May 13, 2021
Company Name: Kumagai Gumi Co., Ltd.
Representative: Yasunori Sakurano, President
Securities Code: 1861
List: Tokyo Stock Exchange, First Section
Notice Concerning the Formulation of Medium-term Management Plan
for a Period from FY2021 to FY2023
To whom it may concern:
We are pleased to announce that Kumagai Gumi Co., Ltd., has formulated and released athree-year strategic business plan that is compiled in the Medium-term Management Plan
beginning in fiscal year 2021.
Through its construction business, Kumagai Gumi has been committed to help solving thesocial issues of the day and contributing to the development of society, in accordance with themotto of its founder, “Integrity with a Competitive Mindset,” which has been passed downfrom generation to generation.
In recent years, natural disasters have become more severe and frequent in Japan. Social
infrastructures built during the rapid economic growth period from the mid-1950s throughearly 1970s are aging and deteriorating. These factors are having a major impact on theinfrastructure that supports people's lives, as well as industrial development in Japan. In
addition, the spread of new coronavirus infections is changing people's values and behavior,
which is truly increasing the uncertainty of the future.
Given such a business environment, Kumagai Gumi and its group companies will continue tocommit themselves to supporting their customers and society in general in the future as aleader in the construction service industry sought by society. We will seriously address andconfront the social issues that have emerged in these changing times. Our goal is to contributeto the creation of a sustainable society, a society where people can live comfortably, and a1society where the economy continues to grow. Through these efforts, we recognize that therole of the Kumagai Gumi Group is to contribute to the realization of a society in which
limited resources are recycled, and people, the community, and nature continue to beenriched.
Following the approach of the previous plan, the current Medium-term Management Plan has
set the following basic policies:
1. deepen the construction business to increase profitability,
2. accelerate the construction-related peripheral businesses,
3. develop new business domains, and4. strengthen the management foundation.

Every Kumagai Gumi Group company, working together as a team, is committed to working
closely together to achieve its goal of sustainable growth. We would appreciate yourcontinued support in the future.
For inquiries regarding this matter, please contact:
Kumagai Gumi Co., Ltd.
Corporate Communications Department: +81-3-3235-8155
Administration Division: +81-3-3235-8606

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The Kumagai Gumi Group

Medium-term Management Plan
FY2021-2023
Proactive Measures for Sustainable Growth

May 13, 2021

The Kumagai Gumi Co., Ltd.
🄫🄫2021 K UM A GA I GUM I C O., L TD .

Table of Contents
1

PrefaceP.

22

Summary of the Previous Plan (FY2018-2020)

P.

3

3

Management Planning Process Based on the Group Vision

P.

4

4

Addressing Social Issues to Create an Ideal Society

P.

5

5

The Role We Play in Realizing the Society We Seek

P.

6

6

Basic Policies

P.

7

7

Business and Management Strategies

P.

8

8

Financial Targets

P. 12

9

Non-financial Targets

P. 14

10 Investment Plan

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P. 15

1

1

Preface
Kumagai Gumi Co., Ltd. has developed a three-year strategic business plan that is described in the Medium-term Management
Plan beginning in fiscal year 2021.
Inheriting the integrity with a competitive mindset from its founder, Santaro Kumagai, who used to say, “I’d like to do thework that will benefit the world someday. If there is any challenging construction work, let me do it.”, Kumagai Gumi has been
responding to the social issues of the day and working tirelessly for the development of society.
Given the frequent natural disasters that have become more severe in recent years, and the aging social infrastructure built
during the economic growth period from the mid-1950s through early 1970s, the current situation in Japan has had a major
impact on the infrastructure that supports people‘s lives and industrial development. In addition, the spread of new coronavirus
infections is changing people’s values and behavior, which is truly increasing the uncertainty of the future.
Against this backdrop, the Medium-term Management Plan that we have just formulated is based on a "long-term vision" as its
basic premise, which is described in the first part of the plan. It is a new management policy that looks ahead to 2030 andbeyond, while following the Medium-to-long-term Management Policy established in 2017.
In light of the social issues that have emerged with the changing times, this plan envisions the society in which we want to livein the future, and describes the role of the Kumagai Gumi Group in achieving this goal.
The second part of the Medium-term Management Plan sets out our policies, strategies, and targets for the next three years
based on our long-term vision. Although we were not satisfied with the financial results of the previous plan, we have set 50
billion yen in consolidated ordinary income as our medium-to-long-term financial target for sustainable growth. We havedescribed the initiatives on which we will focus to achieve this goal.
As a leader in the construction services that society requires, the Kumagai Gumi Group is committed to contributing to thecreation of an ideal community in which people would want to live by solving social issues to the best of our ability at all
times.

