Insight, Onsite, Farsight

The Kumagai Gumi Group
Corporate Report 2021

As a leader in the construction services that society requires, theKumagai Gumi Group is committed to contributing to the creation of an
ideal community in which people would want to live by solving social
issues to the best of our ability at all times.
Management Planning Process
Based on the Group Vision
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.

Grou
p
Visio
n

Long
-ter
Visio mnMedi
Mana um-term
geme
nt Plan

CONTENTS
Corporate Information

Technology to Creates Social Value........................................... 40

The Kumagai Gumi Group's Value Creation History.................... 4

Aiming for Safe Workplace Environments.................................. 42

The Kumagai Gumi Group's Business......................................... 6

Quality Control and Environmental Preservation....................... 43

The Kumagai Gumi Group's Strengths......................................... 8
The Kumagai Gumi Group's Value Creation Process................ 10

Stakeholder engagement

Financial and Non-Financial Highlights...................................... 12

Engagement with Customers..................................................... 47
Engagement with Employees..................................................... 48

Strategies for sustainable growth

Engagement with Shareholders and Investors........................... 50

The Medium-Term Management Plan........................................ 14

Engagement with Business Partners......................................... 51

ai
Kumag
Gumi
Group's age
ate imcorporInterview with the President....................................................... 16

Engagement with Communities.................................................. 52

Kumagai Gumi's ESG/SDGs Strategy........................................ 22

Evaluation by Society and Participation in Initiatives................. 53nt
geme
Mana orfpolicy ond
ey
and b
0
3
0
2

,
tegiesartS
es,
Polici oals for
and G Y2023
1-F
FY202

Sustainability Dialog...................................................................24
Business Strategy: Civil Engineering......................................... 26

GovernanceBusiness Strategy: Building Construction.................................. 28

List of the Board of Directors...................................................... 54

Business Strategy: Overseas Projects....................................... 30

Corporate Governance...............................................................56

Business Strategy: Construction-related Peripheral Businesses.... 31

Risk Management......................................................................58
Interview with an Outside Director.............................................. 60

Value creation initiatives
Special Feature 1: Bringing innovation to expressway

Financial Information

renewal construction

Commentary on and Analysis of Management Performance..... 62

The Challenge of the Cotter Floor SlabKey Financial Data over 10-Year Period.................................... 64

Method for Bridges.................................. 32
Diverse Human Resources........................................................ 34

Corporate Information and Stock Information............................ 66

Special Feature 2: A new challenge in the region of ourOrganizational Chart..................................................................67

founding
Aiming to Achieve Medium- and large
scale wooden construction..................... 38

Our Company's Code of Conduct(Mission Statement)● TRUST: To develop client trust andearn their confidence.
● CONSISTENCY: To be consistently
professional and responsible.
● CO-OPERATION: To promote
cooperation and mutual prosperity.

Management Philosophy● ENVIRONMENT: We aim to use our breadth of expertise to

design and construct projects which are environmentally friendly
and which will improve quality of life and satisfy the needs ofsociety.

● CLIENTS: We aim to be an innovative and dynamic company,

one that can provide our clients with a comprehensive service ofconsistently high standards, tailored to satisfy clients' individual
requirements.

● 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.

Editorial Policy
This Corporate Report is issued with the goal of communicating the
Kumagai Gumi Group's management policies, business strategies,
and value creation initiatives to all of our stakeholders.
It showcases the involvement of our ESG-based business activities
with the SDGs, and communicates our contribution to the formationof a sustainable society.
The report meets the expectations of stakeholders for information
disclosure, and makes reference to various guidelines in order toensure objectivity and transparency.
Information disclosure scheme● REPUTATION: We strive to be a responsible corporate citizen,
recognized for our business integrity and social awareness.

Financial Information
SimpleThe Kumagai Gumi Group Corporate Report● Shareholder
Corespondence● Financial Statement
Explanation Material● Financial Result● Securities Report

Detailed

Non-financial Information● Company Information● KUMAGAI UPDATE● Kumagai News● Governance Report

Kumagai Gumi website

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

Period of Reporting
FY2020 (April 1, 2020 to March 31, 2021)
The information in this report also incorporates examples of activities
and other information from April 2020 or later, as required.
Scope of Reporting
The scope of this report covers Kumagai Gumi Co., Ltd. and its sevengroup companies, six of which are in Japan and one of which is in Taiwan.
References in this report to "Kumagai Gumi" or "our company" are used inreporting on Kumagai Gumi Co., Ltd. only. Reports on Group companies
mention the specific companies. In reporting on environmental activities,
numerical data for Kumagai Gumi covers construction projects undertaken
by Kumagai Gumi alone, as well as for joint venture projects with Kumagai
Gumi as the lead company.
Issue Date
August 2021 (Previous edition: August 2020; Next edition: Scheduled
for August 2022)
Referenced Guidelines● Environmental Reporting Guidelines (2018 Edition) from the Ministryof the Environment● International Integrated Reporting Framework (2021.1) from the IIRC
Notes on the Outlook for the Future
Opinions and other forward-looking statements in this report are basedon data currently available to us and on certain assumptions that we
believe are reasonable. Actual results may, therefore, differ materiallyfrom these statements for various reasons.

The Kumagai Gumi Group Corporate Report 2021

3

Corporate Information

The Kumagai Gumi Group's Value Creation History
1898 to 1945

1946 to 1960
Postwar reconstruction period
Birth of Kumagai Gumi astunnel experts
After the war, Kumagai Gumi established
its Building Construction Division andcontributed to the reconstruction ofJapan. The Civil Engineering Division
was involved in many tunnel construction
projects. It was quick to adopt mechanized
construction, and dramatically improved
productivity. The division took charge of thehard construction of the Omachi Tunnel at
the Kurobe River No. 4 Power Plant andsolidified the reputation of Kumagai Gumi
as tunnel construction experts.

Kumagai Gumi started its operationin January 1898 when Kumagai Gumi
founder Santaro Kumagai, who had
worked as a stone mason in Fukui,
undertook aqueduct construction at the
Shikununo Power Station. Kumagai
Gumi has carried forward his words of"If there is any challenging construction
work, let me do it" to take on challenging
construction projects.

Track record and technologies

1937 Whole line opening of
Sanshin Railway LineSales

1981 to 1990

Second growth period
Rapid progress and challenges

Third growth period
Active business expansion

As the Japanese economy grew rapidly,
Kumagai Gumi's Architectural Construction
Division made remarkable advances,including the receipt of consecutive BCS
Prizes and the construction of skyscrapers.
The Civil Engineering Division, too, recorded
numerous achievements that include thefirst use in Japan of NATM, which became
a standard tunnel construction method. We
went on to conduct business development
on a global stage, particularly in Hong Kong,
Taiwan, and Southeast Asia.

Our Overseas Projects expanded not onlyin Asia but US, Australia and so on. In 1985,
Kumagai Gumi recorded over one trillion yen
in orders along with the industry's highest
ordinary income of 32.6 billion yen.

1977
Opening of the Joetsu
Shinkansen Nakayama
Tunnel1958 Opening of the Omachi Tunnel at
the Kurobe River No. 4 Power Plant

1978 Shinjuku
Nomura Building
project completed

Sales (bar)History of the group and performance over time

1,500

1963
Establishment of Kumagai Road Co., Ltd.

billion yen
1,250

1,000

1898
Foundingof Kumagai
Gumi* 1994 Change of company name to Gaeart Kumagai Co., Ltd.

1958
Opening of the
Toyokawa Factory

1974
Establishment of Taiwan
Kumagai Co., Ltd.

1985
Recorded over
one trillion yen
in orders, alongwith the highest
ordinary income inthe constructionindustry

500

2004 TAIPEI 101 completed

In 2016, Kumagai Gumi made a new startwith the formulation of the Kumagai Gumi
Group Vision Statement.
In 2017, the company entered into a businessand capital alliance with Sumitomo ForestryCo., Ltd. with the aim of building a unique
new position extending beyond its existing
business domains. The company marked the120th anniversary of its founding in 2018.

2017
2018
Aso Ohashi Bridge Area Tao Zhu Yin Yuan (Taiwan)
slope disaster prevention high-rise designer's
construction
condominium completed
2016
Formulation of the Kumagai
Gumi Group Vision* 2000 Change of company name to Techno-Space Creates Co., Ltd.

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

2001 Establishment of K&E Co., Ltd.

Ordinary income (dotted line)

2017
Business and capitalalliance with Sumitomo
Forestry Co., Ltd.

60
billion yen
50

2014

2000, 2003

Cancellationof preferredstockscompleted

Request to
financial
institutions
for aid

1958
Opening of theOmachi Tunnel at
the Kurobe RiverNo. 4 Power
Plant

1938
Establishment ofKumagai Gumi
Co., Ltd.

New founding period
Aiming for a sustainable
company

Kumagai Gumi was hit by the bursting of
the economic bubble. Facing a financial
crisis triggered by massive real estate
investments, the company requested
financial aid two times. It promoted
thorough business revolution, tackled
new fields of construction, and undertook
the development of technologies such as
unmanned construction. In 2014, Kumagai
Gumi completed the cancellation of preferredstocks and achieved its reconstruction.

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

Founder•Santaro
Kumagai

750

2015 onward

From crisis to reorganization

1992
1989
Start of service of Sydney
Completion of World
Wide Center (New York) Harbour Tunnel
1989
Establishment of
FATEC Co., Ltd.

Ordinary income

1945
Establishment of
Building Construction
Division

1991 to 20142018
120th anniversary offounding

40

30

2004
Merger of Gaeart Kumagai Co., Ltd. andTobishima Road Co., Ltd.
Launch of GAEART T. K. Co., Ltd.

20

* 2016 Change of company name to GAEART Co., Ltd.

250

10

0

0

1900

1910

1920

1930

1940

1950

1960

1970

1980

1990

2000

Corporate Information

Our founding and initial
growth period
Work on difficult projects indifficult places

1961 to 198020102020 (FY)* Financial results through fiscal 1988 are for the fiscal year ended September 31; financial results from fiscal 1989 are for the fiscal year ended March 31* Figures through fiscal 1981 are for Kumagai Gumi only

Website History https://www.kumagaigumi.co.jp/en/company/history/index.html

4

The Kumagai Gumi Group Corporate Report 2021

5

Corporate Information

The Kumagai Gumi Group's BusinessIn every phase of the construction value chain, the Kumagai Gumi Group demonstrates the comprehensive capabilities ofOrders received composition ratio

Civil Engineering

its eight group companies.

Through the construction of tunnels,
bridges, dams, roads, and otherinfrastructure vital to people's lives,
Kumagai Gumi Group will continue tobuild places where people can live in security and comfort. We
will continue to enhance our Technology Strength to deal withsuperannuated infrastructure that is reaching the age of largescale renewal, as well as increasingly severe natural disasters.

The construction value chain and our main fields of business

Kumagai Gumi Co., Ltd. / GAEART Co., Ltd.

Core construction businessTaiwan Kumagai Co., Ltd.
K&E Co., Ltd.
Techno-Space Creates Co., Ltd.
Technos Co., Ltd.
FATEC Co., Ltd.

Building Construction

Related information P30

Planning andDevelopment

The Kumagai Gumi Group is
expanding sales and marketing
networks at our overseas offices, andis striving to expand our business tosecure stable sources of revenue. To develop our overseas
business and enhance our earning ability, we will promotealliances with other companies while securing global humanresources and making efforts toward risk management.

DesignEngineering

Construction
Procurement

Maintenanceand Repair● Product planning● Design● Business planning● Technology development/
application● Patent-related
measures● Quality assurance● Construction planning● After-sales care system● Construction management● Periodic inspection● Safety and healthmanagement

Technical Support Co., Ltd.

6

● Inspections● System audits

Related information P31

Work outsourcing andinsurance agency● Quality andenvironmental
management

Construction-related Peripheral Businesses● Building management● Research and marketing● Urban development

Operational
Management

35.6%

100.1 billion

Private19%
Public16%

Related information P28

The Kumagai Gumi Group provides
buildings for every application andpurpose, including housing, offices,
hospitals, schools, and commercial
facilities. The Kumagai Gumi Group provides buildings forevery application and purpose, including housing, offices,
hospitals, schools, and commercial facilities, always building
stages for living with consideration of users' feelings.
We will also advance initiatives for environmentally friendly
construction and medium- to large-scale wooden construction.

Overseas Projects
Delivery

Civil Engineering

Corporate Information

Related information P26

Building Construction

64.4%

181.4 billion

Public5%

Private60%

Fiscal year ended March 31, 2021,
Kumagai Gumi only (domestic)

Renewable energy business

Infrastructure Management

We will engage in businesses
such as woody biomass power
generation and wind power/
solar power generation tocontribute to decarbonization and to the formation ofa recycling-oriented sustainable society.

Our company has engaged
in PPP projects including
the operation of toll roads.
We will further leverage ourcomprehensive strength to actively undertake suchprojects.

Real-estate development

Technological product sales

Kumagai Gumi has a constructionindustry-leading track record in realestate development projects. We
will take advantage of our know-how
and expertise to contribute to urban
redevelopment and area revitalization.

We strive to solve problems andimproveproductivity
throughtechnology products. We will
engage in collaboration with othercompanies to create new value.

The Kumagai Gumi Group Corporate Report 2021

7

Corporate Information

The Kumagai Gumi Group's Strengths
As stated in the Kumagai Gumi Group Vision Statement, the Kumagai Gumi Group is committed to support our customers
and society throughout the ages by "On-site Capability" and "Happiness Quality".

FY2020 results
400
billion yen

Sales(upper bar)

300

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

Kumagai Gumi Co., Ltd.
https://www.kumagaigumi.co.jp

Technos Co., Ltd.
https://www.technos.info

0February 1996
Headquarters 2-1 Honohara, Toyokawa,
Aichi Prefecture
Representative Eiji Morita

Civil Engineering P26

Building
Construction P28

Overseas Projects
P30

CapitalSales
No. ofemployees¥470,000,000¥6,448,000,000(FY ended March 2021)
148 (as of March 2021)

Kumagai Gumi implements its projects in close collaboration with its
group companies by effectively utilizing and mutually complementing
the technologies, expertise, products and management resources
held by these companies, so as to maximize its collective
Related information P66 Corporate Information
capabilities.

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

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

Trading company specializing in construction

GAEART Co., Ltd.

