Insight, Onsite, Farsight

About the Front CoverThe large work at the top is "I Found a Crayfish in
Rice Field," which won the Kumagai Gumi Corporate
Prize at "the Children's Painting Exhibit 2019: Rice
Fields and Water in Your Hometown". The remaining
five works were created on the theme of the environmentby 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 our headquarters,
Kumagai Gumi actively engages in environmental learningand cleanup of the local area. The company also sponsors
the above-mentioned Children's Painting Exhibit hosted by
the national Federation of Land Improvement Associations.

The Kumagai Gumi Group Corporate Report

Kumagai Gumi Co., Ltd.
2-1 Tsukudo-cho, Shinjuku-ku, Tokyo 162-8557
https://www.kumagaigumi.co.jp
Inquiries
Corporate Planning DivisionCorporate Communication Office

TEL 81-3-3235-8114 FAX 81-3-5261-9665
E-mail info@ku.kumagaigumi.co.jp

CONTENTS
The Kumagai Gumi Group Vision Statementand Editorial Policy_ _________________________ 2
Mission Statement and Management Philosophy________ 3

Our Company's Code of Conduct(Mission Statement)

Corporate Information
The History of the Kumagai Gumi Group_ ________ 4
The Kumagai Gumi Group's Business_ __________ 6
The Kumagai Gumi Group's Strengths___________ 8
The Kumagai Gumi Group's Value Creation Process___ 10
Financial and Non-Financial Highlights__________ 12● TRUST:
To develop client trust and earn their confidence..
●C ONSISTENCY:
To be consistently professional and responsible..
●C O-OPERATION:
To promote cooperation and mutual prosperity..

Growth Strategy
The Medium-Term Management Plan ___________ 14
Interview with the President __________________ 15
Executive Interview_________________________ 20
The Kumagai Gumi Group's ESG Strategy_______ 22
Business Report: Civil Engineering_____________ 24
Business Report: Building Construction_ ________ 26
Business Report: Overseas Projects,
Development Projects, and New Projects ________ 28

Management Philosophy

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.

● 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.

Insight● 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
clients' individual requirements.

_____________________________ 30
Technology Development System______________ 31
Technology to Create Social Value_____________ 32
Diverse Human Resources___________________ 33● 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.

Onsite_ _____________________________ 35

Aiming for Safe Workplace Environments________ 36
Quality Control and Environmental Preservation _ _ 37

● REPUTATION: We strive to be a responsible corporate
citizen, recognized for our business integrity and social
awareness.

Farsight ___________________________ 42
Involvement with Customers__________________ 43
Involvement with Employees__________________ 44
Involvement with Shareholders and Investors _____ 46
Involvement with Business Partners____________ 47
Involvement with Communities________________ 48
Evaluation by Society_ ______________________ 49

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 ever-ready support, our structures serve as the timeless stage
where each generation performs there 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.

Governance
The Board of Directors_ _____________________ 50
Corporate Governance_ _____________________ 52
Risk Management__________________________ 54
Interview: President Yasunori Sakurano and
Hideo Tsukamoto (Attorney)_ _________________ 56
Financial Information
Analysis of Financial and Management
Performance_ _____________________________ 58
Key Financial Data over a 10-Year Period _______ 60
Corporate Information and Stock Information_____ 62
Organizational Chart________________________ 63
Historic site of Shukununo Power Station (Fukui, Fukui Prefecture)

See P4 for details

The first job undertaken by the founder of Kumagai Gumi was stonework
construction at the Shukununo Power Station, commissioned by Kyoto Dento Co.

Editorial Policy

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 reportingon environmental activities, numerical data for Kumagai Gumi covers
construction projects undertaken by Kumagai Gumi alone, as well as forjoint venture projects with Kumagai Gumi as the lead company.

Issue Date
August 2020 (Previous edition: August 2019; Next edition: Scheduled
for August 2021)
Referenced Guidelines● Environmental Reporting Guidelines (2018 Edition) from the Ministryof the Environment● International Integrated Reporting Framework from the IIRC
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 on certain assumptions
that we believe are reasonable. Actual results may, therefore, differ
materially from these statements for various reasons.

Our approach to information disclosure
Degree of relevanceto stakeholders

This Corporate Report is issued with the goal of communicating
the Kumagai Gumi Group's management policies, businessstrategies, 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, efforts toprovide solutions to social issues, and governance initiatives, tosupport our contribution to the formation of 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:
FY2019 (April 1, 2019 to March 31, 2020)
The information in this report includes examples of activities andother information from April 2020 or later, as required.

Corporate Report

WebsiteRelevance to our strategy

Information on the website

A report presenting our financial and nonfinancial information in an organized andintegrated manner.
More detailed
information isdisclosed forthe purpose ofaccountability to all
stakeholders.

https://www.kumagaigumi.co.jp/en/index.html
The Kumagai Gumi Group Corporate Report 20203

■ The History of the Kumagai Gumi Group ■Corporate Information

Growth Strategy

Insight

OnsiteFarsight

From the long-lasting economic
slump to the restoration period

1981 to 2000

Since its foundation in1898, Kumagai Gumi's history has been one of extensive contribution to the modernization

From the third growth period tothe long-lasting economic slumpof Japan between the late 19th century and the early 20th century, as well as to the reconstruction of war-torn
We will continue to work with customers to contribute to the development of society through Worksite Excellence,

Financial Information

2001 onward

Seeking to be a company needed by society
Japan and its remarkable postwar economic growth.

Governance1961 to 1980
Second growth period

the powerful synergy of the technology and human resources we have built up for over a hundred years.

⓮

1941 to 1960⓱⓫

Wartime and postwar reconstruction period1898 to 1940❼

Our founding and initial growth period

⓯

❿

⓲

❹
❾
❺
❶

❸
❻

The foundation of Kumagai Gumi
In 1898, Santaro Kumagai ❶ founded Kumagai Gumi at the age of
27. The first job that Santaro, a stonemason at the time, undertook
was stonework construction at the Shukununo Power Station ❷,commissioned by Kyoto Dento Co.

1898 Founding of Kumagai Gumi
1899 Completion of the Shukununo Power Station ❷Initial growth period
In 1934, Santaro took on construction work at the Sanshin Railway
Line (current JR Iida Line), one of the greatest civil engineering
projects in modern Japan ❸. This involved the construction of
116 tunnels and 54 bridges over a 45-kilometer section of peaks
and gorges along the Tenryu River. Leading the construction tocompletion in three years, Santaro turned this success into an
opportunity to establish Kumagai Gumi Co., Ltd. in 1938.

1937 Opening of the entire Sanshin Railway Line ❸1938 Establishment of Kumagai Gumi Co., Ltd.
(capital: 400,000 yen)

During wartime, Kumagai Gumi received orders including power
station and railway construction projects.
After the war, the company founded the Building Construction
Divison in 1945 ❹. Together with the company's strong Civil
Engineering Division, this division made great contributions topost-war Japan's revitalization and further development of social
infrastructure in the subsequent period of high economic growth, aswell as in urban development.
In 1956, the company tackled construction of the Omachi Tunnel(current Kanden Tunnel) at the Kurobe river No. 4 Power Plant, oneof the largest projects in the history of civil engineering in Japan ❺.
The project encountered a major fractured zone in a weak stratum
containing a large volume of groundwater. Battling water rushing inat up to 660 liters per second, the company spent seven months
breaking through this 80-meter fractured zone.

1945 Establishment of the Architectural Construction Division
immediately after the end of the war ❹1958 Opening of the Omachi Tunnel at the Kurobe river No. 4
Power Plant ❺1960 Completion of the Prefectural Assembly Hall; Kumagai
Gumi's first BCS Prize ❻2018 Shukununo Power Station site renovation project ❷The Shukununo Power Station is the third hydroelectric power station in Japan.
In 2018, Kumagai Gumi carried out renovation work at the plant site, as a part of our 120th anniversary projects.
In the work, we unearthed remnants of the pipelines that sent water to reservoirs and turbines, and built an
exhibition hall featuring a generator from the time the plant was in operation.
We also built a lawn space, parking lot, and explanatory plaques, and donated the site to the city of Fukui as aplace open to the general public.

The History of the Kumagai Gumi Group
1898 Founding of Kumagai Gumi
1938 Establishment of Kumagai
Gumi Co., Ltd.

1945 Establishment of the
Building Construction
Divison1958 Opening of the Toyokawa
Factory❽⓬

In 1961, the company won an orderfor its first overseas project, the Hong
Kong Plover Cove Water Tunnel ❼. The
company went on to conduct businessdevelopment on a global stage, particularly
in Hong Kong, Taiwan, and Southeast Asia.
In 1975, Kumagai Gumi solely started
construction of the Shinjuku Nomura
Building ❽. The company successfully
finished the construction of the skyscraper,
which has 53 floors and five basement
floors. The completion made Kumagai
Gumi the first Japanese company to build
a skyscraper on its own, which greatly
enhanced the reputation of the company.
At the Joetsu Shinkansen Nakayama
Tunnel project (Gunma Prefecture) in 1977❾, we introduced the first use in Japan of
NATM, now the standard method for tunnel
construction.

1966
Hong Kong Plover Cove Water Tunnel
completed ❼1977
Opening of the Joetsu Shinkansen
Nakayama Tunnel ❾1978
Shinjuku Nomura
completed ❽Building

project⓰

1981
Start of the New City Higashi
Totsuka Project ❿1985
Opening of the Seikan Tunnel ⓫1989
Opening of the Eastern Harbour
Crossing (EHC) Tunnel, Hong Kong ⓬1990
Bank of China Tower (HongKong) project completed ⓭1963 Establishment of Kumagai Road Co., Ltd.

1989 Establishment of FATEC Co., Ltd.
1993 Establishment of Kumagai Techno-Space Co., Ltd.

1974 Establishment of Taiwan Kumagai Co., Ltd.

1995 Establishment of Technical Support Co., Ltd.
1996 Spin-off of the Toyokawa Factory as Kumagai Technos Co., Ltd.

* 1994 Change of company name to Gaeart KumagaiCo., Ltd.

⓭Starting from Hong Kong, Kumagai
Gumi'soverseasbusiness
extended at a steady pace. In
1985, Kumagai Gumi recorded
over one trillion yen in orders,
resulting in the greatest ordinary
income in the industry.
In 1981, Kumagai Gumi took partin the New City Higashi-Totsuka(Yokohama) development project ❿,one of the largest private sector urban
development projects in Japan.
In 1985, Kumagai Gumi completed
work on one of the world's longest
undersea tunnels, the Seikan Tunnel ⓫,demonstrating its unchanging strength
in the civil engineering industry.
Overseas, the completion of theEastern Harbour Crossing (EHC)
Tunnel in Hong Kong ⓬ in 1989
attracted attention as the first
BOT project involving a Japanesecompany in Hong Kong.
In the latter half of the 1990s,
however, Kumagai Gumi was hit
by the bursting of the so-called
economic bubble and entered aperiod of difficult trials.

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

* 2002 Change of company name to Technos Co., Ltd.

In 1998, the massive real estate investments of the
bubble economy era caused Kumagai Gumi to face
the most severe management crisis since its founding.
Although the company undertook significant businessreorganization, reworking of employee treatment, andother measures, in 2000 and 2003 it was forced toseek aid from financial institutions.
While enacting thorough management reforms, thecompany engaged in new fields of construction suchas mobile communication base stations and wind andsolar power generation facilities, to overcome thechallenging conditions in the construction industry.
Never losing its spirit of challenge even during suchdifficult times, Kumagai Gumi constructed TAIPEI
101 in Taiwan ⓮, the tallest skyscraper in the world
at the time of its completion.
The company also tackled unmanned construction
and other new technological developments aimed
at the next generation of the construction industry.
In 2014, the company completed the cancellationof preferred stocks, and carried out a financial
reconstruction with the support of many parties.
In response to the Great East Japan Earthquake(2011) and two major earthquakes in Kumamoto(2016) Prefecture, Kumagai Gumi carried out
its role as a construction firm by contributing torestoration and reconstruction in the affected areas.

2004 Construction of TAIPEI 101 completed ⓮2006 Construction of the Mino Toll Road Mino
Tunnel completed ⓯2007 Construction of Mihara Performing Arts
Center "Popolo" completed ⓰2008 Construction of the Tohoku Shinkansen
Sanbongihara Tunnel completed ⓱2018 Construction of Hua Zhu Zi Huan (Taiwan)
super high-rise designer's condominium
completed ⓲2001 Establishment of K&E Co., Ltd.
2004 Merger 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 Business and capital alliance with Sumitomo Forestry Co., Ltd.

See website for details
History https://www.kumagaigumi.co.jp/en/company/history/index.html

4

The Kumagai Gumi Group Corporate Report 20205

■ The Kumagai Gumi Group's Business ■Corporate Information

Growth Strategy

Insight

OnsiteFarsight

Governance

Financial Information

Since our foundation in 1898, the construction company Kumagai Gumi has made efforts to contribute to thedevelopment of society through construction contracting.
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 creationof new businesses and on strategic collaboration with partners.
Eastern Harbour Crossing (EHC) MOM Project (Hong Kong)

Tao Zhu Yin Yuan Tower (Taiwan)

The Kumagai Gumi Group

8 companies

Overseas Projects
Civil Engineering

Kumagai Gumi Co., Ltd.

GAEART Co., Ltd.

K&E 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.
For details, see P24-25, Business Report > Civil Engineering

Taiwan Kumagai Co., Ltd.

FATEC Co., Ltd.

The main businesses
that have supported thegroup's development

Techno-Space Creates Co., Ltd.

Building Construction

Technos Co., Ltd.

Technical Support Co., Ltd.

For details, see P8-9, Group Strengths

Aso Ohashi Bridge Area slope disaster prevention construction

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.

Pacifico Energy Toyota Mega Solar Power Plant civilengineering construction

The Kumagai Gumi Group is expanding our sales and marketing networks in
our overseas offices, and is working to expand its business to secure stablesources of revenue. To develop our overseas business and enhance ourearning power, we will promote alliances with other companies while securing
global human resources and making efforts toward risk management.

New business domains
for future activity
For details, see P28-29, Business Report > Overseas Projects, Development Projects, and New Projects

Urban Development Projects and New Category Projects
Kumagai Gumi has an industry-leading track record in urban development
projects. Taking advantage of our know-how and expertise, we will contributeto a wide range of urban redevelopment and area revitalization projects.
We will also actively undertake projects that include concession projects,
infrastructure operation, and renewable energy.
Headquarters of Hokkaido Broadcasting Co., Ltd.

For details, see P26-27, Business Report > Architectural Construction

MIDAC Kurematsu Solar Power Plant(renewable energy project)
HOTEL COLLECTIVE (Okinawa Prefecture)6

Toyota Municipal Northern District School Meal
Supply Center (PFI project)

The Kumagai Gumi Group Corporate Report 20207

■ The Kumagai Gumi Group's Strengths ■Corporate Information

Based on the Kumagai Gumi Group’s vision, we engage in construction services through solutions unique toour group.

Growth Strategy

Kumagai Gumi only

Looking toward the future, we will promote joint technological development and greater fluidity of management
300

resources, and will enhance the collective capabilities of the group.

273.4

267.5
19.9

21.1

150

OnsiteFY2016

Governance7 group companies

Operating income (billion yen) 45

150 Sales (billion yen)

30

21.1

17.9

FY2017

Sales

Financial Information

Operating income
Operating income (billion yen) 15

352.2

307.1

294.5

FY2018

100

76.2

20.2

0

FY2015

Farsight

Operating income

Sales

450 Sales (billion yen)

Our eight group companies will generate synergies through collaboration.

Insight

15

50

0

0

71.3
4.6

4.0

FY2015FY2016

10

83.9

82.0

79.5
5.1

5.4

5.2

FY2017FY2018FY201950FY2019* Value after deduction of intra-group transactions

https://www.kumagaigumi.co.jp/en/index.html

https://www.gaeart.com (Japanese only)

https://www.technos.info (Japanese only)

http://www.fa-tec.co.jp/ (Japanese only)

General Contractor

Manufacture and sales of road pavement and asphalt mixture, etc.

Civil Engineering, Renovation, and Production of Construction Machinery and Materials

Trading company specializing in construction

Kumagai Gumi Co., Ltd.

GAEART Co., Ltd.

Technos Co., Ltd.

FATEC Co., Ltd.

Civil
Engineering

Building
Construction

P24-25

P26-27

Overseas Projects,
Development Projects,
and New Projects
P28-29Kumagai 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 tomaximize its collective capabilities.

November 1963
8-27 Shinogawamachi,
Shinjuku-ku, Tokyo
Representative Kenji Yamamoto¥1,000,000,000¥53,768,000,000(FY ended March 2020)
No. of759
employees (as of March 2020)

CapitalFebruary 1996
2-1 Honohara, Toyokawa, Sales
Aichi Prefecture
Representative Eiji Morita
No. ofEstablished

CapitalEstablished

Headquarters

Sales

Headquarters

Officer

GAEART Co., Ltd. is expanding nationwide as a company thatmeets various infrastructure needs, from new construction tomaintenance management, through infrastructure development
including paving for roads, airports, harbors, and bridges, and the
manufacturing of asphalt mixtures as paving materials.

Officer

employees¥470,000,000¥7,856,000,000(FY ended March 2020)
161 (as of March 2020)

Technos manufactures segments for shield tunnels, construction
machinery, etc., engages in civil engineering and renovation,
environmental-related projects, and basic construction, andoperates a leasing business for a steel construction method
called ACEUP.

June 1989
2-1 Tsukudocho,
Shinjuku-ku, Tokyo
Representative Takayuki Aono
Established

CapitalHeadquarters

Sales

OfficerNo. ofemployees¥20,000,000¥4,349,000,000(FY ended March 2020)8 (as of March 2020)

FATEC Co., Ltd. is a trading company that offers construction
materials and equipment developed with state-of-the-art
technologies.

See P62 for corporate information

https://www.k-and-e.co.jp/ (Japanese only)

http://www.taiwankumagai.com.tw (Traditional Chinese and Japanese)

Building renovation

K&E Co., Ltd.
January 2001
2-1 Tsukudocho,
Shinjuku-ku, Tokyo
Representative Kazuhisa Iwama¥300,000,000¥21,824,000,000(FY ended March 2020)
No. of363
employees (as of March 2020)

8

Construction in Taiwan

Working Drawing and Education

Work Outsourcing and Insurance Agency

Taiwan Kumagai Co., Ltd.

Techno-Space Creates Co., Ltd.

Technical Support Co., Ltd.

CapitalNovember 1993
3-12-12 Higashi-Ikebukuro, Sales
Toshima-ku, Tokyo
No. of
9F, Showa Building
employees
Representative Naoyuki Yamashita¥30,000,000
740,000,000(FY ended March 2020)59(as of March 2020)

Established

Since its founding in 1974, Taiwan Kumagai Co., Ltd. has built
a best-in-class track record as a Japanese general contractor in
Taiwan, introducing Kumagai Gumi's technology to Taiwan.

The company engages in production of construction drawings
and temporary design drawings, preparation of applications, andother business. It also offers educational seminars for universities
and construction companies.

CapitalEstablished

Headquarters

Sales

Headquarters

K&E Co., Ltd. is a comprehensive producer of planning and design
incorporating building surveys and diagnosis, seismic diagnosis
and reinforcement design, and proposals for comfortable
spaces, as well as construction work leveraging the company's
technological capabilities, after-sales service, and more.

https://www.tsp-kumagai.co.jp/ (Japanese only)

CapitalDecember 1974
Sales
Room 8 (1408), 12F, No.
205, Section 1, Dunhua
South Road, Taipei, Taiwan
Representative Toyohiko Ina
No. ofEstablished

Officer

https://www.technsp.co.jp/ (Japanese only)

Officer

NT$800,000,000¥9,130,000,000(FY ended December
2019)
191
employees (as of December 2019)

Headquarters

Officer

July 1995
2-1 Tsukudocho,
Shinjuku-ku, Tokyo
Representative Hiroshi Shimura
Established

Headquarters

Officer¥70,000,000¥556,000,000(FY ended March 2020)
No. of38
employees (as of March 2020)
CapitalSales

The company is developing an outsourcing business for clerical
work requiring expert knowledge, and also offers insurance plans
as an agency handling both life and non-life insurance.