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2

Summary of the Previous Plan (FY2018-2020)
Consolidated Business Results

ROE

Return on Equity
was around thetarget of 12%.

Sales generally were in line with our
expectations, but consolidated ordinary income
did not reach the target number, and the profit
margin we had initially envisioned was notrealized.
Performance
25.0%

ROE

Cumulative
40.0%

35.0%

10.2%

13.7%

10.0%
5.0%

31.2%

28.8%

15.0%

Consolidated
Sales

Consolidated
Ordinary
Income

0.0%

436.2

26.6

2015

2016

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2017

11.5%

（billion yen）

389.1

2018

We paid stabledividends, aiming for atarget of 30%.

Consolidated
Ordinary Income

Consolidated Sales

Dividend Payout Ratio

20.0%

Dividend Payout Ratio

450.2

25.7

2019

Previous
Planning Period

28.4

2020

1,280 billion yen

Cumulative
1,275.5 billion
yen

Cumulative
83 billion yen

Cumulative
80.7 billion yen

28.4

30.0%

460.0

450.2

FY2020

33.0

420.0

436.2

FY2019

26.0

400.0

389.1

FY201824.0

26.6

TargetActualTargetActualPerformance

20.0%

10.0%

0.0%

(FY)

25.7

3

3

Management Planning Process Based on the Group Vision
Given the recent changes in the business environment, the Kumagai Gumi Group has set its
management direction from an ESG perspective based on the Group Vision.

Universal Thoughts
We are committed support our customers and society throughout
the ages by enhancing our well-seasoned “On-site Capability”(*1) and creating our original value of “Happiness Quality” (*2).

Role to PlayA leader in the construction service industry that is soughtby society, contributing to the realization of a society inwhich limited resources are recycled, and people, thecommunity, and nature continue to be enriched.

Initiatives to Focus on Deepening core
construction business Accelerating peripheralbusinesses (*3)

 Developing new
business domains
 Reinforcing
management base

*1 On-site practical skills and versatility combining superior technical capabilities and wellseasoned, resourceful personnel*2 In addition to the external and functional quality of the building, the quality that the people
who gather there and who use it can continue to be satisfied.
*3 Projects in which the Group invests or owns assets and participates as a principal.

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4

Addressing Social Issues to Create an Ideal Society
As times change, social issues are becoming more and more apparent. They are diverse and intricately intertwinedwith each other, and therefore simple solutions are becoming harder to find. The Kumagai Gumi Group is directly
confronting such social issues, and will work to create “a sustainable society,” “a society where people can live
comfortably” and “a society where the economy continues to grow.” By achieving these goals, we aim to realize asociety in which limited resources are recycled, people are healthy and happy, the community is prosperous, andnature is preserved.

The Society We Seek
A sustainable society

A society where people
can live comfortably
Livelihoods with peace of mind
and feelings of satisfaction
A society without
regional disparities anddisadvantages due toinfrastructure

A mechanism for swift
recovery and restorationfrom natural disasters

Small living spaces due touneven population distribution
and/orcommunity collapse
Worsening financial
situation of national andlocal governments andaging infrastructure

Frequent and intensifying
natural disasters

Greenhouse gas
emission reduction,
recovery, storage,
and utilization

Effective
utilization of
resources andself-sufficiency

Global warming
andacceleration ofclimate change

Imbalance in the
supply and demandof resources

A society where the economy
continues to growExperimental cities and pilot towns that
attract people from all over the world

Efficient urban
infrastructure using
digital technology

Economy and/or
industries unique toeach region

Declining competitivenessof cities

Inefficient urban
infrastructure

Decreasing economic
power due topopulation decline

Social issues for the year 2030 and beyond
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5

The Role We Play in Realizing the Society We Seek
In order to realize the society we are aiming for, we need a foundation that allows people to live
healthy lives and industries to develop greatly, while living in harmony with the global environment.
As a leader in the construction service industry that society needs, the Kumagai Gumi Group willcontinue to support our customers and society in general throughout the years.

The Society We Seek
A society in which limited resources are recycled, and people are healthy andhappy, the community is prosperous, and nature is preserved.
A sustainable society
A society where people canlive comfortably

A society where the economy
continues to growContributing to the society we seek

The Role the Kumagai Gumi Group Plays

We take on difficult projects in difficult locations as a group of construction
technology professionals. We build social infrastructure and provide diverse
values in terms of both construction and services.

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6

Basic Policies
Based on its solid management foundation, the Kumagai Gumi Group first identifies the existing and emerging issues, startingfrom its long-term vision, and then further develops its core construction business as the cornerstone of our earnings. The
Group will also seek the profitability of construction-related peripheral businesses which it has positioned as a growth area. In
addition, we will try to develop new business domains to expand the scope of our contributions.