FATEC Co., Ltd.

https://www.gaeart.com

http://www.fa-tec.co.jp/

November 1963
Headquarters 8-27 Shinogawamachi,
Shinjuku-ku, Tokyo
Representative Kenji Yamamoto
Established

CapitalSales
No. ofemployees¥1,000,000,000¥57,084,000,000(FY ended March 2021)
753 (as of March 2021)

CapitalJune 1989
Headquarters 2-1 Tsukudocho, Shinjuku-ku, Sales
Tokyo
Representative Takayuki Aono
No. ofEstablishedemployees¥20,000,000¥4,768,000,000(FY ended March 2021)
8 (as of March 2021)

Building renovation

Working drawing production and education

K&E Co., Ltd.

Techno-Space Creates Co., Ltd.

https://www.k-and-e.co.jp/

https://www.technsp.co.jp/

CapitalSales
No. ofemployees¥300,000,000¥21,410,000,000(FY ended March 2021)
373 (as of March 2021)

K&E Co., Ltd. is a comprehensive producer active in areas frombuilding deterioration surveys and seismic diagnosis to theplanning, design, and construction of comfortable spaces, as well
as after-sales service.

30

21.1

71.3

17.9

21.1

79.5

20.2

82.0

22.4

83.9

90.0

4

5.1

5.3

5.2

5.6

FY2016FY2017FY2018FY2019FY2020

15

0

20.0%

Operating income (inner circle)
Civil Engineering

Gumi
27.0 (Kumagai
only)%

20.0% 27.5%
Building
Construction(Kumagai
Gumi only)

52.5%

53.0%

* Value after deduction of intra-group transactions* Amounts less than 100 million yen are rounded.

Examples of Group companies' initiatives

Continuing to create more comfortable spaces through total renewal / K&E Co., Ltd.

November 1993
Headquarters 3-12-12 Higashi-Ikebukuro,
Toshima-ku, Tokyo
9F, Showa Building
Representative Naoyuki Yamashita
Established

CapitalSales
No. ofemployees

Construction Unit as a specialist in the architectural renewal business, basedon the creed "Practicing construction services." We believe that renewal
business is not simply repair, but rather the creation of new value for buildings

FATEC Co., Ltd. is a general technology trading company thatoffers construction materials and equipment developed with stateof-the-art technologies. We provide not only products but also
technologies for their utilization.

January 2001
Headquarters 2-7-2 Fujimi Chiyoda-ku,
Tokyo 15F, Stage Building
Representative Kazuhisa Iwama

Group companies

Sales (outer circle)

In 2001, K&E became independent from Kumagai Gumi's Renewal

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.

Established360.2

FY2020 composition
ratio

200
100

Established

Operating income
45(lower bar)billion yen

352.2

307.1

294.5

273.4
General contractor businessGroup companies

Corporate Information

Our group will continue proactive measure for sustainable growth.

Kumagai Gumi only

¥30,000,000
765,000,000(FY ended March 2021)
57 (as of March 2021)

Techno-Space Creates Co., Ltd. engages in business including
the preparation of construction and architectural schematics andapplication documents. It also engages in educational businessaimed at universities and construction companies.

and the handing down of buildings to the next generation.
In the Kyoto Gojo Hotel renovation (Fauchon Hotel Kyoto), a businesshotel scheduled for dismantling was reborn as a luxury hotel with a senseof esprit through various technologies andingenious refinements.

Guest room

Exterior

Sales of FLORA TENDER independent walking aid with stand-up assist feature / FATEC Co., Ltd.
After a period of development, Kumagai Gumi began sales of a new modelof FLORA TENDER in November 2020 through the group company FATEC
Co., Ltd.
FLORA TENDER is an independent walking aid with a powered stand-up
assist feature.
To ensure use with peace of mind, we acquired robot safety certificationfrom the Japan Electrical Safety & Environment Technology Laboratories

Construction in Taiwan

Work Outsourcing and Insurance Agency

Taiwan Kumagai Co., Ltd.

Technical Support Co., Ltd.

http://www.taiwankumagai.com.tw

http://www.tsp-kumagai.co.jp/

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

CapitalHeadquarters

Sales
No. ofemployees

NT$800,000,000¥15,268,000,000(FY ended December 2020)
259 (as of March 2021)

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

8

CapitalJuly 1995
2-1 Tsukudocho, Shinjuku-ku, Sales
Tokyo
Representative Hiroshi Shimura
No. ofEstablished

Headquarters

employees(JET) based on multiple JIS standards and risk assessments, a first in Japanfor welfare equipment.

¥70,000,000¥555,000,000(FY ended March 2021)
41 (as of March 2021)

The company is developing an outsourcing business for clericalwork, and also offers insurance plans as an agency handling bothlife and non-life insurance.

FLORA TENDER

Website Information about FLORA TENDER https://www.kumagaigumi.co.jp/news/2021/nw_202210115_1.html

The Kumagai Gumi Group Corporate Report 2021

9

Corporate Information

Long-term Vision

The Kumagai Gumi Group's Value Creation Processsocial 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.

Corporate Information

Society in which limited
resources are recycled,
and people, thecommunity, and nature
continue to be enriched.

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

The Society we seek
A Sustainable
Society
A society where
people canlive comfortably

Awareness of social issues
Aging ofinfrastructure

Naturaldisasters

Management capital(FY2020 performance)

Community
collapse

ClimatechangeCollapse in the
supply anddemand balanceof resources

Decline in urban
competitiveness

Inefficient urban
infrastructure

Population
declineDecline ineconomic power

Financial capital

ESG/SDGs strategy

Total assets 379.6 billion yen

Manufacturing capitalBusiness Activities

Formation of environmentally considerate businessYuuei Kyoryoku Kai 859 companies
Manufacturing sites 32

Intellectual capital
Number of patents held 482
Research and development
expenses 2.7 billion yen

Human capital
Number of employees(non-consolidated) 2,620(consolidated) 4,259

Societal capital
Domestic sales sites 116(Headquarters, branches,sales offices, etc.)
Technical Research &Development Institute 2
Equipment and material centers 1
Equipment and material centers 1
Public works renewal
Overseas sales sites 10

Natural capital (non-consolidated)
Electric power 33,417,000 kWh
Gas63,800 m3
Diesel oil
19,282 kl
Kerosene
29 kl
Water
556,000 m3

10

Insight
Kumagai
Gumi Group
VisionStatement

Farsight

S
Creation of rewarding
workplaces for all

Achievement ofsustainable communities

OnsiteGovernanceOutcomes

OutputKey issues (materiality)

E(The Value We Provide to Stakeholders)

Sales

Enhancing of corporate governanceMedium-termManagement Plan
targets FY2023

121.4 billion

125 billion

Domestic
Building
Construction
Business

236.9 billion

240 billion

Overseas
Construction Business17.2 billion

30 billion

Customers and local communities

Domestic Group
Companies Business74.7 billion

75 billion

Constructionrelated
Peripheral
Businesses

300 million

2 billion(Ordinary income)Quality That Inspires Happiness
Global environment / Local communities

Sustainable Coexistence with NaturePartnercompanies / Business partners

Coexistence in Mutual Prosperity
For employees-9.1%-25% comparedto FY2019(In 2030)

Human Resource Development

Mixed Waste
Discharge Rate

1.2%

2.0% or lessShareholders and investors

Casualty
Frequency Rate

0.32

0.5 or lessNumber ofOvertime
Hours Worked
by Employees

Monthly average
29.2 hours

Monthly average
30 hours or less0 cases

0 cases(Scope 1+2)

Strengthening of relationships with stakeholders

FY2019 results

Domestic Civil
Engineering

CO2 Emissions
Reduction Rate

G

A society where
the economy
continues to grow

Number of
Cases of Serious
Violations of Law
and Regulations

Return to Shareholders
Global Environment

Alteration of nature(negative)

The Kumagai Gumi Group Corporate Report 2021

11

Corporate Information

Financial and NonFinancial Highlights

283.4

500
billion yen

whereas non-financial information is based solely on Kumagai Gumi.
* Amounts less than 100 million yen are rounded.

billion yen

Sales
500
billion yen

454.0
381.8

400

400

325.0

284.7

300

450.2

283.4

344.7

389.1

374.0

Dividend per share

120 ■billion yen

150
120

100

100

0

0

60

FY2017FY2018FY2019FY2020FY2017FY2016FY2018

31.2

28.8

35.0

billion yen

0
FY2018FY20192.7

billion yen■ Research and development expenses
7.4

6

4.2
3.2

20
10

FY2017847FY2016billion yen

Capital investment

30

15.9

0

FY2020FY2019

％
40

23.1

30
FY2016

120

120

100

90

90
200

Payout ratio

yen

300

200

50

2.5■

%

Dividend per share

Research anddevelopment expenses

Capital investment

31.2

yen

450.2

436.2

Payout ratio

Corporate Information

Orders received(Kumagai Gumi only)* The financial information is based on the Kumagai Gumi Group consolidated results,

1.8

2.0

FY2016FY20172

2.7
2.3 2.6 2.6 2.5

0

FY2020FY2018FY2020FY2019* The company performed a stock merger at a ratio of 1 share per 10 shares of common stock, effective October 1, 2017.

Operating income

28.1
40

Operating income margin

6.2

billion yen%■ Operating income

Operating income margin

billion yen
30

25.1

26.5

23.0

20

7.3

25.4

billion yen

6.8(Number of female employees: 396)

Ordinary income margin

25.4

26.6

22.7

20

25.7

15

28.4

10

6.8

6.1

6.3

5.9

10

2,620

FY2016FY2017FY2018FY20190

FY202058people■ Number of employees
3,000

people

2,305

2,382

2,497

29

(Kumagai Gumi Group overall)people

2,578

2,620

90
people

58

54

49

39

5

CO2 emissions (Scope 1+2)

Number of female managers

2,000

1,000
0

0

Number of female
managers

Number of employees

%
％

7.4
5

6.3

billion yen

20

6.2

5.8

10

30

Ordinary income margin■ Ordinary income

40

%

10

6.2

28.4

20

15

28.1

Ordinary income

84,000■ Total emissions

15

t-CO2

Intensity

10,000 t-CO2

6
t-CO2 /billion yen

113,000
60

10

30

5

0

0

95,00028.3

96,000 92,000
84,000
29.9
24.7
21.1
18.6

4

2

0
FY2016FY2017FY2018FY2019FY20200FY2016FY2017FY2018FY20190

FY2020FY2016FY2017FY2018FY2019FY2020* The CO2 calculation method was changed in FY2018.

Return on equity(ROE)

Profit attributable toowners of parent

17.9

11.5

billion yen%■ Net profit

25

ROE

billion yen

19.4

20
15
10

16.4

15.8

15.3

10.2

13.7

0
FY201612FY2017FY2018FY2019FY2020

379.6

50

500

%

billion yen

40

400

11.5

30

300

20

200

10

100

0

0

43.2

billion yen■ Total assets
333.7

13.3

22.6

5

17.9

Capital adequacy ratio

Total assets%

Number of patent applications

Capital adequacy ratio

353.7

374.8

379.6

29.5

37.9

38.1

39.5

100

％

cases

60

43.2

271.9

75

45

FY2017FY2019FY2020Casualty Frequency Rate

0.32

1.00

64

70

73

0.70

0.75

65

0.65
50

50

15

FY2018

cases

0.50

30

0
FY2016

75

50

25

0

0.44

0.42

0.25

0.32

0
FY2016FY2017FY2018FY2019FY2020FY2016FY2017FY2018FY2019FY2020

The Kumagai Gumi Group Corporate Report 2021

13

Strategies for sustainable growth

The Medium-Term Management Planlong-term vision, we set the concept "policies, strategies, and targets for the next three years." We have set 50 billion yen
consolidated ordinary income as our medium- to long-term financial target for sustainable growth, and set out initiatives tofocus on this.

We set numerical targets for four financial indicators during the period of the plan.
Consolidated Sales

Consolidated Ordinary
Income (FY2023)(FY2023)470 billion yen

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.

Performanceby Segment

Long
-te
Visionrm

We are committed to 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).

Domestic Building
Business

470

450.2 billion yentemenManag rfo
policy ond
ynd be
2030 as,
ategiert
S,
es
Polici oals for
and G Y2023
1-F
FY202

Med
Mana ium-term
geme
nt Plan

A leading in the construction service industry that is sought bysociety," contributing to the realization of a society in which limited
resources are recycled and people, the community, and nature
continue to be enriched.

● Deepening core construction business● Developing new business domains● Accelerating peripheral business (*3)
● Reinforcing management base
*1 On-site practical skills and versatility combining superior technicalcapabilities and well-seasoned, resourceful personnel*2 In addition to the external and functional quality of the building, the qualitythat 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.

Based on its solid management foundation, the Kumagai Gumi Group first identifies the existing and emering issues, starting fromits 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.

Medium-term Management Plan
Identify Issues

Contribute to the realization of asociety in which limited resources arerecycled, and people, the community,
and nature continue to be enriched.

A society where theeconomy continues
to grow

14

Making the Land More
Resilient to Disasters
and Extending the Lifeof Infrastructure
Upgrading Urban
Functions andSmart Cities

Business
promotion

A society where people
can live comfortably

Starting
Point

A sustainable society

Develop New
Business Domains

Management Foundation
Strengthen
Management
Foundation

Consolidated
0.1 Ordinary Income

5.5

30

28.4

50 billion yen

8.5
Consolidated
Ordinary Income

33.0

0.5

billion yen

15.2

16.5

240

ro

236.9

121.4

Previous Planning Period

FY2020Current Planning
Periodta
Sus

FY2023

Non-financial Targets

in

l
ab

e

The Future We Are Aiming For(2030 Financial Targets)

Related information P22-23 Kumagai Gumi's ESG/SDGs strategy

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

Main Evaluation Indicators

CO2 Emissions Reduction Rate (Scope 1, 2)

E

Accelerate
Construction-related
Peripheral Businesses

75

7.7

125

Scope 1: All direct emissions of greenhouse gases from the activities oforganizations or ones under their control.
Scope 2: Indirect emissions from electricity, heat, and steam purchased andused by the organization

Mixed Waste Discharge Rate
Total amount of mixed waste generated as a percentage of total constructionwaste generated

Bolster Overall
Construction Business

Carbon Neutrality
by 2050 (Japan)

0.3

Consolidated
Ordinary Income

2

Construction-related
Peripheral Businesses(Environment)

Basic Policy

5.1

billion yen

billion yen

Overseas Construction
Business

Business

The Society We Seek

17.2

Initiatives to Focus on

Basic Policies

Long-term Vision

74.7

30% target

Consolidated Sales

Consolidated Sales

Domestic Group
Company BusinessRole to Play

12% or more

G

Grou
p
Visio
n

Universal Thoughts

Domestic Civil
Engineering Business

Dividend Payout RatioROE

33 billion yen(billion yen)

ai
Kumag
i
m
Gu
Group's age
ate imcorporStrategies for sustainable growthin 2017, we set up a new "long-term vision" as a management policy that looks ahead to 2030 and beyond. Based on thisFinancial TargetshManagement Plan beginning in fiscal year 2021. While following the Medium-to-long-term Management Policy establishedwt

The Kumagai Gumi Co., Ltd. has developed a three-year strategic business plan that is described in the Medium-term

Casualty Frequency Rate

S

(Social)Number 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 Violations of Law andRegulations
Those that have been administratively punished or have been subject toadministrative measures are included

Numerical Targets
during thePlanning Period

Contributions to
SDGs

In 2030
Achieve minus 25%
when compared to FY2019-25%

2.0% or less
0.5 or less
30 hours or less0 cases
The Kumagai Gumi Group Corporate Report 2021

15

Strategies for sustainable growthInterview with the President
Strategies for sustainable growth

As a leader of the construction services thatsociety requires, we will earnestly address social
issues and continue taking on challenges.
Looking back on the previous Medium-Term Management Plan, please tell us about the results.