The Kumagai Gumi Group Corporate Report 20209

■ The Kumagai Gumi Group's Value Creation Process ■Corporate Information

Growth Strategy

Insight

to contribute to the resolution of social issues and to 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.

Outcomes(FY2019 performance)

ESG Initiative Direction
1. Kumagai Gumi identifies key issues (Materiality) to be resolved from the perspective ofEnvironment, Social, and Governance, and pursues sustainable business activities.

3. Through its business activities, Kumagai Gumi aims to build relationships of trust with its
stakeholders and to increase its corporate value.

Sales
436.2 billion yen

Key issues from theperspective of ESG(Materiality)

E

Management capital(FY2019 performance)

Formation of environmentallyconsiderate business

Financial capital▶
Total Assets 374.8 billion yen

Kumagai Gumi Group
Vision Statement

Manufacturing capital▶
Yuuei Kyoryoku Kai*
880 companies
Manufacturing sites 32

Insight* Group of partner companiesof Kumagai Gumi

S

"Human Resources""Technologies"

Intellectual capital▶
Number of patents held
475
Research anddevelopment expenses(non-consolidated)
2.4 billion yen

Creation of rewarding
workplaces for alll

Farsight Onsite"Worksite
Excellence
to Farsight"

Number of employees(non-consolidated) 2,578(consolidated) 4,154

Domestic sites
Branches 29, Sales offices 84
Technical Research & Development Institute 2
Equipment and material centers 2
Overseas offices 9

Financial Information

25.4 billion yen

Ordinary
income"White 500" enterprisewith outstanding healthand productivity
4 consecutive years ofrecognition

Selection as "Nadeshiko
Brand" enterprise thatencourages women’s
success in the workplace
Customer Consultation
Officesame-day initial
response

25.7 billion yen

100% for 4 consecutive
years

Profitattributableto ownersof parent

Activities that
contributeto society

19.4 billion yen

108

ROE
13.7%

Number ofpatentapplications

Dividend
per-share

CO2 Emissions

For
Customers andlocal communities

Quality That
Inspires
Happiness

For Global
environment andLocal communities

Sustainable
Coexistencewith Nature

For
Partnercompanies
and Business partners

Coexistencein Mutual
Prosperity
Kumagai Gumi's vision

A corporate group
trusted and neededby society

For employees

Human
Resource
Development
For
Shareholders
and investors

Stable Returnto
Shareholders

65

94,000 t-CO2

Universal Sustainable
Development Goals (SDGs)

Recycling rate
98%

G

Governance

Natural capital (non-consolidated)▶
Electric power 31,916,000 kWh
Gas125,000 m3
Diesel oil
22,264 kl

GovernanceAchievement ofsustainable communities"Worksite
Excellence"

Societal capital▶

10

Operatingincome120 yen

Human capital▶

Farsight

The Value We Provide to Stakeholders

The Kumagai Gumi Group conducts business activities on the basis of its Group Vision,

2. Kumagai Gumi creates new value by leveraging the group's technologies, experience andexpertise. We engage in business activities that contribute to the resolution of social issues
represented by the SDGs.

OnsiteEnhancing of corporate governance proactive
communication with stakeholders and others

Kerosene
21 kl
Water 352,000 m3

The Kumagai Gumi Group Corporate Report 202011

■ Financial and Non-Financial Highlights ■Corporate Information

Growth Strategy

Insight

OnsiteFarsight

Governance

Financial Information* 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.

325.0 billion yen* Kumagai Gumi only

Amount oforders received
500
billion yen

381.8
293.6

300

400

200

100

100

0

0

FY2017FY2016FY201860

FY2017FY2016FY2018FY201940Operating profit margin

Ordinary profit

25.4 billion yen 5.8%
Operating profit

30
billion yen

25.1

24.5

15

30

26.5

%

billion yen

25.4

23.0

20

10

7.3

7.1

25.8

25.4

5.8

10

5

Ordinary profit margin

15

26.6

%

25.7

22.7
7.4

2,578

5.9

0

FY2015FY2016FY2017FY20180

FY201950FY2015FY2016FY2017FY2018Return on equity (ROE)

19.4 billion yen 13.7%
Net income

249.7

25

500

%

billion yen

%

20

40

400

60

15

12.1

15.8

20.4

30

13.3

22.6

10

20

15.3
13.7

5

10.2

0

FY2015

12

Capital adequacy ratio

FY2016FY2017FY2018FY2019

300

100

0

0

37.9
25.4

38.1

29.5

75

39.5

FY2016FY201715FY2018FY2019

0

0

1.5

1.8

2.0

2.3

2.6 2.6

FY2015FY2016FY2017FY2018FY20192.2

CO2 Emissions (Scope 1, 2) * Kumagai Gumi Group overall

94,000 t-CO

90

Total Emissions

15

Intensity

60

t-CO2/100 million yen

10

93,00054

96,00095,000

29.9
30

5

0

0

27.1

40

94,000

24.7

28.3

21.5

20

FY2017FY2016FY20180

FY2019FY2015FY2017FY2016FY2018FY2019

100

65

75

60

64

70

Frequency oflabor accidents
1.00

73

0.75

65

50

0.50

25

0.25

0.67

0.44
0.70
0.65

30

0

FY20152* CO2 calculation method is changed from FY2018

45

271.9

255.5

200

10

374.8

353.7

333.7

10

4.2
3.2

113,00029

1,000

Number ofpatent applications

50

19.4

4

11

billion yen

16.4

20

60

Capital adequacy ratio

Total assets

6

2,578

49

FY2019374.8 billion yen 39.5%

ROE

30

7.4

10,000 t-CO2

2,000

FY2015

Total assets

8

Research and development expenses

20Profit attributable toowners of parent

40* Kumagai Gumi only

39
0billion yen

FY2019Number of female managers

2,382

2,305

2,223

10

54

Number of employees

3,000

6.8

6.1

FY2018

10％

Number of female managers(Number of female employees: 376)

10

7.5

FY2017FY2016

Number of employees

20

6.8

6.2

Ordinary profit margin

Ordinary profit

7

Capital expenditures

50* Stock merger at a ratio of 1 shares per 10 common shares, dated October 1, 201725.7billion yen 5.9%

Operating profit margin

28.8

15.9

12.4

FY2015

Operating profit

120

35.0

23.1

30

FY2015

Payout ratio

10.0

90

90

FY20192.6 billion yen 2.6 billion yen

yen
120

Research anddevelopment expenses

Capital investment

28.8％

Dividend per share

150

300

200

Payout ratio

120 yen

436.2

389.1

374.0

344.7

343.6

325.0

284.7

FY2015

Dividend per share500
billion yen

454.0

400

436.2 billion yen

Sales

0.44

0.42

0

0

FY2015FY2016FY2017FY2018FY2019FY2015FY2016FY2017FY2018FY2019The Kumagai Gumi Group Corporate Report 202013

■ The Medium-Term Management Plan ■Corporate Information

Based on the Medium-term and Long-term Management Direction that we set forth in November 2017, we formulated

Growth Strategy

Insight

OnsiteFarsight

Governance

Financial Information■ Interview with the President ■"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.

Three Strategies and Target Numbers

We seek to realize a growth spiral and,while continuing our growth strategy,
to become a corporate group
trusted by society.

Medium-term and Long-term Management Direction● 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

Kumagai Gumi Co., Ltd.
President
Yasunori Sakurano

Strategy-2

Strategy-3

Form strategic allianceswith other companies

Create new and innovative
businesses

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

Consolidated
Operating Profits

Sales
500

billion yen

400

300

500 Billion Yen

Dividend
Payout Ratio

ROE

12%

33 Billion Yen

Consolidated Sales
Consolidated Operating Profits

30%

50 Billion Yen

60-Billion-Yen Growth Investment
Sales
OperatingincomeContinuous Investment

10

436.2
389.1

%

483.0
Operatingincomemargin8

Operating income

6.8
5.8
26.5

25.4

result2019

result

6

40

4

20

2

0

0

25.5

100

2018

60

billion yen

5.8

200

0

Operatingincome margin

2020
plan

2022

objectives

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

14

The Kumagai Gumi Group Corporate Report 202015

■ Interview with the President ■Corporate Information

Please tell us about the market environment and about results in fiscal 2019,the second year of the Medium-Term Management Plan.

Completed work value and gross profit
on completed work (margin) (consolidated)

400
300

other companies, we are moving ahead with diverse
projects, including our collaboration with Sumitomo
Forestry. These plans have fallen behind a bit, however,
and are not yet making sufficient contribution to profits.
In the environment surrounding the constructionindustry in fiscal 2019, housing construction remained
weak; corporate construction investment also declined,
rebounding from the last-minute demand preceding theconsumption tax hike in the previous year. However, agenerally strong market environment continued for projects
related to disaster readiness and mitigation in preparation
for natural disasters, projects to address aging social
infrastructure, as well as facility development projects
related to the Tokyo Olympic and Paralympic Games.
Regarding the impact of the COVID-19 pandemic, delay
in delivery of materials and other issues occurred in someprojects, but impacts in fiscal 2019 were rather limited.
The theme of the Medium-term Management Plan is"Strategies for Accelerating Growth" for the reborn Kumagai
Gumi Group. Although income declined in fiscal 2019, I feelthat we are making steady progress toward new growth.

Volume of completed construction

Gross profit on completed work

Consolidated impact

Consolidated impact

Kumagai Gumi only500
billion yen

343.6

344.7
71.0

76.2

100
0

41.1 8.5
March 2017

Operating income (consolidated)

15

10.4

45.5 10.1

40.2 9.7

March 2019

Operating income

10

346.0

45.5 10.2

35.4

30.6

March 2018

10.4

352.2

307.1

32.5

30.3

March 2016

%

20

92.0

11.7

294.6

273.7

39.1 8.8

83.9

10.8

200
267.5

25

438.0

82.0

79.4

11.9

11.4

Profit margin

Kumagai Gumi only

436.2

389.1

374.0

45.6 10.3
35.3

35.3

March 2020

March 2021
(forecast)

50Operating income margin

Consolidated impact
30
billion yen
22.5

Kumagai Gumi only

24.5

23.0

4.1

4.6

7.3

7.1
21.1

16

25.4

25.5

5.2

5.2

6.8

6.2
21.1
17.9

7.5

0

5.4

5.1

15.0
19.9

10

26.5

25.1

Insight

OnsiteFarsight

Governance

Financial Information

What initiatives do you plan to advance in fiscal 2020?

We achieved increased income for the fourth consecutive year, but operating revenue
fell. While the environment surrounding construction industry has changed greatly,
I believe that we are making steady steps toward new growth.
The Kumagai Gumi Group set a Medium-term and Longterm Management Direction in 2017, under which we are
now moving ahead with the Medium-term Management
Plan. Fiscal 2019 is the second year of the Mediumterm Management Plan. Viewing it as a key year indetermining success of the plan, all of us, management
and employees alike, came together to challenge projects
strategically and with a sense of urgency. As a result,sales in fiscal 2019 grew for the fourth consecutive year.
However, operating income fell year-on-year due to some
unprofitable construction projects, resulting in decreased
operating income on higher sales.
The three pillars of our strategy under the Mediumterm Management Plan are: 1. Maintain and increase
contracted construction businesses; 2. Create new andinnovative businesses; and 3. Form strategic alliances withother companies. Regarding the contracted construction
business, I believe that our production capabilities are
steadily growing, as seen in the achievement of four
consecutive years of increased sales. Regarding thecreation of new businesses and strategic alliances with

Growth Strategy

%

8
6

5.8
20.2

5.8
20.3

4

We've set a direction of realizing a growth spiral,
and will stick to our ongoing growth strategies.
Fiscal 2020 will mark the final year of the Medium-termManagement Plan. I would like to make this a year inwhich our efforts so far will be rewarded and lead to further
growth. With that wish in mind, we have set Realization ofa Growth Spiral as the president's policy for fiscal 2020.
While there are many things that we cannot foresee
because of the ongoing pandemic, we should manage
without changing the direction.
In fiscal 2020, we will continue to advance the threestrategies of the Medium-term Management Plan.
In the strategy no.1 (maintain and increase contracted
construction business), improving profitability is the top
priority. With regard to sales capabilities on the front
lines of the business, my sense is that we are steadily
gaining strength in the fields of both civil engineeringand architectural construction. We will promote efficiency

through on-site technological development and inovation,
the use of ICT tools, and other means, and will work to
improve productivity and strengthen cost competitiveness.
Moreover, expansion of overseas business is anindispensable strategy for our company in achieving
sustainable growth in the future. We are expanding ourbusiness in Myanmar and India, as we have in Taiwan
and Hong Kong, but overall, our stage is one of cultivating
the market and building a foundation. To strengthen thisdevelopment, in April 2020 we expanded the functions
and organizations of Overseas Divisions to create theInternational Division.
In conducting our business, the proposition that wemust tackle above all else is "Safety." While aiming to be"No.1 in Safety, Quality and Environment Management,"
we will further strengthen our activities in fiscal 2020.

Please tell us about the creation of new businesses and strategic alliances with other companies.

We will actively take on the creation of new businesses
as a strategies supporting sustainable growth.
With Japan's construction market expected to decreasein the future, the creation of new businesses is anextremely important strategy along with expansion ofoverseas business. We have strengthened our structure
for promoting new business initiatives by making the
New Business Development Division independent of the
Corporate Planning Division. We intend to make evengreater efforts to create new businesses, including PPP/PFI concession businesses and collaboration with many
companies such as Sumitomo Forestry.
In our collaboration with Sumitomo Forestry, we haveestablished and are working through eight subcommittees
in five fields of focus. Among these, we aim tocommercialize greening and wood-building promotion
and greening-related construction projects as quickly as
possible, and to create a new medium- to large-scale
wood structure market. We are also moving ahead withthe commercialization of projects in renewable energy
fields, including biomass power generation and wind
power generation.

In January 2020, Kumagai Gumi and Sumitomo Forestry
established SFKG Property Asia Pte. Ltd., a Singaporean
joint venture that is already active in projects in Jakarta,
Indonesia. In the future, we intend to work together onreal estate development in the Asian region.
We also plan to focus efforts on technological development
and expansion of our business domains in response tochanges in society. One such effort is FLORA TENDER, an
independent walking equipment for nursing care and othermarkets, with sales launch scheduled for fiscal 2020.
With regard to the third strategy of the Mediumterm Management Plan, strategic alliances with othercompanies, we are promoting alliances with a variety ofdomestic and overseas companies with rich knowledge
and technologies that we do not have, and hope tocommercialize these alliances at an early stage.
By cultivating the architectural construction field, which
accounts for about 70% of our sales, and by creating new
businesses, we will work to build a more robust businessstructure that will support the next generation for Kumagai
Gumi.

2

March 2016

March 2017

March 2018

March 2019

March 2020

March 2021
(forecast)0
The Kumagai Gumi Group Corporate Report 202017

■ Interview with the President ■Growth Strategy

Insight

OnsiteFarsight

Governance

Financial Information

How do you plan to incorporate ESG into the company's management and businesses?

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

We will boost our efforts to incorporate ESG perspectives in management,
to solidly meet the needs of society.

Our ROE and dividend payout ratio remain steady.
We expect a stable dividend in fiscal 2020 as well.

The emergence of global societal issues, as symbolized
by the SDGs, will bring about changes in the behaviors andthoughts of company stakeholders. I now have a strong
and renewed sense of those changes. The COVID-19
pandemic that hit the world in 2020 is something that
we have never experienced before. It will likely spurchanges in the relationships among companies, society,and stakeholders. For companies to achieve sustainablegrowth, initiatives aimed at creation of business
opportunities and risk management to address thesechallenges will take on important roles.

In our Medium-term and Long-term Management
Direction, we included enhanced management in termsof ESG perspectives, and formulated our ESG Initiative
Direction in April 2019. This initiative aligns ESG-related
vectors across the company, and clearly communicates
our stance and initiatives to society. It sets five key issues(Materiality) from the three perspectives of Environment,
Social, and Governance.
A year has passed since the creation of the initiative,
and from fiscal 2020, we are working to clarify which
key issues of the ESG Initiative Direction relate to ourpolicy measures, and to enhance awareness and enforce
initiatives.

Under the Medium-Term Management Plan, we plan 60
billion yen in growth investments over the plan's three
years, with the target of creating 7 billion yen in 2022.
In fiscal 2020, we will continue to make aggressive
growth investments while closely examining investment
projects. We have set an ROE of 12% as a numericaltarget for fiscal 2020, and have already reached the levelof achievement. Our payout ratio, with 30% as our aim,
is progressing according to plan, and amid the pandemic
concerns of 2020 we expect to maintain the same stabledividend.

I will continue working to optimize the balance between
growth investments and returns to shareholders. My
intent is to achieve solid growth with the understanding ofshareholders and investors.
Our ESG Initiative Direction positions reinforcement ofrelationships with stakeholders as a key issue. Looking
ahead, we will actively hold institutional investor meetings
in Japan as well as overseas. We will also increase
opportunities for direct dialogs with a wide range ofshareholders, and will work to speedily incorporate theirvalued opinions in our management.

Are there any initiatives of particular focus under the ESG Initiative Direction?

Amid current concerns over impacts of the pandemic, what sort of corporate image do you aim to achieve?

We want to give particular consideration to "work style reform" andto employee health management.
In recognition of these efforts, we were selected as a "Nadeshiko Brand" enterprise.

By sharing Kumagai Gumi's DNA of integrity and spirit of endeavor
with our employees, we will overcome the tides of the times andaim for sustainable growth.

In the "Environment" area of the ESG Initiative Direction, weare continuing our approaches to climate change risks while
also advancing a wide range of initiatives, including woodenarchitecture projects and renewable energy projects.
For many of these projects, our alliance with Sumitomo
Forestry, a company with cutting-edge knowledge in theenvironmental field, is a major driving force.
Regarding the "Society" component of the ESG
Initiative Direction, we believe this is an area that will
require ever stronger approaches following the COVID-19
global emergency. The construction industry still faces
many issues that call for improvement in the area ofworking environments. We will make further efforts
toward reforming work styles and toward employee healthmanagement.
As an effort to promote diversity, we are working tocreate environments that support the active participationof female employees. In recognition of these efforts, inMarch 2020 our company was selected as a "Nadeshiko
Brand*" enterprise by the Ministry of Economy, Tradeand Industry and the Tokyo Stock Exchange. We actively
communicate such achievements both inside and outside
the company to foster a corporate culture that embraces
awareness of ESG.

18

Corporate Information

We also work to create opportunities for directcommunication between employees and me as
President, such as the round-table conferences we holdat headquarters and at domestic branches, althoughthese are suspended for some time due to the pandemic.
Thinking together with employees, I want to lay out animage for a company that has a strong presence in society.
Finally, there is the "Governance" component of the
ESG Initiative Direction. This is a critical proposition
for us in earning trust within a global society. With
the addition of Outside Directors in 2015 and throughquestionnaire-based evaluations of the effectiveness ofeach Director and Audit & Supervisory Board Member, I
feel that discussions by the Board of Directors have beenenergized and that effectiveness is steadily improving.
Another issue that requires immediate improvement isthat of governance of group companies. I want to rebuild
a group governance system that achieves governancewhile respecting each company's autonomy. We intend towork toward group management by which every company
in the Kumagai Gumi Group can aim for growth from thesame perspective as Kumagai Gumi.

In the face of the pandemic emergency situation, I feelanew the weight of the social responsibilities that ourbusinesses bear.
In 2018, Kumagai Gumi celebrated its 120th
anniversary. At our start in 1898, our founder Santaro
Kumagai expressed a wish to perform work that would
benefit the society someday, and a wish to take on difficult
construction projects. Those words and thoughts havebeen carried forward in the DNA of our company. I believethat his words represent integrity and a spirit of endeavor.
It is not easy to predict how the world will change in the
coming "post-COVID" era. However, the mission that the
Kumagai Gumi Group should shoulder in society, and thespirit of integrity and spirit of endeavor that will support
our mission, will not change. Sharing this sense anew
with our employees, we will overcome the tides of thetimes and will work to be a corporate group that achieves
sustainable growth together with our stakeholders.

* "The Nadeshiko Brand" is an initiative aiming to introduce certain TSE-listed
enterprises that are outstanding in terms of encouraging the empowerment of
women in the workplace as attractive stocks to investors.

