up, we provide advice through consultations andinterviews, along with continuous support. Moreover, weoffer accumulated fatigue checklists for employees working
long hours, and every month provide consultation withindustrial physicians to persons who request it. In addition
to this, we provide special follow-up through visits byindustrial physicians, interviews with employees, and othermeasures to address workplaces in special environments,
such as overseas or at disaster reconstruction sites.
Initiatives for mental health
As initiatives involving mental health, we carry out stresschecks, employee training (self care and organizationalcare), and support for return to the workplace, among awide range of activities that extend from primary to tertiary
prevention.

"Worksite Excellence."
Every employee of the Kumagai Gumi Group is frontline personnel.
We gain deep understanding of our customers, learn

OnsiteDeliver Quality that Inspires Happinesswith Our Worksite Excellencefrom them, and share their thoughts. Giving thought tothose who use what we create and who will gather atthese locations even 10 or 20 years in the future, we
consider what we can do to accommodate their wishes,
and take action.
To deliver quality not only in terms of the form andfunction of structures but also "Quality that Inspires
Happiness" that continues to satisfy those who gather
at and use our structures, we undertake construction
with the aim of "Be No. 1 in Safety, Quality andEnvironment Management."
The Kumagai Gumi Group Corporate Report 201923

Insight

OnsiteOnsiteDeliver Quality that Inspires Happiness with Our Worksite Excellence

Farsight

Aiming for Safe Workplace Environments
Safety results in FY2018
We set a frequency rate of 0.5 or less as our occupationalsafety and health target for FY2018 and placed ourhighest priority on the prevention of industrial accidents in
our annual plan, but did not achieve this target.
In FY2019, we are placing the highest priority on humanlife in accordance with our Safety and Health, Quality
and Environment Policy, and will engage in occupationalsafety and health management aimed at eliminating
serious accidents and achieving occupational safety andhealth targets.
83rd (FY2019) Safety and Health Control Plan (extract)
Targets

Frequency rate of 0.5 or lessPrevention of similar disasters/
accidents(continuation of the Safety Declaration
Campaign)

Actions to
be taken

1. Prevention of slip-and-fall accidents
2. Prevention of disasters/accidents involving
heavy construction equipment
3. Prevention of tumbling/elderly accidents
4. Prevention of heat stroke
5. Reduction of construction work accidents thatlead to public disaster

Diligent system operation

6. Enforcement of a line and staff control system
7. Strengthening of occupational safety
and health management systems for
subcontractors or partner companies
8. Strengthening of guidance and support for
branches' key designated construction work
9. Implementation of programs for mental andphysical health promotion

Enforcement of hazard prediction andthoughtful work
Industrial accidents stemming from non-enforcementof risk management are on the rise. We will continue
to enhance risk prediction capabilities, connect this tobehavior that reduces risk, and work to prevent industrial
accidents.

24

Practicing the PDCA cycle under our
Safety and Health Management System
1. Maintain a safe, secure and pleasant workplaceenvironment

Branch managers, on-site managers, branch managers of
the business partnership, chairmen of foremen associations,and all workers express safety declarations in their respective
positions, and realize safe, secure, and pleasant workplaceenvironments through the involvement of all staff, based on
the pleasant workplace commendation system of the Japan
Federation of Construction Contractors.

2. Enhance a “line and staff control system”

Quality Control and Environmental
Preservation
Quality and Environment Management System
Toward the provision of construction services that earn
the trust of customers, the reduction of environmental
impacts, and the creation of a better environment,
we began operation of our reconstructed Quality andEnvironment Management System in April 2016. The
Quality and Environment Management System operates
under the structure shown in Figure 1.
Figure 1. Q uality and Environment Management System
Organization

Each department that supports work sites plays an assured
role in the system.
The Construction Division, a line organization, coordinateswith the Safety Division to maintain systems that guide andsupport occupational safety and health management at worksites.
In construction plans, experienced staff from headquarters
and branch offices participate to perform risk assessment andprevent disasters and accidents, with no risks overlooked.
We prevent industrial accidents through a support andguidance system. In this system, employees at work sites
and the foremen association work together in daily safety
inspections to eliminate hazards. These safety activities arethen reviewed from different angles by headquarters, branch
offices, and "Yuuei Kyoryoku Kai*".
* A group composed of 868 (as of April 1, 2019) partner companies ofKumagai Gumi.

3. Improve safety and health education

Our headquarters, branches, and Yuuei Kyoryoku Kai provide
employees, business owners, supervisors, and workers witheducation on improving risk prediction and education on
occupational safety and health management systems.
Already, over 10,000 foremen have undergone supervisors
skill enhancement education based on occupational safety
and health education guidelines from the Ministry of Health,Labour and Welfare. In FY2018, we conducted 12 education
sessions for over 300 supervisors.

4. E
 nhance the prevention of accidents among
seniors and prevention of falls

Accidents among seniors and falls are issues that our company
must further address.
To prevent accidents among seniors, we continue toencourage senior employees to leverage their abundant
experience while instilling self-awareness of physicalweakening, along with the placement of “thoughtfulness
stickers.” We are also working to place age restrictions andpermission systems on work that accompanies a risk of falls.
To prevent falls, we practice "KST exercises" that train thesense of balance, and enforce basic rules such as organizationof workplaces and securing safe passageways.

President
Overall Quality and Environment
Control Manager
Quality and Environment Committee
Quality and Environmental Expert
Subcommittee System Audit Team
Branches

Policy for Environmental Diversity Initiatives(outline)
Basic Philosophy

In the conduct of its business activities, Kumagai Gumi:■ Recognizes that our daily lives are supported by thebenefits of biodiversity■ Recognizes that biodiversity faces severe threats fromthe various activities of people■ Recognizes the deep connection between the constructionindustry and nature, and actively works toward thepreservation and sustainable use of biodiversity

The stance of our initiatives
Headquarters
Division Head
Department Heads

Branch Managers

We incorporate consideration of ecosystems in our businessactivities, and carry out such activities company-wide
1. Initiatives for design and construction
2. Legal compliance
3. Technology development
4. Activities that contribute to society

Overall Branch Quality and Environment Control Manager
Branch Quality and Environment Committee
Branch Quality andEnvironmental Expert
Subcommittee Branch
System Audit TeamGroup Leaders
Department Heads/
On-site Managers

We have further set our medium- to long-term goals forenvironmental activity in "The Promise of Eco First,"
and those for our biodiversity initiatives in "Policy for
Environmental Diversity Initiatives." Quality control andenvironmental preservation initiatives in individual projects
are carried out under a cycle of planning (P), execution(D), checking/inspection (C) and review/improvement(A), including assessment of customers' requirements,
project attributes, etc. and identification of risks andopportunities, under management resources that include
people, technology, and information. (See Figure 2)"The Promise of Eco First" (extract)* Figures are for non-consolidated Kumagai Gumi

1. Promote development of a "low-carbon society"through the construction business.
(1) Volume Base

FY2020 FY2030 FY2050

CO2 emissions target (10 kt-CO2)
Reduction
rate (%)

4.8

3.7

1.8

Compared with FY1990

87

90

95

Compared with FY2013

25

42

71

(2) Intensity Base

FY2020 FY2030 FY2050

CO2 emissions target (t-CO2/100 million yen)

20.6

16.4

8.2

Compared with FY1990

50

60

80

Compared with FY2013

18

35

67

Reduction
rate (%)

2. Promote the formation of a "recycling-basedsociety" at construction sites.
(1) FY2020
Mixed waste
discharge volume
objectives(2) FY2020
Green
procurement rate*
objectives

Architectural Sites

Civil Engineering Sites

All Sites
Less than 10 kg/m2 offloor space

All Sites
Less than 0.5 t/
100 million yen

Architectural Sites

Civil Engineering Sites

15% or more

21% or more

* Green procurement rate: Percentage of spending on green procurement items
per 100 million yen of construction work value.

The Kumagai Gumi Group Corporate Report 201925

Insight

OnsiteOnsiteDeliver Quality that Inspires Happiness with Our Worksite Excellence

Farsight

3. Aim for a society that coexists with nature, andpromote initiatives with consideration of biologicaldiversity.
4. Strive for the development, improvement, andpermeation of technologies and methods withconsideration of the environment.

Main risks and opportunities involving theenvironment

Quality Control and Environmental Preservation

We identify environmental risks and opportunities, taking into
account factors including our business environment and thenature of our business activities. Major items are shown below.
Climate change Waste discharge

5. Actively participate in environmental preservation
activities in the community.
6. Actively disclose and communicate environmental
information.

Risk

Type

Physical/transitional risk

Transitional risk

Transitional risk

Details

Difficulty ofbusiness
continuity

Strengthening ofpolicy measuresand laws

Strengthening ofpolicy measuresand laws

Advance consideration of countermeasures forenvisioned conditions

Response

Opportunity

Type

MarketResource
efficiency

Products andservices

Details

Entry into new
businesses

Increase inrecycling

Developmentof new
technologies

Response

Kumagai Gumi Group activities for environmental preservation

Biodiversity

According to the Medium-term Management Plan

Under our Safety and Health, Quality and Environment
Policy, Kumagai Gumi is actively striving to reduce
environmental impacts as an Eco-First company (see P26).
The Kumagai Gumi Group's environmental preservation
activities have earned the praise of customers and manyother people.
CO2 Emissions: Intensity *1 (construction work + offices) (Scope 1, 2 *2)50

Figure 2. Conceptual diagram of the Quality and Environment Management System* Kumagai Gumi only

60 t-CO2/100 million yen

Kumagai Gumi Target Values in FY2020, 2030, 2050

40

Individual projects (sites)

Society/Environment/Stakeholders

Plan

Identification of risks andopportunities
Inspection of blueprints
Construction work
study groups

Ordered construction handover meeting
Assessment of required quality,
project properties, etc.

Headquarters/branchmanagement departments

Target value with Japanese
government target value(26% reduction comparedwith FY2013) applied

30
20

Project operation/
management

10

Execution

Identification of policies/
risks/opportunities
Annual plan

(Human resources, technology,
information, etc.)

CO2 Emissions: Gross Volume (Scope 1, 2, 3 *2)

Progress management/
integrated management

Review of plans
Project supervision
Aftercare

100 %FY1990 FY2000 FY2010 FY2020 FY2030 FY2040 FY2050

Management Resources

Review by the President

Recycling Rate (Construction) *Kumagai Gumi's
CO2 emissions

0

Guidance/support

Review/(Management review)
Improvement

Scope 1
76,000 t-CO2(2.6%)

Checking/
Inspection

Patrol inspections
Internal audits
System audits

Scope 220,000 t-CO2(0.7%)FY2018CO2 emissions

2,971,000 t-CO2* Kumagai Gumi Group

Category 1 49.2%(Purchased products, services)
Category 2 0.3%
Category 3 0.2%
Category 4 0.9%
Category 5 0.7%
Category 6 0.0%
Category 7 0.0%

(Use of sold products)

Scope 3 2,874,000 t-CO2 (96.8%)

Utilizing third-party evaluations
The Kumagai Gumi Group reviewed the results of the Corporate Quality Management Level Survey by the Union of Japanese
Scientists and Engineers and the Environment Management Level Survey by Nikkei Inc. to determine our strengths andissues, and is making use of these in ongoing improvement of our management systems.
The Kumagai Gumi Group's "Quality Management Level Ranking"

The Kumagai Gumi Group's "Environment Management Level Ranking"Ranking in General Construction Industry

Ranking in General Construction Industry

1
3
5
7
9
11

2

43

FY2010

2

1

22

27

FY2012FY20142
15FY20162
6FY2018Strengths: Expansion of quality management
Customer value creation
Inter-departmental collaboration capability
Issues:Further trend analysis of market defect costs
Indicators of the effectiveness of new technology
development

26

1
11
21
31
41
51

1
3
5
7
9
11

5

5

7
FY2014FY2015FY2016109FY2017FY2018

95

90

94.0
93.1

94.0
91.9

94.0

95.4

97.2

92.9

94.0

94.0

FY2016FY2017FY2018Targetvalue

Breakdown of Scope 3 *3Category 11 36.3%*Implemented only in even fiscal years
Ranking in All Industries

Since FY2000, we have practiced reduction activities
at construction sites including prohibition of engine
idling, inspection and maintenance of vehicles, and fuelconscious driving, with the result of reductions in CO2emissions nearly in line with plans. Regarding Scope 1
and 2, we are moving toward achievement of our FY2020
targets. We are currently studying reduction measures
for FY2020 onward. As shown in the diagram, Scope
3 makes up 97% of the total for Scope 1, 2, and 3. In
particular, the total of Category 1 and 11 make up 88% of
Scope 3. Regarding Category 11, we have already begun
initiatives through environmentally considerate design.
We will further advance initiatives aimed at reducing
Scope 3.