While we did not hit our initial targets,
I feel that our steps toward growth are gradually gaining in strength.
The Kumagai Gumi Group set a Medium-Term andLong-term Management Direction in 2017, underwhich we have moved ahead with the Medium-Term
Management Plan since fiscal 2018. Fiscal 2020
marked the final year of the Management Plan.
Looking back on the results of those three years,
sales were generally favorable but ordinary income
failed to achieve our initially expected profit margin,
which unfortunately meant that we did not reach ourtarget values.
The three pillars of our strategy under the MediumTerm Management Plan were "maintain and increase
contracted construction business," "create new
businesses," and "form strategic alliances with othercompanies." Contracted construction business performed
relatively well against a backdrop of robust construction

demand, and while it did not reach the target value, it
achieved a growth rate among the highest level in theindustry. Our productivity, the source of earning ability,
also steadily increased. Regarding the creation of new
businesses and strategic alliances with other companies,
we are have moved ahead with diverse projects, including
our collaboration with Sumitomo Forestry. These planslagged somewhat in Overseas Projects and other areas,
however. While we have sown seeds for the future, wewere not able to sufficiently nurture those.
As such, there are issues that have been left unsolved
for the next fiscal year, but I feel that we did achieve
results. The theme of the Medium-Term Management
Plan was "Strategies for Accelerating Growth" for thereborn Kumagai Gumi Group. Our steps toward thatgrowth are steadily increasing in power.

Summary of the Previous Plan (FY2018-FY2020)/ Consolidated Business Results/ ROE

Return on Equity was aroundthe target value of 12%.

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

28.8
ROE
Dividend Payout Ratio

13.7
10.2

Kumagai Gumi Co., Ltd.
President
Yasunori Sakurano(billionyen)Consolidated Sales
Consolidated Ordinary Income

26.6

2015

2016

2017

2018

31.2

11.5

25.7

2019

Cumulative

Cumulative

2020

33

28.4

2019

26

25.7

389.1

2018

24

26.6

Actual(FY)

TargetActualCumulative

Cumulative

460

450.2

420

436.2

400

Targets

83 billion yen 80.7 billion yen

28.4

2020

Previous Planning Period

16

Consolidated
Ordinary Income

1,280 billion yen 1,275.5 billion yen

450.2

436.2

389.1

We paid stable dividends,
aiming for a target value of 30%.

Consolidated Sales

35.0
(%)

/ Dividend Payout Ratio(FY)

The Kumagai Gumi Group Corporate Report 2021

17

Strategies for sustainable growth Interview with the President

How do you see the business environment changing in the future?

The COVID-19 pandemic that the world is wrestlingof DX (digital transformation) and transform how we dowith now is an event that talking about the uncertain

business.

era ahead, I feel. From here on out, it will be vital for

The achievement of a sustainable society, as

the management of the Kumagai Gumi Group thatsymbolized by the SDGs, is a surging movement in the

we anticipate such uncertain changes and create

world. In Japan, the intensification of natural disasters,

systems that adapt flexibly and promptly to risks andaging infrastructure, declining economic power due

opportunities.

to population decline, and other social issues areWith the pandemic, social values and people's modes

emerging. As a construction group, we have respondedof behaviors have changed greatly. The same is true

to a variety of social issues and have contributed to thewith ways of working. Our group is enacting telework

development of society. Upholding this stance, we will

and other measures, but we face the problem of having

take these social risks as opportunities for businessmany divisions in which such initiatives are difficult,expansion and will continue taking on challenges aimed

as at civil engineering and architectural sites. Fromat sustainable growth.

here on out, we will further accelerate our promotion

The Society We Seek

Strategies for sustainable growthI think that movements in the world will increase in speed and become more uncertain.
Management that can anticipate such changes and flexibly adapt to risks andopportunities is important.

Awareness of social issues, and the society we seek

A Sustainable society
A society in where
people can live comfortably
Greenhouse gas
emission reduction,
recovery, storage,
and utilization

Livelihoods withpeace of mind andfeelings of satisfaction
A society without
regional disparities
and disadvantages
due to infrastructure

Experimental cities
and pilot towns that
attract people fromall over the world

Effective utilizationof resources andself-sufficiency

A mechanisms for
swift recovery andrestoration fromnatural disasters

Small living spaces due touneven population distribution
and/or community collapse
Worsening financial situation ofnational and local governments
and aging infrastructure

A society where theeconomy continues to grow

Efficient urban
infrastructures using
digital technology

Global warming andacceleration ofclimate change

Frequent andintensifying natural
disasters

Imbalance in the
supply and demandof resources

Economy and/or
industries uniqueto each region

Declining
competitivenessof cities
Inefficient urban
infrastructure

Decreasing economic
power due topopulation decline

Social issues for the year 2030 and beyond

Under what sort of recognition did you formulate the new Medium-Term Management Plan?

We discussed what sort of society we are aiming for, set our a long-term vision,and formulated a management policy aimed at 2030 and beyond.
The new Medium-Term Management Plan that we

As I noted, even greater uncertainty is expected

formulated sets out a "long-term vision" as a premisein society. In such times, accurately predicting howof the three-year plan that starts in fiscal 2021. This

society will have changed a decade from now is difficult.

management policy looks ahead to 2030 and beyond,However, it's vital for the future of our group that weshowing how we will contribute through our coredraw up an image of our own future and discuss ourbusiness to the SDGs, globally shared goals aimed at

path for getting there.

achieving a sustainable society.

In formulating this Medium-Term Management Plan,
we performed repeated reviews through a working
group focused on young and mid-career employees
who will lead the next generation, and held thoroughdiscussions in management meetings.
What we reaffirmed through such discussions was
the importance of aspirations, including the integrity
and spirit of endeavor that Kumagai Gumi has carriedforward since its founding. We incorporated theseideas into our long-term vision, and expressed therole of the Kumagai Gumi Group with the words "Wetake on difficult projects in difficult places as a group of
construction technology professionals. We build social
infrastructure and provide diverse values in terms ofboth construction services."

18

What sort of business strategy do you plan to undertake in the new Medium-Term Management Plan?

While further bolster our core construction business, we will accelerate growth inperipheral domains and take on the challenge of pioneering new businesses.
In the new Medium-Term Management Plan, we will

Our second strategy is "Accelerate construction-

advance strategies over the course of three years from

related peripheral business". Within this domain, we planfiscal 2021, based on our long-term vision. There are

to position the four business areas of renewable energy,

three pillars of this business strategy.

real estate development, infrastructure management,

The first is "bolster overall construction business."

and technical product sales, and to accelerate growthThis is a core business that forms a foundation for theand create solid sources of revenue. In the renewablegroup's growth. One field that we will focus on withinenergy business, we plan to move ahead withdeepening of the construction business is large-scaleongoing businesses such as woody biomass power

infrastructure renewal, for which growing demand isgeneration, while also examining offshore wind power

expected in domestic Civil Engineering. In domestic

generation, an area attracting attention. In the real

Building Construction, we will ramp up our development

estate development business, we will work to developof the medium- to large-scale wooden construction

overseas projects to follow our projects in Jakarta,

market together with Sumitomo Forestry. In March

Indonesia. In businesses peripheral to construction, we

2021, we launched "with TREE," a medium- and large-

will actively partner with other companies, including ourscale wooden construction brand as a collaboration

collaboration with Sumitomo Forestry, to accelerate thebetween our two companies. This is a business that I

speed of business.

want to get on track. In Overseas Projects, we intend to

Our third strategy is "Develop new business domains".

strengthen our expansion in the Asian region, includingThis is another very important strategy for the group inin Taiwan, where orders are rising.

achieving further growth.

The Kumagai Gumi Group Corporate Report 2021

19

Strategies for sustainable growth Interview with the President

What are your reasons for setting new non-financial goals from an ESG perspective?

In the Medium-Term and Long-term Management Directionthat we established in 2017, we included strengtheningof management in terms of ESG perspectives, andformulated our ESG Initiative Direction in 2019. In the
new Medium-Term Management Plan that we launched,too, management from an ESG perspective can beconsidered the root. For this reason, we clarified our nonfinancial goals in each of the fields of E (environment), S(society), and G (governance).
From this fiscal year, we will also connect our businessto the SDGs and work to address risks and opportunities.
Strengthening the foundation that supports ourmanagement is also vital. Advancing digitalizationis one of the priority measures in the Medium-Term
Management Plan. In May 2021, we established a DX
Promotion Department to expand this area throughout
the company. Taking into consideration the hiring ofDX human resources and collaboration with othercompanies, we will pursue work style reform and will
streamline and automate our business processes.
In technological development, too, we will contributeto the formation of a sustainable society featuring
decarbonization and a recycling orientation. We will

accurately capture these business opportunities andbuild a research and development system that leads toincreased profits.
In human resource development, we continue topromote diversity, including active participation by
women. We have received recognition in this area.
For instance, we were selected in "the New Diversity
Management Selection 100 companies" by the Ministryof Economy, Trade and Industry in fiscal 2020.
A topic that is extremely important as a foundationof ESG/SDGs management is the enhancement ofgovernance, including risk management. In Board of
Directors meetings, we hold discussions concerning
major business projects with outside directors tothoroughly identify any risks. To strengthen our financial
risk management system, in April 2021 we separated
and expanded an examination group that was part of
the Finance Department, creating a new Examination
Department. We are also tackling the issue of reforming
the governance system of the Kumagai Gumi Group. We
extend compliance training to the employees of groupcompanies, collaborating closely with the managementof the companies.

Management Strategy: Strengthen the Management Foundation
Classification

20

Focused Initiatives

DigitalTransformation● Streamline and automate business processes through the modernized coremainframe and other systems for competitive differentiation● Embrace and promote digital transformation (DX) and innovation toward business
transformation● Enhance IT literacy of employees and secure DX human resources throughalliances with other companies

Technological
Development● Implement research and development that contributes to recycling-based,
decarbonized society society● Promote technological research and development in response to the increasingly
digital society● Propel technological development that contributes to the advancement of various
functions in construction

Human
Resource
Development● Improve the work environment and workplace systems that enable diverse
human resources to maximize their abilities● Promote new ways of workstyle in response to the new normal● Establish a new personnel system and training programs to secure high valueadded human resources

Governance● Long-term and sustainable enhancement of corporate value through the promotionof ESG management● Create synergistic outcomes by deepening Group's alliances and collaborations● Maintain stable management through thorough risk management

Strategies for sustainable growth

The pursuit of ESG could be called the root of the Kumagai Gumi Group's management.
We set new goals to make this management policy clearer.

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

Our ROE and payout ratio remain steady.
We will continue to make aggressive growth investments while closely examining
capital cost
Under the Medium-Term Management Plan, we plan 40
billion yen in growth investments over the three years of
the plan, with the aim of 33 billion yen in consolidated
ordinary profit three years from now in fiscal 2023. We
will carefully consider projects with a focus on businesses
peripheral to construction that we consider growth areas,
and will make aggressive investments with appropriate
distributions taken into account.
In these growth investments, we place an emphasizeon the cost of capital. For ROE, one of our numericaltargets, we are aiming for 12%, the same as in theprevious Medium-Term Management Plan. In fiscal
2020, too, our ROE has reached a level close to thistarget, achieving capital efficiency that greatly exceeds
our expected cost of capital. We will continue striving toachieve a stable payout ratio of 30%.
Looking ahead, we will actively hold institutional
investor meetings in Japan as well as overseas. We

also hope to increase opportunities for dialogs with ourvaried shareholders. I will continue working to optimize
the balance between growth investments and returns toshareholders. My intent is to achieve solid growth while
listening to opinions of our stakeholders.

What do you think will be important for the Kumagai Gumi Group in achieving sustainable growth?

A spirit of endeavor toward the future is nurtured in an environment in which diverse
human resources can play active roles.
We will work as one with our employees to tackle the challenge of our further growth.
Three years have passed since I became the Presidentof Kumagai Gumi. Although we've fallen under thisunexpected pandemic situation, I've tried to head out
to sites and branch offices as much as possible to talkdirectly with employees. I've also actively engaged indialogs with our customers and other stakeholders.
Interacting with employees in this way, there's
something that I've recently come to feel. Our efforts
to promote diversity are yielding results, and a culture
in which varied and diverse human resources can play
active roles is taking root.
In order to realize the "Proactive Measures forsustainable growth" set forth in our new Medium-Term
Management Plan, it's important that we create anorganization that lets diverse people fully exert theirabilities and acknowledge each other in free discussions,and that fosters the new ideas emerging from this. I wantto take the lead in further advancing the reforms that are
taking place in the company.
The spirit of endeavor that has been passed down
since our founding is important to Kumagai Gumi. Ourgroup will work as one to tackle the new Medium-Term
Management Plan and will continue taking on challenges
aimed at new growth.