The Kumagai Gumi Group Corporate Report 202019

■ Executive Interview ■Corporate Information

Growth strategies envisioned throughpartnerships, and new domains
cultivated by Kumagai Gumi

Yasunori Sakurano, President

Growth Strategy

Insight

OnsiteFarsight

Governance

Financial Information

Medium- and large-scale wooden architectural structure projects that change the urban landscape
Sakurano I understand that medium- and large-scale woodenarchitectural structure projects are an area that wewant to commercialize as quickly as possible.
Sato		 That's right. I also think that medium- and largescale wooden architectural structures are the mostimportant key issue in the collaboration between ourcompanies. This is a business with huge potential.
The concept behind medium- and largescale wooden architectural structure projects
is to reassemble the business of architectural
construction from a sustainable perspective.
Recently, in the field of architectural
construction, attention has focused on the ideaof reducing the CO2 emitted within the cycle thatspans manufacturing of materials, transport,
construction, and demolition, in order to lessen theburden on the environment. Wooden architecture
excels from that standpoint. As growing trees
absorb and fix atmospheric CO2, woodenarchitecture is expected to yield the same effectas creating forests within cities.

Tatsuru Sato, Audit & Supervisory Board Member (Representative Director,

Executive Vice President and Executive Officer, Sumitomo Forestry Co., Ltd.)Entering into a business and capital alliance in November 2017, Kumagai Gumi and Sumitomo Forestry are now
engaged in collaborative projects in a wide range of fields with the aim of creating new businesses. Tatsuru Sato,
Representative Director and Executive Vice President of Sumitomo Forestry and an Audit & Supervisory Board
Member of Kumagai Gumi, spoke with Kumagai Gumi President Yasunori Sakurano about the significance and theAn era is coming in which wooden architecture,
which reduces burdens on the environment, will
create major markets. In fact, wooden architecture isviewed highly by Western institutional investors who
focus on ESG investment. I really hope to pioneer
this future market together with Kumagai Gumi.
Sakurano I feel the same. There are research results thatpredict an expansion of 300 to 400 billion yen in
the wooden architecture market. I want to turn thisbusiness into a pillar supporting the next era ofKumagai Gumi. We are advancing a strategy bywhich our two companies jointly create a private
brand and develop sales to open up that newmarket.
Sato		 Joint research on fire resistance and soundproofing
performance is progressing, and the elemental
technologies for medium-rise wooden structures
are already coming together. We are also
undertaking research and development on highrise and even super-high-rise wooden structures.
Sakurano Sumitomo Forestry is moving ahead with aconcept called the W350 Plan, which aims tobuild a 350-meter high-rise wooden structure
in 2041, the 350th anniversary of the company.
The arrival of such high-rise and super-highrise wooden structures would change the urban
landscape dramatically. I would definitely like tomake this a reality through collaboration between
our companies.

achievements of the two companies' collaboration and the future.

Promoting collaborative projects in a wide range of fields

20

Sakurano About two and a half years have already passed
since Sumitomo Forestry and Kumagai Gumi
began their collaboration. So far, we have set up
eight subcommittees in five fields, and employees
of both companies have worked together toadvance projects. What are your frank thoughts
on our current achievements?
Sato		 There are still a lot of areas that have yet to
manifest as businesses, but we are growing a lotof promising buds from business seeds, and I canfeel solid effects appearing.
Sakurano I think that the greening-related business, the fieldof environmental real estate, has yielded early
results.
Sato		 I agree. This is a business that proposes anintegration of architectural construction planningand greenery planning. We also undertook asustainable concept project involving currently
unused facilities that were constructed using
timber provided by 63 local governments
nationwide. Kumagai Gumi and Sumitomo
Forestry jointly dismantle the facilities and returnthe timber to the local governments.
Sakurano There is also project in which, at the project
proposal stage of a medical facility for which wewere engaged in sales activities, we presented aplan using wood from a Sumitomo Forestry groupcompany, and we won the order. The effects ofour collaboration are already seen in various
places.
Sato		 In the renewable energy field, too, we areproceeding with plans for a joint venture related
to biomass power generation. We are also
moving ahead with projects related to wind
power generation, and in the future, would like tochallenge offshore wind power generation.
Sakurano One unique project is the development of a forestry
machinery system that makes use of the unmanned
construction technologies that Kumagai Gumi has
acquired. Joint research with the Japan Aerospace
Exploration Agency (JAXA) has developed fromthis. In the future, we aim to apply the technologies
to structures, material transport, installation, andother purposes on the moon.
Sumitomo Forestry has a very long history of
involvement with trees and forests. The company
has accumulated know-how during that history,
and is engaged in advanced and sustainable
initiatives. There is much that Kumagai Gumi canlearn from this. I feel that we have built a very
positive relationship that will spur new initiatives
within Kumagai Gumi.

Developing joint projects in Asia and elsewhere overseas
Sakurano Another major pillar of our collaboration isoverseas business.
Sato		 In January 2020, we launched a joint venture in
Singapore and began a real estate investment
business in Indonesia. Looking ahead, I would
like to expand our business to the Asian region
and tackle large-scale projects such as real estatedevelopment and urban development.
Sakurano Yes, of course. If we think about future growth,
the expansion of overseas business is also an
indispensable strategy for Kumagai Gumi.
On the topic of urban development that justcame up, Kumagai Gumi is undertaking urban
redevelopment projects that include a new
development project in the Iidabashi area of Tokyo.
This project is also an area in which we haveexpectations for Sumitomo Forestry's knowledgeof wood-building promotion and greening.
Sato		 Moving forward with construction projects related
to wood-building promotion and greening will
naturally connect to large-scale developments

such as urban redevelopment. Sumitomo Forestry
wants to achieve environmental wooded cities
that transform neighborhoods into forests. This isa dream that we would love to bring about with
Kumagai Gumi, not only in Japan but around theworld. It is actually easier to proceed with mediumand large-scale wood structures overseas than inJapan, for reasons including laws and regulations.
Sakurano I share the same wish. We plan to continue
deepening our partnership with Sumitomo
Forestry to tackle the creation of new businesses
and seek sustainable growth.

See website for details
https://www.kumagaigumi.co.jp/ir/management/strategy/index.html(Japanese only)

The Kumagai Gumi Group Corporate Report 202021

■ The Kumagai Gumi Group's ESG Strategy ■Corporate Information

Growth Strategy

Insight

OnsiteFarsight

Governance

Financial Information

Example of initiatives
The construction industry that Kumagai Gumi has engaged in for so many years supports the infrastructure of society.
Contributing to society through this core business is Kumagai Gumi’s ultimate goal. The Sustainable Development Goals● CDP evaluation(SDGs) adopted by the United Nations set out global priority issues and a vision for the year 2030. We believe that we can

CDP uses questionnaires to collect, analyze, and evaluate information on environmental topics such as the greenhouse gas
emissions and climate change initiatives of major companies around the world. It releases information on corporate initiatives,
based on common scales. As a result of our response to the 2019 CDP questionnaire in the field of climate change, we
achieved a rating of "B" on an 8-step scale.

contribute to these through our business activities. Under this thinking and based on the Kumagai Gumi Group's Vision
Statement, Kumagai Gumi formulated its ESG Initiative Direction. Through it, we aim to contribute to the resolution of social
issues through our business activities and to increase our corporate value through sustainable growth.

ESG Initiative Direction
1. Kumagai Gumi identifies key issues (Materiality) to be resolved from the perspective of Environment, Social, andGovernance, and pursues sustainable business activities.

● Third-party verification
To enhance the transparency and reliability of disclosed non-financial information, greenhouse gas emissions reported by ourCompany underwent third-party verification from SOCOTEC Certification Japan in March 2020. We will continue working to
improve the objectivity and quality of our environmental reports.

2. Kumagai Gumi creates new value by leveraging the group's technologies, experience and expertise. We engage
in business activities that contribute to the resolution of social issues represented by the SDGs.
3. Through its business activities, Kumagai Gumi aims to build relationships of trust with its stakeholders and toincrease its corporate value.

Key issues (Materiality)

E

Formation of environmentallyconsiderate business(Environment)

Creation of rewarding
workplaces for all

SSpecific issues

Achievements in FY2019 concerning specific issues
Civil Engineering 40.1t-CO2/¥100 million
Building Construction 7.2t-CO2/¥100 million

39-41

Civil Engineering 0.65t/¥100 million
Building Construction 9.1kg/m2

40-410 cases39-40

Addressing climate change risks

CO2 emissions intensity

Achievement of zero emissions

Mixed waste discharge intensity

Initiatives with consideration of biodiversity

Significant environmental accidents during construction

Initiatives for wooden architecture projects
Initiatives in the forest conservation business

Acquisition of Ministerial certification for two-hour fireproof structures of
CLT (wooden structural panel) floors and walls

Initiatives in the renewable energy businessStart of renewable energy projects

Development of environmentally considerate technologies

Development of algae biomass production technologies

Securing and developing human resources

New graduate hiring / mid-career hiring

Succession of technology

New employee training / young employee follow-up training

Promotion of diversity

First selection as "Nadeshiko Brand" enterpriseAchievement of work-life balance

Promotion of worker health and prevention of labor accidents

Pages

1 project

29

-

32

118 persons / 24 persons

34

188 hours/person / 36 hours/person

33

-

34

Limit overtime work through FY2018 to under 100 hours/month

99%

44

Percentage of employees taking 5 days or more of annual paid leave through FY2018

100%

44

Safety/Frequency of labor accidents

0.44

36

Safety/severity rate

0.02

36

-

45

108

48

1 project

48

-

28

4 consecutive years of recognition as a "White 500" enterprise with outstanding health and productivity
Number of reports on activities that contribute to society (Smile Project)(Society)

Contribution to local communities

Activities that contribute to society overseas (KUMAGAI STAR PROJECT
school construction)
Participant in redevelopment project as a business agent

Achievement of sustainable communities

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

G(Governance)

22

Enhancing of corporate governance

Proactive communication withstakeholders and others

Disaster-related construction

Civil Engineering: 11 projects / Building Construction: 28 projects

Seismic reinforcement construction

Civil Engineering: 10 projects / Building Construction: 10 projects

Number of projects applying productivity
enhancement technologies onsite

Civil Engineering-related: 3 projects
Building Construction-related: 3 projects

Number of technology research projects related to resolving social issues

6 projects

31-32

Improvement of the effectiveness of the Board of Directors

Review of internal rules and management conferences based on the Basic Policy to Establish Internal Control Systems-

52

Enforcement of compliance

Compliance reinforcement month (October), submission of written pledges concerning compliance, compliance training-

54

Strengthening of risk management

Setting of tax policy, BCP, health management, respect for human rights

-

45,55

Active dialog with investors

Small meetings

4 times

Individual meetings/teleconferences

74 times

Improvement of CS

24-hour consultation desk (100% same-day initial responses), customer insights investigate (questionaries/visiting)

Promotion of CSR procurement

Green procurement ratio-

Civil Engineering: 14.7% / Architectural Construction: 12.8%

46
43
39-41

The Kumagai Gumi Group Corporate Report 202023

■ Business Report ■Civil
Engineering

Corporate Information

Growth Strategy

Insight

OnsiteFarsight

Governance

Financial Information

Amid rampant natural disasters and the COVID-19 pandemic, Kumagai
Gumi will commit to its mission as a civil engineering firm, including
disaster recovery and the renewal and maintenance of infrastructure.
Our goal is to let our employees feel the joy of construction thingsin comfortable working environments, and to be a company that
contributes to the world.

Domestic sales

122.2 billion yen(billion yen)

106.8

Domestic operating profit(billion yen)

122.2

111.6

8.6
5.8

Director and Executive Vice President
General Manager of the Civil Engineering Management Division
General Manager of the Railway Project Promotion
Division of the Civil Engineering Management Division

Yoshihiko Kato

FY2017

7.6 billion yen

FY2019FY2018FY2017FY20187.6

FY2019

Hokkaido Electric Power Shintoku Hydroelectric Power Plant

Business environment
Business risks

Business opportunities

Capitalinvestment● Fluctuations in construction investment● Market fluctuations in construction materials/equipment
and labor cost

● PPP/PFI/concessions projects/MOM projects/DB, ECI● Large-scale infrastructure renewal/expansion of Cotta deckslab projects

Productivity● Securing full-time engineers for specific construction
projects and passing down skills and expertise● Significant shortages of human resources, and structural
decrease in skilled construction workers● Application of the revised Labor Standards Act to theconstruction industry● DX (Digital Transformation), robotics● Development and promotion of ICT, AI-related technologies,
and other next-generation technologies● Promotion of flexible work styles (securing of humanresources)

Environment● Regulations for ecosystem conservation● Recycling-related regulations● Intensifying natural disasters● Growth of business related to renewable energy, forest
conservation, smart cities, and waste treatment● Disaster recovery through unmanned construction
technologies and disaster prevention support

Strategy

Maintain andincrease contracted
construction
businesses

Initiatives in FY2019

Future initiatives

Expansion oforders for major
construction projects● Receipt of orders for advanced
construction projects, including
survey and design leveraging oursolutions capabilities● Integration, analysis, and sharing of digital data;technology transfer and development● Improvement of operational efficiency and elimination ofoccupational accidents

Response to natural
disasters● Contribution to society throughresponse to natural disasters● Training of operators for unmanned construction
machinery and high function operating room
● Continuation of KUMA-DECS training in disaster
information communication

PPP/PFI projects● Provision of technology concerning
final disposal site maintenance andoperation business● Efforts toward hydroelectric power
generation concessions● Approaches to PPP/PFI methods (concessions,comprehensive private contracting, etc.)

Renewable energy
projects● Strengthening of support for solar
power, wind power, and geothermal
power
Expansion of the renewable energy
project domain● Participation in EPC as investor● Strengthening of hydroelectric repowering project
initiatives● Focus on frontier sectors such as biomass power
generation, off-shore wind power, and geothermal power
generation

Large-scale
infrastructure
renewal● Practical use and diffusion of Cotta
deck slabs in large-scale highway
renewal projects● Human resource development and accumulation ofdesign and construction technologies for deck slab
replacement construction● Participation in electric power development projects

Partnership with
Sumitomo Forestry● Expansion of use of wood materials
in the civil engineering sector● Application of civil engineering technology to the forest
industry

Create new andinnovative
businesses

Form strategic
alliances with othercompanies

24

Looking back on FY2019
A generally favorable environment for orders continued in
the domestic market, but signs of restrained investment
became visible under the COVID-19 pandemic.
As a result of FY2019, our orders received declined
year-on-year to 92.4 billion yen. However, we accumulatedorders in sectors in which we have less construction
experience. We aim to connect this experience to the
expansion of bid participation opportunities in the future.
Our sales remained strong, rising 10.6 billion yen fromthe previous year to 122.2 billion yen. This marked the firsttime in 17 years that our sales exceeded 120 billion yen.
Amid this high level of sales, we advanced the useof ICT tools such as CIM, the IoT, and unmanned
construction technologies to promote compelling working
environments. We are introducing AI to sites for threemain types of construction: tunnels, shields, and dams.
In this fiscal year, we started practical application of
the Cotter deck slab method, a technology that we havedeveloped. This technology is scheduled to be put to greatuse in works starting in the next fiscal year.

Future initiatives
To adapt to long-term changes in the construction industry,
we have broadened the business domains of Kumagai
Gumi to the domains of maintenance, repair, and renewal,
as seen in large-scale highway renewal projects, alongwith our ongoing domains of PPP/PFI, concessions,
ECI, DB, and other domains of project planning. We plan
to continue accelerating these domains. We will also
continue our efforts in overseas civil engineering andrenewable energy projects.
We declared FY2019 to be our "DX ground year"
and began digitalization and accumulation of numerous
construction information in order to develop and transmit
technology and improve operational efficiency. At present,
we have stored all past construction records in the cloud,

reaching the stage at which these records can be shared.
In the future, we will collect expanded information such asvideos of ongoing construction works, CIM, and 3D datain the cloud in real time. We will share and analyze thisinformation, and put it to use in everyday work.
In 2018, we launched the KUMA-DECS disasterrecovery team together with 17 major civil engineering
companies in the Yuuei Kyoryoku Kai* association topromptly respond to requests for support from disasterareas. We have carried out dispatch training andunmanned construction machinery operator training.
We will enhance this training along with accelerated
development of new unmanned construction technologies.
* Group of partner companies of Kumagai Gumi

The Kumagai Gumi Group Corporate Report 202025

■ Business Report ■Corporate Information

Building
Construction● We

Growth Strategy

Insight

OnsiteFarsight

Governance

Financial Information

will strengthen solution-oriented sales that resolve customer

issues, and will build relationships of trust with customers.
● Our Headquarters, branches, and workplaces come together in our"Aiming to Be No.1 in Safety, Quality and Environment Management"
initiative to provide construction services that customers trust.
● We will discover growth opportunities through flexible creativity, andwill realize them through rapid actions.

Domestic sales

229.5 billion yen(billion yen)Domestic operating profit

13.1billion yen(billion yen)

186.8

195.0

FY2017FY2018

229.5

12.4

12.9

13.1

FY2017FY2018FY2019Director and Executive Vice President
General Manager of the Building
Management Division

Yoshiaki Ogawa

FY2019The Fukui Bank, Ltd. Head officeBusiness environment
Business risks

Business opportunities

COVID-19 pandemic

Decrease in markets for accommodation industry,
etc. due to decrease in inbound travel

Increase in investment in telecommunications
infrastructure due to increased demand for telework

Deflationary trend in theeconomyDecline in appetite for private-sector construction
investment

Reduction of construction costs

Aging population

Shortage of skilled workers due to declining
working population

Increase in investment for school system
reformation

Increased number of natural
disasters such as heavy rains,
typhoons, and earthquakes

Delays in processes due to construction
interruptions; incurring of disaster recovery costs

Demand for BCP-compliant buildings that areresistant to disasters

Strategy

Maintain and increase contracted
construction businesses

Create new and innovative
businesses

Form strategic alliances with othercompanies

26

Initiatives in FY2019

Future initiatives● Strengthening of sales at large logistics facilities● Strengthening of cost competitiveness in large-scale
logistics facilities● Creation of an achievement in the hotel sector● Strengthening of initiatives aimed at luxury-classhotels● Continued sales activities in the medical andwelfare sector● Strengthening of initiatives aimed at public-private
demand for hospital rebuilding● Ongoing endeavors to become "No.1 in Safety,
Quality and Environmental Management"● Improvement of productivity through ICT technology
and construction BIM activities● Expansion of business domain in the mediumand large-scale wood structure market● Strengthening of initiatives aimed at wooden officebuildings● Promotion of urban redevelopment projects● Promotion of participation in urban redevelopment
projects● Strengthening of partnership with Sumitomo
Forestry● Creation and realization of synergies with Sumitomo
Forestry● Collaboration with plant manufacturers● Promotion of alliances with incineration facilities

Looking back on FY2019
The amount of orders received decreased from theprevious year due to the considerable number of orders
placed at the end of FY2018, as a measure against theconsumption tax hike in October 2019. Meanwhile, orders
received were focused on promising growth sectors in
the private-sector market, such as large-scale logistics
facilities undergoing growing demand due to the growth of
e-commerce in the retail industry, office buildings centeredin Tokyo metropolitan hubs, and production facilities
across Japan. These will help maintain and expand salesof Building Construction in the future.

With regard to sales, all of our headquarters, branches,
and workplaces have made efforts to increase productivity
in our abundant existing construction projects, achieving
new highs in productivity for the past few years.
We believe that technological advancement lie at thecore of our corporate value. In FY2019, we received
a Good Design Award for the Branz Rokubancho
condominium (Chiyoda-ku, Tokyo), which we designed
and constructed. We will continue working to hone andpass down our technical skills and expertise.

Future initiatives
We believe that the COVID-19 pandemic will have avariety of effects on construction investment. As the
pandemic moves toward subsiding, we will flexibly andpromptly respond to changes in society and will continue
to provide construction services that customers can trust.
Areas in which growth is expected include renewalof waste treatment facilities, the medical and welfare
sector under the expansion of regional medical services
in an aging society, and the e-commerce logistics sector
boosted by the pandemic.