85

FY2014FY2015* Includes construction sludge from FY2017

Green Purchase Rate (Construction)(per 100 million yen of construction work value)
20 %

15

14.0

14.4
12.3

Category 12 9.1%

*1 CO2 emissions per 100 million yen of construction work
*2 Scope 1 The business operator's own direct emission of greenhouse gases
		(burning of fuel, industrial processes)
Scope 2 Indirect emissions accompanying the use of electricity, heat, andsteam supplied by other companies
Scope 3 Indirect emissions other than Scope 1 and Scope 2		(emissions from the entire supply chain involved in Kumagai Gumi
business activities)*3 Scope 3 is calculated for Categories 1 to 7, 11, and 12
Revision of calculated range and method from FY2018
	Category 12 is calculated for Kumagai Gumi alone and for constructionrelated group companies

10

13.4

14.7

11.9

12.3

12.3

12.2

FY2015FY2016FY2017FY2018Target
value

9.5
5

0

FY2014

See the website for CO2 emissions and waste discharge
volumes overseas (Taiwan Kumagai Co., Ltd.).
https://www.kumagaigumi.co.jp/csr/environment/ecofirst/
index.html (Japanese only)

Strengths: Support for biodiversity, green procurement,
and provision of environmentally conscious product andservices
Issues:Global warming countermeasures, initiatives to address
wastes/water resources

The Kumagai Gumi Group Corporate Report 201927

Insight

OnsiteOnsiteDeliver Quality that Inspires Happiness with Our Worksite Excellence

Farsight

Compliance with environmental conservation laws
To prevent violations of environmental laws and regulations, we undertook the following initiatives in FY2018, and continue
working to comply with environmental laws regulations.
1. Education on environmental laws and regulations within the intensive employee education at headquarters, by theheadquarters manager in charge of environmental regulations (6 times)
2. Education for branch managers (2 times) and inspection tour of waste treatment facilities (Hokkaido)* In FY2018, no fines or penalties were levied due to legal violations, and no suits were filed.
Environmental incidents
No environmental incidents occurred in FY2018.

Manufacturing Together with Partner
Companies
To achieve "No. 1 in Safety, Quality and Environment
Management," our partnership with the cooperatingorganization "Yuuei Kyoryoku Kai*" is vital.
* A group composed of 868 (as of April 1, 2019) partner companies of Kumagai
Gumi.

Environmental Targets and Results Evaluation for FY2018 and Targets for FY2019 (construction) * Kumagai Gumi only
Environmental goal

Reduction in CO2 emissions

Reduction in mixed waste discharge(promoting zero emissions)

Promoting green purchases

FY2018 target

FY2018 performance

Evaluation

FY2019 target

Civil
Engineering

53.7 t-CO2/100 million
yen or less44.4 t-CO2/
100 million yen

Achieved

46.7 t-CO2/
100 million yen or lessArchitectural
Construction

11.2 t-CO2/100 million
yen or less10.0 t-CO2/
100 million yen

Achieved

10.7 t-CO2/
100 million yen or less

Civil
Engineering

0.33 t/100 million yen
or less

0.74 t/
100 million yen

Notachieved

0.27 t/100 million
yen or lessArchitectural
Construction

5.92 kg/m2 or less5.43 kg/m2

Achieved

5.74 kg/m2 or less

Civil
Engineering

Green purchase rateof 15.9% or more

12.8%

Not
achieved

18.5% or more

Architectural
Construction

Green purchase rateof 14.0% or more

11.9%

Not
achieved

14.5% or more

Business Activities and Their Impact on the Environment * FY2018 performance/Kumagai Gumi only

INPUT
Principal
material
inputsInput
energyConstruction Division
189,000 t● Cement
67,000 t● Wet concrete 1,820,000 t● Steel frame
125,000 t
27,765,000 kWh● Electricity● Light oil
23,292 kl● Kerosene
7 kl● Water
370,000 m3● Steel rod

Office Division● Electricity● Paper● Water

28

3,703,000 kWh
115,000 kg
29,000 m3

OUTPUT

Business Activities
Civil Engineering
Completed work value

75,000 t-CO2

111.6 billion yen

● NOx

65 t

● SOx

103 t

Architectural Construction

Kumagai Gumi and Yuuei Kyoryoku Kai have set afrequency rate of 0.5 or lower as an occupationalsafety and health target. We implement mutual patrols
between branches, foremen association patrols, business
operator patrols, and so on, with the aim of creating safe
workplaces.

From FY2017, Kumagai Gumi has taken note of Yuuei
Kyoryoku Kai member company workplaces that actively
undertake the securing and development of humanresources, widely communicating these examples toother member companies. From FY2018, we haveleveraged our participation in the "Tsunaguka" programof the Ministry of Health, Labour and Welfare to offer onsite work experiences to high school students, and areworking with Yuuei Kyoryoku Kai to communicate theappeal of the construction industry.

Quality and the environment
Kumagai Gumi and Yuuei Kyoryoku Kai identify a modelsite for each branch, and hold activity presentation meets
hosted by Yuuei Kyoryoku Kai once a year. At these meets,
the status of activities at the model sites is widely reported,
addressing themes of quality assurance, productivity
enhancement, and environmental conservation activities.

Construction Division (Scope 1, 2)● CO2

Tunnels, dams,
land development,
etc.

Safety and health

Securing and developing human resources

Waste discharge● Gross output

570,000 t● Recycle/reduction

553,000 t● Net discharge

16,000 t

Completed work value

195.4 billion yen
Offices, hospitals,
schools, etc.

Office Division (Scope 1, 2)● CO22,000 t-CO2

The Kumagai Gumi Group Corporate Report 201929

Insight
OnsiteFarsight

We Feel a Deep Responsibility to Our Clients.

Involvement with Customers
We deliver "Quality that Inspires Happiness"

Farsight
We Feel a Deep Responsibility
to Our Clients.

When we build a structure, we are building a community
together with the people who will use that space.
Our relationship with our structures continues beyond
their physical completion.
It includes ongoing operation, maintenance, renovation,

Kumagai Gumi established the Customer Satisfaction
Promotion Office in 1998 and the Customer Consultation
Office in the following year.
We are working toward organizational collaboration that
instills a corporate culture of "Inspiring Customers" andfurther lets us deliver "Quality that Inspires Happiness,"
to improve our appraisal by customers. The customer

and restoration. With this ever-ready support, ourstructures serve as the timeless stage where eachgeneration performs its part in life's ever-evolving story.

Primary CS activities of Kumagai Gumi
1) CS hearings
Our top management makes visits not only to our regularpatrons but also to customers with whom we have lost
regular contact, to directly hear our their honest thoughts
and incorporate these into our management.
(FY2018: 18 visits)2) Customer opinion questionnaires
Three years after delivering a structure to customers, we
conduct a comprehensive evaluation questionnaire. We
respond promptly to the responses received, analyze
the overall questionnaire, and make use of the content
as valuable management information of use in design,
construction, sales activities, and after-sales follow-up.
Questionnaire items● Workmanship● Aftercare● Support by contact desk
● Work progress by our employees● Performance and design of structure● Comprehensive evaluation (added in 2018)

satisfaction (CS) functions of Kumagai Gumi are placed
within the Corporate Planning Division. The organization
is designed to directly reflect the voices of customers in
our management. Every year we conduct training for all
employees of the CS Division as we strive to develop
professional human resources.

Questionnaire results■ Above expectation■ As expected■ Nearly as expected■ Slightly below expectation ■ Below expectation● Aftercare overall
FY2018 (72)FY2017 (76)FY2016 (87)
FY2015 (66)
FY2014 (73)
(n)

0%

20%

40%

60%

80%

100%

60%

80%

100%

● Overall workmanship of building
FY2018 (72)FY2017 (76)FY2016 (87)
FY2015 (66)
FY2014 (73)
(n)

0%

20%

40%

Purpose of questionnaire● For customers with whom contact ends at 2-year scheduledinspection, extend contact to 3 years and strive to maintainpositive relationships● Quickly discern signs of defects that concern customers● In response to any account of dissatisfaction, visit the customer
promptly to restore trust, and prevent recurrence of the issue
through thorough investigation of the cause

3) Improvement of aftercare system
We perform centralized management of requests,
inquiries, defect information, and more using "construction
clinical records," and share this information within thecompany.

Customer Consultation Office
20 years have passed since we established a toll-free
telephone number to extend customer response fromnormal hours to night and holidays as well, placed
dispatch sites throughout the country, and established a
24-hour reception system. In FY2018, we received 546
consultation inquiries. For the third consecutive year, weachieved 100% same-day primary responses (and a rateof over 98% for seven consecutive years).

4) Instillation of CS awareness in employees
We hold lectures and distribute an email newsletter toinstill Kumagai Gumi's CS awareness in our employees
and to achieve CS with the involvement of all.
The Kumagai Gumi Group Corporate Report 201931

Insight

Farsight

OnsiteFarsight

Involvement with Employees
Promotion of work style reform at Kumagai Gumi
Creating an environment in which all employees can tackle work with motivation enhances the capacity of every employee,
which in turn becomes a driving force for changing the company and work for the better. Under this thinking, in April
2018 we launched a full-scale reform of work styles at Kumagai Gumi. In addition to establishing a promotion division,
we formulated a Work Style Reform Action Plan outlining numerical targets and a plan of action, as we aim to become acompany in which every employee is active and motivated.
Work Style Reform Action PlanThree pillars of reform

Numerical targets and timing for their achievement

Correction of long working hours

Establish an upper limit on overtime work and undertake reduction of working hours● Limit overtime work through FY2018 to under 100 hours/month●F rom FY2019 to FY2020, limit overtime work to 960 hours/year(average 80 hours/month)

Promotion of use of paid leave(annual)Establish lower limits on the use of annual leave and targets for average use, andpromote the use of annual leave● By FY2018, raise days of use of annual leave to 5 or more
● By FY2020, use an average of 10 or more days of annual leave

Promotion of flexible work styles

Promote flexible work styles that allow a balance of work and lifestyles● Aim for 100% return to work after child-care leave (FY2018-FY2020)●R educe to zero the number of persons resigning for reasons of balancing work withchild-care and nursing care (FY2018-FY2020)● Increase the usage rate of child-care leave by male employees to 10% by FY2020

1. Correction of long working hours
In order to make progress in correcting long working hours,
Kumagai Gumi has set numerical targets for working
hours and is working toward reduction. In addition, toachieve a five-day workweek at all worksites by FY2021(with the exception of sites at which application is difficult),
we have formulated the Kumagai Gumi Co., Ltd. Action
Program and are working to enforce appropriate order
receipt activities, support for cooperating companies, andself-help efforts.
2. Promotion of the use of paid leave
We are using employee training, e-learning, our internal
portal site, and other tools to improve understanding of
the leave system and to promote its use. In addition to
the company's annual leave, at the beginning of the fiscal
year the company discloses its plans for leaves related
to employees' work-life balance, including planned dates
for taking annual leave, annual leave incentive dates,"no overtime" days, and unified Saturday closing dates,
to promote the planned use of annual leave. We arealso promoting the visualization of annual leave days
used, and are conducting follow-up to promote use by
employees who fail to do so.

32

3. Flexible work style reform
Kumagai Gumi is making improvements to work
environments to achieve flexible work style reform fordiverse employees. In particular, we are improving systems
to support employees involved in childbirth, child-care, andnursing care, have created a Handbook for Supporting
Balance that offers simple summaries of these systems,
relevant laws, and more, and have set up a consultation
desk in the company. Of female employees who desire tocontinue working after childbirth, 100% make use of childcare leave. Regarding nursing care, we are constructinga system for consultation outside of the company with thecooperation of NPOs, due to the need for expert knowledge.