The Kumagai Gumi Group Corporate Report 2021

21

Strategies for sustainable growth

ESG Initiative Direction

Kumagai Gumi's ESG/SDGs Strategy

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

We indicated the relationships between business activities

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

Gumi contributes to solving social issues through its

based on ESG and the 169 targets of the SDGs (numbersin the table), and visualized the fields in which Kumagai
Strategies for sustainable growth

To realize long-term growth and to contribute to the formation of a sustainable society, the Kumagai Gumi Group has
adopted the Medium-Term and Long-term Management Direction announced in November 2017, and has expressed that
we will strengthen management from an ESG perspective.
In April 2019, we formulated the ESG Initiative Direction, identified key issues in our group's long-term business development,
and clarified our targets concerning related SDGs.
Based on the long-term vision presented in the Medium-Term Management Plan (FY2021-FY2023) formulated in May
2021, we organized the relationships between our business activities and the SDGs, and will engage in promotion of theSDGs in accordance with our ESG initiatives. As a group, we will contribute to solving social issues.

ESG/SDGs Matrix*3

business, in the ESG/SDGs Matrix.
The ESG/SDGs Matrix is used for innovation ideas andas a list for long-term risk management to achieve further

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

problem solving. It also serves as a tool for dialog withstakeholders from the approach of ESG and the SDGs.

ESG/SDGs Matrix
ESG Initiative Direction
Perspectives(Environment)E

Key issues(Materiality)

Formation ofenvironmentallyconsideratebusiness*1 Initiatives
aimed atcarbonneutrality(Society)

Achievementof sustainablecommunities(Governance)G

Enhancingof corporate
governance

Proactive
communication
withstakeholders
and others

FY2020

Promotion of CO2 emissions reduction activities

CO2 emissions (Scope 1+2) reduction rate(compared with FY2019)-25% (FY2029)-9.1%

Achievement of zero emissions

Promotion of mixed waste discharge reduction
activities

Mixed waste discharge rate (total intensity)

2.0% or less

1.2%

Initiatives with consideration of
biodiversity

Environmental conservation activities

Serious environmental accidents during
construction

0 cases

0 cases

Initiatives for woodenarchitecture projects

Promotion of medium- to large-scale wooden
structure initiative

Number of orders for wooden architecture andstructures

2 or more projects

1 project

Initiatives in the forest
conservation businessInitiatives for forest conservation in collaboration
with other companies

Number of forest conservation projects

6 or more projects

6 projects(Project-leading) Renewable energy business

Number of operation projects in the renewableenergy business (domestic)

5 projects (FY2023)

1 project

Initiatives for environmentally consideratearchitecture (ZEB, etc.)

Number of environmental accreditation projects

7 projects

5 projects

Initiatives in the renewable energy
business
Development of environmentallyconsiderate technologies

Promotion of DX

Promotion of action plan for active participation
by women

Support for acquiring architect, construction
management engineer, and other national
qualifications

Renovation of core systems

Indicators

Ratio of women in new graduate hires

25% or more

24.4%

Rate of acquisition of First-Class Engineering
Works Execution Managing Engineer qualifications

88%

83%

Rate of acquisition of First-Class Architect
qualifications (Design)

50%

43%

Rate of acquisition of First-Class Building
Operation and Management Engineer
qualifications (Building)

90%

82%

Rate of progress of system development

SDGs*2

7.2
7.b

1.5

9.4

9.4

6.6

6.3
6.6
4.4
4.7

5.1
5.5
5.b

4.4
4.7

5.b

7.2

9.4
9.5

11.3

12.4
12.5

74.5%

8.5

30 hours or less29.2 hours

3.4

8.2
8.5

0.5

0.32

3.3
3.4
3.9

8.5
8.8

Infrastructure renewal business

Number of expressway renewal construction projects

13 projects

10 projects

Initiatives for urban redevelopment

Number of initiatives

3 projects

2 projects

Social contribution activities

Number of projects/total participants in social
contribution activities

Increase in number ofprojects/participants

87 projects/1,307
participants

Response to natural disasters(resiliency)

Disaster prevention/mitigation, national resilience

Automated operation through AI

1 project(New initiative)

High-seismic-resistance structural system/
design and diagnostic technology for early postearthquake recovery

Number of technology development initiatives(cumulative total, FY2021-FY2025)

6 projects

4 projects

Number of environmental technology patents
held (cumulative total, FY2021-FY2025)

10 projects

3 projects

R&D expenses as a percentage of sales

0.80% (FY2025)

0.72%

Improvement ofeffectiveness

Securing ofeffectiveness0 cases

1.5

2.4

17.17

17.17
17.7
17.16

15.1

17.17

9.5

70% or more

Contribution to local
communities

15.1
15.2
15.4
15.1
15.2
15.4
15.1
15.2
15.4

10.2
10.3

8.5

Rate of acquisition of leave by men associatedwith childbirthCasualty frequency rate

13.1

12.2
12.7

8.2

Maintenance and improvement of safety
management standards

12.2
12.7
11.6

5.1
5.5
5.b

Promotion of worker health andprevention of labor accidents

13.1

9.1
9.4

5.b

Number of overtime work hours (compared with
April 2020)

14.1

12.7

7.2
7.b

4.4
4.7

11.3

9.4

7.4% increase

Promotion of work style reform

12.4
12.5

14.1

10% increase

Achievement of work-life balance

13.1
13.3

6.3
6.6

100% (FY2023)

Fostering of an organizational climate forunderstanding of diversity

12.2
11.6

Number of female managers

Promotion of diversity

6.6

8.2

1.5

9.5

12.7
10.2
10.3

9.1
9.4
9.5

10.2

16.7

11.2
11.3
11.5
11.7
11.a

9.1

11.5

9.4
9.5

11.2
11.a

17.16
17.17

12.8

13.1

15.2

Development of technologies
that lead to resolution of social
issuesR&D that contributes to a decarbonization anda recycling oriented society

Improvement of the effectivenessof the Board of Directors

Continued evaluation and improvement of theeffectiveness of the Board of Directors

Evaluation level by outside experts

Enforcement of compliance

Construction of an Antimonopoly Act compliancesystem that includes group companies
Enforcement of compliance

Number of case of serious legal violations

0 casesStrengthening of risk
management

Initiatives for Business Continuity Planning(BCP)

Safety confirmation system response rate

100%

Active dialogs with investors

Enhancement of dialogs with institutional
investors

Rate of increase in number of participants infinancial briefings and other opportunities for dialog

10.0%

-2.4%

12.6

16.7

Improvement of CS(Improvement of stakeholder
satisfaction)

Improvement of customer satisfaction
Strengthening of information communication
capabilities

Primary response to complaints within 24 hours

100%

100%

12.6
12.8

16.5
16.7

Promotion of CSR procurement

Compliance with Procurement Policy andProcurement Policy Guidelines

Zero irregular transactions

0 cases

0 cases

12.7

16.5
16.7

*1 The key issue "Formation of environmentally considerate business" refers to a strengthening of initiatives for carbon neutrality.
*2 Of the relationships between Kumagai Gumi's business and the 169 targets of the SDGs, the primarily relevant ones are noted.
*3 The content of the ESG/SDGs Matrix covers Kumagai Gumi only.

22

FY2021

Addressing climate change risks

Succession of technology

S

Performance

Specific issues

Securing and developing humanresources

Creation of
rewarding
workplaces
for allTargets

Business initiatives andspecific actions

1.5

6.3

7.2
7.b

5.5

10.3
8.5
8.7
8.8

12.2
12.4
12.5

13.1
13.3

17.17
16.5
16.7

12.6

16.5
16.7

10.2

98.1%
(in December
2020)

13.3

8.5
8.7

17.16
17.17

Supervision: Hidemitsu Sasaya, Professor, Basic Education Organization, Chiba University of Commerce; CSR/SDGs consultant

The Kumagai Gumi Group Corporate Report 2021

23

Strategies for sustainable growth

Sustainability Dialog

CSR/SDGs consultant
Hidemitsu Sasaya, Professor, Basic Education Organization,
Chiba University of Commerce

Fusing the perspectives of the SDGs with
our management, we will contribute to theachievement of a sustainable society.
We invited Hidemitsu Sasaya, a professor at Chiba University of Commerce and a CSR/SDGs consultant. President Yasunori
Sakurano and Mr. Sasaya discussed Kumagai Gumi's business and management from the perspective of the SDGs.

Considering the society we should seek, from a sustainable perspective
Sakurano
The Kumagai Gumi Group began its new MediumTerm Management Plan in 2021 and formulated a"long-term vision." This envisions the society weshould strive for from 2030 onward, and our pathfor contributing to that society.
We made the decision to try envisioning society
from 2030 onward, in our own way.
SasayaSo, the Kumagai Gumi Group went back to thestarting point to consider the society it should aim
for. I think that's admirable. As this is an era inwhich the future is hard to see, you now have tolift your gaze higher as transformation progresses.
Sakurano
For our long-term vision, we put together a project
team focused on mid-career and young people, andconducted discussions. We adopted a backcasting
method by which we envision an ideal future, thenidentify what we should do to achieve that.

SasayaThat's also an apt way to proceed. What are thesocial issues of the future? How should you utilize
the legacy that Kumagai Gumi has created to solvethese issues? Does society need innovation? It'svery important to identify these things in terms ofboth opportunities and risks.
Sakurano
Doing that lets us all rethink the significance of theKumagai Gumi Group's support for society.
SasayaSince the company's founding, Kumagai Gumi has
no doubt engaged in business that helps solve
social issues. If you compare your many projects
so far with the 17 goals of the SDGs, many of yourprojects should naturally address those goals.
Listening to you, I feel that the Kumagai Gumi
Group is a corporate entity that holds extremely
high potential with respect to the SDGs.

Sakurano
Many of the fields of focus in the Medium-Term
Management Plan have a deep connection to
ESG and the SDGs. One of these is the renewalof social infrastructure in Civil Engineering. In
Building Construction, the medium- to large-scale
wooden construction that we are undertaking with
Sumitomo Forestry will become a major pillar. In
Overseas Projects, we plan to focus on improving
urban infrastructure in Asian countries.
SasayaThe three fields that you mention are the corebusinesses of the Kumagai Gumi. I think it's a very
fortunate thing that engaging in these businesses
connects directly to the SDGs.
Kumagai Gumi comprehensively organized therelationships between ESG and SDGs in a matrix
format. This is effective in systematically making
Kumagai Gumi's SDGs management visible toboth ESG investors and stakeholders at large.
It also lets employees really sense the themes

Related information P22-23
Kumagai Gumi's ESG/SDGs strategy

they're tackling,
and in a universal
language. SDGs
management canproceed throughthis.
SasayaSupport for
carbon neutrality
is a necessity.
Where does
Kumagai Gumi
stand on this?
Sakurano
We've set a target of zero greenhouse gas
emissions by 2050, have joined RE100 and
JCLP, and have acquired SBT certification.
These actions express our strong commitment toachieving a decarbonized society, both inside andoutside the company.

Strategies for sustainable growth

Yasunori Sakurano, President

SDGs management through organization of the ESG/SDGs Matrix

Taking personal responsibility for the SDGs
Sakurano
To help achieve the society that we envisioned
in our long-term vision, we have to create morediverse value
than ever before.
Toward that
end, I believethat partneringwith companies
in even morediverse fields
will become
increasingly
important.
SasayaCreating a mindset that leads to concrete actionis also important. I think this will allow addressing
the SDGs even more smoothly.
Sakurano
On that point, I think that we're starting to seechanges in employees' mindsets in Kumagai

Gumi. We operate an original social contribution
activity platform that we call "the Kumagai Gumi
Smile Project." Employees have recently begun
voluntarily engaging in social contribution activities
through this platform. The content of these
activities have gone beyond the environment tocover fields including education, welfare and so on.
The influence of the project has raised our feeling.
SasayaThat's good to hear. Working to address social
issues will make a broader network with allkind of people, including local communities,
which leads to greater learning by employees
themselves. If I were to make one suggestion, it
would be to advance the mechanism a bit further
so individuals can see which of the SDGs theiractivities equate to. That lets them feel somepersonal responsibility for the SDGs.
Sakurano
I appreciate your valuable comments today. We willcontinue undertaking initiatives for sustainability.

Online https://www.kumagaigumi.co.jp/ir/management/strategy/index.html(Japanese only)24

The Kumagai Gumi Group Corporate Report 2021

25

Strategies for sustainable growth Business strategies

The COVID-19 pandemic has created a need to reassessconventional wisdom.
Now is the time for distinguishing between what things call forreform and what things are unchanging. We aim to improve
efficiency through DX promotion and to carry forward theWorksite Excellence that we have cultivated.

EconomyAwareness of opportunities
Opportunities

Environment

Koji Okaichi● Response to increase in orders by
improving work efficiency through DX● Accumulation of ICT, AI-related
technologies, and other nextgeneration technologies● Expansion of Cotter floor slab projects● High prices and shortages of materials/
equipment following the pandemic● Economic downturn due to thepandemic● Contraction of budgets due to fiscal
soundness pressures● Acceleration of digitalization due to thepandemic● Promotion of digitalization of corebusiness● Increased efficiency of internal
information sharing through creation of
construction achievement database● Improvement of productivity throughutilization of ICT● Significant shortages of humanresources, and advancing age of skilledconstruction workers● Expansion of orders related torenewable energy, forest conservation,
smart cities, and waste treatment● Disaster recovery through unmanned
construction technologies and disasterreadiness support● Comprehensive technical capabilities
in the civil engineering field● Increase in comprehensive contracts● Regulations for ecosystem conservation● Recycling-related regulations● Intensifying natural disasters

Summary of the previous Medium-Term Management Plan and review of FY2020

Medium-Term Management Plan

The stated fields of focus in the previous MediumTerm Management Plan were (1) major infrastructure
renewal, (2) renewable energy, (3) disaster prevention
and mitigation measures, and (4) utilization of civilengineering projects for forest conservation. We wereable to achieve results in large-scale highway renewal
construction, hydroelectric repowering, onshore wind
power, Mega Solar power, and other areas. Drawing
on these achievements, we aim to further evolve ourBusinessstrategy

management capabilities and expand our scope ofinclusion.
Despite changes in timing of additional renewal
contracts due to the pandemic, orders in fiscal 2020
increased from the previous fiscal year to 100.1 billion
yen. Sales were 121.4 billion yen, exceeding 120 billion
yen as in the previous fiscal year and remaining at ahigh level.