In the medium- and large-scale wood structures that
we are pursuing in collaboration with Sumitomo Forestry,
we will seek to seize business opportunities such asutilization for office buildings.

The Kumagai Gumi Group Corporate Report 202027

■ Business Report ■Corporate Information

Overseas
Projects

Bank of China Tower (Hong Kong)

TAIPEI 101

Urban Development
Projects

Conceptual image of completed new construction of Type-1 Urban Area
Redevelopment Project facility in the Kanazawa Station Musashi-minami area

Looking back on FY2019

Looking back on FY2019

As a new initiative in FY2019, we established a joint venturewith Sumitomo Forestry focusing on real estate investment
in Singapore. As our first overseas development projectin collaboration with Sumitomo Forestry, we will invest
through this joint venture and undertake a development
project for a condominium and commercial high-risecomplex in the central area of ​​Jakarta, Indonesia, with a
total project cost of about 16 billion yen.
In addition, in Management, Operations, andMaintenance (MOM) projects in Hong Kong, we added tothe previous fiscal year's order for the Tate's Cairn Tunnel
by receiving another order for the Eastern Harbour Crossing(EHC) Tunnel and renewing our contract (6 years).
In addition, the Bank of China Tower (Hong Kong)
and TAIPEI 101 properties constructed by Kumagai
Gumi were selected among the "50 Most Influential Tall
Buildings of the Last 50 Years" by the Council on Tall
Buildings and Urban Habitat (CTBUH), an eminent USbased international NPO.

In urban redevelopment projects, we received an order for
new construction of Residence in the Kanazawa Station
Musashi-minami area. Construction is now underway, withcompletion scheduled for the autumn of 2021. In addition,
we were selected as a designated business agent for
urban redevelopment projects in Shinjuku Ward in Tokyoand the city of Iwaki in Fukushima Prefecture. We will
work toward successful redevelopment in these projects
while holding discussions with the respective proprietors
and providing support to the secretariats.
In projects to utilize the space of shrines and temples,
we provided support from the project configuration stageof a temple restoration project in Kyoto, which successfullycompleted in June 2020.

Future initiatives
In April 2020, we reorganized the existing International
Branch Offices to establish the International Division,and simultaneously established a new sales office inIndonesia. These were done to accelerate measures
aimed at making our international business a base forsustained income, as indicated in our Medium-termManagement Plan. We will powerfully promote a wide
range of developments in collaboration with groupcompanies, in addition to contracted construction work
such as ODA projects in Asian countries and support foroverseas expansion by Japanese companies, to take ondevelopment projects including projects in collaboration
with Sumitomo Forestry, PPP projects, infrastructure
MOM projects, and more.

28

Growth Strategy

Insight

OnsiteFarsight

Governance

Financial Information

New Category
Projects
Looking back on FY2019

Future initiatives

In response to future contraction of the domestic
construction market, we are taking part in projects
that involving investments. Our goal is diversificationin our income bases beyond contracted construction
businesses, and securing stable income bases that willcompensate for income fluctuations.
In PPP and PFI projects, we have traditionally focusedon service purchase-oriented projects as a means ofpublic procurement, but are also advancing larger-scale
projects and independent profit-oriented projects. As in
FY2018, we launched and bid on concession projects,
infrastructure operation projects, renewable energy
projects, and other projects in the aim of securing profits
through project operation.

We position the following businesses as key sectors forour company and will continue challenging them with thegoal of commercialization.
● Concession projects that form one essencial of Japan's
future growth strategy.
● Infrastructure operation projects and renewable energy
projects that promise long-term and stable revenue.

Future initiatives
Two urban redevelopment project properties in which weare currently participating as a designated business agent
will enter important phases in starting their construction.
We will work to advance these projects while resolving
issues one by one.
In new urban redevelopment projects, we will actively
challenge publicly offered projects and work to further
increase orders, so that we can continue participating in
projects from the previous year.
Looking ahead, we will strengthen our efforts in built-in
sales, such as effective utilization of public land.
Through the variety of knowledge we have accumulated
through projects to utilize the space of shrines andtemples, we will continue to develop our sales activities
to religious corporations, positioning these projects asreal estate utilization-oriented restoration projects tostrengthen our sales efforts.
The Kumagai Gumi Group Corporate Report 202029

Insight

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

Corporate Information

Growth Strategy

Insight

OnsiteFarsight

Governance

Financial Information

Technology Development System
In order to provide high-quality construction services,
contribute to the formation of a sustainable society, andstrengthen the solutions capabilities of the Kumagai Gumi
Group and contribute to the enhancement of productivity inconstruction, Kumagai Gumi is undertaking technologicaldevelopment under three main themes: "adaptation to a
recycling-oriented society," "research and development
to meet societal needs," and "technology development toimprove productivity and safety."
In FY2019, we established a Bridge Solutions Officein the Technical Research & Development Institute.
This office will focus on development of technologies forapplication in large-scale highway renewal.
In the development of unmanned construction
technology, which we have been undertaking for frombefore, we are advancing a new initiative called AI
autonomous driving. In technological development in
the construction sector, we are working to develop fireresistant wood-based materials that can be applied tomedium- and large-scale wood structures, as well as
earthquake resistance and seismic isolation technologies.

Technology Development System

Kumagai Gumi Technical Research
ReportPatent-related measures

Kumagai Gumi published the "Kumagai Gumi TechnicalResearch Report" in June 1967. In the 52 years sincethen, we have continued to provide new value in resolving
problems.
Beginning with the first issue, which featured a report on"the linear construction method" (a mechanized version of
the Hume pipe jacking method), we have published 78
issues through 2019. We distribute the report to major
academic societies and related companies.
In recent years, we have published about 20 articles
and reports on four themes, beginning with a preface thatoffers the latest topics in a variety of specialized fields, andmoving on to basic research, technological development,
and overviews of construction sites. The report was
published on paper through the 76th issue, but from issue
77 entered the digital age through publication on CDROM. The CD-ROM report is available upon request.

Kumagai Gumi Group implements patent measuresin line with the three strategies of the Medium-Term
Management Plan.
Our patent applications in FY2019 cover a broad rangeof materials and construction methods for wood andwood-related technologies that account for 40% of our
total number of patent applications. These technologies
strengthen our ability to offer solutions. Technologies
that contribute to improving productivity, including ouradvanced unmanned construction and automated driving,and IT, AI, and robotics related to image processing
and other measurement technologies, account for 15%of the total number of patents. These contributed to themaintenance and expansion of contracted construction
projects.
With regard to our technology and design related toindependent walking equipment, we are readying thestart of a new business by continuing to file applicationsin Japan and overseas to prepare for general market
launches.
Moreover, reflecting our joint research and joint
development that spans industries, one-third of our patentapplications were joint applications. We are working tostrengthen alliances with other companies in our patentmeasures, too.

Planning Group

Technical Research &Development Division

Technical Research &Development Institute
New Technology Innovation
CenterCivil Engineering
Management Division

Civil Engineering Technology
Department

Architectural
Management Division

Architectural Engineering
Department

Technology Development
Management
Subcommittee

See P13 for number of patent applications

The Kumagai Gumi Group Corporate Report 202031

■ Insight

Corporate Information

Growth Strategy

Insight

OnsiteFarsight

Technology to Create Social Value

Diverse Human Resources

Development of CCU technology that contributes to achieving
a carbon cycle-oriented society

Development of human resources

From the standpoint of global warming countermeasuresand our ESG management, our decarbonization
efforts are attracting attention. Expectations are highfor CCU (Carbon Capture and Utilization) technology,
which effectively utilizes CO2 as a resource, as ameans of achieving a carbon cycle-oriented society.
Against this background, Kumagai Gumi has workedon the development of CCU technology through a new
bio-process that differs from means such as artificial
photosynthesis and algae utilization. Using iron-oxidizing

bacteria and using CO2 as a raw material, we developed
basic technology for the production of ethylene, a raw
material for key chemical products. The production of
ethylene from CO2, once made possible, is expected tohave a great effect on reducing CO2 emissions and increating a new industrial sector of CO2 chemistry. We
believe that these will make major contributions to theachievement of a sustainable, carbon cycle-oriented
society. We will tackle further research and developmentwith the aim of practical application.

Our corporate philosophy structure and vision forhuman resources

Insight, Onsite, Farsight

Promote the realization of
our Group Vision Statement
Formulate an image of
employees as "Kumagai

Gumi's vision forhuman resources"

Group Vision
Statement(Kumagai Gumi's
vision for itself)

Enhance our unique Worksite
Excellence, create uniquevalue ("Quality that Inspires
Happiness"), and continue tosupport customers andsociety throughout every era

Vision forhuman resources(Vision expected ofall employees)(Expectations and responsibility for results
borne by each person in the workplace)

Our Company's Code of Conduct(Base and foundation for everything)

Ethylene-producing iron-oxidizing
bacteria grown in liquid medium
Ethylene production equipment (electrified cultivation equipment)

Aiming to develop human resources under the idea of"Enrich the self, create the future, and support people,"
we are working on various efforts. In April 2019, we
formulated the Human Resources Development Plan thatsets our directions in this area.

(1) Job rotation
Our company performs job rotation to let employees acquirewide-ranging knowledge and ways of thinking throughexperience in different work duties at multiple workplaces.

(2) OJT
Through daily work, superiors and senior employees guideand train subordinates and junior employees by consciously,systematically, methodically, and continuously providing theknowledge, skills, and attitudes necessary for executing workduties.

(3) Group training
We conduct planned education drills and training tocomplement OJT, drive self-development, and provide expert
knowledge.

(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-development that
leads to employees’ skill advancement.

Financial Information

Number of persons undergoing hierarchy-specific training
1000■Newly appointed line
director training■Manager training

Conceptual structure of Kumagai Gumi

Roles and duties

Ethylene-producing iron-oxidizing
bacteria grown on agar medium

Governance

800■Evaluator training■Newly appointed
manager training■Beginning manager
training■Newly appointed
instructor training■OJT trainer training

600

400

■3rd-year training

200■Young employee
follow-up training■New employee training

0

FY2015 FY2016 FY2017 FY2018 FY2019

FY2019 number of persons undergoing hierarchy-specific training
Name of training

Eligible
Training
Training
No. ofTotal training
no. ofrate
hours pertrainees
hours
trainees(%)
personNewly appointed line
director training

17

17

10

493

29

Manager training

55

49

89

784

16

Evaluator training

152

152

10

1,216

8

Newly appointed manager
training

19

16

84

256

16

Beginning manager training

36

3.2

89

512

16

Newly appointed
instructor training

46

41

89

656

16

OJT trainer training

111

95

8.6

760

8

3rd-year training

96

95

99

1,377.5

14.5

Young employee
follow-up training

144

143

99

5,148

36

New employee training

148

148

10

27,824

188

Hierarchy-specific training structure
Position

Year-specifictraining

Training at timeof promotion

Role training
Newly appointed line
director training

Selective
training
Next-generation executive
development training

Manager training

Managerposition

Evaluator training
Newly appointed
manager training
Beginning
manager position

Beginning
manager training

Guidance
position

Newly appointed
instructor training
OJT trainer
training

Generalposition

3rd-year training
Young employee
follow-up training
New employee
training

See website for details
Personnel-related data https://www.kumagaigumi.co.jp/csr/employee/date/index.html (Japanese only)

32

The Kumagai Gumi Group Corporate Report 202033

■ Insight

Corporate Information

Current state of employment
Kumagai Gumi only
(FY)

2015

2016

2017

2018

2019

Number of
employees

2,223

2,305

2,382

2,497

2,578

Average age

45.4

45.2

45.3

44.9

44.5

20.9

20.7

20.5

19.9

19.5

Composition of personnel

19.8%
Other employees
512

No. ofemployees
2,578

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 2020, our employment rateof persons with disabilities was 2.09%. We will continue
improving working environments and opening up job areas
to expand employment of persons with disabilities.

Increase the percentage of women in
manager positions (0.8%) to x2 or more

x5.6

All manager positions:
54 out of 1,201

Increase the number of technical-position
women in workplaces to 20 or more (14)31

Increase women in manager positions
to x2 or more (2)x5Employment rate of persons with disabilities
Statutory employment rate 2.20%(From April 1, 2018)

2.00

June
2016

June
2017

2.12

2.09

June
2019

June
2020

1.50

June
2018

Action plan(values at time of formulation)

Performance in FY2019

10

We formulated our second Action Plan in April 2020 andare working to create workplace environments that are
comfortable for women. We conduct networking eventsand career design seminars for women and diversity
seminars for supervisors of female employees topromote continued work and raise awareness. We havealso implemented a mentoring program since FY2019,and from FY2020 are examining mentoring for female
manager position candidates in the construction field.
In July 2020, four female employees took on management
positions through transition from regional clerical positions
to regional management positions.

Promotion of diversity
With a management philosophy of "We strive to bea progressive and nurturing company, offering eachindividual the opportunity for personal growth, pride, andsatisfaction in his or her work," Kumagai Gumi recognizes
the diversity of employees and has promoted the creationof workplace environments that are places for selfactualization. In March 2020, our company was selectedby the Ministry of Economy, Trade and Industry and theTokyo Stock Exchange for the first time as a "Nadeshiko
Brand" (2019 selection) listed company that encourages
women’s success in the workplace, in recognition of ourincorporating diversity
into management strategy
and construction of apromotion system.

34

Financial Information

Full-time
employees
2,049

79.5%

All management
positions: 24 out of 139

2.01

Governance

0.7%

Increase the percentage of new women
17.3%
hires (management positions) to 20%

2.22

Farsight

Executive officers
17

Workplace environments for active participation by women
Between December 2015 and March 2020, we increased
our hiring of women and formulated and enacted an action
plan to improve the workplace environment for active
participation by women, in line with the Act on Promotion of
Women's Participation and Advancement in the Workplace.

2.00

OnsiteKumagai Gumi only (as of March 31, 2020)

Status of employment of elderly persons
We operate under the premise of employment after the
statutory retirement age, until the age of 65. We are
expanding the employment of older workers who have an
ambition to work and high skills. We seek to continuously
hand down the technical and sales capabilities of older
workers to the next generation, energizing employees andorganizations alike. To do so, we are enhancing employee
benefits to create comfortable work environments. As of
April 2020, 359 retirees are working in the company.

2.50 %

Insight

See P13 for number of employees and number of female managers

Number of employees and average age and length of service

Average years ofservice

Growth Strategy

We have created a "Handbook for Supporting Work" thatsummarizes information on work rules and procedures
involving marriage, pregnancy, childcare, and shortened
working hours. We have also established a consultation
desk to support childcare leave, etc., to enhance ourrelevant programs. We have also introduced a support
interview system for childcare and other issues, aimed
at smooth return to the workplace and readiness for work
after maternity leave and childcare leave. This helps inrelieving employees' anxiety and resolving problems.
With regard to long-term care, we have created a nursing
care edition of our "Handbook for Supporting Work" fordistribution to employees, collecting information on work
support programs, basic knowledge, consultation desks,
the mechanisms of long-term care NPOs, and more.

OnsiteDeliver Quality that Inspires Happinesswith Our Worksite Excellence"Worksite Excellence." ― Every employee of the Kumagai Gumi Group is front line personnel.
We gain deep understanding of our customers, learn from them, and share their thoughts. Giving thought to those
who use what we create and who will gather at these 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 and function 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 and Environment Management."■ Onsite

Corporate Information

Growth Strategy

Insight

OnsiteFarsight

Governance

Financial Information

Aiming for Safe Workplace Environments

Quality Control and Environmental Preservation

Safety results in FY2019

Aiming for the highest quality

In FY2019, we achieved our occupational health andsafety target of "frequency of labor accidents rate of 0.5 or
less," but two fatal accidents occurred. This is the first timesince 2005 that multiple fatal accidents have occurred. As
a company that puts respect for human life first, this is anextremely regrettable result.
In FY2020, we will reinforce our commitment to making
human life our highest priority, as stated in our Safety and
Health, Quality and Environment Policy. By enhancing
occupational health and safety education and guidanceand steadily practicing basic rules for safe work, we will
eliminate serious disasters and work toward our targets
for safety and health management.
FY2020 Safety and Health Control Plan (excerpt)
Targets

Fatal accidents: 0 / Frequency of labor
accidents rate: 0.5 or lessPrevention of repeated disasters/accidents

Actions
to be
taken

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

Operation of management system

2. Enhance a "line and staff management system"

Every department that supports workplaces is working to
improve occupational safety and health management bycarrying out its roles in this system.

3. Improve safety and health education

Our headquarters, branches, and Yuuei Kyoryoku Kai provide
employees, business owners, foremen, supervisors, andworkers with education on improving risk prediction andeducation on occupational safety and health management
systems, in accordance with a fiscal year education plan.

Safe and secure workplace environments
for foreign human resources
Many foreign workers are active in the construction industry,and occupational accidents have increased accordingly.
We have translated our Workers' Basic Education booklet
into foreign languages and are supporting education forbusiness operators. We are aiming to create safe andsecure workplace environments for foreign workers, bymeans including creating foreign language versions of
the materials for occupational health and safety education
performed whenentering work sites,
to make the rules of
the workplaceeasier tounderstand.

With the aim of providing construction services that earn
the trust of customers, reducing environmental impacts,
and creating a better environment, we acquired ISO 9001
certification in 1996 and ISO 14001 certification in 1997,
under which we continue to operate our management
systems. We believe that the highest quality is achieved
through an integration of the quality assurance systems,
human resources who are committed to quality, andeffective processes. We continuously develop humanresources through our personnel development systems,
and, in every process under our quality assurance
systems, we will ensure the cycle of planning (Plan),
execution (Do), confirmation and inspection (Check), andreview and improvement (Act) to improve the quality ofprocesses (Figure 2).

Group work forconstructions

QCDSE patrol(architecture)

Overall Quality andEnvironment Control Manager
Headquarters

Quality and Environment
Committee

Division Head

Quality and Environmental
Expert Subcommittee
System Audit Team
Branches
Overall Branch Quality andEnvironment Control Manager
Branch Quality andEnvironment Committee
Branch Quality and Environmental
Expert Subcommittee Branch
System Audit Team

Department
Heads
Branch Managers

Group Leaders
Department Heads/
On-site Managers

QCDSE patrol(civil engineering)

Patrol by partnercompany

Ordered construction
handover meeting

Site study tour/briefing

Individual projects (sites)

Headquarters/branch management departments

Customers/Society/Environment/Stakeholders

Practicing the PDCA cycle under our
Safety and Health Management System

Safe and secure workplace environments
for elderly persons

Kumagai Gumi obtained the industry's first companywide certification under the COHSMS (Construction
Occupational Health and Safety Management System)
program launched in 2008 by the Japan Construction
Occupational Safety and Health Association (JCOSHA).
In 2018, NEW COHSMS was launched in response tochanges in the environment surrounding the constructionindustry and in the ISO 45001 international standard. Undera system that has received this renewed certification, we
are working to prevent occupational accidents.

We are strengthening initiatives to protect seniors, including
placement of "thoughtfulness stickers" that encourage
surrounding workers to speak to elderly persons, settingof age limits and permission systems for work that involves
a risk of falls, and awareness education that encourages
elderly persons to make use of their abundant experience
while instilling self-awareness of physical weakening.
Through such efforts, in FY2019 we reduced the continually
increasing number of accidents involving elderly persons.

Branch managers, worksite managers, branch managers of
the business partnership, chairmen of foremen associations,and all workers make safety declaration from their respective
positions, and use the PDCA cycle to develop safe, secure,and pleasant workplaces. Many of our workplaces have beencertified under the comfortable workplace certification programof the Japan Federation of Construction Contractors.

President

Figure 2. Conceptual diagram of the Quality and Environment Management System

6. Enforcement of a line and staff control system
7. Strengthening of occupational health and safety
guidance by specialty constructors
8. Support for branch safety priority management sites
9. Implementation of programs for mental and physicalhealth promotion

1. Maintain an excellent workplace environment

Figure 1. Quality and Environment Management System Organization

Identification of risks
and opportunities
Inspection of blueprints
Group work forconstructions

Planning (Plan)
Ordered construction handover meeting
Assessment of required quality,
project properties, etc.

Identification of policies/
risks/opportunities
Annual plan

Execution (Do)
Guidance/support

Management Resources(Human resources, technology,
information, etc.)