Long-term Vision

Mid-term Management Plan

Contribute to the realizationof a society in which limited
resources are recycled, andpeople, the community, andnature continue to beenriched.

Identify Issues

Business
Carbon Neutrality
by 2050 (Japan)

The Society We Seek

A society where
the economy
continues to grow

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Making the Land
More Resilient toDisasters andExtending the Life of
Infrastructure

Upgrading Urban
Functions andSmart Cities

Bolster Overall
Construction BusinessBusiness Promotion

A society where
people can live
comfortably

Starting Point

A sustainable
society

Basic Policies

Accelerate Constructionrelated Peripheral Businesses
Develop New BusinessDomains

Management Foundation
Strengthen the Management
Foundation

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7

Business Strategy-1: Bolster Overall Construction Business
The Kumagai Gumi Group will strengthen and improve the efficiency of its core
construction business in order to increase profitability.
Classification

Domestic Civil Engineering Major infrastructure renewal
 Renewable energy

Area of
Focus

PolicyReinforcement

 Disaster prevention andmitigation, and national land
strengthening

Domestic Building Business Production, commerce, andlogistics
 Medical and welfare services
 Medium- and large-scale
wooden construction

 Unrecyclable waste disposal
facilities

 Urban redevelopment

 Develop management skills tocomprehensively handle large-scale
projects with multiple types of
construction.

 Improve the ability to respondto customers by integrating
sales, design, and construction

 Strengthen engineering capabilities
to provide one-stop services fordesign, procurement, andconstruction
 Improve productivity through theadvanced use of big data obtained
from construction projects.

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 Environmentally-friendly
RenewalOverseas Construction Business Urban infrastructuredevelopment in Asia
 Support for Japanesecompanies entering the
Asian market
 Expand the Group’s
market share in Taiwan

 Reinforce domestic andoverseas sales network

 Bolster the ability to quickly
identify and adapt to changes
in the construction market

 Build closer relationships
and business allianceswith domestic andoverseas partners

 Strengthen front-loading by
utilizing ICT/BIM

 Strengthen technical andsolution sales capabilities

8

7

Business Strategy-2: Accelerate Construction-related Peripheral Businesses
The Kumagai Gumi Group will create a solid source of revenues by accelerating its
construction-related peripheral businesses*, which we have positioned as a growtharea.
Classification

Area of
Focus

Renewable Energy
Business Woody biomass
power generation
businesses
including abusiness alliancewith Sumitomo
Forestry Wind and solar
power generation
businesses(including overseas
projects)

Real Estate
Development
 Urban renewal andurban development
projects
 Real estatedevelopment
projects, including
business alliancewith Sumitomo
Forestry as well as
overseas projects

InfrastructureManagement

Technological
Product Sales Toll road operations

 Biomass fuel development
and sales

 PPPs (public–private
partnerships) andconcessions including
overseas projects

 Infrastructure renewal
method development andsales
 Nursing care and welfare
equipment development
and sales Construction equipment
rental services (e.g. steelframe erection jigs)

 Improve professional skills and accumulation of expertise in such areas as project structuring andbusiness operations.
PolicyReinforcement

 Accelerate joint research and development within the Group companies as well as the mobility ofmanagement resources, including the use of highly-skilled individuals.
 Strengthen partnerships with companies and other organizations beyond the scope of the Kumagai Gumi
Group.
*Projects in which the company participates as a principal by making its own investment and holding assets.

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7

Business Strategy-3: Develop New Business Domains
The Kumagai Gumi Group will try to develop new business domains in which we cancontribute to the society we are aiming for, as well as to create business opportunities
to respond to changes in the business environment.

WoodenConstruction
Major
Infrastructure
RenewalRecyclingof
Resources

Construction Business

Reinforcing
National Land
to Create a
DisasterresistantCountry

Urban
Redevelopment

Renewable
EnergyOn-site Skills

Technological
Capabilities

Highly-skilled,
Resourceful
Personnel

Infrastructure
Maintenanceand Planning

Urban
Renewal and
Urban
Planning

Construction Business

Civil Engineering & Architecture

AreaManagement

PublicFacility
OwnershipandOperation

Smart Cities

New Business Domains
Comprehensive
Management ofSocialInfrastructure

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PPPs
and
PFIs

Construction-related
Peripheral Businesses

Urban
Greening

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7Management Strategy: Strengthen the Management Foundation
We will further strengthen the foundation that supports our management and strive to ensure that
our strategies will lead to solid businesses that generate multiple sources of revenue.