Bolster Overall Construction Business

Area of focus

Policy Reinforcement● Major infrastructure renewal● Develop management skills tocomprehensively handle largescale projects with multiple
types of construction● Renewable energy● Disaster prevention andDomestic Civil Engineering sales

Domestic Civil Engineering gross profit margin

150 billion yen

15 %

100

91.4

111.6

122.2

11.9

121.4
10

50

5

0

0
FY2016FY2017FY2018FY2019FY2020FY20169.9

FY201712.5

FY201810.9

FY201911.3

FY2020

mitigation, and national
land strengthening● Unrecyclable waste
disposal facilities● Strengthen engineering
capabilities to provide one-stop
services for design, procurement,
and construction● Improve productivity throughadvanced use of big dataobtained from construction projects

26

Financial Targets
Domestic Civil
Engineering Sales

121.4

billion yen

FY2020125.0
billion yen

FY2023

Domestic Civil Engineering
Ordinary Income

8.5

7.7

billion yen

FY2020

FY2023billion yen

Initiatives in FY2021
In the Kumagai Gumi Civil Engineering business, wedeclared fiscal 2019 as DX Year 1. In fiscal 2021, thethird year, we will digitalize our existing operations toimprove efficiency and will undertake development of
next-generation technologies.
In the field of major infrastructure renewal, we will
establish a business model for securing profits. To
meet the increasing scale of construction work and thediversification of the content of orders in this field, we
will strengthen partnerships with other companies. We

Class B river Kasshi River course Kasshi River floodgate civilengineering project

Awareness of risks● Increase in orders due to expandedbudget for disaster readiness/
mitigation and national resilience

Society

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

106.8

Strengths

Strategies for sustainable growth

Civil Engineering

Business
environment

have built up a track record of construction using Cotter
floor slabs, and will further pursue size reduction andsimplification to enhance our advantage in floor slab
replacement construction.
We will address the renewable energy field with onestop support for design, procurement, and construction.
In this field, we will seek to increase orders andaccumulate know-how, as well as to strengthen ourengineering and risk management capabilities at theinitial stage of construction.

Hokuriku Shinkansen, Fukui Takayanagi Viaduct, etc.

The Kumagai Gumi Group Corporate Report 2021

27

Strategies for sustainable growth Business strategies

Opportunities

Strengths

Awareness of risks● Expansion of e-commerce market
scale● Increase in infrastructure renewal
demand● Reduction of construction costs● Track record of construction oflogistics facilities and waste treatment
facilities● Decline in willingness for private-sector
construction investment● Slowing of inbound tourism demandSociety● Increase in investment intelecommunications infrastructure● Expansion of orders for medical andwelfare facilities● Promotion of diversity● Creation of a condominium renovation
business● Improvement of productivity throughutilization of ICT● Maintenance of production systems
and occurrence of construction period
delays under the COVID-19 pandemic● Shortage of skilled workers due todeclining working population● Wooden constructure technology

Environment● Social demands aimed at adecarbonized society● Demand for disaster-resistant BCPcompliant buildings● Risk of soil pollution● Interruption of construction due toincrease in natural disasters● Incurring of disaster recovery costs● Further strengthening of environmental
laws and regulations

EconomyAmid an ever-changing economy and society, we will always take on
new business opportunities and pursue growth in Building Construction.
Taking "construction with integrity that considers safety, quality, and theenvironment" to be the starting point of our business, we will contribute to
our customers and to society through Building Construction.

Awareness of opportunities

Director and Senior Managing Executive Officer
General Manager of the Building Management Division

Strategies for sustainable growth

Building
Construction

Business
environment

Shin Ueda

Summary of the previous Medium-Term Management Plan and review of FY2020

Medium-Term Management PlanThrough "maintain and increase contracted construction
business," one of the strategies of the previous
Medium-Term Management Plan, we were able tocontinue increasing sales during the period of theplan, with fiscal 2020 sales reaching the highest level
since fiscal 2003. This was due to collaboration among
our sales, design, and construction departments, aswell as the productivity improvement measures that

Businessstrategy

we have enacted. Orders faced harsh conditions
due to the COVID-19 pandemic and factors including
postponements of planned construction projects.
In partnerships with other companies, we engaged
in collaboration with Sumitomo Forestry to begin workon a medium-scale office that is adopting wood for thedesign and construction of its spaces.

Bolster Overall Construction Business

Area of focus● Production, commerce,
and logistics● Medical and welfare services● Medium- and large-scale

Domestic Building Construction sales

Domestic Building Construction gross profit margin

300 billion yen

15 %

200

181.0

186.8

195.0

229.5

11.9

236.9
10

wooden construction● Urban redevelopment

10.6

10.9

9.5

10.0

● Environmentally-friendly
renewal field

Policy Reinforcement● Improve the ability to respond

236.9

240.0

FY2020

FY2023billion yen

billion yen

to customers by integrating
sales, design, and construction● Bolster the ability to quickly
identify and adapt to changes in
the construction market● Strengthen of front-loading

Domestic Building Construction
Ordinary Income

15.2

16.5

billion yen

billion yen

FY2020

FY2023utilizing ICT/BIM

5

100

0

0
FY2016FY2017FY2018FY2019FY2020FY2016FY2017FY2018FY2019FY2020Initiatives in FY2021
With the delivery of high-level construction services tocustomers as our foundation, we will work to increase
orders and profits by providing even higher value-added
solutions.
One of these is "with TREE," a new brand of mediumand large-scale wooden constructure launched with
Sumitomo Forestry in March
2021. Through this, we
provide peace of mind inpeople's lives and businesses
through the use of wood in
various applications. As

Fukui Bank headquarter

28

Financial Targets
Domestic Building
Construction sales

we work to achieve carbon neutrality, our stakeholders'interest in environmental technology is growing. We willfurther strengthen our solutions capabilities aimed atachieving low-carbon, recycling-oriented society.
In urban redevelopment projects, we will play theroles of business partner, designated business agent,and so on as we contribute to urban revitalization bybringing projects to fruition. In terms of production, we
will promote utilization of BIM and other front-loading
through construction DX, and will continue to advancework style reforms while working to improve productivity,
safety, and quality.

Dream Bond•Kawasaki NIPPON GAS CO., LTD.

The Kumagai Gumi Group Corporate Report 2021

29

Strategies for sustainable growth Business strategies

Overseas Projects
Awareness of opportunities

Business
environment

Awareness of risks

Economy● Urban infrastructure development in the Asian region,leveraging the comprehensive construction technologiesof the Kumagai Gumi Group● Support for customers' overseas expansion (Japan/
Taiwan)● Uncertain circumstances in countries● Reputation risk with regard to business activities

Society● Support by the government of Japan for infrastructuredevelopment● Collaboration with Taiwan Kumagai Co., Ltd./Taiwan
Kumagai Construction Co., Ltd. and domestic andoverseas partners● Network with existing bases and Sumitomo Forestry● Decrease in local checks and direct negotiations due to
COVID-19 pandemic● Shortage of human capital● Initiatives in the renewable energy business incollaboration with Vietnamese partners● Rise in companies' interest in renewable energy
businesses● Electricity demand in Vietnam, etc.

Environment

EconomySociety
Environment

Summary of the previous Medium-Term Management Plan and review of FY2020
During the period of the previous Medium-Term
Management Plan, we developed construction
business in Taiwan through Taiwan Kumagai Co.,
Ltd., advanced development projects with Sumitomo
Forestry in Thailand and Indonesia, and strengthened
our infrastructure maintenance and operation work in
Hong Kong.

Construction-related
Peripheral Businesses

In addition to the construction contracting business, businesses
peripheral to construction, which we undertake as a business entity,
greatly contribute to the sustainable growth of the Kumagai Gumi
Group.
We will accelerate business through collaboration with Sumitomo
Forestry and other companies to secure solid sources of revenue.

Awareness of opportunities
Opportunities

Strategies for sustainable growthBusiness
environment

For each of our construction, development, andinfrastructure maintenance and operation businesses,
we will collaborate with partners such as Sumitomo
Forestry and our Taiwanese subsidiary Taiwan
Kumagai Co., Ltd., to engage in business aimed atsustainable growth, primarily in the Asian region.

Awareness of risks

Strengths● Revitalization of the real estatedevelopment business● Purchase of real estate for rent
● Expansion of PPP/PFI/concession
business and infrastructure
management business● Strengthening of the real estatedevelopment group● Track record in PPP/PFI/infrastructure
management business in Japan andoverseas● Economic upheaval due to the
COVID-19 pandemic● Changes in real estate investment
exit strategies● Slowing of inbound tourism
demand● Carbon Neutral Green Growth
Strategy● Initiatives in the renewable energy andrelated businesses● Assurance of business continuity
and profitability● Fuel procurement● Procurement of renewable energyderived power sources, expansionof PPA● Initiatives in the renewable energy andrelated businesses; diversification ofinternally procured electricity● Cost reductions

Summary of the previous Medium-Term Management Plan and review of FY2020

In fiscal 2020, stagnation occurred in activities andthe progress of project due to the COVID-19 pandemic
and the coup d'etat in Myanmar. Amid this, we carriedout initiatives to create new business opportunities,
including participation in the renewable energy business
in Vietnam and the launch of a real estate businesscompany in Taiwan.

In the renewable energy business, we launched a solar
power generation business in March 2020. In July of
the same year, Iidate Bio Partners Company Limited,in which Kumagai Gumi is an investor, was selected
as the implementing body of a woody biomass power
generation project in the village of Iidate in Fukushima
Prefecture. We have since moved forward with the
project.

In the real estate development business, we engagedin active information collection from the market andfrom business partners to provide excellent real estate
information linked to projects.
In the field of strategic partnerships with othercompanies, we are undertaking collaboration in thebiomass fuel development and sales business, withplans to focus on commercialization in the future.

Medium-Term Management Plan
Businessstrategy

Bolster Overall Construction Business

Area of focus

Policy Reinforcement● Urban infrastructuredevelopment in Asia

● Reinforce domestic and overseas
sales network● Support for Japanesecompanies entering the
Asian market● Build closer relationships andbusiness alliances with domestic
and overseas partners● Expand the Group's market
share in Taiwan● Strengthen of technical andsolution sales capabilities

Financial Targets
Sales

30.0

17.2

billion yen

FY2020

FY2023billion yen

Ordinary Income

0.1

billion yen
FY20200.5

billion yen
FY2023

Initiatives in FY2021
In the construction business, we will focus on urban
infrastructure development in the Asian region and support
for Japanese companies expanding overseas, and will work
to develop construction bases overseas. In businesses
peripheral to construction, we plan to make a full-scale
entry into the renewable energy business in Vietnam and to30

Medium-Term Management Plan
Businessstrategy
Renewable Energy
Business
Real Estate
Development
InfrastructureManagement
Technological
Product Sales

Accelerate Construction-related Peripheral Businesses
Area of focus

Policy Reinforcement● Woody biomass power generation business,
including a business alliance with Sumitomo Forestry● Wind and solar power generation businesses (including overseas projects)● Improve professional skills andaccumulation of expertise in suchareas as project structuring andbusiness operations● Accelerate joint research anddevelopment within the Group
companies as well as the mobilityof management resources, including
the use of highly-skilled individuals● Strengthen partnerships withcompanies and other organizations
beyond the scope of the Kumagai
Gumi Group● Urban renewal/urban development projects● Real estate development projects, including business alliancewith Sumitomo Forestry as well as overseas projects● Toll road operations● PPP (public-private partnerships) and concessions including
overseas projects● Biomass fuel development and sales● Infrastructure renewal method development and sales● Nursing care/welfare equipment development and sales● Construction equipment rental services(e.g. steel frame erection jigs)

Financial Targets
Ordinary Income

2.0

0.3

billion yen

billion yen
FY2020

FY2023

Initiatives in FY2021
engage more aggressively in PPP/concessions businesses.
We will further activate human resources andtechnological exchanges with Taiwan Kumagai, strengthen
our construction and real estate development businesses
in Taiwan, and utilize synergies with Taiwan Kumagai inbusiness development in Southeast Asia as well.

To achieve carbon neutrality and contribute to a sustainable
society, we will contribute to the achievement of adecarbonized society through the realization of renewableenergy focused on biomass power generation and wind
power generation, and the biomass fuel development andsales business. We will continue our initiatives in the PFI

business and strengthen our initiatives in the concession
business and infrastructure management business tocapture long-term profit opportunities.
We will also aggressively engage in the real estatedevelopment business and peripheral related businesses,
including in-house development.

The Kumagai Gumi Group Corporate Report 2021

31

Value creation initiatives

On-site work

Cotter joint

Value creation initiatives

Joints embedded in floor slabs

Overview of construction
Name ofconstruction work
Orderer
Construction period
Details of
construction
Contractor

SpecialFeature1

Bringing innovation to expressway renewal construction
The Challenge of the Cotter Floor Slab Method for Bridges
Expressways are key infrastructure that serve as the arteries of a society.
The aging of expressways has become an issue in recent years, with renewal work planned in many
locations. Through advanced technology and outstanding Worksite Excellence, Kumagai Gumi
contributes to solving such social issues.

Addressing the social issue of aging expressways
The Tohoku Expressway plays a vital role as the maintransportation artery running through eastern Japan.
Large-scale renewal projects are planned to address
deterioration of the expressway. The renewal work being
carried out between Hachimantai in Iwate Prefectureand Hirakawa in Aomori Prefecture, a stretch under
the jurisdiction of the Towada Management Office of
the Tohoku Branch Office of East Nippon Expressway
Company Limited, is part of such a project. Kumagai
Gumi is in charge of replacement work on five bridges
in this project.

"This construction work will replace floor slabs laid on
the bridge girders with highly durable precast PC floorslabs. In this project, Kumagai Gumi is undertaking fullscale adoption of revolutionary new technology,"
says On-site Manager Takahiro Machiya. The
proprietary new technology that he speaks of is the
Cotter Floor slab method for bridges.

32This method roughly doubles the
speed of construction and halvesrequired construction staff comparedwith conventional methods, achieving
a major increase in efficiency.
Traditional floor slabs have rebar
joints at both ends; at the site, concretemust be cast on these portions, a task On-site Manager
requiring considerable labor and skill. Work place manager
On the other hand, Cotter floor Takahiro Machiya
slabs use cotter joints developed
particularly for this connecting portion. This enables
joining with a joint width of only about 2 cm, making onsite concrete casting unnecessary.
Precasting 99% of the floor slabs also improves thequality of the concrete. Its outstanding performance,
including the capability for partial replacement, has won
the Innovative Technique Award of the Japan Society of
Civil Engineers.