We Feel a Deep Responsibility to Our Clients.

Involvement with Shareholders and Investors
Disclosure of information to shareholders and investors
Kumagai Gumi works to properly, fairly, and promptly
disclose information pertaining to our management andbusiness activities.
In our engagement with investors, we held earnings
briefings 2 times (for the fiscal year ended March 2019; thesame applies to the following numbers) (including 2 times
with top management in attendance; the same applies tothe following numbers in parentheses), small meetings 6
times (6 times), individual meetings and teleconferences
86 times (14 times), and site/facility tours 2 times.
In FY2018, we worked to enhance the content of our
IR tools to enable faster and deeper understanding of ourgroup. On our website, we graphed various management
indicators, offered ESG-related content, and took othersteps to meet users' needs, and renewed our notices
for the convocation of shareholders' meetings and ourearnings briefing materials.
For overseas investors, an area of increasing importance,
we produced English editions of IR tools and conductedvisits by top management to overseas investors.
We will continue to aggressively promote IR activities
to gain shareholders' and investors' understanding of thegroup's initiatives for sustainable growth, and to aid theformation of an appropriate share price.

Involvement with Business Partners
Rules concerning purchasing work
Kumagai Gumi has formulated purchasing management
rules with the objective of ensuring transparency in theselection of business partners, as well as consideration ofrisk management and the environment.
Based on this, we will comply with laws and ordinancesfrom the standpoint of a corporate citizen as extolled in
our Management Philosophy, and will conduct purchasing
work on a foundation of fairness, clarity, and rationality.

The Kumagai Gumi Group Corporate Report 201933

Insight

Farsight

OnsiteFarsight

Involvement with Local Communities

Evaluation by Society (July 2018 to June 2019)

At our headquarters, branches, and worksites, Kumagai Gumi is continuously involved in a variety of activities as a memberof our communities.

Start of operation of the Kumagai Gumi Smile Project social contribution activity platform
Kumagai Gumi built the Kumagai Gumi Smile Project
as a platform for engaging in unique social contribution
activities, and launched operation in May 2019.
Kumagai Gumi Smile Project is a platform for our
unique social contribution activities that makes use ofa matching gift mechanism. It aggregates the numberof employees who participated in social contribution

A Branch employees

activities by site, workplace, or other region, and donates
social contribution costs in accordance with the cumulative
number of participants in each fiscal year. The spending
on social contribution costs will be considered in terms ofresolution of the social issues represented in the SDGs,
and will be used as funds and donations for greater social
contribution activities.

System FlowSocial contribution activities by employees
Report

The company donates funds
equivalent to the yearly
accumulated points

System supervision
department in headquarters

B Branch employees

C Branch employees

Point tabulation
Posting on internal portal site

Introduction on external website

We Feel a Deep Responsibility to Our Clients.

Donation of funds

Donations from the company areused for social contribution
activity costs

August 2018 Engineering Advancement Association of Japan (ENAA)
40th Anniversary Great Contribution to Engineering
Ministry of Economy, Trade and Industry Bureau
Chief Award
Toyohiko Ina, Chairman of the Board, Taiwan
Kumagai Co., Ltd.

October 2018
3R Suishinkyogikai
FY2018Commendation for Contribution to 3R Promotion, etc.
Minister of Land, Infrastructure, Transport andTourism Award"3R Activities in Small-Scale Construction Using
Proprietary Checklists in Cooperation with Orderers
and Excellent Industrial Waste Businesses"(tentative name) "Grande Maison Shukugawa
Chitose-machi"
Contractor: Kumagai Gumi Co., Ltd., Kansai Branch
Orderer: Sekisui House, Ltd.

D Headquarters employees

November 2018
Japan Dam Foundation
Commendation for Contribution to Dam
Construction (Construction-related)
Hidekazu Takagi, Dam Technology Department,
Civil Engineering Division

November 2018

Japan Construction Machinery andConstruction Association

FY2018 Symposium on Construction Work andConstruction Equipment
Academic Paper Award"Development of Automated Driving Technology for
Rough Terrain Haulers"
Masaru Kobayashi, Katsumi Miyagawa, Shigeo Kitahara,
Civil Engineering Division

February 2019Japan Facility Management Association
13th Japan Facility Management Award (JFMA Award)
Special Award"Effective Utilization of Assets through FM (AM)
Methods to Achieve Regional Revitalization"
GAEART Co., Ltd.

Return to society* For each employee participating in social contribution activities, 1 point is donated to the platform.
1 point is calculated as 10,000 yen in social contribution costs.

Decision on usage of funds

KUMAGAI STAR PROJECT
In our construction business overseas, Kumagai Gumi
has collaborated with NPOs on the construction of schoolbuildings in Myanmar from 2015 as an initiative to resolve
social issues as a general contractor.
To raise the level of education to international levels in
Myanmar, we are engaged in educational reform with the
improvement of the school environment as a key item.
However, school classrooms remain insufficient, andthere are children who do not go on to higher education or
who otherwise learn in a difficult environment.
In response, we surveyed the state of classroom
deficiency in areas around Kumagai Gumi construction
sites, and took part in the construction of buildings at
Teline Elementary School and Tepuchaun Elementary
and Junior High School.

Following the construction, we have continued ourinteraction with the schools, donating shelves of books
through NPOs and holding wall painting events to enrich
the school environments.
We intend to continue engaging in community-based
activities, with the hope that small circles of happinesscan emanate from our company.

November 2018 Republic of China Executive Yuan Ministry of Labor
FY2018 National Occupational Safety and HealthAward
Taiwan Kumagai Co., Ltd.

November 2018 Japan Federation of Construction Contractors
59th BCS Awards"Tajimi City Crematorium Hanadate Yasuraginomori""Roadside Station Mashiko""Roadside Station Mashiko" project members

34

March 2019 Japan Federation of Construction Contractors
Award for Excellence, 4th Awards for Promotion of
Activity by Women in Construction"Kumagai Gumi × Otsuma Women's University:
Achieving Temporary Enclosures Conceived by
Women's University Students"

May 2019
Japan Dam Foundation2018 Japan Dam Foundation Award, Technical Award
Funagira Dam Downstream Riverbed Scouring
Countermeasure Project

June 2019Japan Construction Engineers' Association
FY2018 Zenken Award(Architecture Category) Hyuga City New Government
Office Building Construction Project

June 2019
Ministry of Defense
2019 Special Honor for Excellence in Construction, etc.
JGSDF Camp Miyakojima (29) Building (A), etc. New
Construction
Kumagai Gumi / Kyowa Sangyou / Sahira Kensetsu Joint
VentureThe Kumagai Gumi Group Corporate Report 201935

Governance

List of the Board of Directors

Yasunori Sakurano

Yasushi Higuchi
Apr 1976
Jun 2003
Apr 2008
Apr 2011
Apr 2012
Apr 2013
Jun 2013
Apr 2018

Joined Kumagai Gumi Co., Ltd.
Representative Director and President of K&E Co., Ltd.
Executive Officer of the Company/Branch Manager of the
Tohoku Branch of the Company
Managing Executive Officer of the Company
Senior Managing Executive Officer of the Company
Executive Vice President of the Company
President/Representative Director of the Company
Chairperson and Director (Current)

Susumu Ogawa

Apr 1981
Apr 2010
Apr 2011
Jun 2012
Apr 2014
Apr 2015
Apr 2017
Apr 2018

Apr 2012
Jun 2012
Jul 2012
Jun 2013
Apr 2014
Apr 2015
Apr 2017

Manager of Public and Finance Institutions of Sumitomo
Mitsui Banking Corporation
Senior Inspector of the Audit Department of Sumitomo Mitsui
Banking Corporation
Executive Advisor, Kumagai Gumi Co., Ltd.
Managing Executive Officer of the Company
Managing Director of the Company
Senior Managing Director/Senior Managing Executive Officerof the Company (Current)
In charge of International Business/Domestic ArchitecturalMarketing at the Company
In charge of International Business, In charge of Marketing at
the Company (Current)

Yoshiaki Ogawa

Apr 2012
Apr 2013
Apr 2017
Jun 2017

36

Joined Kumagai Gumi Co., Ltd.
Executive Officer of the Company
Department of the Kansai Branch of the Company
Deputy General Branch Manager of the Kansai Branch of theCompany
Managing Executive Officer/Branch Manager of the Kansai
BranchSenior Managing Executive Officer (Current), General
Manager of the Architectural Management Division of theCompany (Current)
Senior Managing Director of the company (Current)

Apr 1968
Jun 2003
May 2005
Jun 2008
Jun 2009
Jun 2010
Jun 2015

Joined Fujitsu Ltd.
Representative Director and President of Fujitsu Advanced
Solutions Limited
Corporate Executive Officer of FUJITSU LIMITED
Director and Vice President of FUJITSU LIMITED
Representative Director and Vice President of above company
Representative Director and Chairman of FUJITSU FSAS INC.
Director, Kumagai Gumi Co., Ltd. (Current)

Apr 1971
May 1981
Jan 1995
Jan 1997
Jan 1999
Jan 2006
Jun 2016

Joined IBM Japan Ltd.
Joined American Family Life Assurance Company ofColumbus, Japan Branch (Aflac)
Manager of the Human Resources Development Departmentof Aflac
Director, Aflac
Executive Officer, Aflac
Representative of Rischiare Consulting (Current)
Director, Kumagai Gumi Co., Ltd. (Current)

Yoshihiko Kato

Senior Managing Director and Senior Managing
Executive Officer
General Manager of the Civil Engineering Management
Division, General Manager of the Railway Project Promotion
Division of the Civil Engineering Management DivisionApr 1982
Apr 2013
Apr 2014
Jun 2014
May 2016
Apr 2017

Senior Managing Director and Senior Managing
Executive Officer
General Manager of the Architectural Management DivisionApr 1982
Apr 2011

Director

Director* Mr. Koichi Hironishi and Ms. Mikie Yumoto are both outside directors of the company.

Senior Managing Director and Senior Managing Executive Officer
In charge of International Business, in charge of MarketingApr 2010

Joined Kumagai Gumi Co., Ltd.
General Manager of the Personnel Division of the Company
Executive Officer of the Company
Director of the Company
Managing Director/Managing Executive Officer/General
Manager, Management Administration Division of the Company
Managing Director/Executive Officer/General Manager,
Corporate Planning Division of the Company
Senior Managing Director/Senior Managing Executive
Officer of the Company
President and Representative Director of the Company (current)

Mikie Yumoto

Koichi Hironishi

President, Representative Director
CEO and President

Chairperson, Director

Joined Kumagai Gumi Co., Ltd.
Executive Officer/Deputy General Branch Manager of the
Tohoku Branch of the Company
Managing Executive Officer, General Manager of the Civil
Engineering Management Division of the Company (Current)Managing Director of the Company
General Manager of the Railway Project Promotion Divisionof the Civil Engineering Management Division of theCompany (Current)
Senior Managing Director/Senior Managing Executive Officerof the Company (Current)

Apr 1981
Apr 2012
Apr 2013
Apr 2015
Apr 2016
Apr 2017
Jun 2018

Joined Kumagai Gumi Co., Ltd.
Joint General Manager of the Administration Division of theCompany
Executive Officer of the Company
General Manager of the Administration Division of theCompany (Current)
In charge of Discipline at the Company (Current); In charge of
Personal Information Protection at the Company (Current)Managing Executive Officer of the Company (Current)Managing Director of the Company (Current)

Audit & Supervisory Board Member

Standing Audit & Supervisory
Board Member
Apr 1981
Apr 2007
Apr 2010
Apr 2014
Jun 2017

Joined Kumagai Gumi Co., Ltd.
General Manager of the Administration Department of the
Kyushu Branch of the Company
General Manager of the Administration Department of theChushikoku Branch of the Company
Assistant General Manager of the Chushikoku Branch of theCompany
Standing Audit & Supervisory Board Member (Current)

Apr 1969
Feb 1971
Mar 1983
May 2000
Mar 2009
Jun 2014
Mar 2016

Tatsuru SatohKoji Hidaka

Managing Director and Managing Executive Officer
General Manager of the Administration Division in chargeof Discipline and Personal Information Protection