Review/
Improvement(Act)

Aiming to become the industry’s No. 1 in
See P13 for frequency of labor accidents
safety results
Kumagai Gumi introduced an occupational health andsafety management system in 1999 and has pursued
occupational health and safety up to the present.
In the Medium-term Management Plan that began in FY2018,
too, we aim to be at the head of the industry in this area.

Project operation/
management

Review by the President(Management review)

Planning/Review
Project supervision
Aftercare

Progress management/
integrated management

Patrol inspections
Internal audits
System audits

Review by the President

Confirmation/
Inspection(Check)Quality Management
Committee

See website for details
Occupational health and safety initiatives https://www.kumagaigumi.co.jp/en/csr/safety/index.html

36

Inspection by customers

System audit

Internal inspection

Inspection by partner company
The Kumagai Gumi Group Corporate Report 202037

■ Onsite

Corporate Information

We conduct two-month practical training forconstruction drawing, with dormitory stays, foremployees in their third to twelfth years in theConstruction Division.

Insight

OnsiteFarsight

Governance

Financial Information

Quality Control and Environmental Preservation

Training engineers with a commitment to quality
Employeetraining

Growth Strategy

Quality
instructor
program

We appoint a quality instructor in the Architectural
Project Department of every branch, and conduct
quality control guidance every month at every
workplace.

Environmental conservation activities

Policy for Biodiversity (outline)

We have further set our medium- to long-term goals forenvironmental activity in "The Promise of Eco First,"
and goals for our biodiversity initiatives in "Policy for
Environmental Diversity Initiatives."

Fundamental concept"The Promise of Eco First" (excerpt)■ That biodiversity is facing a severe crisis due to various

Target values are for Kumagai Gumi only

■ That there is a deep relationship between the construction

We recognize the following in our business activities, andactively work towards biodiversity protection and sustainableusage.

■ That our daily lives are supported by the benefits provided
by biodiversity

human activities

industry and nature

Training
for partnercompanies

The Yuuei Kyoryoku Kai association conducts
various types of training with the aim of improving
capabilities related to QCDSE (Quality, Cost,
Delivery, Safety, and Environment).

Technology To share information on ever-evolving architecturalpresentation construction and civil engineering technologies andmake full use of these in our everyday work, wehold presentation meets to broadcast technologies
we have developed and new technologies
introduced at workplaces company-wide.

1. We promote the building of a low-carbon society via
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

4.2

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

1.8

35

67

Reduction
rate (%)

2. We promote the creation of a recycling society at ourconstruction sites.

Business improvement and creativerefinement proposal program
We operate a business improvement and creativerefinement proposal program with aim of improving
business and work efficiency and cutting costs. The
program solicits proposals for business improvements,
refinements, and ideas from our employees andthe employees of partner companies, receiving 239
submissions in FY2019. Outstanding proposals
are entered into a database and are used at sites
and workplaces to help improve safety, quality, theenvironment, and workability.
Number of work improvement proposals(1) FY2020
Mixed waste
discharge target

External evaluation
The Kumagai Gumi Group reviewed the results of the
Corporate Quality Management Level Survey by theUnion of Japanese Scientists and Engineers to determine
our strengths and issues. This information is used to effectongoing improvements in our management systems.
The Kumagai Gumi Group's "Quality Management Level Ranking"* Not conducted in FY2019 due to biennial schedule
Ranking in general construction industry

Ranking in all industries(Number of responding companies in FY2018: 193)
1

1
2

2

2

6

3

300

239

250

2

22

5
7

15

151
100

11

50

60
0

32
FY201538

FY2016FY2017FY2018FY2019Architectural sites

Civil engineering sites

15% or more

21% or more

1. Initiatives for design and construction
2. Legal compliance
3. Technological development
4. Social contribution initiatives

Main risks and opportunities involving
the environment
We identify environmental risks and opportunities, taking
into account factors including our business environment
and the nature of our business activities. Major items areshown below.
Risk

Green Purchase Rate
Percentage of spending on green purchasing items per 100 million yen of
construction work value

3. We strive for a society that coexists with nature andpromote initiatives that consider biodiversity.
4. We strive to develop, improve, and popularize
technologies and methods that consider theenvironment.
5. We actively contribute to environmental
conservation activities in the region.
6. We actively disclose environmental information andwork on communication.

43

ClimatechangeFY2014FY2016●

Biodiversity

FY2018Strengths: Expansion of quality management (quality
improvement activities at cooperative association)
Customer value creation (change of technology
development system, technology creation)
Inter-departmental collaboration capability
Issues: Further trend analysis of market defect costs
Indicators of the effectiveness of new technology development

Loss of trust due to noncompliance with laws
and regulations● Decline incompetitiveness due toinsufficient compliancewith laws and regulations●

Resource
recycling

51

FY2012

Decline incompetitiveness due toinsufficient adaptation
to social systems andregulatory tightening● Occurrence of damage
to health due to rise inaverage temperature● Occurrence ofconstruction delays andshortages of materials
and equipment due toabnormal weather●

41

FY201087

All sites
Less than 0.5 t/
100 million yen

We incorporate consideration of ecosystems in our businessactivities, and carry out such activities company-wide.

31

9
150

11

Civil engineering sites

All sites
Less than 10 kg/m2
of floor space

21

27

200

1

(2) FY2020
Green Purchase
Rate target

Architectural sites

Our initiatives

Interruption orcancellation of businessdue to destruction of theenvironment

Opportunity
Creation of technologies,
products, andbusinesses that resolve
climate change issues● Expansion of markets
due to growing customer
needs for environmentfriendly design andconstruction● Expansion of demandfor infrastructuredevelopment associatedwith increasing
frequency and intensityof natural disasters●●●

Creation of technologies,
products, andbusinesses for buildinga recycling-oriented
society

Creation of technologies,
products, andbusinesses that takebiodiversity conservation
into consideration

See website for details
Kumagai Gumi's "The Promise of Eco First" https://www.kumagaigumi.co.jp/en/csr/environment/ecofirst.html
Information about CO2 emissions overseas – Taiwan Kumagai Co., Ltd. https://www.kumagaigumi.co.jp/csr/environment/ecofirst/ecofirst01/
		(Japanese only)

The Kumagai Gumi Group Corporate Report 202039

■ Onsite

Corporate Information

Environmental performance

See P41 for details

Kumagai Gumi is actively working to reduce its
environmental impacts as an Eco-First company. Since
2000, we have reduced CO2 emissions nearly according
to plan through activities such as prohibiting engine idlingat construction sites, vehicle inspection and maintenance,
and fuel-efficient driving. Our Scopes 1 and 2 are moving
toward the achievement of 2020 targets, and we are
currently planning measures for 2021 and beyond.
In addition, Scope 3, which accounts for 98% of our
total CO2 emissions, accounts for 95% overall, mainly
from the total for categories 1 and 11. We have begun
to address Category 11 through environmentally friendly
design, and will continue to work toward further reductionin Scope 3.

Compliance with environmental conservation laws
In FY2019, we undertook the following initiatives toprevent violations of environmental laws and regulations,and continue working to comply with environmental laws
regulations.
1. Education on environmental laws and regulations within
intensive employee education at Headquarters, by the
Headquarters manager in charge of environmental
regulations (5 times)
2. Education for branch managers (2 times) andinspection tour of facilities to address global warming(Hokkaido)* In FY2019, no fines or penalties were levied due to legal
violations, and no suits were filed.

Environmental goal

Reduction of CO2
emissions
Reduction of mixed
waste discharge(promotion of zero
emissions)
Promoting green
purchasing

FY2019 target

FY2019 results

Evaluation

FY2020 target

Civil
Engineering

46.7 t-CO2/100 million yen
or less

40.1 t-CO2/
100 million yen

Achieved

39.4 t-CO2/
100 million yen or less

Building
Construction

10.7 t-CO2/100 million yen
or less

7.2 t-CO2/
100 million yen

Achieved

10.2 t-CO2/
100 million yen or less

Civil
Engineering

0.27 t/100 million yen or less

0.65 t/
100 million yen

Not achieved

5.74 kg/m2 or less

9.1 kg/m2

Not achieved

5.57 kg/m2 or less

Civil
Engineering

Green Purchase Rate of 18.5%
or more14.7%

Not achieved

21.0% or more

Building
Construction

Green Purchase Rate of 14.5%
or more12.8%

Not achieved

Kumagai Gumi only (domestic)

The Kumagai Gumi GroupKumagai Gumi Target Values in FY2020, 2030, 2050

40

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

30
20

Scope 174,000 t-CO2(1.9%)

Scope 220,000 t-CO2(0.5%)FY2019CO2 Emissions

3,944,000

Kumagai Gumi's CO2 emissions
10

GovernanceGreen Purchase Rate (construction)
20 %

95

90

94.0

94.0
92.9

91.9

95.4
94.0

97.2

94.0

97.5

Targetvalue

per 100 million yen of construction work value

14.4

15
10

94.0

Financial Information

12.3

14.7

13.4

11.9

12.3

12.3

12.2

FY2015FY2016FY2017FY201815.8

Target
value

13.4

5

85

0

FY2015FY2016FY2017FY2018FY2019FY2019* Includes construction sludge from FY2017

Impact on business performance and the environment FY2019 performance/Kumagai Gumi only

INPUT
Principal
material
inputsEnergyinputs● Electricity● Paper● Water

Construction Division
110,000 t● Cement
17,000 t● Wet concrete 1,400,000 t● Steel frame
103,000 t
27,654,000 kWh● Electricity● Light oil
22,264 kl● Kerosene
21 kl● Water
317,000 m3● Steel rod

Office Division
4,262,000 kWh
172,000 kg
35,000 m3

OUTPUT

Business Activities
Civil Engineering
Completed work value¥122.2 billion
Tunnels, dams,
land development,
etc.

Construction Division (Scope 1, 2)● CO2

73,000 t-CO2

● NOx

94 t

● SOx

148 t

Waste discharge● Gross output

633,000 t

Building Construction● Recycle/reduction

618,000 t

Completed work value● Net discharge

16,000 t¥229.5 billion
Offices, hospitals,
schools, etc.

Office Division (Scope 1, 2)● CO23,000 t-CO2

15.0% or more

CO2 Emissions: Gross volume (Scope 1, 2, 3*2)*4

50

Farsight* Of the greenhouse gases (CO2, CH4, N2O, HFC, PFC, SF6), those other than CO2 (CH4, N2O, HFC, PFC, SF6) are not emitted through our business activities

CO2 Emissions: Intensity*1 (construction work + offices) (Scope 1, 2*2)
60 t-CO2/100 million yen

Onsite100 %0.23 t/100 million yen
or less

Building
Construction

Insight

Recycling rate (construction)

Environmental incidents
No environmental incidents occurred in FY2019.

Environmental Targets and Results Evaluation for FY2019 and Targets for FY2020 (construction) Kumagai Gumi only

Growth Strategy

t-CO2

Breakdown of Scope 3*3
Category 1 35.4%(Purchased products, services)
Category 2 0.1%
Category 3 0.3%
Category 4 1.3%
Category 5 0.0%
Category 6 0.0%
Category 7 0.0%

Category 11 59.6%(Use of sold products)

0

FY1990 FY2000 FY2010 FY2020 FY2030 FY2040 FY2050

Scope 3 3,850,000 t-CO2 (97.6%)

Category 12 0.8%

*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, and steam 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 Group business activities)*3 Scope 3 is calculated for Categories 1 to 7, 11, and 12. Category 12 is calculated for Kumagai Gumi alone and for construction-related Group companies.
*4 Figures in FY2019 include overseas figures. The Scope 2 emissions coefficient is the market standard.

40

The Kumagai Gumi Group Corporate Report 202041

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

Corporate Information

Growth Strategy

Insight

OnsiteFarsight

Governance

Financial Information

Involvement with Customers
We deliver "Quality that Inspires Happiness"
Kumagai Gumi established the Customer Satisfaction (CS)
Promotion Office in 1998. The following year, we established
the Customer Consultation Office at our all branches. We
are working toward organizational collaboration that lets us
deliver "Quality that Inspires Happiness," to improve ourappraisal by customers.

The customer satisfaction functions of Kumagai Gumi areplaced within the Corporate Planning Division, as a part oforganizational design to directly reflect customers' opinions
in our management. Every year since 2008, we haveconducted training for all employees of the CS Division as
we strive to develop professional human resources.

Customer Consultation Office
21 years have passed since we established a toll-free
telephone number to extend customer response fromnormal business hours to night and holidays as well, placed
dispatch sites throughout the country, and established a

24-hour reception system. In FY2019, we received 517
consultation inquiries. For the fourth consecutive year, weachieved 100% same-day initial responses (and a rate ofover 98% for eight consecutive years).

Primary CS activities of Kumagai Gumi
1) Customer insight 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. In
FY2019, we received 58 questionnaire responses.
Questionnaire items
Workmanship ● Aftercare ● About Help desk
● Work progress by our employees● Performance and design of structure● Comprehensive evaluation●

Purpose of questionnaire●●●

For customers with whom contact ends at 2-year
scheduled inspection, extend contact to 3 years andstrive to maintain positive 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 investigationof the cause

2) Visit customer for asking their insight
Our top management makes visits not only to our regularpatrons but also to customers with whom we have lost
regular contact, to directly hear their honest opinions andincorporate these into our management. (FY2019: 17 visits)

Questionnaire results■ Above expectation■ As expected■ Nearly as expected■ Slightly below expectation ■ Below expectation● Aftercare overall
FY2019 (57)
FY2018 (72)FY2017 (76)FY2016 (87)
FY2015 (66)(n) 0%

20%

40%

60%

80%

100%

60%

80%

100%

● Overall workmanship of building
FY2019 (57)
FY2018 (72)FY2017 (76)FY2016 (87)
FY2015 (66)(n) 0%

20%40%3) Improvement of aftercare system
We perform centralized management of requests, inquiries,
defect information, and more using "construction clinicalrecords," and share this information within the company.
4) Instillation of CS awareness in employees
We conduct internal commendations and lectures on CS
initiatives and take other actions to instill Kumagai Gumi's
CS awareness in our employees and to achieve CS with
the involvement of all.

The Kumagai Gumi Group Corporate Report 202043

■ Farsight

Corporate Information

Growth Strategy

Insight

OnsiteFarsight

Governance

Financial Information

Involvement with Employees
Promotion of work style reform

Health management

Kumagai Gumi began full-scale work style reforms in April 2018 to create a workplace in which all employees can work withmotivation and maximize their abilities. 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 a company in which every employee isactive and motivated.

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 the 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 healthpromotion plan as part of our programs for mental andphysical health promotion, and carry out health promotion
activities that seek an upward spiral in PDCA activities.

Work Style Reform Action PlanThree areas of reform

Correction of long
working hours

Promotion of use of
paid leave (annual)

Promotion of flexible
work styles

Establish an upper limit
on overtime work andundertake reduction ofworking hours

Establish lower limits on
the use of annual leaveand targets for average
use, and promote the useof annual leave

Promote flexible work
styles that allow a balanceof work and lifestyles

Initiative results

Numerical targets and timing for theirachievement

Indicators

FY2018FY2019Limit overtime work through FY2018 tounder 100 hours/month

Percentageof employees
achieving target

98%

99%

From FY2019 to FY2020, limit
overtime work to 960 hours/year(average 80 hours/month)

Percentageof employees
achieving target

97%

97%

By FY2018, raise days of use ofannual leave to 5 or more

Percentageof employees
achieving target

63%

100%

By FY2020, use an average of 10 ormore days of annual leave

Average numberof days taken

7 days8 daysAim for 100% return to work afterchild-care leave (FY2018-FY2020)

Return rate

100%

96%

3

1

5%

21%

Reduce to zero the number of persons
resigning for reasons of balancing
Number resigningwork with child-care or nursing care
(FY2018-FY2020)
Increase the utilization rate of childcare leave by male employees to 10%
by FY2020

Utilization rate

* As of March 2020 (rounded to nearest whole number)

Improvement of work efficiency and productivity
Remedying long working hours at sites is a priority issue
for the entire company. As one measure to improve work
efficiency and productivity, in July 2018 we launchedfour task teams for promotion of site support, promotionof construction management/safety documentation,
promotion of electronic transactions, and promotionof paperless work. We identified specific issues, andconducted repeated examinations of solutions to thesealong with practical applications. In the promotion of
construction management/safety documentation, we
have introduced a system that enables on-site work
management and creation and management of labor
safety documentation over the Internet. In the promotionof electronic transactions, we are constructing a Web-EDI
system for transactions such as placing and receiving
orders over the Internet, to improve work efficiency andproductivity together with our customers and partnercompanies.

44

Transformation in awarenessWe consider it important to promote work style reform
together with initiatives for awareness changing among
employees, not only through improvement of systems andenvironments. For that reason, Kumagai Gumi regularly
communicates messages from top management andworks to make every employee aware of the importanceof work-life balance.
● Small Start ProjectIn August 2019, we launched the Small Start Projectto accumulate small reforms that will lead to individual
motivation. Activities to enhance the productivity of inhouse conferences include the formulating of 10 Articles
for holding meetings and offering IT courses taught byoutside instructors. From June 2020, we are also testing"office casual" as a company-wide option for clothes.

Annual Plan for the Promotion of Employee Health (FY2020)(1) Support for employees experiencing health issues(2) Prevention of damage to health from long working hours(3) Provision of appropriate health check-ups(4) Preventive actions against mental health disorders(5) Initiatives to maintain and promote mental andphysical health(6) Active use of industrial health care resources

For four consecutive years since FY2016, 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. Our initiatives have received
commendations for two consecutive years from the Japan
Construction Occupational Safety and Health Association
at its national conventions for the prevention of industrial
accidents in the industry, events at which industrial
physicians from our company delivered presentations. We
intend to continue strengthening measures for the health of
not only employees but all workers at Kumagai Gumi sites.

Measures in the annual plan
● Initiatives for employees with higher risks
All employee health checkup results undergo carefulchecks by industrial physicians. For employees requiring
follow-up, we provide continuous support along withrecommendations and reminders for check-ups andinterviews. Moreover, to prevent cardiac disease andmental health disorders caused by long working hours, weoffer accumulated fatigue checklists for eligible employees
and every month provide consultation with industrial
physicians to employees 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
In initiatives involving mental health, we carry out stresschecks, employee training (self care and organizationalcare), and support for return to the workplace, amonga wide range of activities that extend from primary totertiary prevention. To raise employee health awarenessand create an atmosphere that facilitates consultation,
we regularly deliver health-related communications andemployee health interviews, and conduct health-related
events such as health workshops and walk rallies. In
response, we have received comments from employees
saying that not only have their exercise habits improved,
but the workplace atmosphere has improved as well.

Human rights
The Kumagai Gumi Code of Conduct declares the following:

The Kumagai Gumi Code of Conduct-Corporate Citizenship Declaration-

Fairness, Equality, and Respect for Human Rights
We will conduct our corporate activities based onprinciples of fairness and equality, and will aim to
be a creative corporate group in which every person
can freely demonstrate individuality.

Human rights training for employees
Kumagai Gumi conducts training on human rights issues
for new employees. In terms of content, the training
provides opportunities to deepen understanding of 1)
why companies value human rights, 2) our approach tohuman rights, and (3) a variety of human rights issues(gender, people with disabilities, social discrimination,and harassment in general).
LGBT-related initiatives
Our new employee training includes a program for gaining
basic knowledge of sexual orientation and gender identity,
to promote correct understanding. On our in-house portal
site, we post articles that promote understanding of LGBT
issues. In our company regulations, we have added
prohibitions against discriminatory words and behavior
based on sexual orientation or gender identity. We
have also established an in-house contact desk where
employees can consult anonymously.