Tohoku Expressway Towada Jurisdiction
Expressway Renewal Work
East Nippon Expressway Company
Limited, Tohoku Branch
January 8, 2019 to March 22, 2022
(39 months)
Floor slab replacement: 5 bridges;
Tunnel repair: 21 tunnels
Kumagai Gumi/SHO-BOND Corporation
joint venture* Shared construction-type joint venture
Kumagai Gumi: Floor slab replacement;
SHO-BOND Corporation: Tunnel repair

Connecting the joints

Installation of a massive floor slab in
about 15 minutes
From the construction of Tengu-bashi Bridge (heading
toward Tokyo), the fourth bridge, in June 2021, we havecompletely introduced the Cotter floor slab method. The
cotter joints, too, have evolved into a more compact andlight form. Work was performed at night, due in part tocoordination with other processes.
At the brightly lit work site, a huge cotter floor slab issuspended from a crane and is installed on the bridge
girders under the direction of young engineers. The
position and the height are adjusted to a high precisionof scant millimeters. When installation is complete, theworkers insert wedge pieces into the joints and fix themwith bolts.
On-site Manager Machiya describes the work.

"We've become quite proficient in the work as we've
made improvements on site. The time required to install
one Cotter floor slab is about 15 minutes. At Tengubashi Bridge, we install five slabs at once, so the work
will be completed in about 1 hour and 20 minutes."

Contributing to society and theenvironment with outstanding
Technology Strength and Worksite
Excellence
Machiya adds that there are many other merits of
the Cotter Floor slab method that can be appreciatedonly at the worksite. The greatest of these is safety
management.
In conventional construction methods, concrete is
cast on-site. This involves many tasks that require skill,such as creating concrete placing form and inserting
reinforcing steels. This created considerable tensions
over safety management. With cotter floor slabs,
however, this work is no longer needed. Moreover, theelimination of councrete placing form has enabled amajor reduction of waste, contributing significantly toenvironmental aspects.
The total length of Japan's expressways is about
9,071 km (as of March 2021), with renewal projects
planned for many locations. Kumagai Gumi is also
undertaking development of new cotter floor slabs forurban expressways to meet such societal needs.

The Kumagai Gumi Group Corporate Report 2021

33

Value creation initiatives

Diverse Human Resources
Fundamental concepts of human resources

About recruitment
Kumagai Gumi works to resolve the advancing age of
employees and imbalances among generations, andengages in recruitment activities with an awareness ofdiversity.
Based on information including future businessperformance trends, we formulate recruitment plansthat take into consideration employees' total number,job types, age distribution, and other factors 5 and 10
years ahead, and engage in hiring of new graduatesand mid-career employees.
In fiscal 2019, we set up a job return system. We are
creating an environment by which retired employees
who meet certain conditions can join the company
again, to make use of experience gained at othercompanies.

Workplaces where women can play active roles
From December 2015, we increased our hiring of
women and formulated and enacted an action plan
to improve the workplace environment, in line with
the Act on Promotion of Women's Participation andAdvancement in the Workplace.
Status of employment of persons with disabilities
As a new initiative for the employment of persons withdisabilities, we offered workplace training for students
from special support education schools. We included
site tours in the training so the students could gain
familiarity with the construction industry. Accepting
trainees in multiple departments also helped change
the mindsets of employees.
Achievements of the Action Plan for Promotion ofParticipation by Women Kumagai Gumi only
(Period of formulation: January 2021 to December 2022)

Number of employees and average age/years of service Kumagai Gumi alone

Number of employees(persons)

FY2016FY2017FY2018FY2019FY2020

2,305

2,382

2,497

2,578

2,620

Average age(years)

45.2

45.2

44.9

44.5

44.4

Average years ofservice(years)

20.7

20.5

19.9

19.5

19.5

Action plan

Performance atthe end of FY2020

Increase in the percentage of womenamong new graduate hires to 25% or more

24.4%

Increase in the number of female
managers by 10% from the current level(54 as of April 2020)

58

70% or higher rate of acquisition ofchildbirth-related leave by men

As a diversity company
Kumagai Gumi recognizes the diversity of its employees
and promotes diversity by creating environments that
let employees exert their capabilities to the maximum,
which leads to increased corporate value and growth ofthe company.
Promotion structure
The Diversity Promotion Group and the Work Style
Reform Promotion Office of the Human Resources andGeneral Affairs Department were integrated in 2021
to establish the Diversity Promotion Department. Thisaction is aimed at deepening diversity and strengthening
our competitiveness.
We established a Diversity Promotion Committee,
composed of General Managers of divisions and chaired

34

Status of reemployment after retirement
We operate employment-related systems under thepremise of employment until the statutory retirement ageof 65, and contribute to the expansion of reemploymentof retirees who wish to continue working. For Kumagai
Gumi, the technical and sales capabilities of retirees
constitute valuable assets that we hope to pass down
to the next generation without interruption.
To energize employees and organizations alike, weare enhancing employee benefits to create comfortable
work environments. As of April 2021, 353 retirees areworking in the company.

Employment rate of persons with disabilities
Kumagai Gumi only

Statutory employment rate: 2.30%

2.50 %(from March 1, 2021)

2.22

2.00

2.00

74.3%

Value creation initiatives

We recognize that there are concerns over a declining
workforce in the construction industry, and that securing
human resources will become more difficult. Under
these circumstances, Kumagai Gumi is actively
undertaking the preparation of environments andsystems that allow diverse human resources to performtheir capabilities to the maximum. We are working topromote active participation by women, the employmentof persons with disabilities, and reemployment after
retirement to improve our employment environment andmake it a foundation that supports management.

Related information P13 Number of employees Number of female managers

2.12

2.09

June
2019

June
2020

2.14

1.50
June
2017

June
2018

June
2021

Related information P48 Promotion of work style reformby the President, and a Work Style Reform Working
Group, in which representatives of divisions examine
specific systems and measures suited to Kumagai
Gumi. Through these, we are promoting diversity andwork style reforms horizontally across the company.

Promotion of diversity Main initiatives in fiscal 2020 and evaluation by society
2020

OctoberJoined the IkuBoss Enterprise Alliance operated by the NPO Fathering Japan, aimed at creating
environments where diverse human resources can work comfortably and fostering bosses who support
team members in achieving work-life balance.
Held a roundtable discussion by male employees who have taken childcare leave, to promote leavetaking

2021

Diversity Promotion Committee

NovemberReceived Bronze rating in the PRIDE Index that evaluates companies' LGBTQ efforts, in recognition ofefforts including establishment of an LGBTQ consultation desk and conducting of awareness surveys.

February

Obtained the third level of Eruboshi, a certification from the Ministry of Health, Labour and Welfare
related to the promotion of active participation by women.

March

Selected by the Ministry of Economy, Trade and Industry for inclusion among the fiscal 2020 New
Diversity Management Selection 100, which showcases advanced efforts of companies that connect
diversity promotion to management results.

The Kumagai Gumi Group Corporate Report 2021

35

Value creation initiatives

Diverse Human Resources

Development of human resources

Training engineers with a commitment to quality

Job rotation

Our company performs job rotation to let
employees acquire wide-ranging knowledge
and ways of thinking through experience indifferent work duties at multiple workplaces.

OJT

Through daily work, superiors and senior
employees guide and train subordinates
and junior employees by consciously,systematically, methodically, andcontinuously providing the knowledge, skills,
and attitudes necessary for executing workduties.

Our corporate philosophy structure and vision for human resources
Conceptual structure of Kumagai Gumi
Insight, Onsite, Farsight

Enhance our unique Worksite
Excellence, create unique value("Quality that Inspires Happiness"),and continue to support customers
and society throughout
every eraGroup Vision(Kumagai Gumi's
vision for itself)

Promote the realizationof our Group
VisionFormulate
an image of employees as"Kumagai Gumi's vision
for human resources"

We conduct planned education drills
and training to complement OJT, drive
self-development, and provide expert
knowledge.

Group
training

Vision forhuman resources(Vision expectedof all employees)

We encourage the acquisition of official
qualifications such as Professional
Engineer and 1st-Class Architect, conduct
supplementary lectures and mockexaminations, and support and promote
self-development that leads to employees’skill advancement.

Supportfor selfdevelopment

Roles and duties(Expectations and responsibility for results
borne by each person in the workplace)

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

We believe that the highest quality is achieved throughan integration of quality assurance systems, humanresources who are committed to quality, and effective
processes. Kumagai Gumi continuously develops
human resources based on its human resource

development system, and enhances quality in every
process through the steps of planning (Plan), execution(Do), confirmation/inspection (Check), and review/
improvement (Act) under our quality assurance system.

Employee training
We conduct two-month practical training for construction
drawing, with dormitory stays, for employees intheir third to twelfth years in construction divisions.
To improve our quality control capabilities, we holdconstruction technology training workshops for learning
about quality control in frame work and equipment/
electrical workshops for learning about equipment andelectrical work.

OFFJT education (Building construction staff)
In order to learn about operation methods able toexpress on-site conditions matched to processes,
we conduct group education on basic operationsof ARCHICAD and Smart CON Planer for building
construction staff at least twice a year at each branch,using real equipment.

Training for partner companies
The Yuuei Kyoryoku Kai association conducts various
types of training with the aim of improving capabilities
related to QCDSE (Quality, Cost, Delivery, Safety, andEnvironment).

Technology presentation
To share information on ever-evolving building
construction and civil engineering technologies andmake full use of these in our everyday work, we holdpresentation meets to broadcast technologies wehave developed and new technologies introduced atworkplaces company-wide.

Value creation initiatives

Aiming to develop human resources under the idea of"Enrich the self, create the future, and support people,"
Kumagai Gumi undertakes a variety of initiatives.
In April 2019, we formulated the Human Resources
Development Plan that sets our directions in this area.

Training of rank structureYear-specific training

Training at time of promotion

Role training
Newly appointed line director training

Selective training
Next-generation executive development training

M2 promotion training

Manager position

Evaluator training
Newly appointed manager training
Beginning manager training

Beginning manager position

Newly appointed instructor training

Guidance position

General position

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

FY2020 attendance status of training by rank
Name of training
Newly appointed line director training
M2 promotion training

Eligible no. No. of Trainingof trainees trainees
rate(persons) (persons)(%)

Total training hours
Total hours

Training hours
per person

Role

20

18

90

558

31

Time ofpromotion

48

45

94

720

16

Role

198

164

83

1,312

8

Newly appointed manager training

Time ofpromotion

52

49

94

784

16

Beginning manager training

Time ofpromotion

36

34

94

544

16

Newly appointed instructor training

Time ofpromotion

52

50

96

800

16

OJT trainer training

Role

130

130

100

1,040

8

3rd-year training

Year-specific

124

124

100

1,798

14.5

Young employee follow-up training Year-specific

117

115

98

6,900

60

New employee training

118

118

100

22,184188

Evaluator training

36

By target
Category

Year-specific

Number of persons undergoingtraining of rank
1,000 people

800

600

400

200

0
FY2016 FY2017 FY2018 FY2019 FY2020
The Kumagai Gumi Group Corporate Report 2021

37

Value creation initiatives

A hybrid structure with medium- to high-rise wood structures in mind
"When I heard about this project, I thought I definitely
wanted to work on it. One reason was because it was
the rebuilding of our traditional head office, and anotherwas the wood structure,"

2

A new challenge in the region of our founding
Aiming to Achieve Medium- and large scale wooden construction
Since our founding in 1898, Kumagai Gumi has maintained its Headquarters in Fukui, our place of origin.
The construction of a new Headquarters building with a wood and steel frame hybrid structure isunderway, and will mark the history of the new Kumagai Gumi.

Overview of construction

ZEB implementation technology

Name ofconstructionwork

New construction of the Kumagai Gumi
Fukui Head OfficeArchitecture

Sunlight shielding, daylight utilization (light
shelf), high insulation, wood materials, etc.

Location

2-6-8 Chuo, Fukui, Fukui Prefecture

Low-use water fixtures, use of rainwater

Construction
periodSeptember 2020 to July 2021

Plumbing
system

Structure

Steel frame + wood, 4 floors above ground
Fire-resistant buildingAir
conditioning/
ventilation

High-efficiency air-source heat pump,latent heat sensible heat separation
air conditioning, floor radiant air
conditioning, BEMS, etc.

Uses

1F: Entrance hall, conference rooms
2F: Exhibition room, meeting space
3F, 4F: Offices

Electricity

Total floor area

1,190.85m2

High efficiency transformer, lighting control,
storage batteries, solar power generation(Light-passing double-sided power
generation type)

A project at our place of origin that marks the history of Kumagai Gumi
The history of Kumagai Gumi began in 1898 when our
founder Santaro Kumagai undertook construction of
the Shikununo Power Station, the first power plant inFukui Prefecture. Even after Headquarters functions

38

were moved to Tokyo in 1964, the head office remainedin Fukui. As the main office has aged, we are now
rebuilding it.

"We need to use a construction method suited to wood
structures, which differ from the steel frame structuresthat we often handle. From this point onward, it was
Kumagai Gumi's first experience with this." (Sabe)

Value creation initiatives

SpecialFeaturesays Tetsuji Sabe, On-site Manager for the project.
The most significant feature of the new main officebuilding is its hybrid woodand steel frame structure. We
are adopting Insulated FireResistant λ-WOOD® (Lambda
WOOD), a wooden fireproof
structural member developedby our company, for the firsttime in columns and beams.
We are also pursuing anurban wood structure capable
On-site Manager
of withstanding snow loading
Tetsuji Sabein winter through the useof cross laminated timber (CLT) earthquake-resistantwalls.

The team carried out assembly of the wood structure
in collaboration with Sumitomo Forestry engineers
who have a wealth of experience with wood residential
structures. This project, however, involved an officebuilding. The beams have a long span, as much as eight
meters. As structural members on this scale are notfound in houses, it was a novel experience for the project
members, who learned and cultivated knowledge onsite. Their experiences will be accumulated as Kumagai
Gumi technology that will support the next generation.

Achieving "Nearly ZEB" with consideration of office workers and the environment
Another key feature of the new head office building is that
it is a Net Zero Energy Building (ZEB), a concept attracting
attention as an initiative aimed at a decarbonized society.
The aim of a ZEB is to reduce the balance of the building's
annual primary energy consumption to zero. The head
office building project achieves "Nearly ZEB." Ayana
Fuchizaki of the Architectural Environment & Engineering
Department, who took charge of these technologies, talks
about this.