Masaaki Ayukawa

Junji Konishi

Yutaka Takehana

Audit & Supervisory Board
MemberApr 1978Apr 2011
Jun 2012
Apr 2013
Jun 2013
Apr 2016
Apr 2018
Jun 2018

Joined Sumitomo Forestry Co., Ltd.
General Manager of Personnel Department of above company
Executive Officer of above company
Managing Executive Director of above company
Director of above company
Senior Managing Executive Officer of above company
Representative Director of above company (Current); Executive
Vice President and Executive Officer of above company (Current)
Audit & Supervisory Board Member, Kumagai Gumi Co., Ltd. (Current)

Joined Chuo Aoyama Audit Corporation
Registered as Certified Public Accountant
Representative Partner, Chuo Aoyama Audit Corporation
Senior General Mamager of Chuo Aoyama Audio Corporation
Full-Time Statutory Auditor of Tonen General Sekiyu K.K.
Audit & Supervisory Board Member, Kumagai Gumi Co., Ltd.
(Current)
Outside Director (Audit Supervisory Committee Member) of
AUCNET INC. (Current)

Audit & Supervisory Board Member
Apr 1973
Sep 2001
Jun 2003
Apr 2009
Jun 2013
Jun 2015
Sep 2017
Jun 2019

Joined National Police Agency
Chief of Police, Hiroshima Prefecture
Vice Governor of Tokyo Metropolis
Senior Executive, Panasonic Corporation
President & CEO, Tokyo Big Sight Inc.
Outside Director, SOHGO SECURITY SERVICES CO., LTD.
(ALSOK)
Advisor, Meiji Yasuda Life Insurance Company (Current)
Audit & Supervisory Board Member, Kumagai Gumi Co., Ltd.
(Current)* Mr. Masaaki Ayukawa and Mr. Yutaka Takehana are both outside Audit & Supervisory Board Members.
The Kumagai Gumi Group Corporate Report 201937

Corporate Governance

Governance

Basic Philosophy
In order to make our Management Philosophy of "We aim
to serve as a corporate group that contributes to society
through business activities centered on construction" areality, we position enhancement of the efficacy of ourcorporate governance as a priority issue.

Corporate governance structure
Drawing on the aims of the Corporate Governance Code,Kumagai Gumi has adopted a corporate governancestructure that comprises a Board of Directors, a Board of
Corporate Auditors, and an independent accounting auditor
to enhance the effectiveness of our corporate governance.
We have clarified the managerial responsibility of
directors, and, to build an optimal management structurewith respect to changes in the business environment,
have set the term of office of directors to one year. We
also employ an executive officer system to ensure thatthe duties of directors are executed efficiently. In addition,
we appoint two outside directors who provide counsel tomanagement from an objective standpoint.
In determining the nomination and amounts ofcompensation for directors and executive officers, we
conduct deliberation within the Board of Directors on
the basis of reports by the Nomination & Compensation
Advisory Committee, which is composed of theRepresentative Director and outside directors, in order tofurther ensure objectivity and transparency.
With regard to corporate auditors, we appoint outside
auditors from among persons who have appropriate
experience and capabilities knowledge concerning
finances, accounting, and legal matters, in order to conduct
audits with high efficacy.
Regarding accounting audits, we undergo impartial audits
by GYOSEI & CO. in accordance with the Companies Act
and the Financial Instruments and Exchange Act.
Corporate Governance Structure
General Meeting of Shareholders
SelectAdviseAccounting Auditor

Nomination &Compensation
Advisory
ReportCommittee

AuditsInstruct

Audit Office(Internal audit
function)38

Select(Board of)
Directors

Audits(Board of)Corporate Auditors

Control

Execution
Management
Conference
Executive Officers(including Board Members)
Instruct

AuditsSelectBusiness Units

AuditsInstructManagement Department

Guidance Legal & Compliance Department(Restraint function)

Improvement of the effectiveness ofinternal controls
To enhance the efficacy of our internal control. weare working to review internal rules and management
conferences as required, and to otherwise continually
improve our systems, based on our Basic Policy toEstablish Internal Control Systems.
In addition, the Kumagai Gumi Group as a whole isengaged in the improvement and operation of internal
control aimed at maintaining the reliability of our financial
reporting, in accordance with the Financial Instruments
and Exchange Act.

Evaluation of the effectiveness of theBoard of Directors
From the past, our company has implemented improvements
to secure the efficacy of the Board of Directors. Once a
year since 2015, we use a questionnaire to conduct anevaluation by directors and auditors of the efficacy of theBoard of Directors. We then study the results in Boardof Directors meetings, and engage in consideration of
improvements to ensure efficacy. Based on our evaluation
in FY2018, we carried out a review of the evaluation items
and evaluation results by external experts, and are using
this to ensure and improve efficacy.
In evaluations involving the efficacy of the Board of
Directors in FY2018, we conducted self-evaluations
using evaluation items including the composition of theBoard of Directors, its operation, agendas, and support
structures, and the status of improvement from theprevious fiscal year. Based on the findings of reviews by
outside experts, we confirmed that the board as a whole isappropriately carrying out its role and responsibilities, andwe determined that the efficacy of the Board of Directors
overall is secured.
In addition, based on the issues for improvement
shared following evaluations of the efficacy of the Boardof Directors in FY2017, we strove to energize deliberationin the Board of Directors by holding study sessions
following the conclusion of board meetings, as well as byenhancing information sharing through progress reports
on plans and by sharing information in a timely manner.
In order to further enhance the efficacy of the Boardof Directors in the future, we will continually address
issues for improvement shared through evaluations of
the efficacy of the Board of Directors in FY2018. These
include the further practice of constructive and active
declarations of opinion, the enhancement of information
sharing for supervising the execution of work with highefficacy, and the promotion of delegation of authority byreviewing criteria for inclusion in agendas.

Executive compensation

Strategic stock holdings

Cash compensation for directors and top management
is composed of compensation according to position, plus
basic compensation that reflects results in contributing
to annual performance plans based on the Mediumterm Management Plan, and extraordinary bonuses
linked to business performance. (Outside directors
receive basic compensation only, with results ofcontribution not reflected.) Amounts of compensation
are determined by the Board of Directors within the limits
on compensation for directors determined at General
Meetings of Shareholders, and take into consideration
factors including employee wage levels and marketplacecompensation levels, as well as findings reported by the
Nomination & Compensation Advisory Committee.
In addition, the company has adopted a stock compensation
system employing trusts, by which the company grants
points based on position, etc. each fiscal year to directors(excluding outside directors) and top management, and,generally at the time of retirement, grants shares of stock,etc. based on the cumulative number of points.
Reasons for appointment of outside directors/
Attendance at Board of Directors meetings (FY2018)
Name

Reason for appointment

Attendance

KoichiHironishi

Koichi Hironishi has a track record ofparticipation in corporate management.
Based on his resulting extensive
experience and wide-ranging insights,
the company has appointed him
outside director in anticipation that hewill provide appropriate guidance andadvice to the company's management.

16 times/
18 times

Mikie
YumotoMikie Yumoto has a track record ofparticipation in corporate management.
Based on her resulting extensive
experience and wide-ranging insights,
the company has appointed heroutside director in anticipation that she
will provide appropriate guidance andadvice to the company's management.

18 times/
18 times(1) Policies concerning the reduction of strategic
stock holdings
Our company carries out reductions in strategic stock
holdings, other than stock held for the purpose ofstrengthening transactions and collaborative relationships
to improve sustainable corporate value, or to capture
earnings opportunities. Moreover, every year the Board of
Directors conducts verification of strategic stock holdings,
and sells or reconsiders the number of held shares for which
the significance of holding is deemed to have lessened.
(2) Results of verification of the significance ofstrategic stock holdings
From a comprehensive perspective, our company performs
verification of whether earned profits, etc. based on
various transactions with investee companies are in linewith our cost of capital, and whether holding the stock ofinvestee companies is beneficial to the execution of ourbusiness. By doing so, we confirm the significance of ourstrategic stock holdings.
(3) Criteria for the exercise of voting rights
involving strategic stock holdings
In exercising voting rights for strategic stock holdings,
our company employs criteria for determining whether
the exercise of voting rights leads to improvement ofcorporate value in the investee company from a mediumto long-term perspective. We exercised voting rights forthe following sort of proposals, after particularly carefulconsideration from the perspective of improvement ofcorporate value.
● Organizational restructuring including mergers,
acquisitions, and transfer of important business● Presentation of executive retirement benefits
implemented by companies with excessive debt orother poor business performance● Capital increase through third-party allotment via
interest-bearing issuance● Introduction of hostile takeover defense measures,etc.

Site visit by outside directors
The Kumagai Gumi Group Corporate Report 201939

GovernanceRisk Management

Compliance system
Our company's compliance system consists primarilyof three internal functions: Autonomous functions byheadquarters and branch offices, support functions by theadministration head office and other specialized divisions,and audits by the Audit Office.
In addition, the Legal Compliance Committee, anorganization independent of management, periodicallycarries out evaluations of the company from an outsider'spoint of view and advises the management of any problems
uncovered, in order to strengthen the enforcement ofcompliance.
Compliance System

Support function
Administration
Headquarters, etc.

InstructCompany-wide Legal Complianceand Legal Support Systems

AdviseManagement

Evaluation
by outsiders

Autonomous function
InstructHead andBranch Offices
Enforcement of prior judgment
Auditing and corrective advising

Auditing function
Audit findings

Audit Office
Unbiased audits

Legal Compliance Audit Committee
The Legal Compliance Audit Committee is composed ofinternal company committee members as well as outsidecommittee members who include former judges andformer prosecutors. It convenes every year to strengthen
the compliance systems of Kumagai Gumi Group.
Instruct

Administration
Headquarters, etc.
Supportfunction
Company-wide Legal
Compliance and Legal
Support Systems

Our initiatives toward legal complianceManagement

Outside evaluation
function of written pledge from all managers
Submission

Internal whistleblower system
Our company has set up a hotline for quickly assessing,correcting, and preventing problems involving compliance.
We are working to root out compliance violations byaccepting a wide range of whistleblower reports, includingfrom our employees, group company employees, andpartner businesses.

Audit findings

System to eradicate anti-social forces
In the Kumagai Gumi Code of Conduct, our company
declares that we take a firm stance against anti-social
forces. We have also established a program for dealing
with anti-social forces, and educate our employees on
specific ways of eliminating such forces.
We have also incorporated provisions regarding anti-social
forces into the Special Construction Contracting Agreement
and the Equipment and Material Sales Agreement that
we use for transactions with partner companies. We areworking to thoroughly eliminate any involvement with antisocial forces by collecting written pledges prior to concluding
agreements with transacting partners.

Status of Legal Suits
Excluding lawsuits for tunnel-related pneumonoconiosis
damage compensation in six district courts nationwide, asof the end of March 2019 our company is involved in four
civil cases.

Systems improvement and legal support

Legal Complianceandemployees
Audit
Committee
Advising
Instruct Autonomous
Head andBranch Offices
function
To raise
all employees'
awarenessin enforcing
compliance
Evaluation
byoutsiderswith laws and ordinances, every year
all executives
andEnforcementof prior judgment
staff members of Kumagai Gumi Group submit a written
Auditing and corrective advising
pledge concerning compliance (100% submissionrate).
Audit Office
Auditing function

Unbiased audits
Implementation of compliance training
To improve basic understanding of compliance, from
October 2018 through March 2019 our company conducted40

Compliance reinforcement month
Kumagai Gumi has designated October as the month tostrengthen compliance, in an attempt to enhance employees'
awareness of compliance and to re-examine potential risks
in daily work.

Systems improvement and legal support

Outsideevaluation function
Legal Compliance
Audit Committee

an internal training program on topics including antitrust law,bribery, and corruption, targeting employees of Kumagai
Gumi as well as group companies, from a perspective ofstrengthening the group's compliance structure.

Legal Violations (including administrative
disposition, administrative measures, etc.)
In FY2018, our company was involved in no legal violations,
including administrative disposition or administrative
measures.