The Kumagai Gumi Group Corporate Report 202045

■ Farsight

Corporate Information

Insight

OnsiteFarsight

Governance

Involvement with Shareholders and Investors

Involvement with Business Partners

Active dialog with investors

Rules concerning purchasing work

Kumagai Gumi works to properly, fairly, and promptly
disclose information pertaining to our management andbusiness activities.
In our engagement with investors in FY2019, we held
earnings briefings 2 times (both with top management
in attendance), small meetings 4 times (all with top
management in attendance), and individual meetings
and teleconferences 74 times (including 7 with top
management in attendance).
While some planned IR activities were canceled during
FY2019 due to political unrest in Hong Kong and the
COVID-19 pandemic, we implemented new initiatives
such as visits to investors in Taiwan, where our groupis expanding its business, and participation in investor
meetings hosted by securities companies.
Moreover, due to the seriousness of the pandemic,
we promoted telecommuting, staggered work hours, anddistributed work. During the state of emergency announced
by the government, we temporarily suspended about 60%
of our construction work in prefectures under special
precautions. However, utilizing tools for remote work, wewere able to announce our financial results for the fiscal
year on May 13. Regarding our outlook for the next fiscal
term, as the extent to which the pandemic impacts ourbusiness activities and financial position is important
in investment decisions, we set certain conditions anddisclosed forecast values.
Subsequent earnings briefings for institutional investors
were held online, but in the financial results briefing
materials, we noted our status of progress under the newinvestment plans set out in the Medium-term Management
Plan, and details of the status of our collaboration with
Sumitomo Forestry. We are also concretely indicating
negative and positive impacts of the pandemic on our
performance and its impacts our finances, as a meansof proactively enhancing our information disclosure topromote faster and deeper understanding of our group.
We will continue to aggressively promote IR activities
to gain shareholders' and investors' understanding of thesurety of our sustainable growth, and to aid the formationof an appropriate share price.

Impacts of the COVID-19 pandemic
We predict that the COVID-19 pandemic will bring not only risks but also opportunities to our group

Impacts on performance
Risks● Decreasein capital expenditures by private-sector
companies due to recession● Decrease in construction of new hotels, etc. due tocontraction of inbound travel demand● Postponement of public notifications and bidding ingovernment office construction● Difficulty in negotiations for additional design changes,etc.
● Intensification of domestic competition due to a decreasein overseas construction● Project delays due to interruption of construction● Project delays due to delays in delivery of materials● Increase in risk of bankruptcy among ordering clientsand construction partners● Increased costs associated with contagious disease
countermeasures

Opportunities● Increase in public works construction as an economic

support measure● Reduction of construction costs due to deflation● Expansion and relocation of medical, warehousing, anddistribution facilities
construction and relocation associated with thereturn of overseas production sites to Japan and theirreorganization● Development of social infrastructure● Developmentof telecommunications infrastructureassociated with increase in telework● Increase in renewal construction in line with changes inmodes of behavior● Shift from centralized to decentralized offices● Progress of M&A● Decline in purchase cost of real estate related toredevelopment projects● New* Regarding performance of the group for FY2020, forecast values ​​are calculated on the assumption that the amount of orders received will decline by about the same
extent as after the 2008 Lehman Brothers collapse.

Financial stability● Our capital adequacy ratio is relatively stable at about 40%● Our solvency is high, with current ratio in excess of 150% and a certain percentage of cash and deposits secured as well
● We have established a commitment line of 20 billion yen and have the capability to handle unexpected situations

46

Growth Strategy

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 these rules, we comply with laws and ordinancesfrom the standpoint of a corporate citizen as extolled in ourManagement Philosophy, and conduct purchasing work on

Financial Informationa foundation of fairness, clarity, and rationality.
In accordance with the "Declaration of Abiding byLabor Cost Quotations" from the Japan Federation ofConstruction Contractors, we enforce the submissionof quotations from partner companies that clearly state
appropriate wages for skilled construction workers, and,after confirming the content, abide by the quotations.

Yuuei Kyoryoku Kai
Yuuei Kyoryoku Kai, an association composed of 880
partner companies of Kumagai Gumi (as of April 1, 2020),
engages in activities under a policy of taking action in allareas of QCDSE and promoting the creation of positive
Organizational chart of Yuuei Kyoryoku Kai

workplace environments, with Kumagai Gumi and themember companies of Yuuei Kyoryoku Kai cooperating
as good partners.

General Assembly
Headquarters Board of Trustees

Planning and Steering Committee
Planning
Subcommittee

Workstyle Reform
Subcommittee

Hokkaido

TohokuController

Construction Career-Up
System Subcommittee

Tokyo Metropolitan Area

NagoyaIn FY2018, Kumagai Gumi and 17 civil engineering
specialist construction companies in the Yuuei Kyoryoku
Kai association formed a team called KUMA-DECS toprepare for recovery work in response to the frequent
earthquakes, heavy rains, floods, landslides, storms,
and other natural disasters of recent years. This teamworks disaster response, one of the important roles of theconstruction industry, and develops activities that protect
and support people's lives.
In FY2019, with the Construction Work-Specific
Subcommittee developed as a cross-branch activity
entering its third year, we conducted workshops andstudy sessions as well as active exchanges among
branches. The outcomes were promptly communicatedwith members nationwide via the Yuuei Kyoryoku Kai
website, which has been completely redesigned for easy
sharing at the level of person in charge. In such ways,
we are working to improve construction quality overall for
Kumagai Gumi and Yuuei Kyoryoku Kai.

Headquarters Secretariat
Hokuriku

Kansai

Chugoku Shikoku

KyushuActivity targets for FY2020 are:
1. Safety results: Fatal accidents: 0;
Frequency labor accidents rate: 0.5 or less
2. Serious quality incidents during construction: 0
3. Serious environmental incidents during
construction: 0
Under the slogan "Professional skills that earn trust, andsolidarity in building," we will steadily carry out branch
activity plans.
We plan to aggressively challenge a number of otherissues, including improvement of skilled workers' wage levels(a common issue in the construction industry), promotionof two days off a week, popularization and promotion of
construction career advancement systems, adoption andutilization of ICT to promote work efficiency, promotion ofelectronic transactions, and response to the new status ofresidence for foreign workers based on their specific skills.
We have established a unique work leave support fundfor workers who are forced to take leave from work whenconstruction work is temporarily suspended to preventthe spread of contagion under the COVID-19 pandemic.
This support provides a payment of a fixed daily amountto each worker.
On the Yuuei Kyoryoku Kai website, we have posted COVID19-related Q&A information for companies and workers
published by the Ministry of Health, Labour and Welfare, andare working to make this information known to members.
The Kumagai Gumi Group Corporate Report 202047

■ Farsight

Corporate Information

Involvement with Communities

Growth Strategy

Insight

OnsiteFarsight

Governance

Financial Information

Evaluation by Society (June 2019 to May 2020)

The Kumagai Gumi Smile Project
In May 2019, Kumagai Gumi began operating the
Kumagai Gumi Smile Project as a platform for engaging
in unique social contribution activities.
Making use of a matching gift method, it aggregates thenumber of Kumagai Gumi employees who participated insocial contribution activities. Kumagai Gumi then donates
social contribution costs in accordance with the cumulative
number of participants in each fiscal year.
In FY2019, 879 employees participated in 108 activities
in the areas of the environment, education, welfare,regional contribution, and more, with Kumagai Gumi
donating 8.79 million yen in social contribution costs.
We made the decision to apply the contributions toward
areas that include cooperation with our social contribution

activity KUMAGAI STAR PROJECT, as well as support for
four organizations working on social issues.
In FY2020, Kumagai Gumi will make donations to thefollowing organizations.
● JUON NETWORK (Activities that relate cities andcountryside and give consideration to nature)● Kosodate Hiroba Zenkoku Renraku Kyogikai(Activities to support childcare in the community)● Japan Cancer Society (Support for cancer patientsawareness of cancer diseases)● Zenkoku Kodomo Shokudo Shien Center Musubie(Local network bases that serve meals)

The company donates funds equivalent
to the yearly accumulated points

Social contribution activities by employees
Branch A employees

ReportBranch C employees

Point tabulation
Introduction on external website

Posting on internal portal site

November 2019

Selection Committee Award, Japan Construction
Machinery and Construction Awards
Development of Automated Driving Technology for
Rough Terrain Haulers (Crawler Carrier)
Joint award with the Kumamoto Reconstruction Project
Office of the Kyushu Regional Development Bureau,
Ministry of Land, Infrastructure, Transport and Tourism

2019 Timber Utilization Excellent Facility Contest
Ministry of Agriculture, Forestry and Fisheries
Director-General Award

Japan Construction Machinery and Construction Association

June 2019

Donation of funds

Donations from the company
are used for social contribution
activity costs

Yui no Mori Arakawa

July 2019

Engineering Advancement Association of Japan

Hokusatsu Odan Road Hokusatsu Tunnel Izumi
Construction Zone

October 201950 Most Influential Tall Buildings of the Last 50 Years
See P28 for details

Japan Dam Foundation

FY2019 Commendation for Contribution to Dam
Construction (Construction-related)
Hidenori Umeda, Civil Engineering Department,
Hokuriku Office
Jun Taneya, Civil Engineering Department,
Kansai Office

January 2020

Determination of usage of funds

November 2019

KUMAGAI STAR PROJECT
Launched in 2015, this project engages in school building
construction as international contribution to society incountries in which Kumagai Gumi has sales sites. So far,
we have constructed three elementary and junior highschool buildings in the Republic of the Union of Myanmar.
The third school, Myohaung East Elementary and JuniorHigh School, was certified by the Ministry of Foreign Affairs
as a project for Mekong-Japan Exchange Year 2019. In
January of 2020, we donated books and bookshelves to

December 2019

Bank of China Tower (Hong Kong) TAIPEI 101

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

Hyuga City Hall

Tokyo Association of Architectural Firms

Council on Tall Buildings and Urban Habitat (CTBUH)Division D employees

Japan Council for Advancement of Timber Utilization

Governor of Tokyo Award, 45th Tokyo ArchitectureAwards

FY2019 Outstanding Achievement in Engineering Award

System supervision
department

Branch B employees

June 2019the second school, along with wooden toys provided by
Sumitomo Forestry. At the third school, we plan to provide
scholarships to students in addition to bookshelves.
In addition, we received a special award at the JIA
Golden Cubes Awards in recognition of the wall art event
related to our school gate restoration, an activity thatfeatured the participation of children studying amid thechallenging educational environment in Myanmar.

Japan Institute of Design Promotion

FY2019 Good Design Awards
Category 13 Architecture (Medium- to Large-Scale
Mass Housing) Category
Branz Rokubancho

Chiba city

Chiba Municipal Urban Culture Awards 2019 Scenery
Advertising Category Award for Excellence
Makuhari Bay Park signJanuary 2020

The Japan Institute of Architects (JIA)JIA Golden Cubes Awards 2019/2020 Special AwardKUMAGAI STAR PROJECT
Wall Art Workshop

April 2020
Mekong-Japan
Exchange Year 2019
Logomark

48

Architectural Institute of Japan

Architectural Institute of Japan Award (Work)
Michi-no-eki Mashiko

The Kumagai Gumi Group Corporate Report 2020

49

■ GovernanceCorporate Information

Growth Strategy

Insight

OnsiteFarsight

Governance

Financial Information

List of the Board of Directors

Back row, from left: Koji Hidaka, Susumu Ogawa, Junji Konishi

Back row, from left: Masaaki Ayukawa, Tatsuru Sato, Yutaka Takehana

Front row, from left: Yoshiaki Ogawa, Yoshihiko Kato, Yasunori Sakurano

Front row, from left: Mikie Yumoto, Sakae Yoshida

Yasunori Sakurano

50

Yoshihiko Kato
Director

Susumu Ogawa

Mikie Yumoto

Junji Konishi

Tatsuru Sato

Director *1

Standing Audit & Supervisory Board Member

Audit & Supervisory Board Member

President, Representative Director
CEO and President

Executive Vice President and General Manager of
the Civil Engineering Management Division
General Manager of the Railway Project Promotion Divisionof the Civil Engineering Management Division

Director
Senior Managing Executive Officer

Apr 1981 Joined Kumagai Gumi Co., Ltd.
Aprl 2010 General Manager of the Human Resource
Division
Apr 2011 Executive Officer
Jun 2012 Director
Apr 2014 Managing Director
Managing Executive Officer
General Manager of the Management
Administration Division
Apr 2015 General Manager of the Corporate
Planning Division
Apr 2017 Senior Managing Director
Senior Managing Executive Officer
Apr 2018 President, Representative Director (current)
CEO and President (current)

Apr 1982 Joined Kumagai Gumi Co., Ltd.
Apr 2013 Executive Officer
Deputy General Branch Manager of the Tohoku OfficeApr 2014 Managing Executive Officer
General Manager of the Civil Engineering
Management Division (current)
Jun 2014 Managing Director
May 2016 General Manager of the Railway Project
Promotion Division of the Civil Engineering
Management Division (current)
Apr 2017 Senior Managing Director
Senior Managing Executive Officer
Apr 2020 Director (current)
Executive Vice President (current)

Apr 2010 Sumitomo Mitsui Banking Corporation
Manager of Public and Finance Institutions
Apr 2012 Senior Inspector of the Audit Department of
Sumitomo Mitsui Banking Corporation
Jun 2012 Executive Advisor, Kumagai Gumi Co., Ltd.
Jul 2012 Managing Executive Officer
Jun 2013 Managing Director
Apr 2014 Senior Managing Director
Senior Managing Executive Officer (current)
Apr 2017 In charge of International BusinessIn charge of MarketingApr 2020 Director (current)

Apr 1971 Joined IBM Japan Ltd.
May 1981 Joined American Family Life Assurance
Company of Columbus, Japan Branch(Aflac)(currently Aflac Life Insurance Japan Ltd.)Jan 1995 Manager of the Human Resources
Development Department of above
company
Jan 1997 Director of above company
Jan 1999 Executive Officer of above company
Jan 2006 Representative of Rischiare Consulting(current)
Jun 2016 Director, Kumagai Gumi Co., Ltd. (Current)

Apr 1981 Joined Kumagai Gumi Co., Ltd.
Apr 2007 General Manager of the Administration
Department of the Kyushu OfficeApr 2010 General Manager of the Administration
Department of the Chugoku Shikoku OfficeApr 2014 Assistant General Manager of the
Chugoku Shikoku OfficeJun 2017 Standing Audit & Supervisory Board
Member (current)

Apr 1978 Joined Sumitomo Forestry Co., Ltd.
Apr 2011 General Manager of Human Resource
Division
Jun 2012 Executive Officer of above company
Apr 2013 Managing Executive Officer of above company
Jun 2013 Director of above company
Apr 2016 Senior Managing Executive Officer ofabove company
Apr 2018 Representative Director of above company(current)
Executive Vice President and Executive
Officer of above company (current)
Jun 2018 Audit & Supervisory Board Member,
Kumagai Gumi Co., Ltd. (current)

Yoshiaki Ogawa

Koji Hidaka

Sakae Yoshida

Masaaki Ayukawa

Yutaka Takehana

Director
Executive Vice President
General Manager of the Building
Management Division

Director
Senior Managing Executive Officer,
General Manager of the Administration Division
In charge of Discipline, In charge of Personal Information Protection

Director *1

Audit & Supervisory Board Member *2

Audit & Supervisory Board Member *2

Apr 1982 Joined Kumagai Gumi Co., Ltd.
Apr 2011 Executive Officer
General Manager of the Building
Management Division, Kansai OfficeApr 2012 Deputy General Branch Manager of the
Kansai OfficeApr 2013 Managing Executive Officer
Branch Manager of the Kansai OfficeApr 2017 Senior Managing Executive Officer
General Manager of the Building
Management Division (current)
Jun 2017 Senior Managing Director
Apr 2020 Director (current)
Executive Vice President (current)

Apr 1981 Joined Kumagai Gumi Co., Ltd.
Apr 2012 Deputy General Manager of the
Administration Division
Apr 2013 Executive Officer
Apr 2015 General Manager of the Administration
Division (current)
Apr 2016 In charge of Discipline (current)
In charge of Personal Information
Protection (current)
Apr 2017 Managing Executive Officer
Jun 2018 Managing Director
Apr 2020 Director (current)
Senior Managing Executive Officer (current)

Apr 1981
Apr 2009
Apr 2010
Jan 2015
Jan 2018
Jun 2020

Joined Dainippon Ink and Chemicals Inc.
(currently DIC Corporation)
Factory Manager, Sakai Factory,
DIC Corporation
Factory Manager, Chiba Factory of theabove company
Executive Officer and General Managerof the Production Supervising Division ofabove company
Advisor to above company
Director, Kumagai Gumi Co., Ltd. (Current)

Apr 1969 Joined Chuo Accounting Office(subsequently ChuoAoyama Audit Corporation)
Feb 1971 Registered as Certified Public Accountant
Mar 1983 Representative Partner, ChuoAoyama
Audit Corporation
May 2000 Senior General Manager of ChuoAoyama
Audit Corporation
Mar 2009 Tonen General Sekiyu K.K.
(currently JXTG Nippon Oil & Energy Corporation)
Standing Audit & Supervisory Board Member
Jun 2014 Audit & Supervisory Board Member,
Kumagai Gumi Co., Ltd. (current)
Mar 2016 Outside Director (Audit Supervisory Committee
Member) of AUCNET INC. (current)*1 Ms. Mikie Yumoto and Mr. Sakae Yoshida are both Outside Directors.
*2 Mr. Masaaki Ayukawa and Mr. Yutaka Takehana are both Outside Audit & Supervisory Board Members.

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 SECURITYSERVICES CO., LTD. (ALSOK)
Advisor, Meiji Yasuda Life Insurance
Company
Audit & Supervisory Board Member,
Kumagai Gumi Co., Ltd. (current)

The Kumagai Gumi Group Corporate Report 202051

■ GovernanceCorporate Information

Corporate Governance
Basic Philosophy

Meeting the Corporate Governance CodeIn order to realize our Management Philosophy of "We aim
to serve as a corporate group that contributes to society
through business activities centered on construction,"
we view enhancing the effectiveness of our corporate
governance as a priority issue.

We engage in a variety of initiatives to enhance theeffectiveness of our corporate governance, including
evaluations of the effectiveness of the Board of Directors
and the establishment of a Nomination & Compensation
Committee. Details are noted in the Report on Corporate
Governance which is available at our website or the Tokyo
Stock Exchange website.

Corporate governance system
Drawing on the aims of the Corporate Governance Code,Kumagai Gumi has adopted a corporate governancestructure that comprises a Board of Directors, an Auditors
Committee, and an independent accounting auditor toenhance 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
Committee, which is composed of the Representative
Director and Outside Directors, in order to further ensure
objectivity and transparency.
With regard to Audit & Supervisory Board Members,
we appoint outside Audit & Supervisory Board Members
from among persons who have appropriate experience,capabilities, and knowledge of finances, accounting,and legal matters, in order to conduct audits with higheffectiveness.
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 System
General Meeting of Shareholders
Appointment

Accounting Auditor

Nomination &Compensation
Committee

ReportAppointment(Board of)
Directors

Appointment
AuditsAudit &
Supervisory
Board

Control

Business Execution
Management
Meeting

AuditsAuditsExecutive Officers

Instruct

Audit Office(Internal audit
functions)

52

Advise(including those concurrency
serving as Directiors)

Instruct
AuditsOperating Divison

Instruct

Administration Divison

Guidance Legal & Compliance Department(checks & balances)

Improvement of the effectivenessof internal controls
To enhance the effectiveness of our internal control, we
are working to review internal rules and management
conferences appropriately, and to otherwise improve andoperate structures to assure appropriateness in work, basedon our Basic Policy to Establish Internal Control Systems.
In addition, the Kumagai Gumi Group as a whole
undertakes the improvement and operation of internal
control with the aim of maintaining the reliability of our
financial reporting, based on the Financial Instruments
and Exchange Act.

Evaluation of the effectiveness
See P56-57 for detailsof the Board of Directors
Once a year, every Director and Audit & Supervisory
Board Member participates in questionnaire -based
evaluations of effectiveness. We verify the results inBoard of Directors meetings, and consider improvements
to ensure effectiveness. From the FY2018 evaluation
onward, we are conducting reviews of our evaluation item
settings and evaluation results through external experts.
In FY2019, based on the issues for improvement fromthe previous fiscal year's evaluations, we worked toenergize deliberation in the Board of Directors by holding
exchanges of opinions following the conclusion of board
meetings, as well as by enhancing information sharing
through progress reports on plans and by early provisionof meeting materials.
In the FY2019 evaluation, we conducted self-evaluations
using evaluation items that include the composition of theBoard of Directors, its operation, agendas, and support
structures, and the status of improvements from theprevious fiscal year. Based on the findings of reviewsby outside experts, we confirmed that the entire board isappropriately carrying out its roles and responsibilities,
and we determined that the effectiveness of the Board of
Directors overall is secured. We also shared issues forconsideration, including 1) the promotion of delegationof authority through revisions to standards for agendas,
2) consideration of the number and ratio of Outside
Directors and the securing of diversity in the compositionof the Board of Directors, and 3) further strengthening ofcompliance and group governance.