"The new head office faced a lot of restrictions in aiming
for ZEB, including the Sea of Japan-type climate peculiar
to the Hokuriku region, and the small building site. We
brought together the technologies of Kumagai Gumi

and combined energy savingwith energy creation to
reduce the building's primaryenergy consumption to 17%."(Fuchizaki)
Creating bright, healthy
spaces for the office workers
Architectural Environment &Engineering Department
is another important concept
Ayana Fuchizakiof the new head office. We
also used Echizen Japanese
paper and cedar wood from Fukui Prefecture in the interior,to create an office that is rooted in our place of origin andthat moves in step with the community.

Initiatives for wooden architecture projects
Olympic Village Plaza

Hyuga City Hall

An all-Japan project by the Tokyo Organising Committee of the
Olympic and Paralympic Games, this facility was constructedusing wood loaned by 63 local governments nationwide. Woodfrom different regions is used in various locations of the building
to express the diversity and harmony that are basic concepts ofthe event.
Following the event, the wood
will be removed and returnedto the local governments foruse as legacy materials in local
public facilities or other works.

About 200,000 pieces of wood, mainly cedar and cypress, areused inside and outside the government building.
The project received the BCS Prize from the Japan Federation ofConstruction Contractors as well as the Forestry Agency DirectorGeneral's Award in the 2019 Timber Utilization Excellent Facility
Contest.

(Completed: 2020; Construction site: Tokyo)(Completed: 2019; Construction site: Miyazaki Prefecture)

Olympic Village Plaza at the time of private viewing
Before completion and interior work
(January 2020) ©Tokyo2020

The Kumagai Gumi Group Corporate Report 2021

39

Value creation initiatives

Technology to Create Social ValueTO P I C S

Technology Development System and Policy

Technology development under the Medium-Term
Management Plan
The Kumagai Gumi Group's Medium-Term Management
Plan sets out areas of focus related to technology
development as follows, to strengthen our managementfoundation.

Planning Group

Technical Research &Development Division

Technical Research &Development InstituteTechnology development in response to the digitalsociety
Technology development that contributes to theadvancement of various functions in construction

We believe that basic research aimed at a decarbonizedsociety, technology development in renewable energy orother fields aimed at a sustainable society, and futureoriented initiatives in domains such as smart cities will leadto opening up new business domains for us. We will also
engage in co-creation with other companies on production
systems that use robotics, AI, and other technologies tocontribute to innovation and the advancement of various
functions in construction.

Patent-related measures
Our patent applications filed in fiscal 2020 were mainly
related to materials, structures, and fire resistancein the field of wood, accounting for about 20% of our
total number of applications. The number of patentapplications related to caregiving assistance andmovement assistance is also increasing, accounting forabout 10% of our total number of applications.
In this area, to prepare for overseas expansion of the
independent walking aid developed by Kumagai Gumi
(refer P9), we are acquiring intellectual property rights

40

Insulated Fire-Resistant λ-WOOD® (Lambda-WOOD) acquires Ministry
certification for 1 to 3 hours fireproof performance

New Technology Innovation Center

Civil Engineering
Management Division

Civil Engineering Technology Department

Building
Management Division

Building Engineering Department
Technology Development
Management Subcommittee

Technological development
Kumagai Gumi has established an R&D vision andmission to achieve R&D with the period of the MediumTerm Management Plan and beyond in sight, and isformulating a technology development policy.
Research and development vision

Research and development that contributes to a
recycling-based, decarbonized society

Related information P38-39 Special Feature 2

Value creation initiatives

Technology Development System
Kumagai Gumi's Technical Research & Development
Division, Civil Engineering Management Division, andBuilding Management Division collaborate on thedevelopment of technologies. We set out policies
related to technology development, research topics innew business domains, and other matters through theTechnology Development Management Subcommittee,
and carry out development of technologies that directly
connect to business.

Development of environmentally considerate technologies

Achievement of communities for sustainable and enriching living
MissionDevelop technologies that aid the world andbear responsibility for the future across the ages
Technological development policy
Contribution to the achievement of a decarbonized
and recycling-oriented society
Contribution to advanced construction through digitalization

One challenge in achieving medium- to largescale wooden construction is fire prevention
and fire resistance performance. The BuildingStandards Act stipulates the fire resistance
performance of major structural parts, varying
with the number of floors of a fire-resistantbuilding. Constructing a high-rise wood structure
without constraints related to the number offloors requires a demonstrated fire resistance of
3 hours for columns and beams and 2 hours forfloors and walls.
In evaluation tests of fire resistance, heatingthat simulates a fire is performed for 1 to 3
hours while a constant vertical load is applied, toconfirm that the load-bearing member does notcarbonize between the time that the heating is
stopped and the time that the fire is extinguishednaturally.
Developed by Kumagai Gumi, Insulated Fireresistant λ-WOOD was certified in March 2021
by the Minister of Land, Infrastructure, Transport
and Tourism for use in all fire-resistant structures
as a wood fire-resistant structural member with
1 to 3 hours of resistance in laminated lumber

columns and beams and 1 to 2 hours in CLT
floors and walls.
Insulated Fire-Resistant λ-WOOD layers
a hard gypsum board and an insulating fireresistant panel on the "fire-stopping layer"
installed around the load-bearing structuralmember (pillar) to reduce the thickness of themember. This allows free selection of surface
finishing material.
Insulated Fire-Resistant λ-WOOD (pillar) is
being used in the construction of our new Fukui
head office.

Specifications for Insulated
Fire-Resistant λ-WOOD (pillar)
Load-bearing member
Fore-stopping layer● Hard gypsum board● Insulated fire-resistant panel● Hard gypsum board
Surface finishing material

During the three-year period of the plan, we will carryout research and development across the company
while promoting technology development that supports
our management foundation.

Related information P13 Number of patent applications

regarding patent rights, design rights, and trademark
rights not only in Japan but also overseas.
Reflecting the increase in joint research andjoint development cases with private companies,
universities, and other research institutes, about 35%of the total number of applications are joint applications.
We will continue strengthening collaboration with othercompanies and promoting the Kumagai Gumi Group's
patent measures.

The Kumagai Gumi Group Corporate Report 2021

41

Value creation initiatives

Value creation initiatives

Aiming for Safe Workplace Environments

Quality Control and Environmental
Preservation

Health and Safety Policy and Management System

Fundamental concepts of quality assurance and structure of the Quality and Environment Management System●A verage frequency during the Medium-Term Management
Plan period: 0.5 or less
(Average frequency from FY2018 to FY2020: 0.48)●F Y2021 safety and health targets: Fatal accidents: 0;
Frequency of fatal accidents: 0.5 or less

Sharing of safety and health informationand prevention of the recurrence ofaccidents and incidents

Initiatives concerning foreign workers

To enforce the sharing of safety and health informationand prevention of the recurrence of accidents andincidents, we introduced the Safety Portal System in
April 2021 and worked to accumulate and centralize
data.
We will also create a database of the results of daily
safety and health patrols, and will develop a system fordrafting workplace Safety and Health Control Plans.

Many foreign workers are active in the constructionindustry, and labor accidents involving these workers
have increased accordingly. We have translated ourWorkers' Basic Education booklet into foreign languages
to provide basic safety and health knowledge and aresupporting education for business operators. We areaiming to create safe and secure workplace environments
for foreign workers by means including creating foreign
language versions of the materials for occupational
health and safety education performed when entering
work sites, to promote understanding of workplace rules.

Safety education for employees

Kumagai Gumi believes that complying with social
norms, laws, our internal standards, and other rules,
establishing management systems and operating withhigh efficacy to respond to changes in the businessenvironment, and working to improve the capabilities
of employees, specialty constructors, and other parties
through education and training, are important elements
in quality assurance.
The Quality and Environment Committee, chaired byan Overall Quality and Environment Control Manager
appointed by the President, and the Quality andEnvironmental Expert Subcommittees under it, examine
quality issues and environmental issues. We regularly
check the status of progress toward targets, conduct
system audits, and constantly check and improve theeffectiveness of our management systems.

President
Overall Quality and Environment
Control Manager

Initiatives for safe work by elderly persons
We are strengthening initiatives to protect seniors,
including placement of "thoughtfulness stickers" thatencourage surrounding workers to warm to elderly
persons, visualization of fall prevention measures,setting of age limits and permission systems for workthat involves a risk of falls, and awareness educationthat encourages elderly persons to make use of theirabundant experience while instilling self-awareness ofphysical weakening.
Through such efforts, in recent years we have
reduced accidents involving elderly persons, which had
been on the rise.

FY2017FY2018FY2019FY2020Frequency

0.65

0.42

0.70

0.44

0.32

Severity
Number of accidents involving
leave of 4 days or more
Reference frequency(All industries/Construction industry)

0.02

0.33

0.02

0.02

0.28

15

10

17

13

9

1.63/0.64

1.66/0.81

1.83/1.09

1.80/1.67

1.95/1.30

42

Division Head

Quality and Environmental Expert
Subcommittee System Audit Team

Department Heads

Branches

Branch Managers

Overall Branch Quality andEnvironment Control Manager
Branch Quality andEnvironment Committee

Group Leaders

Branch Quality and Environmental
Expert Subcommittee Branch
System Audit Team

Department Heads/
On-site Managers

Ordered construction
handover meeting

Patrol by partner company

Headquarters/branch management departments

Individual projects (sites)
Order receipt/
design/planning

Purchasing/construction

Customers/Society/
Environment/Stakeholders

Identification of risks
and opportunities
Inspection of blueprints
Planning Group
work for constructions

Project operation/
management(Plan)

Identification of policies/
risks/opportunities
Annual plan

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

QCDSE patrol

Execution(Do)

Guidance/support

Management Resources(Human resources, technology, information, etc.)
Review by the President(Management review)

Progress management/
integrated management

Aftercare

Patrol inspections
Internal audits
System audits

Review/
improvement
Planning/Review(Act)
Project supervision

Checking/
Inspection(Check)Review by the President

Inspection by partner company

Improvement/aftercare

Inspection and evaluation

Inspection by customers
Website Health and safety initiatives https://www.kumagaigumi.co.jp/en/csr/safety/index.html

Headquarters

Quality and Environment Committee

Conceptual diagram of the Quality and Environment Management System

Status of labor accidents (including skilled construction workers at construction sites)
FY2016Structure of the Quality and Environment
Management System

Group work for construction

We established educational guidelines to improve thelabor/occupational health and safety management
capabilities of our employees, and conduct occupational
health and safety education and systems education at
Headquarters and branches. While we were unable toconduct our usual group education in fiscal 2020 due
to the COVID-19 pandemic, we refined and carried out
online education and e-learning. The possibilities have
expanded for new teaching methods that are effective
and efficient.

Value creation initiatives

Since receiving the first company-wide certification
under the Construction Occupational Health and
Safety Management System (COHSMS) program in
2008, Kumagai Gumi has maintained its system while
renewing certification, and works to prevent labor andconstruction accidents.

In the conduct of its business, the Kumagai Gumi Groupprioritizes respect for human life and maintains highhealth and safety management standards to prevent
labor accidents, improve health, and create comfortableworking environments. We comply with social norms,
laws, our internal standards, and other rules, and haveestablished a Safety and Health Management System
which we operate with high effectiveness.

Internal inspection
Site study tour/briefing

System audit
The Kumagai Gumi Group Corporate Report 2021

43

Value creation initiatives

Concept of initiatives for the environment

Fundamental concepts of environmental management● Reduction of CO2 emissions inbusiness activities
Kumagai Gumi Group numerical targets
Scopes 1+2

With the integration of management and the environment,
the formation of environmentally considerate businesses, theestablishment of group-wide environmental management
systems, and the strengthening of risk management against
environmental accidents as our fundamental concepts ofenvironmental management, the Kumagai Gumi Group
engages in efforts to solve social and environmental issues
and achieve a sustainable society through our businessactivities.

Environmental target setting

Decarbonizedsociety

FY2019 performance (total emissions) 92,100 t-CO

2030: 25% reduction compared to FY2019
2050: 100% reduction compared to FY2019

Addressing
climate change
risks

Scope 3

FY2019 performance (total emissions) 4,143,600 t-CO

2030: 13% reduction compared to FY2019
2050: 37% reduction compared to FY2019

Kumagai Gumi environmental structure

Initiatives in
the wooden
construction
business

ESG Initiative Direction
Safety and Health, Quality
and Environment Policy
Biodiversity Initiative Direction

Value creation initiatives

Quality control and environmental preservation worthy of trust

Recycling-oriented
society

Initiatives in
the renewableenergybusiness

Development ofenvironmentallyconsideratetechnologies● Promotion of considerationof biodiversity● Conservation of biodiversity
and promotion of sustainable use

Initiatives in
the forest
conservation
business

Initiatives withconsideration of
biodiversity

Achievement ofzero emissions

Society thatcoexists with nature

The Promise of Eco First

Annual plan
● Reduction of mixed waste discharge
Numerical targets for Kumagai Gumi only
Total mixed waste rate:Maintain at 2.0% or less

Policy for Biodiversity (outline)
Fundamental concept
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● That biodiversity is facing a severe crisis due to various
human activities● That there is a deep relationship between the constructionindustry and nature
Our initiatives
We incorporate consideration of ecosystems in our businessactivities, and carry out such activities company-wide.
1. Initiatives for design and construction
2. Legal compliance
3. Technological development
4. Social contribution initiatives

Medium- to long-Term targets forEnvironmental Preservation
The Promise of Eco First (extract)
1. We will promote the creation of a decarbonizedsociety through the construction business.
2. We will promote the formation of a recyclingoriented society through business activities.
3. We will aim for a society that coexists
with nature and promote initiatives withconsideration of biological diversity.

* Total mixed waste rate (%) = amount of mixed waste (t) / total discharge (t)Mixed waste amount:Total amount of all construction mixed waste discharge for thecurrent fiscal year (including from demolition work and underground installations)
Total discharge volume:Total amount of all construction waste discharge for the current
fiscal year (including from demolition work, underground installations, and construction
sludge)● Promotion of 3Rs (Reduce, Reuse, Recycle)● Enforcement of separation of plastic garbage● Promotion of green purchasing

Main risks and opportunities involving the environment
Risks

4. We will strive to develop, improve, andpopularize technologies and methods withconsideration of the environment.
5. We will actively participate in environmental
conservation activities in communities.
6. We will actively disclose environmental
information and strive to build partnerships
with stakeholders.