Business Continuity Plan (BCP)
Kumagai Gumi has formulated a Business Continuity
Plan (BCP) that will enable our primary business tocontinue operating even in the event of large-scaledisasters, through means including recovery supportand reconstruction work on behalf of customers andlocal residents. We have also established a permanent
Crisis Control Committee to maintain and improve theeffectiveness of BCP. We create a PDCA-based planfor BCP activities each fiscal year, and cooperate with
branch offices, group companies, and partner companies
on drill planning and training. We continue working to
improve and enhance our BCP so that we can remain aconstruction company that earns the trust of customers
and contributes to society.

Operation of the Safety Confirmation
Communication System
We operate a Safety Confirmation Communication
System to confirm the safety of employees, a key matterin preparing support systems based on our BCP. We
are implementing a system that enables confirmation of
the safety of employees in group companies and somepartner companies, and are improving systems for thebusiness continuity of the Kumagai Gumi Group.

Protection of personal data
Kumagai Gumi has established fundamental rules andregulations, such as the Basic Principle, the Privacy Policy,
and the Personal Information Protection Regulations, andhas posted the necessary information on its website,in order to properly handle and protect the private
information of all stakeholders, including shareholders
and employees.
We have also prepared an instruction manual for all
employees that concerns the Personal Information Protection
Law, and communicate the importance of personal dataprotection to all executives and staff members, as we
continue to improve our personal information protection
systems and methods.

Business and other risks
Regarding the business and financial status of Kumagai
Gumi, items such as the following may have a significant
impact on decisions of investors, and are deliberated by
the Management Conference and supervising committees.

(1) Trends in construction investment
When construction investment by government offices,private capital investment, housing investment, etc.
have fluctuated significantly(2)	Fluctuations in the prices of construction
materials and labor
When suddenly market inflation or labor shortages
have occurred(3) Business partner credit risk
Construction delays, inability to recover claims, etc.
when credit uncertainty has occurred among orderers,
contractors, joint contractors, etc.
(4) Business expansion overseas
When unexpected events have occurred in the
country's political situation, economy, etc., and thepolitical and economic situation has deteriorated(5) Exchange rate fluctuations
Fluctuations in exchange rates when local currencydenominated transactions, assets, liabilities, revenue,
and expenses are converted into yen by the company(6) Fluctuations in interest rates
Future interest rate conditions, such as a rapid risein interest rates(7) Legal regulations
Adaption when laws concerning the operation of
construction businesses (construction industry laws,
construction recycling laws, etc.) are revised
When unforeseen circumstances such as environmental
pollution caused by construction work have occurred(8)	Effects of natural conditions on the construction
business
Geological or ground conditions, natural conditions
such as weather, unexpected phenomena in thenatural environment, etc.
(9)	Occupational disasters and accidents in theconstruction business
Expenses required for compensation, etc. in the eventof occupational disasters or accidents(10) Defects in construction, etc.
Major expenses which may be incurred for repair inthe case of major defects in structures, etc. which wehave constructed

The Kumagai Gumi Group Corporate Report 201941

Business
Overview

Group Strengths

Kumagai Gumi only (Unit: billion yen)

Subsidiaries (Unit: billion yen)

Sales

Operating profit

300
200

30

288.1

21

19.9
100

21

17.9

10

100

86.2

84.4

20

3

0

0

FY2015FY2016FY2017

97.5

93.9

83.5

50
10

13
FY2014

Operating profit

307

294.5

273.7

267.4

Sales

FY2018

4.5

5

5.3

FY2017FY2018

3.9

5

0

0

FY2014FY2015FY2016* Value after deduction of intra-group transactions

Kumagai Gumi Co., Ltd.

General Contractor

Kumagai Gumi implements its projects in close collaboration
with its group companies by effectively utilizing and mutuallycomplementing the technologies, expertise, products andmanagement resources held by the group companies, so as
to maximize its collective capabilities.

h ttps://www.kumagaigumi.co.jp/
en/index.html

Corporate
Information

Road paving•
Manufacture and sales ofasphalt mixture, etc.

GAEART Co., Ltd.

GAEART Co., Ltd. engages in construction work centered on
paving services for roads, airports, harbors, bridges, etc., as wellas the manufacture and sale of asphalt paving materials, etc.

Capital
Sales

Civil Engineering

Construction

Overseas andOther Business

P44

P45

P46

K&E Co. Ltd.

As a specialist in building renovation, K&E Co., Ltd.
comprehensively offers planning and design incorporatingbuilding surveys and diagnosis, seismic diagnosis andreinforcement design, and proposals for comfortable spaces, aswell as construction work leveraging technological capabilities,
after-sales service, and more.

Established
Head office
CapitalSales

January 2001
2-1 Tsukudocho,
Shinjuku-ku, Tokyo¥300,000,000¥23,618,000,000(FY ended March 2019)354 (as of March 2019)

No. ofemployees
Representative Kazuhisa Iwama
Officer
http://www.k-and-e.co.jp/ (Japanese only)

42

Technos Co., Ltd.

At its Toyokawa Factory headquarters, Technos designs,
manufactures, and installs steel segments for shield tunnels,
construction machinery, and soil decontamination equipment,along with leasing of the ACEUP steel frame construction
method.

Trading company specializingin construction

FATEC Co., Ltd.

FATEC Co., Ltd. is a trading company that sells construction
materials and equipment developed with state-of-the-art
technologies. Currently the company is engaged in thedevelopment of technologies related to maintenance andrenovation, primarily in the construction sector. It is also
advancing development of independent walking aid devices in
the welfare and nursing care sector.

P54

Established
Head office

Building renovation

Public works renewal•
Equipment manufacture

November 1963
8-27 Shinogawamachi,
Shinjuku-ku, Tokyo¥1,000,000,000¥50,623,000,000(FY ended March 2019)756 (as of March 2019)

No. ofemployees
Representative Kenji Yamamoto
Officer
https://www.gaeart.com (Japanese only)

Construction in Taiwan

Taiwan Kumagai Co., Ltd.

Taiwan Kumagai Co., Ltd. was established in Taiwan in 1974
as a Kumagai Gumi Group company. It has a best-in-classtrack record as a general contractor, bringing Kumagai Gumi
technology to Taiwan.

Established
Head office
CapitalSales

December 1974
Room 8 (1408), 12F, No.
205, Section 1, Dunhua
South Road, Taipei, Taiwan
600,000,000 NTD¥10,252,000,000(FY ended December 2018)
182 (as of March 2019)

No. ofemployees
Representative Toyohiko Ina
Officer
http://www.taiwankumagai.com.tw/

Established
Head office
CapitalSales

February 1996
2-1 Honohara, Toyokawa,
Aichi Prefecture¥470,000,000¥8,366,000,000(FY ended March 2019)173 (as of March 2019)

No. ofemployees
Representative Eiji Morita
Officer
http://www.technos.info (Japanese only)

Production of construction
drawings•
Education businessTechno-Space Creates
Co., Ltd.

Utilizing CAD and information systems, Techno-Space Createsprovides software services that span the planning phase to thecompletion of projects, including preparation of construction
and architectural schematics and application documents.

Established
Head office
CapitalSales

November 1993
9F Showa Bldg., HigashiIkebukuro 3-12-12,
Toshima-ku, Tokyo¥30,000,000¥797,000,000(FY ended March 2019)57 (as of March 2019)

No. ofemployees
Representative Tsukasa Wakuta
Officer
https://www.technsp.co.jp/ (Japanese only)

Established
Head office
CapitalSales

June 1989
2-1 Tsukudocho,
Shinjuku-ku, Tokyo¥20,000,000¥3,062,000,000(FY ended March 2019)8 (as of March 2019)

No. ofemployees
Representative Takayuki Aono
Officer
http://www.fa-tec.co.jp/ (Japanese only)

Clerical services•
Insurance agency

Technical Support Co., Ltd.

Technical Support supports the strengthening of clients' corebusiness through outsourcing services for vital but complex
work and work that requires expert knowledge. It also offers
insurance plans as an agency handling both life and non-life
insurance.

Established
Head office
Capital
Sales

July 1995
2-1 Tsukudocho,
Shinjuku-ku, Tokyo¥70,000,000¥556,300,000(FY ended March 2019)37 (as of March 2019)

No. ofemployees
Representative Hiroshi Shimura
Officer
http://www.tsp-kumagai.co.jp/ (Japanese only)

The Kumagai Gumi Group Corporate Report 201943

Business
Overview

Business
Overview

Civil Engineering

Architectual Construction

We will quickly respond to expanding societal issues such as increasingly

We will strengthen solution-oriented sales that resolve customer issues, andsevere natural disasters, social infrastructure reaching the stage of large-

will build relationships of trust with customers.

scale renewal, and the inexorably declining birthrate and aging population.

With a goal of 250 billion yen in net sales and 22 billion yen in operating

Through manufacturing, we will deliver inspiration and happiness that leads

income 5 years from now,

to an abundant society in the next generation.

each and every one of us will continue our efforts to raise productivity andstrengthen Worksite Excellence.

Senior Managing Director, Senior Managing Executive, General Manager of the Railway Project
Promotion Division of Civil Engineering Management Division

Senior Managing Director, General Manager of the Architectural Management Division

Yoshihiko Kato

Yoshiaki Ogawa

Progress of the Medium-Term Management Plan (2018-2020)

Strategy 1

Construction
work Maintenanceand expansion ofcontracted work
Strategy 2

Creation of new
businesses
Strategy 3

Strategic
partnerships withother companies

Expansion oforders for major
construction

Major results in FY2018

Future growth and issues

Orders received for difficult construction,
including survey design leveraging oursolutions capabilities

Integration, analysis, and sharing of digital data;technology transfer and development
Improvement of operational efficiency andelimination of occupational accidents

Handling of natural Launch of KUMA-DECS*, which cancontribute to disaster recovery
disasters
PPP/PFI projects

Accumulation of knowledge and technology
Approaches to diverse PPP/PFI methods
concerning the final disposal site maintenance(concessions, comprehensive private contracting,and operation business Efforts towardetc.)hydroelectric power generation concessions

Renewable energy Accumulation of construction techniques forsolar, wind, geothermal, and biomass powerbusiness
generation Participation in EPC as investor
Large-scale
infrastructure
renewalEvolution of unmanned construction machineryand high-function operation rooms Training ofoperators

Receipt of large-scale renewal projects forexpressways through formation of multiindustries JV, and accumulation of renewal
construction technologies

Partnership with
Expansion of use of wood materials in civil
Sumitomo Forestry engineering sector

Strengthening of support for wind power andbiomass power generation Expansion of therenewable energy business domain
Practical use and diffusion of cotta deck slabs inlarge-scale expressway renewal projects
Application of civil engineering technology toforest industry* A name incorporating an acronym for Disaster, Emergency, Construction work, and Support.

44

Progress of the Medium-Term Management Plan (2018-2020)

Domestic sales(billion yen)

106.8

111.6

120

Strategy 1
2017

2018

2020

2022

150

Objectives(FY)

Construction work
Maintenance andexpansion ofcontracted work

Domestic operating income(billion yen)

5.8

(FY)

Future growth and issues● Lodging facility sector, capturing thecontinuous expansion of inbound demand● Medical and welfare sector, in preparation for
the aging society● High-productivity large-scale logistics
facilities sector and large-scale commercial
facilities sector● Production market sector for food plants, etc.
● Continuous efforts toward "No.1 in Safety,
Quality and Environment Management"● Sales development leveraging our track record in theluxury grade hotel market● Problem resolution capability and solutions capability
through solutions-oriented sales● Structure for company-wide initiatives in large-scaleconstruction● Creation of track record in accommodating halal, etc.
● Strengthening of Worksite Excellence andtechnological capabilities
Use of BIM/IT● Expansion of business domain in the mediumto large-scale wood structure market● Promotion of urban renewal andredevelopment projects● Promotion of technology development for woodenbuildings● Promotion of participation in urban redevelopment
projects● Strengthening of initiatives toward shrine and temple
renovation projects● Strengthening of partnership with Sumitomo
Forestry● Promotion of active external alliances● Expansion of the sales domain for wooden buildings● Collaboration with plant manufacturers in thenationwide incineration facility renewal sector

11
8.6

2017

Major results in FY2018
130

2018

8

2020

Strategy 2

2022

15

Creation of new
businesses

Objectives■ Looking back on FY2018■ Future initiatives

In FY2018, orders for private-sector construction, including
the Chuo Shinkansen maglev line and renewable energy
projects, were robust, reaching the highest level in nearly
20 years. More than the amount of the orders, I believe that
there was value in the opportunities that we gained to further
polish our Worksite Excellence through difficult projects, andto connect these more advanced technological development.
These projects included the Kitashinagawa portion of the
Chuo Shinkansen maglev line No. 1 metropolitan tunnel(length 9.2 km, shield construction), the Omori portion of
the Chuo Shinkansen maglev line No. 1 Chukyo tunnel(length 4.9 km, mountain tunnel), the Arishima portion of the
Hokkaido Shinkansen Yotei tunnel (length 4.2 km, SENS
method tunnel construction), and Tohoku Expressway
Towada renewal construction (length 66 km, bridge deckslab replacement construction).
In terms of profits, too, we saw considerable improvementfrom the previous fiscal year due to the strength of major
construction projects. Amid this increase in construction
work on hand, we recognize that furthering the evolutionof the IoT, AI, and unmanned construction technology toachieve substantive productivity increases in construction is
an issue that we face in successfully reforming work styles,
especially in correcting long working hours.
The construction industry is seeing an increase in newworkers coming from other industries or from overseas, andensuring safety and proper treatment for unfamiliar faces is
a new issue.