Growth Strategy

Insight

OnsiteFarsight

GovernanceDirectors' compensation and selection of Outside Executives
Cash compensation for Directors and Executive Officers
consists of 1) fixed compensation, composed of compensation
based on position and compensation based on contribution tobusiness performance, and 2) bonuses paid provisionally inaccordance with business performance (Outside Directors arepaid compensation based on their positions only). The amountof compensation is determined by the Board of Directors, taking
into consideration the salary level of employees, marketplacecompensation levels, and other factors, and taking into accountthe results of reports by the Nomination & Compensation
Committee, within the limits on total amount of compensation for

Financial Information

Outside Executives' backgrounds appear on
P50-51 ("List of the Board of Directors")

Directors decided at the General Meeting of Shareholders.
In addition, the company has adopted a stock compensation
system employing trusts, by which the company grants
points based on position, etc. every fiscal year to Directors(excluding Outside Directors) and to Executive Officers, and,generally at the time of retirement, grants shares of stock, etc.
based on the cumulative number of points.
Compensation for Audit & Supervisory Board Members
consists of fixed compensation only, and is determined throughdeliberation with Audit & Supervisory Board Members, withthe compensation levels of Directors taken into account.

Compensation, etc. for Directors and Audit & Supervisory Board Members (FY2019)
Executive category

Directors (excluding Outside Directors)
Audit & Supervisory Board Members (excluding
Outside Audit & Supervisory Board Members)
Outside Executives(¥ million)

Total amount by type of compensation, etc.
Total amount of
Number ofcompensation Fixed compensation Bonus Stock compensation eligible Executives

169

151

－

17

6

21

21

－

－

2

40

40

－

－

5

Reasons for appointment of Outside Executives/Attendance at Board of Directors meetings (FY2019)
Attendance
Board ofBoard ofDirectors Corporate Auditors

Independent
Executive

Reason for appointment

Mikie
Yumoto○Mikie Yumoto has a track record of participation in corporate management. Based on her
resulting extensive experience and wide-ranging insights, the company has appointed her
Outside Director in anticipation that she will provide appropriate guidance and advice tothe company's management.

17 times /17 times－

KoichiHironishi○

Koichi Hironishi has a track record of participation in corporate management. Based on his resulting
extensive experience and wide-ranging insights, the company has appointed him Outside Director
in anticipation that he will provide appropriate guidance and advice to the company's management.

17 times /17 times－

Sakae
Yoshida○Sakae Yohida has a track record of participation in corporate management. Based on his resulting
extensive experience and wide-ranging insights, the company has appointed him Outside Director
in anticipation that he will provide appropriate guidance and advice to the company's management.

－

－

○

Masaaki Ayukawa has a track record of practical work as a certified public accountant. The
company has appointed him Outside Audit & Supervisory Board Member in the expectationthat he will leverage his resulting extensive experience and expert knowledge to provide
appropriate auditing of the company's management from an objective standpoint.

16 times /17 times

13 times /13 times○

Yutaka Takehana has a track record of participation in key government office positions andcorporate management. Based on his resulting extensive experience and wide-ranging insights,
the company has appointed him Outside Audit & Supervisory Board Member in anticipation that
he will provide appropriate auditing of the company's management from an objective standpoint.

13 times /13 times

10 times /10 timesName(resigned June 2020)(appointed June 2020)

MasaakiAyukawa
YutakaTakehana

Cross Holding(1) Policy Concerning the Reduction of Cross
Holdings
Kumagai Gumi will reduce the number of cross-heldshares, except for such cases as transactions forenhancing sustainable corporate value, strengthening
business alliance, and obtaining more opportunities togenerate profits. With regard to the cross-held shares, theboard meeting will verify the significance of holding suchshares every year, and when it is decided to be of little
value to hold them, the Company will sell or reduce thenumber of such shares.
(2) The Significance of Cross Holdings
The Company comprehensively reviews the significanceof cross-held shares; whether the earnings generated bycross holdings are sufficiently beneficial in relation to theircapital cost, and whether it is worthwhile to hold suchshares in the daily performance of business.

(3) The Standards Regarding the Exercise of
Voting Rights Associated with Cross Holdings
When exercising its cross holdings voting rights, the Company
will do so by determining whether owning stock in anotherpublicly traded company will increase the value of thecorporations in which it invests, from a medium- to long-term
perspective. With regard to the following issues, among others,
the Company will exercise its voting rights only after deliberately
examining them in relation to raising corporate value.
● Organizational restructuring, including the merger, acquisition,transfer, and/or takeover of an important business● Retirement allowances to executives to be paid by anunderperforming company, such as a company withexcessive liabilities● A planned third-party share issuance that may havethe risk of being considered a favorable issuance● Introduction of defensive measures against hostile
corporate takeovers

See website for details
Corporate Governance https://www.kumagaigumi.co.jp/en/company/governance.html

The Kumagai Gumi Group Corporate Report 202053

■ GovernanceCorporate Information

Growth Strategy

Insight

OnsiteFarsight

Governance

Financial Information

Risk Management
Compliance system
Kumagai Gumi's compliance system consists primarilyof autonomous functions by headquarters and branch
offices, support functions by the administration divisionand other specialized divisions, and auditing functions by
the Audit Office (diagram below).
In addition, the Legal Compliance Audit Committee, whichis independent of management, periodically carries out
evaluations of the company from an outside point of view andadvises company management of any problems uncovered,in order to strengthen the enforcement of compliance.
Compliance System
Instruct

Whistleblowers

Means ofwhistleblowing

Administration
Division, etc.

Kumagai Gumi andgroup companies

E-mail

Evaluation by outsiders

Management

Systems improvement
and legal support

Legal Compliance
Audit Committee Advise

Autonomous function
InstructHead andBranch Offices

Auditing function
Audit OfficeSenioremployees

Contract
employees

Part-time
employees

Advisors

Temporaryemployees
etc.

Partner firms

Verbal /Telephone FAX /Postal mailE-mail*Anonymity
possible

Contact desk
Chairman, Legal
Compliance Audit
Committee
Legal &
ComplianceDepartment
Implementation of factual
investigation
Examination ofrecurrence prevention
measures● Enactment of appropriate
measures●●Reporting on investigation
findings and response(except where anonymous)

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.

Main Initiatives Aimed at Legal Compliance
Submission of written pledge from all managers
and employees
To raise all employees' awareness in enforcing compliancewith laws and ordinances, every year all executives andstaff members of Kumagai Gumi Group submit a written
pledge concerning compliance (100% submission rate).
Implementation of compliance training
To improve basic understanding of compliance, from
October 2019 through March 2020 our company conducted
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.
Compliance reinforcement month
Kumagai Gumi has designated October as a month
to strengthen compliance, with the aim of enhancing
employees' awareness of compliance and re-examining
potential risks in daily work.
54

Full-time
employees

Enforcement of prior judgment
Auditing and corrective
advising

Audit findingsInternal whistleblower system

Support function

Company-wide Legal Complianceand Legal Support Systems

Outside evaluation
functionInternal whistleblower system
The Kumagai Gumi Group has set up a hotline for quickly
assessing, correcting, and preventing problems involving
compliance. We are working to root out complianceviolations by accepting a wide range of whistleblower
reports, including from our employees, group company
employees, and partner businesses.
On September 1, 2019, we introduced an in-houseleniency program (measures reducing penalties forwhistleblowers) to encourage use of the voluntary
whistleblower system.

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 antisocial forces into the Special Construction Contracting
Agreement and the Equipment and Material Sales
Agreement involved in transactions with partner companies.
We are working to thoroughly eliminate any involvementwith anti-social forces by collecting written pledges prior toconcluding 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 2020 our company is involved in eightcivil cases.

Legal Violations (including administrative
disposition, administrative measures, etc.)
On July 30, 2019, the Kumagai Gumi Group company
GAEART Co., Ltd. received a cease and desist order andan order for payment of surcharge from the Japan Fair

Trade Commission, for violating the Antimonopoly Act(asphalt mixture selling price cartel). The Kumagai Gumi
Group will enforce the prevention of recurrence and will
undertake further strengthening of groupwide compliance.

Setting of Tax Policy
In March 2020, the Kumagai Gumi Group documented its
existing initiative direction concerning tax affairs to create
the Kumagai Gumi Group Tax Policy, with the aim of
improving corporate governance and compliance regarding
tax affairs and fostering proper awareness of taxation
payment matters among executives and staff members.
Kumagai Gumi Group Tax Policy
The Kumagai Gumi Group recognizes that it is an
important obligation for companies to fully understand thesocial significance of tax payment and properly fulfill theirtax obligations in each country and region.
1. Compliance with Laws and Regulations
The Kumagai Gumi Group fulfills its tax return andtax payment obligations in compliance with tax laws,
regulations, and conventions of each country and region.
2. Optimization of Tax Expenses
The Kumagai Gumi Group will conduct tax planning,
including the utilization of preferential tax systems,
within the scope of normal business activities, in orderto optimize tax expenses. It should be noted that
we will not take any action to reduce the tax burden
unreasonably, which is not in line with the spirit of laws
and regulations.
3. To Reduce Tax Risk
The Kumagai Gumi Group shall endeavor to reducetax risks by seeking agreement with the tax authorities
through advance inquiries and other means regarding
matters that are unclear in terms of tax matters.
4. Relationship with Tax Authorities
The Kumagai Gumi Group will provide information in atimely and appropriate manner in response to requests
from tax authorities in each country and region, and build
relationships of trust with and favorable cooperative
relations with tax authorities through constructive
dialogue.

Business Continuity Plan (BCP)
In the event of a major disaster, Kumagai Gumi will makeevery effort toward the rapid recovery of sites underconstruction and restoration of infrastructure, and torespond to requests for restoration aid from customers
and residents. The company has formulated a BusinessContinuity Plan (BCP) as its basic policy for contributing
to prevention of secondary accidents, restoration of urban
functions, and recovery of safety for residents.
Kumagai Gumi's BCP received its initial certificationfrom the Kanto Regional Development Bureau of the
Ministry of Land, Infrastructure, Transport and Tourism
in FY2009, and has been renewed and re-certified fivetimes so far. We have also received certification for our
BCP from the Kinki Regional Development Bureau andthe Tohoku Regional Development Bureau.
We have established an expert committee to maintainand improve the effectiveness of the BCP, and will
formulate fiscal year plans for BCP activities based on the
PDCA cycle.

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

Protection of Personal Data
Kumagai Gumi has established its Basic Principle, Privacy
Policy, Personal Information Protection Regulations,and other matters concerning personal data, and posts
necessary information on its website. The company
enacts initiatives for the proper handling and protection of
the private data of all stakeholders, including shareholders
and employees.
The company has also prepared a manual concerning
personal data protection, which is provided to all
executives and employees.

COVID-19 countermeasures
Since the end of January 2020, the Kumagai Gumi Grouphas undertaken COVID-19 countermeasures throughits Crisis Management Committee. In line with the April
7 national emergency declaration based on special
measures legislated by the government to combat the
pandemic, our group established a new COVID-19
countermeasure task force headed by the President.
This task force implemented the actions below tocooperate in preventing the spread of the pandemic, andto protect the health and lives of employees, their families,
and participants such as partner companies.
Formulation of guidelines for overseas travel
Formulation of guidelines for dealing with COVID-19● Implementation of staggered working hours● Implementation of telework(Work from home, shift work, satellite offices, etc.)● Granting of special paid leave (up to 5 days) toemployees with children at home due to nationwide
temporary school closures*● Distribution of masks to employees● Special provisional pay (paid together with salary in May)
● Reporting on health status using the safety confirmation
system● Special paid leave for infected employees●●* For cases in which taking leave is required and no paid leave days
remainThe Kumagai Gumi Group Corporate Report 202055

■ GovernanceCorporate Information

Growth Strategy

Insight

OnsiteFarsight

Governance

Financial Information

Interview: President Yasunori Sakurano and Hideo Tsukamoto (Attorney)

Incorporating objective perspectives
into management to further enhance
corporate governancelarge percentage of the performance of the groupoverall, and the growth of group companies is
indispensable to the future of our company. We
intend to speedily build a governance structurethat can foster a sense of unity among all of us in
the Kumagai Gumi Group.

Kumagai Gumi is working to enhance its corporate
governance by actively taking in the opinions of external
experts.
President Yasunori Sakurano spoke with Hideo
Tsukamoto, an attorney who has reviewed the company's
questionnaire for evaluating the effectiveness of theBoard of Directors.

Linking ESG to growth strategy
Anderson Mori & Tomotsune

President

Partner

Yasunori Sakurano

Hideo Tsukamoto

Conducting a questionnaire to evaluate theeffectiveness of the Board of Directors
Sakurano Kumagai Gumi conducts a questionnaire survey for
our Directors and Audit & Supervisory Board Members
once a year to evaluate the effectiveness of the Board of
Directors and to connect the results to improvements. We
ask you, Mr. Tsukamoto, to perform reviews of evaluation
results and other matters related to the questionnaire.
Tsukamoto That's right. This is my second time to be involved
with Kumagai Gumi, following the first time in fiscal
2018. Looking at the results of the questionnaire,
my impression is that a variety of opinions havebeen expressed, that awareness of corporate
governance is high, and that the company isaddressing evaluation with a positive attitude.
Sakurano As you note, the responses to the questionnaire
are becoming more substantive each time. They
include some sharp criticisms, and the Secretariat is
keeping themselves busy connecting the comments
to improvements. The atmosphere of the Board of
Directors has changed considerably, especially withthe addition of Outside Directors in fiscal 2015.
Tsukamoto You mention that it's changed. What are yourfrank thoughts on the company's current Board of
Directors and corporate governance?
Sakurano Let me talk a little about background here. Our company
has been laying out a region-specific business structure.
There are many advantages to a regionspecific business structure, but disadvantages
can appear when the authority of a Business
Unit in a region becomes too strong. This was acontributing factor in our past management crisis.
Since then, we have walked a long path
to revitalization, doing so while organizing amanagement structure through actions including
strengthening headquarters functions, introducing
an executive officer system, and appointing
Outside Directors. These efforts have continued
to the present. There are still many areas for
improvement, but I feel that we have steadilyenhanced our corporate governance.

56

Promotion of diversity inthe Board of Directors
Tsukamoto Looking at the fiscal 2019 survey, several opinions
stood out. One of these was a suggestion that thecompany should add female internal executives
to the Board of Directors.
Sakurano I think that adding human resources with diverse
insight and backgrounds, not necessarily limited
to women, to the Board of Directors is an issue
that we have to actively address in the future.
However, with regard to female executives, ourcompany first faces the issue that our fraction of
female employees remains low. Currently, thepercentage of female employees is 17.1% (as ofthe end of March 2020). There are still no female
on-site managers or line managers. We aremaking efforts to create environments in whichfemale employees play active roles, but my senseis that this will take a bit more time.
Tsukamoto Hiring female employees and providing them withactive roles is an issue across the constructionindustry in Japan. As you note, it may be difficult
to resolve this issue quickly. I think that if we
gradually resolve the issue, shore up our footing,and increase the number of women in manager
positions, and if female executives appear as aresult, our corporate activities will be reinvigorated
and we will become a more resilient company.
Another opinion coming out of the questionnaire
is that we should increase the number of Outside
Directors. There is a possibility that the Corporate
Governance Code will require that one-thirdor more of a company's directors be outside
directors in the future. I think you should actively
consider the matter.

The issue of "defensive" governanceTsukamoto In order for companies to achieve sustainablegrowth, it is indispensable that governancebe "defensive," not only "offensive." Anothercomment that stood out in the questionnairesuggested that the company should strengthen
governance in group companies.
Sakurano We recognize the urgent need to improvegovernance in group companies, as was pointed
out in the questionnaire. A series of improprieties
related to governance has recently occurred ingroup companies, leading to the Board of Directors
taking up the improvement of governance in its
discussions.
Tsukamoto In group management, there is the problem
of how to balance the independence of groupcompanies with management and supervisionby the parent company. How to put this into
actual practice is a very difficult topic, I think.
The Ministry of Economy, Trade and Industry
published its "Practical Guidelines for Corporate
Governance Systems." I was involved in theformulation of this. As one improvement measure
for increasing the value of the group as a whole, I
think it is important to enhance awareness so thatgroup companies hold the same perspective as
Kumagai Gumi.
Sakurano Exactly. From here on out, I want to examine
measures for achieving that. Performance bygroup companies makes up an increasingly

Tsukamoto The Stewardship Code revised in March 2020
makes sustainability-oriented dialog one of its
keywords. Kumagai Gumi has set an ESG Initiative
Direction. How do you view the "Environment"and "Social" components of that?
Sakurano I personally consider ESG a vital theme for
Kumagai Gumi Group in growing sustainably inthe future. Regarding environmental initiatives,
the business and capital alliance we formed with
Sumitomo Forestry in 2017 has been a major
driver. With regard to social aspects, healthmanagement for employees has been particularly
on my mind nowadays. Now, with response to the
COVID-19 pandemic a major social issue, I feelanew the importance of health management. I
want to actively challenge the creation of suitableenvironments not only within our group but also
for those in partner companies and elsewhere.
Tsukamoto As you say, linking ESG to growth strategies will
become an important management issue.
Sakurano To some extent, I admit that we are not very goodat outwardly communicating how we address ESG
through our business activities. I want to create avariety of opportunities to have active dialogs withinstitutional investors and other stakeholders.
We plan to continue incorporating the opinions ofexternal experts like you to enhance our corporate
governance. Thank you today for your valuablecomments.

See website for details
Interview: President Yasunori Sakurano and Hideo Tsukamoto (Attorney) https://www.kumagaigumi.co.jp/company/director's-interview-2020.html (Japanese only)
The Kumagai Gumi Group Corporate Report 202057

■ Analysis of Financial and Management Performance ■58* Numbers are rounded down to the nearest 100 million yen.