Classification

Digital Transformation

 Streamline andautomate businessprocesses through themodernized coremainframe and othersystems forcompetitive
differentiation

FocusedInitiatives

 Embrace and promote
digital transformation(DX) and innovation
toward business
transformation
 Enhance IT literacy of
employees and secure
DX human resources
through alliances withother companies

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Technological
Development

Human Resource
Development

Governance Implement research and  Improve the work
environment anddevelopment thatworkplace systems
contributes to athat enable diverse
recycling-based,
human resources todecarbonized society
maximize their abilities

 Long-term andsustainableenhancement ofcorporate value throughthe promotion of ESG
management

 Promote technologicalresearch anddevelopment inresponse to theincreasingly digitalsociety Create synergistic
outcomes by deepening
the Group’s alliancesand collaborations

 Propel technologicaldevelopment that
contributes to theadvancement of various
functions inconstruction

 Promote new ways ofworkstyle in responseto the new normal
 Establish a new
personnel system andtraining programs tosecure high-valueadded humanresources Maintain stable
management throughthorough risk
management

118

Financial Targets
During the planning period, we have set our financial targets for four financial indicators.

Consolidated Sales【In FY2023】

Consolidated
Ordinary Income【In FY2023】

470 billion yen

33 billion yen

ROE

Dividend Payout Ratio

12% or more
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30% target128Financial Targets (Performance by Segment)
Domestic
Civil
Engineering

Domestic
Building
Business

Overseas
Construction
Business

74.7

470.0 billion yen

17.2

0.3

75.0

7.7
Consolidated
0.1
Ordinary Income

30.0

236.9

121.4

Previous Planning Period

FY2020

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5.1

Constructionrelated Peripheral
Businesses

Consolidated Sales

Consolidated Sales

450.2billion yen

Domestic Group
Company
Business

28.4 billion yen
15.2（billion yen）

Current Planning Period

2.0

8.5

5.5
0.5

240.0

Consolidated
Ordinary Income

50

Consolidated
Ordinary Income

33.0 billion yen
16.5

125.0

FY2023

The Future We Are Aiming For（2030 Financial Targets）

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9

Non-financial Targets
Based on its ESG Policy*, the Kumagai Gumi Group has identified issues that are considered
important to our stakeholders from an ESG perspective in order to build a sustainable society andachieve sustainable growth for ourselves, and pursue both solutions to social issues (social value)and expansion of business profits (economic value) through our business activities.
Main Evaluation Indicators

ESG Perspective

CO2 Emissions Reduction Rate (Scope 1 & 2)
Scope 1: All direct emissions of greenhouse gases from theactivities of organizations or ones under their control
Scope 2: Indirect emissions from electricity, heat, and steam
purchased and used by the organization

E

Environment

Mixed Waste Discharge Rate

Total amount of mixed waste generated as a percentage of
total construction waste generated

Casualty Frequency Rate

S

SocialNumber of casualties due to occupational accidents per 1
million total actual working hours

Number of Overtime Hours Worked by
Employees
Average number of overtime hours worked in one monthG

Governance

Number of Cases of Serious Violationsof Law and Regulations

Those that have been administratively punished or have been
subject to administrative measures are included

Numerical Targets
during the Planning
PeriodContributions

to SDGs【In 2030】

Achieve minus 25%
when compared to FY2019

2.0% or less
0.5 or less
30 hours or less0 cases*See the Kumagai Gumi website:

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10 Investment Plan
The domestic construction market is projected to shrink in the future due to a declining population and fiscal
constraints, and competition is expected to intensify further. Therefore, the Kumagai Gumi Group will invest 40
billion yen to further bolster its core construction business and accelerate its efforts in construction-related
peripheral businesses, in an attempt to reinforce its competitiveness and secure stable earnings by diversifying its
revenue sources.

40

Investment Size

Deepening ofConstruction Business
Major
Infrastructure
RenewalMedium- to largescale Wooden
Construction

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Acceleration ofConstruction-related
Peripheral Businesses

Renewable Energy
Real Estate Development

InfrastructureManagementbillionyen

Development of New
Busines Domains
Research andDevelopment ofTechnologies tocontribute to theresolution of social
issuesAlliances with othercompanies to create
new business
opportunities

Reinforcement ofManagement
Foundation
Digital Transformation
Technology Development

Human Resource
Development

15

Disclaimer: Forward-looking statements in this document, including strategies, plans, and financial targets, are based on information
currently available to the Kumagai Gumi Group and certain assumptions that we consider reasonable. However, please be aware that
actual results may differ materially for a wide range of possible reasons, including general industry and market conditions and the general
economic environment.
🄫🄫2021 K UM A GA I GUM I C O., L TD .