To respond to long-term changes in the constructionindustry, we have worked to enhance our main businessof construction contracting, and have expanded Kumagai
Gumi's "defensive range" into the domains of projectplanning, such as PPP/PFI, concessions, ECI, and DB,
and domains of maintenance, repair, and renewal, as seenin large-scale renewal of expressways. Looking ahead, we
will build up new know-how gained through construction
work, and and will enter the stage of connecting this to ournext projects. We will start accumulating digital data as afirst step toward this. We will collect video, CIM, 3D data,
and more in the cloud, and analyze and share these, sothat we can connect them to the transfer and developmentof technology and to the streamlining of work. We will also
continue making efforts in overseas civil engineering andrenewable energy projects.
A succession of natural disasters occurred in 2018.
Kumagai Gumi responded to requests for aid from
afflicted areas, dispatching employees, heavy machinery,
operators, and more. In order to respond even more quickly,
we launched the KUMA-DECS disaster recovery team
together with 17 major civil engineering company membersof "Yuuei Kyoryoku Kai*". We also began training operators
in parallel with the evolution of unmanned construction
machinery and high-function operation room technologies,
and will prepare for the occurrence of disaster.
* A group composed of 868 (as of April 1, 2019) partner companies of Kumagai
Gumi.

Strategy 3

Strategic partnerships
with other companies

Domestic sales(billion yen)

186.8

195

2017

2018

240

250

2020

2022

Objectives(FY)

Domestic operating income(billion yen)

22
18

12.4

12.9

2017

2018

(FY)

2020

2022

Objectives■ Looking back on FY2018■ Future initiatives

In order volume, we were able to greatly surpass ourtargets. Reasons for this include apt response to themarketplace though the strengthening of initiatives
for large-scale projects and the strengthening ofsolutions-oriented sales that resolve customers'
issues in the execution of their projects, which led
to our winning construction orders while building
relationships of trust with customers.
Looking at net sales, delayed deliveries ofmaterials had some effect, leading to results slightly
under target. However, we maintained a high level ofprofit margin.
In addition, our work on Roadside Station Mashiko(Mashiko, Tochigi Prefecture) and Tajimi City
Crematorium Hanadate Yasuraginomori (Tajimi, Gifu
Prefecture) received BCS awards for architectural
work
incorporating
advanced
construction
technology. We will continue to further deepen andhand down our technologies.

The origins of our business lie in manufacturing with safety andintegrity, to deliver quality that customers can trust. We will notchange in our goal of working as one to achieve "Be No.1 in
Safety, Quality and Environment Management."
Looking at the environment for orders, we foresee robust
construction demand, including in the hotel sector due toinbound demand, and the medical and welfare sector in
preparation for the aging of society.
We will continue striving to resolve customers' issues inadvancing projects, and will focus on strengthening our project
proposal capabilities. In addition, we will strengthen our urban
renewal business, including the urban district redevelopment
business and real estate development business. Through suchsales activities, we aim to make a special mission of increasingorders in private-sector architecture.
Moreover, viewing wood and the promotion of building withwood as a growth sector, we established a new Medium- toLarge-Scale Wood Architecture Promotion Office. We will
highlight the merits of wood in proposals and productization
aimed at stores, hotels, senior facilities, and more.
Through the promotion of BIM and electronic commerce, theactive adoption of ICT tools in workplaces, and other initiatives,
we will promote the enhancement of productivity.
The Kumagai Gumi Group Corporate Report 201945

Business
Overview

Overseas Projects and Other BusinessWe will respond flexibly to qualitative and quantitative changes in thedomestic construction market, will aim to diversify our revenue baseoutside of the construction contracting business to secure a stablerevenue base, and will promote our overseas business, PPP/PFI/
concession business, and development business.

Namxouang Aquaculture Development Center Construction (Vientiane special municipal zone, Laos)

Progress of the Medium-Term Management Plan (2018-2020)
Major results in FY2018

Future growth and issues● Completion of Namxouang Aquaculture
Development Center Construction (Laos)● Construction of plants by Japanesecompanies is at a peak (India)● Receipt of order for the Yulon Motor newcommercial mall, said to be a posthumouswork of the late Zaha Hadid (Taiwan
Kumagai/Taiwan)● Aim to win construction orders for ODA projects
and from Japanese companies● Winning orders for ongoing and related
construction, and preparing a managementfoundation (India)● While aiming for continued receipt of orders,also work toward receipt of orders for landmark
construction projects (Taiwan Kumagai/Taiwan)

Overseas● Receipt of order for Tate's Cairn Tunnel MOM
Project, the second of the Hong Kong MOM
projects● Aim to continue winning orders for MOM projects
in Hong Kong
● Aim to advance into new development projects incooperation with local developers (Hong Kong)

Domestic● Initiatives aimed at large and diverse
projects, and self-supporting businesses● Promotion of urban renewal andredevelopment projects● Acceleration of entry into businesses including
investment● Promotion of entry into urban redevelopment
projects

Overseas● Collaborative projects overseas with
Sumitomo Forestry, etc. are underconsideration● Internal consideration of business expansion
destination, and execution

Strategy 1

Maintain andincrease contracted
construction
businesses

Strategy 2

Create new
and innovative
businesses

Overseas

Strategy 3

Form strategic
alliances with othercompanies■ Looking back at FY2018■ Future initiatives

Overseas Projects
In 2018 we completed construction of the Namxouang
Aquaculture Development Center in Laos, a pro bono
government project that we were awarded in 2017.
In Myanmar, we have received orders for ongoing
construction work from Japanese companies. In
India, orders received by our local subsidiary for plant
construction for Japanese companies have reached apeak.
Our subsidiary in Taiwan, in recognition of its trackrecord, was able to win the order for the Yulon Motor newcommercial mall, considered a posthumous work of thelate Zaha Hadid. The project is expected to become a newlandmark when completed.
To win construction orders, we are constructing a system
in Japan to support overseas sites. In FY2018, with oursights on the invigoration of our overseas business, we
held the 1st Global Staff Meeting in Hong Kong, targeting
global staff at overseas sites.
In Hong Kong, we also received the order for the Tate's
Cairn Tunnel MOM Project, coming after the Eastern
Harbour Crossing (EHC) MOM Project.

Overseas Projects
The Kumagai Gumi Group will continue overseas
business activities with a focus on Taiwan, Hong Kong,
Southeast Asia, and South Asia. We will expand orders
received for government pro bono construction work,
and, with regard to private-sector construction, will aim to
win orders by leveraging our record of success and ourtrusted relationships in Japan.
As a part of our global human resources development,
we will dispatch architectural staff to worksites in Myanmar
and India for short-term training of about two months. We
will also send clerical staff on two-month assignments toour subsidiary in Bangkok.
In Hong Kong, we are seeking to acquire an extensionof our contract for the Eastern Harbour Crossing (EHC)MOM Project. We are engaged in specific discussions
with Sumitomo Forestry regarding the development
business, focused on Southeast Asia. We are also
studying investment projects involving local subsidiaries.

Development businessWe created a new Urban Development Group tostrengthen our approach to urban renewal andredevelopment projects, one of the strategies of our
Medium-term Management Plan.
Moreover, we were recognized for our contribution
as a subsidized project contractor in a project for thedevelopment of compelling residential areas in the
Wakabayashi district of Shinjuku-ku, Tokyo, throughneighborhood fireproofing and living environment
improvements involving the replacement of dense
wooden construction. This has led to receiving orders forjoint rebuilding work.
PPP/PFI/concession businessIn response to the future contraction of the Japaneseconstruction market, we are advancing initiatives involving
project participation with accompanying investment,
specifically PPP and PFI projects, concession projects,
infrastructure operation projects, and renewable energy
projects, to secure a more diversified revenue baseoutside of construction contracting and secure a stablerevenue base that will smooth out fluctuations in revenue.
In the past, we have participated in PPP and PFI
projects, mostly service purchase-oriented projects.
We are now advancing initiatives for large and diverse
projects and self-supporting projects, and since FY2017
have continued bidding on these together with concession
projects.

46

Development businessWith our sights on the creation of opportunities toparticipate as the operating party in projects accompanying
investment, we created an Urban Development
Department within the Architectural Management Division.
We will further strengthen our approach to development
businesses, including urban renewal and redevelopment
projects.
In the urban district redevelopment business, thisfiscal year we will collect information on urban district
redevelopment with a focus on becoming a business
partner or designated business agent, and willconduct sales activities aimed at resolving issues incommercialization.
Regarding our approach to real estate development
projects in which we act as business owner, we will
actively consider proposals for commercialization.
PPP/PFI/concession business
Regarding the concession business that forms one of thepillars of Japan's future growth strategy, the infrastructure
operation business, and the renewable energy businessthat promises stable revenue, we are positioning these as
central sectors for our company as well, and will tackle
these over the medium- to long-term.
Looking ahead, we will more actively tackle all of thesebusiness sectors.

The Kumagai Gumi Group Corporate Report 201947

Financial
Information

Analysis of Financial and Management Performance

Looking at Japan's economy during the consolidated
fiscal year, the continuing high level of corporate earnings
showed some signs of weakness. However, capital
expenditures continued their upward trend, consumer
spending remained solid against a backdrop of steady
improvement in employment and wage levels, and mild
recovery continued in business conditions.
In the construction industry, although residential
construction remained generally flat, corporate construction
investment increased and public works investment maintained
its high level, continuing a favorable business environment.
Looking at our group's consolidated performance, net sales
increased 4.0% from the previous fiscal year to 389 billion
yen. Operating income was 26.4 billion yen and ordinary
income was 26.5 billion yen due to improvement in grossprofit ratio. Current net income attributable to shareholdersof the parent company was 13.3 billion yen, due to factors
including the recording of special losses (including provision
for loss related to the Anti-monopoly Act).

■ Financial status
Assets (total assets: +6.0% year on year)
Total assets increased by 20 billion yen (6.0%) from theend of the previous consolidated fiscal year to 353.7
billion yen.
Current assets increased by 13.8 billion yen (5.1%) fromthe end of the previous consolidated fiscal year to 287.9
billion yen. Notes receivable and accounts receivablefrom completed construction contracts increased by 36.4
billion yen, due to an increase in completed construction
work over the end of the fiscal year.
Non-current assets increased by 6.2 billion yen (10.5%)
from the end of the previous consolidated fiscal year to65.6 billion yen. Tangible non-current assets increased by
5.3 billion yen, due to factors including the acquisition ofbusiness real estate.
Liabilities (+5.6% year on year)
Liabilities increased by 11.5 billion yen (5.6%) from the endof the previous consolidated fiscal year to 218.8 billion yen.
Current liabilities increased by 13.2 billion yen (7.5%)
from the end of the previous consolidated fiscal year to
191.1 billion yen. In addition to an increase of 10.8 billion
yen in notes receivable and accounts receivable fromcompleted construction contracts, etc. due to an increasein construction sales over the end of the fiscal year, werecorded a provision for losses of 3.9 billion yen related to
the Anti-monopoly Law.
Fixed liabilities decreased by 1.7 billion yen (-6.0%)
from the end of the previous consolidated fiscal year to27.6 billion yen.
Net assets (+6.7% year on year)
Net assets increased by 8.5 billion yen (6.7%) from theend of the previous consolidated fiscal year to 134.8 billion
yen. Retained earnings increased by 9.1 billion yen due tofactors including the recording of 13.3 billion yen in current
net income attributable to shareholders of the parent
company, despite distribution of 4.2 billion yen in surplus.
Equity ratio increased 0.2 points from the end of theprevious consolidated fiscal year to 38.1%.