During the consolidated fiscal year, the Japanese
economy maintained gradual recovery against a
backdrop of strong corporate profits and an improved
employment and income environment, despite the impact
of slowdowns in overseas economies. However, due tothe COVID-19 pandemic situation that occurred from the
beginning of the year, personal consumption fell sharply
and corporate profits turned downward and deteriorated
due to a decrease in sales and stagnant production,
creating a chaotic situation over the end of the fiscal year.
In the construction industry, the housing construction
sector remained weak. Corporate construction investment
fell, rebounding from the last-minute demand prior to theconsumption tax hike in the previous fiscal year. Public
investment remained firm, however, and against abackground of abundant existing construction projects,
construction volume maintained an increasing trend amid
a generally positive overall business environment.

yen (46.1%) from the previous consolidated fiscal year to19.4 billion yen, due to reasons including the recordingof extraordinary profit and a rebound from the previous
extraordinary loss. Return on equity (ROE) improved 3.5%
from the previous consolidated fiscal year to 13.7%.
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■ Management performance by segment

Sales (+12.1% year on year) Due to an increase in theamount of construction work brought forward at the beginningof the term, sales increased by 47.0 billion yen (12.1%) fromthe previous consolidated fiscal year to 436.1 billion yen.
Gross profit (-0.1% year on year) Due to a decline ingross profit margin, gross profit decreased by 30.0 million
yen (0.1%) from the previous consolidated fiscal year to45.4 billion yen. Gross profit margin declined 1.3 points
from the previous consolidated fiscal year to 10.4%.
Selling, general and administrative expenses These
expenses increased by 900.0 million yen (5.2%) from theprevious consolidated fiscal year to 20.0 billion yen due
to reasons including an increase in personnel expenses
related to revision of employee treatment.
Operating profit (-3.9% year on year) Due primarily to theincrease in selling expense and general administrative expense,
operating profit decreased from the previous consolidated fiscal
year by 1.0 billion (3.9%) to 25.4 billion yen. Operating profit margin
fell 1.0% from the previous consolidated fiscal year to 5.8%.
Non-operating profit and loss Non-operating profit
and loss increased by 70.0 million yen from the previous
consolidated fiscal year to 700.0 million yen, due to anincrease in investment income under the equity method.
Non-operating expenses decreased by 100.0 million yen
from the previous consolidated fiscal year to 400.0 million yen
due to a decrease in syndicated loan fees and other factors.
Ordinary profit (-3.1% year on year) Due to a decreasein operating profit, ordinary profit decreased by 800.0 million yen(3.1%) from the previous consolidated fiscal year to 25.7 billion yen.
Extraordinary profit and loss The company recorded
extraordinary profit and loss of 2.0 billion yen, due toreasons including a 1.3 billion yen refund in provision forloss related to the Anti-Monopoly Act, and a 700.0 million
yen gain on sales of memberships.
The company recorded an extraordinary loss of 700.0
million yen, including 200.0 million yen in provision forcontingent loss as an additional expense related tothe condominium in Nishi-ku, Yokohama, Kanagewa
Prefecture, in which our construction defects wereidentified in 2014, as well as a loss on valuation of
investment securities of 100.0 million yen.
Income taxes, etc. The company recorded adjusted
income taxes of 1.4 billion yen due to income taxes,
residential taxes, and business taxes of 6.1 billion yen, areview of recoverability of deferred tax assets, etc.
Profit attributable to owners of parent (+46.1% year on year)
Profit attributable to owners of parent increased by 6.1 billion

Civil Engineering Orders received decreased 40.7%
from the previous consolidated fiscal year to 92.3 billion
yen, due to a rebound from orders received for largescale construction in the railway sector in the previous
consolidated fiscal year, and projects for which orderplacement was brought forward to the next fiscal year.
Sales increased 9.5% from the previous consolidated
fiscal year to 122.2 billion yen, due to an increase inconstruction brought forward at the beginning of the term.
However, operating profit decreased 11.6% from theprevious consolidated fiscal year to 7.6 billion yen due
to a decrease in gross profit associated with a decline inprofit margin on sales caused by the occurrence of lowprofit and unprofitable projects, and an increase in selling,
general, and administrative expenses due to reasons
including improved employee treatment.
Construction Orders were led by warehouses anddistribution facilities, which are on the upswing due togrowth in e-commerce in the retail industry. Despite this,orders received decreased by 22.0% from the previous
consolidated fiscal year to 232.5 billion due to rebound fromthe last-minute demand prior to the consumption tax hike inthe previous consolidated fiscal year.
Sales increased 17.7% from the previous consolidated
fiscal year to 229.9 billion yen due to an increase inconstruction work brought forward at the beginning of
the term. Operating profit margin decreased due to theoccurrence of low-profit and unprofitable projects, but
gross profit increased in line with an increase in sales,
growing 1.4% from the previous consolidated fiscal year
to 12.6 billion yen.
Subsidiaries Sales at GAEART Co., Ltd. increased due toan increase in construction work brought forward at the start of
the term and an increase in orders received. Subsidiary sales
overall increased by 1.1% from the previous consolidated fiscal
year to 98.6 billion yen, while operating profit decreased 3.3%
from the previous consolidated fiscal year to 5.1 billion yen due
to a decline in gross profit margin.

Consolidated performance
Indicators

FY2019(Planned)

Net sales (million yen)

420,000

436,151

16,151

Operating profit

26,00025,440(559)(million yen)

FY2019Difference(Performance)

ROE (%)

12.0

13.7

1.7

Payout ratio (%)

30.0

28.8

(1.2)

■ Financial status
Total assets (+6.0% year on year) Total assets increased
by 21.1 billion yen (6.0%) from the end of the previous
consolidated fiscal year to 374.8 billion yen.
Current assets increased by 22.7 billion yen (7.9%) fromthe end of the previous consolidated fiscal year to 310.6
billion yen. Accounts receivable increased by 14.1 billion yen

Corporate Information

Growth Strategy

Insight

Onsitedue to factors including the recording of 14.9 billion yen innotes receivable and accounts receivable from completed
construction contracts associated with an increase in sales,
and the recording of uncollected consumption tax.
Fixed assets decreased by 1.5 billion yen (2.4%) from theend of the previous consolidated fiscal year to 64.1 billion
yen. Investment securities decreased by 1.5 billion yen due toreasons including a decline in the market value of shares held.
Liabilities (+3.6% year on year) Liabilities increasedby 7.9 billion yen (3.6%) from the end of the previous
consolidated fiscal year to 226.8 billion yen.
Current liabilities increased by 10.4 billion yen (5.5%)
from the end of the previous consolidated fiscal year to201.5 billion yen. Current liabilities decreased for reasons
including liquidation of provision for losses related to theAnti-Monopoly Act and in provision for contingent loss due to
drawdowns associated with payments. Deposits increasedby 10.0 billion yen due to reasons including an increasein consumption taxes held, while notes receivable andaccounts receivable from completed construction contracts,
etc., electronically recorded obligations operating, and otheraccounts payable increased by 6.0 billion yen.
Fixed liabilities decreased by 2.4 billion yen (8.9%) fromthe end of the previous consolidated fiscal year to 25.2 billion
yen. Long-term loans payable decreased by 1.6 billion yen.
Net assets (+9.7% year on year) Net assets increased
by 13.1 billion yen (9.7%) from the end of the previous
consolidated fiscal year to 148.0 billion yen. Retained
earnings increased by 14.7 billion yen due to factors
including the recording of 19.4 billion yen in profit
attributable to owners of parent, despite distribution of 4.6
billion yen in surplus.
Capital adequacy ratio increased by 1.4 points from theend of the previous consolidated fiscal year to 39.5%.
Equity capital, capital adequacy ratio(billion yen)
400
300
200

271.9

255.5
25.4

37.9

0

64.9
2016/3

50.0

39.5

80.2
2017/3

40.0
30.0

29.5

100

20.0

126.3

134.8

148.0

10.0
0.0

2018/3

2019/3Financial Information

The group bases its short-term working capital on
self-funding and short-term borrowings from financial
institutions, and bases its capital and long-term working
capital related to capital expenditures on self-funding andlong-term borrowings from financial institutions.
Our balance of interest-bearing debt at the end of
the consolidated fiscal year was 12.2 billion yen, while
our current ratio was 154.1% and our fixed long term
conformity rate was 37.0%.
We have also entered into syndicated loan agreements
to achieve further stabilization of fund procurement andcontraction of financial expenses. The total amount ofagreements at the end of the consolidated fiscal year was
7.0 billion yen.
We have also entered into loan commitment agreements
in order to efficiently procure working capital. The total
amount of the agreements at the end of the consolidated
fiscal year is 20.0 billion yen (with outstanding borrowingsof 0 yen).
We have secured stable means of raising funds, andwe can fully cope with the sudden occurrence of demands
for funding, including demands related to the COVID-19
pandemic.
Currency/Deposits and Balance of Interest-Bearing Debt
(billion yen)120

Currency and deposits
Interest-bearing debt

108.5

100

72.4

80

82.4

73.9

75.1

60
40

17.8

15.4

2016/32017/3

20

14.4

12.2

12.8

0
2020/3

2019/3

2018/3

(%)

374.8
38.1

Governance■ Capital resources and liquidity of funds

Total capital
Equity capital
Capital adequacy ratio
353.7

333.6

Farsight

2020/3■ Status of cash flow
Cash flow from operating activities Cash flow fromoperating activities was positive 300.0 million yen (negative
12.3 billion yen in the previous consolidated fiscal year) due
to factors including an increase in accounts receivable tradeas well as payments of corporate tax, despite the recordingof 27.0 billion yen in profit before income taxes.
Cash flow from investing activities Cash flow frominvesting activities was negative 2.2 billion yen (negative
7.3 billion yen in the previous consolidated fiscal year),due to acquisition and renewal of equipment and theacquisition of shares of affiliated companies.
Cash flow from financing activities Cash flow fromfinancing activities was negative 5.3 billion yen (negative
6.1 billion yen in the previous consolidated fiscal year)
due to factors including payment of dividends.
Cash and cash equivalents The balance of cash andcash equivalents at the end of the consolidated fiscal
year, including an increase due to currency conversion,
decreased by 7.2 billion yen (8.8%) from the end of theprevious consolidated fiscal year to 75.1 billion yen.

■ 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 83rd term, we paid a dividend of 120
yen per share, an increase of 20 yen per share from the
100 yen per share in the previous term.
Looking ahead, we will further weigh on the return ofprofits to shareholders, and will continue returning profits
with the goal of a 30% payout ratio.
Payout Ratio

Profit attributable to owners of parent
Total dividends
Payout ratio(billion yen)
25

(%)

35.0

20
15

16.4
12.0

23.1

10
50
0

15.7

12.4
1.4
2016/3

40.0

19.4
28.8

13.3

20.0

15.9
2.6
2017/3

30.0

10.0

4.2
2018/3

4.6
2019/3

5.6
2020/30.0

The Kumagai Gumi Group Corporate Report 202059

■ Key financial data over a 10-year period ■Corporate Information

Growth Strategy

Insight

OnsiteFarsight

Governance

Financial Information(Unit: millions of yen)Orders received

Performance

74th term

75th term

76th term

77th term

78th term

79th term

80th term

81st term

82nd term

83rd term

2011/3

2012/3

2013/3

2014/3

2015/3

2016/32017/3

2018/3

2019/32020/3

176,708

208,479

223,429

291,024

329,495

293,558

284,711

381,784

454,007324,959

Civil engineering

43,90873,082

63,410100,805

115,764

109,463

103,718

129,891

155,751

92,371

Building construction

132,799

135,396160,019

190,219

213,730

184,094

180,992

251,892

298,255

232,587

Sales

240,481257,581

260,753

328,900

362,090343,647

344,706

374,019

389,058

436,151

Gross profit

15,81914,385

10,40818,35929,03839,06841,08040,23045,53045,498

6.6

5.6

4.0

5.6

8.0

11.4

11.9

10.8

11.7

10.4

SG&A Expenses

11,785

11,931

11,575

11,75012,934

14,52815,945

17,18819,06520,057

Operating profit (loss)

4,034

2,454

(1,167)

6,608

16,10424,54025,13523,041

26,46425,440

1.7

1.0

(0.4)

2.0

4.4

7.1

7.3

6.2

6.8

5.8

Ordinary profit

2,941

2,904

65

6,791

15,65825,77225,35822,682

26,55325,718

Profit (loss) attributable to owners of parent

1,575

1,593

(1,083)

4,299

5,458

12,092

16,433

15,783

13,312

19,447

Comprehensive profit

1,072

2,435

123

6,313

6,683

12,157

16,947

14,098

12,956

17,851

Net assets

45,37545,38945,47150,46153,55164,93380,288126,374

134,883

148,034

Total assets

179,922200,568

202,800

235,929

255,514

255,525

271,908

333,665

353,718

374,841

Property, plant and equipment

13,923

13,845

14,19314,08015,053

15,745

17,19919,504

24,83625,347

Interest-bearing debt

28,44625,62622,527

21,161

19,93817,821

15,422

14,47912,84912,258

Capital adequacy ratio (%)

24.4

21.9

21.7

20.7

21.0

25.4

29.5

37.9

38.1

39.5

Cash flow from operating activities

9,720

1,317

3,540

21,816

18,262

4,234

8,625

17,641(12,398)

345

Cash flow from investing activities

(132)

(526)

(1,426)(369)(3,042)(448)(3,090)(14,010)(7,379)(2,298)Cash flow from financing activities(1,316)(2,862)(3,208)(1,472)(1,338)(2,926)(4,024)30,856(6,126)(5,361)

Cash and cash equivalents, end of term

39,96437,734

37,16657,60971,702

72,42273,926

108,532

82,44675,155Book-value per share (BPS) (yen)136.58135.42135.70142.09143.27173.762,150.32

2,707.51

2,894.41

3,177.22

8.82

8.79

(5.91)

19.71

15.72

32.35

439.93389.63285.48417.34

Dividend per share (yen)

－

－

－

－

2.00

4.00

7.00

90.00

100.00120.00

Payout ratio (%)

－

－

－

－

12.7

12.4

15.9

23.1

35.0

28.8

Stock price at end of term (yen)

98

88

99

255

375

286

290

3,420

3,460

2,501

Price-earnings ratio (PER) (multiple)

11.1

10.0

－

12.9

23.8

8.8

6.6

8.8

12.1

6.0

Price-to-book ratio (PBR) (multiple)

0.7

0.6

0.7

1.8

2.6

1.6

1.3

1.3

1.2

0.8

Orders received (Non-Consolidated)

Gross profit margin (%)

Operating profit margin (%)

Financial status

Cash flow

Per-share
information

Stock priceindicators

Earnings (loss) per share (EPS) (yen)Number of issued shares at end of term
Other181,544,607

186,544,607

186,544,607

277,544,607

377,544,607

377,544,607

37,754,460

46,805,660

46,805,660

46,805,660

Return on equity (ROE) (%)

3.6

3.6

(2.5)

9.3

10.9

20.4

22.6

15.3

10.2

13.7

Ordinary profit to total assets ratio (ROA) (%)

1.6

1.5

0.0

3.1

6.4

10.1

9.6

7.5

7.7

7.1

Capital investment

854

846

1,279

1,272

2,018

2,234

3,187

4,183

7,374

2,636

Research and development expenses

1,778

1,368

1,323

1,374

1,285

1,516

1,784

1,987

2,348

2,581

Depreciation

1,078

976

939

951

1,045

1,268

1,344

1,684

1,911

2,062

Number of employees

3,655

3,531

3,524

3,510

3,579

3,702

3,798

3,892

4,032

4,154

*1 The company performed a stock merger at a ratio of 1 share per 10 shares of common stock, effective October 1, 2017. Book-value per share and Earnings per share
were calculated on the assumption of the stock merger carried out at the beginning of the 80th term.
*2 The dividend per share of 90 yen in the 81st term includes a dividend of 20 yen per share to commemorate the company's 120th anniversary.

See website for details
To our investors https://www.kumagaigumi.co.jp/en/ir/index.html

60

The Kumagai Gumi Group Corporate Report 202061

Corporate Information

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.

Stock Information
Shareholder Composition

Current Status■ Securities Code:■ Stock Exchange■ Total Number of Shares

1861
First Section of the Tokyo
Stock Exchange
71,400,000 shares■ Total number of Shares

46,805,660 shares

Listing:

Authorized to Be Issued:

outstanding:■ Share Unit:■ Number of Shareholders:■ Administrator of
Shareholders Registry:■ Fiscal Year:■ Base Date for Annual
Dividend:■ Annual Shareholders'Meeting:

100 shares
37,602 (as of March 31, 2020)
Sumitomo Mitsui Trust Bank,
LimitedFrom April 1 through March 31
March 31

Treasury stock:45,623 shares (0.1%)

Securities firms:
42
274,307 shares (0.6%)
Foreign investors:
259
10,284,409 shares(22.0%)

Number ofshareholders:

37,602

Total number ofshares outstanding:Financial institutions:56
15,487,119 shares(33.1%)

46,805,660 shares
Other Japanese
corporations:443
10,642,948 shares(22.7%)(as of March 31, 2020)

Individuals and others:
36,801
10,071,254 shares(21.5%)

Administration Division

Legal & Compliance Department
Human Resources and General Affairs Department
Finance Department
Accounting Department

Civil Engineering Department
Sales Promotion Department
Marketing Department
Electric Power Marketing Department
Railroad Marketing Department
Technical Center
Civil Engineering Technology Department
Information and Communications Technology (ICT) Promotion Office
Infrastructure Renewal Business Department
Bridge Innovation Business Department
Environmental Business Department
New Energy Business Department
Machinery and Materials Department
Dam Technology Department
Tunnel Technology Department
Shield Technology Department
Project Technology Department
Geological Technology Department
Civil Engineering Design Department
Railroad Project Promotion Division

Building Management
Division

Architectural Planning andManagement Department

Planning Promotion Department
Architectural Administration Department

Marketing & Management
Department

Marketing Department
Urban Development Department
Solution Sales Department

Architectural Management
Department

Architectural Project Department
Budget Control Office
Purchasing Department

Architectural Engineering
Department

Architectural Production & Engineering Department
Architectural Structure & Engineering Department
Architectural Environment & Engineering Department
Production Building Information Modeling (BIM) Promotion Office

June of the Year
Architectural Design
Management Division

Stock Trading Data
Stock Price

Turnover150,000,000

5,000International Division

Kumagai Gumi Turnover
4,000

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

Audit Office■ Group Companies:

Corporate Planning Department
Secretarial Department
Corporate Communication Office
IT Solutions Department
Work Style Reform Promotion Office
The Iidabashi Project Office

Civil Engineering
Management Division

Project Management
OfficeChina (Hong Kong), Taiwan, Vietnam, Sri Lanka,
Myanmar

Corporate Planning
Division

Safety, Quality andEnvironment Division

Fukui Office■ Overseas Offices:

Headquarters			
2,578 non-consolidated			(as of March 31, 2020)■ Scope of Business:
To investigate, survey, plan, design, execute,and supervise construction works, and to provide
technical guidance, provide comprehensive
engineering, management, and consulting services,
as well as related contracting

President■ Capital:
JPY 30.1 billion■ Number of Employees: 4,154 consolidated;

Legal Compliance Audit
Committee

Yasunori Sakurano, President
and Representative Director

2-1, Tsukudo-cho, Shinjuku-ku,
		Tokyo 162-8557, Japan■ Domestic Offices:
Hokkaido Office, Tohoku Office, Tokyo Metropolitan
Area Office, Nagoya Office, Hokuriku Office, Kansai
Office, Chugoku Shikoku Office, Shikoku Office, Kyushu
Office, Technical Research & Development Institute

Directors/BranchManagers Meeting■ Headquarters:

January 6, 1938

Audit & Supervisory
Board Member

January 1, 1898

As of Wednesday, April 01, 2020

Fukui 910-0005, Japan

Management
Conference		

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

Kumagai Gumi Co., Ltd.

Board of Directors■ Company Name:■ Founded:■ Incorporated:■ Representative:

Organizational Chart

120,000,000

Kumagai Gumi Stock Price

New Business
Development Division

TOPIX (Tokyo stock price index)
3,000

90,000,000

Technical Research &Development Division
2,000

60,000,000

Hokkaido Office

30,000,000

Tokyo Metropolitan Area OfficeArchitectural Design Administration Department
Quality Control Department
Architectural Design Department 1
Architectural Design Department 2
Architectural Design Department 3
Structural Design Department
Earthquake-resistant Design Department
Environmental Design Department
International Management Department
International Construction Department
International Development Department
New Business Promotion Office
Alliance Promotion Office
Project Creation Promotion OfficePlanning Group
Technical Research & Development Institute
New Technology Innovation Center

Tohoku Office
1,000

Nagoya Office
0

0

March
2009

March
2010

March
2011

March
2012

March
2013

March
2014

March
2015

March
2016

March
2017

March
2018

March
2019

March
2020

* The company performed a stock merger at a ratio of 1 share per 10 shares of common stock, effective October 1, 2017. Kumagai Gumi turnover and Kumagai Gumi
stock price prior to the stock merger have been retroactively revised accordingly.

62

Hokuriku OfficeKansai Office
Chugoku Shikoku Office
Shikoku Office
Kyushu Office

The Kumagai Gumi Group Corporate Report 2020

63

Insight, Onsite, Farsight

About the Front CoverThe large work at the top is "I Found a Crayfish in
Rice Field," which won the Kumagai Gumi Corporate
Prize at "the Children's Painting Exhibit 2019: Rice
Fields and Water in Your Hometown". The remaining
five works were created on the theme of the environmentby 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 our headquarters,
Kumagai Gumi actively engages in environmental learningand cleanup of the local area. The company also sponsors
the above-mentioned Children's Painting Exhibit hosted by
the national Federation of Land Improvement Associations.

The Kumagai Gumi Group Corporate Report

Kumagai Gumi Co., Ltd.
2-1 Tsukudo-cho, Shinjuku-ku, Tokyo 162-8557
https://www.kumagaigumi.co.jp
Inquiries
Corporate Planning DivisionCorporate Communication Office

TEL 81-3-3235-8114 FAX 81-3-5261-9665
E-mail info@ku.kumagaigumi.co.jp