48■ Management performance
Net sales (+4.0% year on year)
Net sales increased by 15 billion yen (4.0%) from theprevious consolidated fiscal year to 389 billion yen, due
to an increase in construction work brought forward at the
beginning of the period.
Gross profit (+13.2% year on year)
Gross profit increased by 5.3 billion yen (13.2%) from theprevious consolidated fiscal year to 45.5 billion yen, due
to improvement in gross profit margin. Gross profit margin
improved 0.9 points from the previous consolidated fiscal
year to 11.7%.
Selling, general and administrative expenses (+10.9%
year on year)
SG&A expenses increased by 1.8 billion yen (10.9%) fromthe previous consolidated fiscal year to 19 billion yen,
due to factors including increased personnel expenses
caused by revised employee treatment.
Operating profit (+14.9% year on year)
Operating income increased by 3.4 billion yen (14.9%)
from the previous consolidated fiscal year to 26.4 billion
yen, due to improvement in gross profit. Operating income
margin improved 0.6% from the previous consolidated
fiscal year to 6.8%.
Non-operating profit and loss
Non-operating profit and loss increased 0.1 billion yen
from the previous consolidated fiscal year to 0.6 billion
yen, due to factors including an increase in dividend income.
Non-operating expenses decreased by 0.3 billion yen
from the previous consolidated fiscal year to 0.5 billion
yen, due to factors including a decline in expenses related
to capital business tie-ups.
Ordinary profit
Ordinary income increased by 3.8 billion yen (17.1%) fromthe previous consolidated fiscal year to 26.5 billion yen, due
to increases in operating income and non-operating income.
Extraordinary profit and loss
We recorded extraordinary profit of 0.1 billion yen, including
70 million yen in gain on sales of investment securities.
We recorded an extraordinary loss of 5.5 billion yen,including 1.3 billion yen in provision for contingent loss
as an additional expense related to the condominium in
Nishi-ku, Yokohama in which construction defects by ourcompany were identified in 2014, and 3.9 billion yen inprovision for loss related to the Anti-monopoly Act basedon the draft order for payment of surcharge in accordancewith the Anti-monopoly Act received by GAEART Co., Ltd.
Income taxes, etc.
We recorded adjusted income taxes, etc. of 0.4 billion yen
due to residential tax and business tax of 7.3 billion yen,review of recoverability of deferred tax assets, etc.
Profit attributable to owners of parent (-15.7% year on year)
Current net income attributable to shareholders of theparent company decreased by 2.4 billion yen (-15.7%)
from the previous consolidated fiscal year to 13.3 billion
yen. Return on equity (ROE) declined 5.1% from theprevious consolidated fiscal year to 10.2%.
A comparison with the performance target values set
in the Medium-term Management Plan (FY2018-2020) –Strategies for Accelerating Growth is as follows.

■ Management performance by segment

Consolidated performance
Metrics
Net sales(million yen)

Operating profit(million yen)

Operating profit
margin (%)

FY2018(Planned)

FY2018(Performance)

Difference

400,000

389,058(10,941)

24,00026,464

2,464

6.0

6.8

0.8

■ Status of cash flow
Cash flow from operating activities
Cash flow from operating activities was negative 12.3 billion
yen (positive 17.6 billion yen in the previous consolidated
fiscal year), due to factors including an increase intrade receivables accompanying increased completed
construction work over the end of the fiscal year.
Cash flow from investing activities
Cash flow from investing activities was negative 7.3 billion
yen (negative 14.0 billion yen in the previous consolidated
fiscal year), due to factors including the acquisition oftanglble non-current assets.
Cash flow from financing activities
Cash flow from financing activities was negative 6.1 billion
yen (positive 30.8 billion yen in the previous consolidated
fiscal year), due to factors including payment of dividends.
Cash and cash equivalents
The balance of cash and cash equivalents at the end of
the current consolidated fiscal year, including a decline
due to currency conversion, declined by 26.0 billion yen(24.0%) from the end of the previous consolidated fiscal
year to 82.4 billion yen.

■ Capital resources and liquidity of funds
Within our group's demand for working capital, the greatest
demand is for operating expenses including construction
expenses involving construction projects and SG&A
expenses. Capital demand for the purpose of investment isprimarily for equipment investment.
The basic policy of our group is to stably secure sourcesof the funding and liquidity necessary for business operation.
Short-term working capital is based on self-funding
and short-term borrowings from financial institutions.
Capital related to equipment investment and long-termworking capital are based on self-funding and long-termborrowings from financial institutions.
Our balance of interest-bearing debt at the end of theconsolidated fiscal year was 12.8 billion yen.

Civil Engineering
Orders received increased by 19.9% from the previous
consolidated fiscal year to 155.7 billion yen, due to factors
including growth in the railway sector.
Net sales increased by 4.5% from the previous
consolidated fiscal year to 111.6 billion yen due to an increasein construction work brought forward at the beginning of theperiod. Operating income increased by 48.2% in the same
period to 8.6 billion yen, due to increased net sales and an
improvement in gross profit margin.
Construction
Orders received increased by 18.4% from the previous
consolidated fiscal year to 298.2 billion yen, due to factors
including growth in the medical and welfare facilities sector
caused by rush demand prior to the consumption tax hike.
Net sales increased by 4.1% in the same period to 195.4
billion yen, due to an increase in construction work brought
forward at the beginning of the period. Operating income
increased by 2.7% in the same period to 12.4 billion yen, due toincreased net sales and an improvement in gross profit margin.
Subsidiaries
Net sales increased by 3.9% overall in the same period to
97.5 billion yen, due to an increase in construction work
brought forward at the beginning of the period at GAEART
Co., Ltd. and an increase in orders. Operating income
increased by 5.0% in the same period to 5.3 billion yen, due
to an improvement in gross profit margin and subsequent
increase in gross profit.

■ Dividends
Our basic policy for distribution of profits is to fairly andstably return profits to shareholders, taking into accountfactors including our current business performance, our
medium- to long-term business outlook, and the businessenvironment, while striving to enhance internal reserves
for the purpose of enhancing our management foundationand expanding business income.
At the end of the 82nd term, we paid a dividend of 100
yen per share, an increase of 10 yen per share from the
90 yen per share in the previous term, which had included
a dividend of 20 yen per share to commemorate thecompany's 120th anniversary.
Looking ahead, we will place further importance on the
return of profits to shareholders, and will continue returning
profits with the goal of a 30% dividend propensity as statedin the Medium-term Management Plan (FY2018-2020).
* Numbers are rounded down to the nearest 100 million yen.

The Kumagai Gumi Group Corporate Report 201949

Financial
Information

Consolidated Financial Statements

Consolidated balance sheet(Unit: millions of yen)

FY2017(As of March
31, 2018)

FY2018(As of March
31, 2019)

AssetsLiabilities

Current assets

Current liabilities

Cash and deposits¥108,536¥82,449

Notes receivable, accounts
receivable from completed
construction contracts andother139,287

175,696

FY2018(As of March
31, 2019)

Notes payable, accounts
payable for construction
contracts and other¥76,043¥86,893

Electronically recorded
obligations - operating

29,29733,172

4,090

3,030

Costs on uncompleted
construction contracts

6,905

7,300

Short-term loans payable
Income taxes payable

2,871

4,821

Accounts receivable - other

12,17815,696

21,527

14,739

Other

7,309

6,998

Allowance for doubtful
accounts

(151)

(191)

Advances received on
uncompleted construction
contracts
Deposits received

20,70019,411

Total current assets

274,066

287,949

Provision for warranties forcompleted construction

433

467

Provision for loss on
construction contracts

438

626

11,341

10,736–

3,933

Non-current assets
Property, plant andequipment
Buildings and structures

17,094

18,378

Machinery, vehicles, tools,
furniture and fixtures

16,374

17,464Land

10,524

14,587

Leased assets

262

398

Construction in progress

618

730

Accumulated depreciation(25,370)(26,723)

Total property, plant andequipment

19,504

24,836441

484

Intangible assets
Investments and otherassetsInvestment securities

24,382

24,438Long-term loans
receivable

858

858

Long-term non-operating
accounts receivable

235

157

Claims provable inbankruptcy, claims provablein rehabilitation and other69

40

Deferred tax assets

11,427

11,045

Other

2,818

4,014

Allowance for doubtful
accounts

(271)

(189)

Total investments andother assets

39,52040,365

Total non-current assets

59,466

65,686

Share issuance cost

132

82

Total deferred assets

132

82

¥333,665¥353,718

Deferred assets

Total assets

50

FY2017(As of March
31, 2018)

Provision for contingent loss
Provision for loss on
anti-monopoly act
Provision for bonuses

3,911

3,911

Other

7,188

9,397

177,845

191,141

10,389

9,819

–

42

16,677

16,499Total current liabilities
Non-current liabilities
Long-term loans payable
Provision for stock payments
Retirement benefit liability
Other

2,378

1,331

Total non-current liabilities

29,444

27,692

Total liabilities

207,290

218,834

Capital stock

30,10830,108

Capital surplus

25,15725,157Retained earnings

68,54077,642

Treasury shares

(189)

(426)

123,616

132,481

2,699

2,501

Foreign currencytranslation adjustment

516

349

Remeasurements ofdefined benefit plans

(457)

(449)

Total accumulated othercomprehensive income

2,758

2,402

Net assets
Shareholders' equity

Total shareholders' equity
Accumulated othercomprehensive income
Valuation difference on
available-for-sale securities

Consolidated statement of income

Total net assets

126,374

134,883

Total liabilities and net assets¥333,665¥353,718(Unit: millions of yen)
FY2018(Apr 1, 2018 Mar 31, 2019)

FY2017(Apr 1, 2017 Mar 31, 2018)
Net sales of completed construction contracts
Cost of sales of completed construction contracts
Gross profit on completed construction contracts
Selling, general and administrative expenses
Operating profit
Non-operating income
Interest income
Dividend income
Share of profit of entities accounted for using equity method
Foreign exchange gains
Compensation for damage income
Other
Total non-operating income
Non-operating expenses
Interest expenses
Foreign exchange losses
Commission for syndicate loan
Capital and business alliance expenses
Amortization of share issuance cost
Other
Total non-operating expenses
Ordinary profit
Extraordinary income
Gain on sales of non-current assets
Gain on sales of investment securities
Gain on sales of memberships
Other
Total extraordinary income
Extraordinary losses
Loss on sales of non-current assets
Loss on retirement of non-current assets
Compensation for damage
Loss on litigation
Provision for contingent loss
Provision for loss on anti-monopoly act
Other
Total extraordinary losses
Profit before income taxes
Income taxes - current
Income taxes - deferred
Total income taxes
ProfitProfit attributable to owners of parent¥374,019
333,789
40,23017,18823,041¥389,058
343,527
45,53019,065
26,464

38
106
144
–
85
148
524

34
329
159
3
10
91
629

241
28
223
236
16
136
883
22,682

231
–
183
–
49
75
541
26,553

22
0
39
2
64

32
73
0
–
106

17
84
16
49
481
–
1
651
22,095
5,386
925
6,311
15,783¥15,783

–
63
73
125
1,349
3,933
7
5,553
21,106
7,341
452
7,793
13,312¥13,312

Consolidated statement of comprehensive income(Unit: millions of yen)
FY2017(Apr 1, 2017 Mar 31, 2018)

ProfitOther comprehensive income
Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Remeasurements of defined benefit plans, net of tax
Share of other comprehensive income of entities accounted for using equity method
Total other comprehensive income
Comprehensive income
Comprehensive income attributable toComprehensive income attributable to owners of parent
Comprehensive income attributable to non-controlling interests

FY2018(Apr 1, 2018 Mar 31, 2019)¥15,783¥13,312(1,722)
127
(83)
(7)
(1,685)¥14,098

(196)
(167)
8
(1)
(356)
¥12,956

14,098–

12,956–

The Kumagai Gumi Group Corporate Report 201951

Financial
Information

Consolidated Financial Statements

Consolidated statements of changes in equity(Unit: millions of yen)

Consolidated statement of cash flows
FY2017(Apr 1, 2017 Mar 31, 2018)

FY2017 (Apr 1, 2017 - Mar 31, 2018)
Shareholders' equity
Capitalstock

Balance at beginning ofcurrent period

CapitalsurplusRetainedearnings¥13,341¥7,880 ¥55,377

16,767

16,767

Accumulated other comprehensive income

Valuationdifference on
Total
Treasuryshareholders’ availablesharesfor-saleequitysecurities¥(753)¥75,845¥4,428Foreigncurrencytranslation
adjustment¥388

RemeaTotal
surements accumulatedof definedotherbenefitcomprehensive
plansincome¥(374)¥4,443Total
net
assets¥80,288

Changes of items during
periodIssuance of new shares

33,53433,534

Dividends of surplus(2,621)(2,621)(2,621)

Profit attributable toowners of parent

15,783

15,783

15,783

(77)

(77)

(77)

641

1,151

1,151

Purchase of treasury
shares
Disposal of treasury
shares509

Net changes of
items other thanshareholders’ equity
Total changes of items
during period

16,767

17,276(1,729)127(83)(1,685)(1,685)(1,685)46,086

13,162564

47,771(1,729)127(83)

Balance at end of current¥30,108 ¥25,157 ¥68,540
period¥(189)¥123,616¥2,699¥516¥(457)¥2,758 ¥126,374

FY2018 (Apr 1, 2018 - Mar 31, 2019)
Shareholders' equity
Capitalstock

Balance at beginning ofcurrent period

CapitalsurplusRetainedearnings¥30,108 ¥25,157 ¥68,540

Accumulated other comprehensive income

Valuationdifference on
Total
Treasuryshareholders’ availableshares
equityfor-salesecurities¥(189)¥123,616¥2,699Foreigncurrencytranslation
adjustment¥516

RemeaTotal
surements accumulatedof definedotherbenefitcomprehensive
plansincome¥(457)

Total
net
assets¥2,758 ¥126,374

Changes of items during
periodDividends of surplus(4,210)(4,210)(4,210)

Profit attributable toowners of parent

13,312

13,312

13,312

(238)

(238)

(238)

1

1

1

Purchase of treasury
shares
Disposal of treasury
shares0

Net changes of
items other thanshareholders’ equity
Total changes of items
during period

52

–

0

(197)

(167)

8

(356)

(356)

(356)

8,508

9,102

(237)

8,865

(197)

(167)

8

Balance at end of current¥30,108 ¥25,157 ¥77,642
period¥(426)¥132,481¥2,501¥349¥(449)(Unit: millions of yen)

Cash flows from operating activities
Profit before income taxes
Depreciation
Amortization of share issuance cost
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for contingent loss
Increase (decrease) in provision for loss on anti-monopoly act
Increase (decrease) in net defined benefit liability
Interest and dividend income
Interest expenses
Foreign exchange losses (gains)Share of loss (profit) of entities accounted for using equity method
Loss (gain) on valuation of investment securities
Loss (gain) on sales of non-current assets
Loss on retirement of non-current assets
Decrease (increase) in notes and accounts receivable - trade
Decrease (increase) in costs on uncompleted construction contracts
Increase (decrease) in notes and accounts payable - trade
Increase (decrease) in advances received on uncompleted construction
contracts
Decrease (increase) in other other assets and other
Other, net
SubtotalInterest and dividend income received
Interest expenses paid
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of investment securities
Proceeds from sales of investment securities
Purchase of shares of subsidiaries and associates
Payments of loans receivableCollection of loans receivable
Other, net
Net cash provided by (used in) investing activities
Cash flows from financing activities
Net increase (decrease) in short-term loans payable
Proceeds from long-term loans payable
Repayments of long-term loans payable
Proceeds from issuance of common shares
Proceeds from disposal of treasury shares
Purchase of treasury shares
Cash dividends paid
Other, net
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

FY2018(Apr 1, 2018 Mar 31, 2019)¥22,095
1,735
16
(13)
(2,575)–(1,746)
(145)
241
30
(144)
(0)
(4)
84
(14,814)
209
8,048
6,910

¥21,106
1,934
49
(38)
(605)
3,933
(165)
(363)
231
(6)
(159)
(73)
(32)
63
(36,504)(394)
13,263(6,759)

(668)
3,879
23,138147(242)(5,402)
17,641377(2,975)(7,119)371(227)(5,423)(12,398)(3,763)130(240)(7,245)15(226)

0(10,271)
(52)
186
(0)
(14,010)

217
(92)
(107)
159
(99)
(7,379)

(420)
8,884
(9,407)33,3851,151(75)(2,621)(41)
30,856
11934,60673,926¥108,532(690)
550(1,490)–1(236)(4,210)(50)(6,126)(181)(26,085)
108,532¥82,446¥2,402 ¥134,883

The Kumagai Gumi Group Corporate Report 201953

Corporate Information

Organizational Chart■ Domestic Offices:	Hokkaido Office, Tohoku Office, Tokyo Metropolitan
Area Office, Nagoya Office, Hokuriku Office, Kansai
Office, Chugoku/Shikoku Office, Shikoku Office,
Kyushu Office, International Office, Technology
Laboratory

Treasury stock
36,826 shares (0.1%)

Number of shareholders

38,474

Total number of shares
outstanding:

46,805,660 shares(As of March 31, 2019)

Other Japanese
corporations:449
10,635,206 shares(22.7%)

Accounting Department

Financial
institutions:60
15,332,422 shares(32.8%)
Individuals
and others:
37,636
9,195,947 shares(19.6%)

Safety Promotion Department
Quality and Environment Promotion Department
Subcontractor Alliance Promotion Department

Civil Engineering
Management Division

Civil Engineering Department
Sales Promotion Department
Marketing Department
Electric Power Marketing Department
Railroad Marketing Department
Technical Center

Audit Office

GAEART Co., Ltd., K&E Co., Ltd., Technos Co., Ltd.,Techno-Space Creates Co., Ltd., FATEC Co., Ltd.,Technical Support Co., Ltd., Taiwan Kumagai Co., Ltd.

Foreign investors:
286
11,130,656 shares(23.8%)

Finance Department

Fukui Office■ Group Companies:

Securities firms:
42
474,603 shares (1.0%)

Legal & Compliance Department
Human Resources and General Affairs Department

Civil Engineering Technology Department
Information and Communications Technology (ICT) Promotion Office
Infrastructure Renewal Business Department
Bridge Innovation Business Department
Enviromental Business Department
New Energy Business Department
Machinery and Materials Department
Dam Technology Department
Tunnel Technology Department

Project Management Office

1861
First Section of the Tokyo
Stock Exchange
Listing:■ Total Number of Shares 71,400,000 shares
Authorized to Be Issued:■ Total number of shares 46,805,660 shares
outstanding:
100 shares■ Share unit:■ Number of shareholders: 38,474 (as of March 31, 2019)
Sumitomo Mitsui Trust Bank,■ Administrator of
Shareholders Registry: Limited
From April 1 through March 31■ Fiscal Year:■ Base Date for Annual March 31
Dividend:■ Annual Shareholders' June of the Year
Meeting:

The Iidabashi Project Office

Administration Division

Headquarters

China (Hong Kong), Taiwan, Vietnam, Sri Lanka,
MyanmarShareholder Composition■ Securities Code:■ Stock Exchange

Project Creation Promotion OfficeDirectors/Branch Managers Meeting

Current Status

Alliance Promotion Office
New Business Development Office

Safety, Quality andEnvironment Division■ Overseas Offices:

Stock Information

Secretariat Department
Work Style Reform Promotion Office

Legal Compliance Audit
Committee

Fukui 910-0005, Japan

Management Conference

To investigate, survey, plan, design, execute, andsupervise construction works, and to give technicalguidance, provide comprehensive engineering,
management, and consulting services as well as
contracted construction businesses in respect thereof
and to contract for such works.

■ Registered Head Office:	2-1, 3-chome, Ote, Fukui-shi,

President■ Scope of Business:

2,497 non-consolidated(As of March 31, 2019)

Corporate Planning Department

Corporate Planning
Division

Corporate Communication Office

Audit & Supervisory
Board Member■ Capital:
JPY 30.1 billion■ Number of Employees:	4,032 consolidated;

As of Monday, April 01, 2019

Tokyo 162-8557, Japan

Auditors Committee

and Representative Director■ Headquarters:	2-1, Tsukudo-cho, Shinjuku-ku,

Board of Directors■ Company name: Kumagai Gumi Co., Ltd.
■ Founded:
January 1, 1898
■ Incorporated:
January 6, 1938
■ Representative:	Yasunori Sakurano, President

Shield Technology Department
Project Technology Department

Architectural
Management Division

Railroad Project
Promotion Division

Civil Engineering Design Department

Architectural Planning andManagement Department

Planning Promotion Department

Marketing & Management
Department
Architectural Management
Department
Architectural Engineering
Department

4,000

160,000,000

Kumagai Gumi Turnover

54

140,000,000

Kumagai Gumi Stock Price

120,000,000

TOPIX (Tokyo stock price index)

2,500

100,000,000

2,000

80,000,000

1,500

60,000,000

1,000

40,000,000

500

20,000,000

0

0

March
2010

Architectural Production & Engineering Department
Architectural Structure & Engineering Department
Production Building Information Modeling (BIM) Promotion OfficeArchitectural Design Administration Department
Quality Control Department

Architectural Design Department 3

Turnover180,000,000

March
2009

Budget Control Office
Purchasing Department

Architectural Design Department 2

Stock Price
4,500

March
2008

Solution Sales Department
Architectural Project Department

Architectural Design Department 1

Stock Trading Data

3,000

Marketing Department
Urban Development Department

Architectural Environment & Engineering Department
Architectural Design
Management Division

3,500

Architectural Administration Department

March
2011

March
2012

March
2013

March
2014

March
2015

March
2016

March
2017

March
2018

Structural Design Department
Earthquake-resistant Design Department
Environmental Design Department

Technical Research & Development Division
Hokkaido Office
Tohoku OfficePlanning Group
Technical Research & Development Institute
New Technology Innovation CenterTokyo Metropolitan Area Office
Nagoya Office
Hokuriku OfficeKansai Office
Chugoku Shikoku Office
Shikoku Office
Kyushu OfficeInternational Branch Office

March
2019
The Kumagai Gumi Group Corporate Report 201955

The large work at the top left is "Tomatoes Grown in
Clean Water," which won the Kumagai Gumi
Corporate Prize at "the Children's Painting Exhibit
2018: Rice Fields and Water in Your Hometown". The
remaining seven works were created on the theme ofthe environment by children at Tsukudo Elementary
School in Shinjuku, Tokyo.
* Kumagai Gumi supports opportunities to foster a mindset
that treasures nature and the environment in the children
who will lead the next generation. Together with the
Tsukudo Elementary School sited adjacent to ourheadquarters, Kumagai Gumi actively engages inenvironmental learning and cleanup of the local area. The
company also sponsors the above-mentioned Children's
Painting Exhibit hosted by the National Water Earth
Hometown Networks and the Prefectural Water, Earth,and Hometown Networks.

The Kumagai Gumi Group Corporate Report 2019

About the Front Cover

Insight, Onsite, Farsight

The Kumagai Gumi Group

Corporate Report

2019
Kumagai Gumi Co., Ltd.
2-1 Tsukudo-cho, Shinjuku-ku, Tokyo 162-8557
https://www.kumagaigumi.co.jp
Inquiries
Corporate Planning Division
TEL 81-3-3235-8155

Corporate Communication Office

FAX 81-3-5261-3716

E-mail info@ku.kumagaigumi.co.jp