● Promotion of environmentally consideratetechnologies (Technology Research andDevelopment Division)
Numerical targets for Kumagai Gumi only
(FY2021-FY2025)
Development and application of environmentallyconsiderate technology: Total 25 cases or more
External announcements (press releases,
academic papers): Total 10 cases or more

● Decline in competitiveness due toinsufficient adaptation to social systems andregulatory tightening

Climatechange● Occurrence of damage to health due to risein average temperature● Occurrence of construction delays andshortages of materials and equipment due
to extreme weather

Resource
recycling
Biodiversity● Loss of trust and decline in competitivenessdue to non-compliance with laws andregulations● Interruption or cancellation of business due

to destruction of the environment

Opportunities● Creation of technologies, products, and businesses

that resolve climate change issues● Expansion of markets due to growing customer needs

for environment-friendly design and construction● Expansion of demand for infrastructure development

associated with increasing frequency and intensity ofnatural disasters● Creation of technologies, products, and businesses forbuilding a recycling-oriented society● Creation of technologies, products, and businesses

that take biodiversity conservation into consideration

Website The Promise of Eco First https://www.kumagaigumi.co.jp/en/csr/environment/ecofirst/index.html

44

The Kumagai Gumi Group Corporate Report 2021

45

Value creation initiatives

Stakeholder engagement

Quality control and environmental preservation worthy of trust

Engagement with Customers

Initiatives and environmental performance in FY2020

1. Education on environmental laws and regulations in intensive
employee education at Headquarters, by the Headquarters
manager in charge of environmental regulations (5 times)
2. Education for branch managers, etc. (2 times)
3. Implementation of e-learning concerning proper treatment ofconstruction waste(Construction-related staff)* In FY2020, no fines or penalties were levied due tolegal violations, and no suits were filed.

2019 results (total amounts)

Scopes 1+2

92,100 t-CO2

Scope 3

4,143,600 t-CO2

Environmental incidents
No environmental incidents occurred in FY2020.

2030 target

2050 target

25% reduction
compared to FY2019
13% reduction
compared to FY2019

100% reduction
compared to FY2019
37% reduction
compared to FY2019

Scope 1: Direct emissions from combustion of fuel used by ourcompany (use of heavy machinery, vehicles, etc.)
Scope 2: Indirect emissions from the use of electricity, etc. supplied byother companies
Scope 3: Indirect emissions from upstream/downstream areas ofbusiness activities other than Scope 1 and 2 (materials
procurement, operation of buildings, disposal, etc.)

FY2020 environmental target and performance evaluation, and FY2021 targets (construction) Kumagai Gumi only
Environmental goal

Reduction of CO2 emissions
Reduction of mixed waste
discharge
Promoting green purchasing

FY2020 target

FY2019 results

Civil Engineering 39.4t-CO2/100 million yen or less 33.3t-CO2/100 million yen

Evaluation

FY2021 target

Achieved

Guideline value: 40.6t-CO2/100 million yen or less

Building
Construction

10.2t-CO2/100 million yen or less

9.7t-CO2/100 million yen

Achieved

Guideline value: 8.2t-CO2/100 million yen or less

Civil Engineering

0.23t/100 million yen or less

0.62t/100 million yen

Not achieved

1.6% or less

Building
Construction

5.57kg/m2 or less

5.53kg/m2

Achieved

17.0% or less

Civil Engineering

21.0% or more

15.7%

Not achieved—

Building
Construction

15.0% or more

12.5%

Not achieved—* Environmental targets were revised in FY2021.
We set guideline values for reducing CO2 emissions by a fixed amount every year to achieve our target for 2030.
For the reduction of mixed waste discharge, we changed our target index to mixed waste rate. Mixed waste rate (%) = amount of mixed waste (t) / total discharge (t)Our promotion of green purchasing has shifted from goal management activities to operational standards compliance activities.

Impact on business performance and the environment

INPUT
Principal
material
inputsPrincipal
material
inputs● Electricity● Paper● Water

Construction Division
85,000 t● Steel rods
● Cement
41,000 t● Wet concrete 1,630,000 t● Steel frames
26,000 t
29,533,000 kWh● Electricity● Light oil
19,278 kl● Kerosene
10 kl● Water
529,000 m3
Office Division
3,129,000 kWh
77,000 kg
24,000 m3

Customer Consultation Office

Kumagai Gumi established the Customer Satisfaction(CS) Promotion Office (current Sustainability Promotion
Group) in 1998. The following year, we established
Customer Consultation Offices at all of our branches.
The customer satisfaction (CS) functions of Kumagai
Gumi are placed within the Management Strategy
Office. The organization is designed to directly reflect
the voices of customers in our management.

In FY2020, we received 590 consultation inquiries (517
in FY2019). For the fifth consecutive year, we achieved
100% same-day initial responses (and a rate of over
98% for nine consecutive years).

Primary CS activities of Kumagai Gumi

The Kumagai Gumi Group's greenhouse gas reduction targets
Category

We deliver "Quality that Inspires Happiness"

Stakeholder engagement

Compliance with environmental conservation laws
Amid the COVID-19 pandemic in FY2020, we
undertook the following initiatives to prevent violationsof environmental laws and regulations, and strove tocomply with environmental laws and regulations.

As an "Eco First" company, Kumagai Gumi has engaged
since 2010 in initiatives aimed at the achievement ofa sustainable society. In February 2021, we joined theRE100 initiative aimed at shifting all electricity used inbusiness activities to renewable energy, and made amajor change in our direction toward decarbonization.
Moreover, after reviewing and resetting our mediumto long-term targets for the reduction of greenhouse gas
emissions, in the same month we obtained certification for
the Science Based Targets (SBT) international framework
aimed at the reduction of greenhouse gas emissions.
To achieve the targets, we will further accelerate
decarbonization in our business activities throughmeans including the promotion of Net Zero Energy
Buildings (ZEB) that contribute to significant energy
conservation in buildings, while further reducing fossil
fuel usage in heavy machinery and vehicles and actively
adopting renewable energy.

Civil Engineering

Completed work value

121.4 billion
Tunnels, dams,
land development, etc.

OUTPUT
Construction Division (Scope 1+2)
● CO2
65,000 t-CO2
● NOx
85 t
● SOx
131 t
Waste discharge

846,000 t● Recycle/reduction 824,000 t● Net discharge
23,000 t● Gross output

Building Construction
Completed work value
Offices, hospitals,
schools, etc.

Questionnaire items● Workmanship ● Aftercare ● Help Desk support● Work progress by our employees● Performance and design of structure● Comprehensive evaluation

2) Visit customer for asking their insight
Our top management makes visits not only to ourregular patrons but also to customers with whom wehave lost regular contact, to directly listen to their frankthoughts and incorporate these into our management.
Restraining from visits due to the COVID-19 pandemic,
in FY2020 we made only one visit (17 visits in FY2019).
3) Improvement of aftercare system
We perform centralized management of regularinspection, requests, inquiries, defect information, andother information using "construction clinical records,"
and share this information within the company.

Purpose of questionnaire● For customers with whom contact ends at 2-year
scheduled inspection, extend contact to 3 years andstrive to maintain positive relationships4) Instillation of CS awareness in employees
We conduct internal commendations (2 commendations
in FY2020) and lectures (in October 2020) on CS
initiatives to instill Kumagai Gumi's CS awareness inour employees and achieve CS with the involvementof all.

● Quickly discern the seeds of future flaws noticed bycustomers● In response to any account of dissatisfaction, visit
the customer promptly to hold detailed hearings,
and prevent recurrence of the issue and restore trust
through thorough investigation of the cause

FY2020 performance/Kumagai Gumi only

Business activities

236.9 billion

1) Customer insight questionnaires
Three years after delivering a structure to customers,
we conduct a comprehensive evaluation questionnaire.
In FY2020, we received 60 questionnaire responses(57 in FY2019).

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

Questionnaire results■ Above expectation ■ As expected ■ Nearly as expected ■ Slightly below expectation ■ Below expectation● Overall workmanship of building● Aftercare overall

FY2020 (60)

FY2020 (60)FY2019 (57)

FY2019 (57)

FY2018 (72)FY2018 (72)FY2017 (76)FY2017 (76)FY2016 (87)

FY2016 (87)( n ) 0%

20%

40%

60%

80%

100%

( n ) 0%

20%

40%

60%

80%

100%

* 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

46

The Kumagai Gumi Group Corporate Report 2021

47

Stakeholder engagement

Engagement with Employees
Promotion of work style reform
annual paid leave increased from 62.9% in FY2018 to
100%, while the rate of male employees taking childcare
leave increased from 4.9% in FY2018 to 34.3%. While
work style reform has steadily taken root, the correctionof overtime hours remains an issue that we continue totackle.

Results of Work Style Reform Action Plan initiatives
Three areas of reform

Numerical targets and timing for theirachievement

Correction of overtime hours

Initiative results

Indicators

FY2018FY2019FY2020Limit overtime work through FY2018
to under 100 hours/month

Percentageof employees
achieving target

97.9%

98.9%

99.4%

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

Percentageof employees
achieving target

96.6%

97.4%

98.5%

Promotion of use of paid leave(annual)By FY2018, raise days of use ofannual leave to 5 or more

62.9%

99.9%

100%

Establish lower limits on the use ofannual leave and targets for average
use, and promote the use of annual
leavePercentageof employees
achieving target

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

Averagenumber of daystaken

6.7 days

8.2 days

9.2 days

Aim for 100% return to work afterchild-care leave (FY2018-FY2020)

Rate of return

100%

96%

100%

Reduce to zero the number of
persons resigning for reasons ofbalancing work with child-care or
nursing care (FY2018 to FY2020)

Numberresigning

3

1

0

Increase the utilization rate ofchild-care leave by male employees
to 10% by FY2020

Utilization rate

4.9%

20.9%

34.3%

Establish an upper limit on overtime
work and undertake reduction ofworking hours

Promotion of flexible work styles
Promote flexible work styles thatallow a balance of work and lifestyles

Future initiatives
Kumagai Gumi has endeavored to promote work stylereform for improvement of productivity and operational
efficiency, and to reform awareness. In response to the
COVID-19 pandemic, in FY2020 we introduced teleworkand staggered work hours as emergency measures.
We also introduced a telework system and a staggered
commuting hours system as measures to prepare for
emergencies and to achieve diverse work styles.
As part of our efforts to reform awareness, since
FY2019 we have engaged in the Small Start Project
to build up small reforms that will lead to individual
motivation. As one such effort, in FY2021 we fully
adopted office casual wear throughout the company and

Employee education concerning human rights
We conduct training on human rights for new
employees. We use this as an opportunity to deepen
understanding of human rights through a broad rangeof topics, including social discrimination, discrimination
toward LGBT persons and persons with disabilities,
harassment in general, and human rights violations on
the Internet.
Prevention of harassment
We conduct e-learning for all employees on theprevention of harassment.
About 80% of employees undergo the e-learning
program, which covers (1) power harassment, (2) sexual
harassment, (3) harassment related to pregnancy,
childbirth, childcare leave, and nursing care leave, (4)Communication in personnel evaluations andexecution of work
We conduct goal setting interviews at the beginning of
the term, progress confirmation interviews at the midpoint of the term, self-evaluation confirmation interviewsat the end of the term, and finally an interview on
evaluation results, for a total of four interviews a year
between employees and their superiors.
Employees are able to state their wishes regarding
future workplace assignment and skill development to
the Personnel Department in the form of a "Career Plan
Declaration" via our in-house application system at any
time, without going through superiors.

Health management

connected this to comfortable working environments.
We will continue reducing overtime work throughmeans such as further reviewing business processes,
during this important three-year period moving toward
the imposition of overtime work limit regulations on theconstruction industry in fiscal 2024.
Amid expectations for changes in working environments
and diversification of employees' senses of values,
we will create environments and systems that enable
flexible selection of work styles while meeting
diversifying needs, and that draw out employees'
willingness to contribute to the company.

Kumagai Gumi has established a health promotion
office staffed by general industrial physicians andhealth nurses in the Human Resources and General
Affairs Department in Headquarters, and has readiedsystems for the comprehensive support of employees'
health with the cooperation of industrial physicians andhealth promotion managers at all branches. Every fiscal
year, we formulate an employee health promotion planas part of our programs for mental and physical healthpromotion, and carry out health promotion activities that
seek an upward spiral in PDCA activities.
With regard to the COVID-19 pandemic, we provide
up-to-date information to the countermeasure task force
and to employees as needed, and offer support including
health checkup and interview recommendations for
employees at particularly high risk of serious illness.
Annual Plan for the Promotion of Employee Health(FY2021)(1) Support for employees experiencing health issues(2) Prevention of damage to health from overtimehours(3) Provision of 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 five consecutive years since FY2016, we have beenrecognized by the Health and Productivity Management48

dealing with harassment, and (5) a confirmation test.
We also make prevention of harassment a mandatory
item in managerial training.

Stakeholder engagement

Work Style Reform Action Plan
Summary (Plan period: 2018-2020)
Launching full-scale work style reform in 2018, Kumagai
Gumi formulated the Work Style Reform Action Plan as
an action plan with numerical targets.
In FY2020, employees taking five or more days of

Respect for human rights

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. We intend to continue strengthening
measures for the health of not only employees but all
workers at Kumagai Gumi sites.
Initiatives for employees with higher risks
All employee health checkup results undergo carefulchecking by industrial physicians. For employees
requiring follow-up, we provide continuous support
along with recommendations for consultations andinterviews. To prevent brain and cardiac disease andmental health disorders caused by overtime hours,
we offer accumulated fatigue checklists for eligible
employees and every month provide consultation
with industrial physicians to persons who request
it. In addition to this, we provide special follow-up
through visits by industrial physicians, interviews with
employees, and other measures to address workplacesin special environments, such as overseas or at disasterreconstruction 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.
The Kumagai Gumi Group Corporate Report 2021

49

Stakeholder engagement

Stakeholder engagement

Engagement with Shareholders andInvestors

Engagement with Business
Partners

Active dialogs with investors

Formulation of the Procurement Policy and Procurement Policy Guidelines

Impacts of the COVID-19 pandemic

Guidelines to further promote sound business activities.
Our aim is to improve governance and compliancein our procurement activities, and to work with partnercompanies and business partners to increase added
value throughout the value chain.

Declaration of Partnership Building
In September 2020, Kumagai Gumi announced its
Declaration of Partnership Building.
In our supply chain, we consider not only materials
and equipment but also human resources, particularlyin the partner companies who work with us on-site tocomplete construction, to be of extreme importance.
In that sense, our partner companies are our mostimportant partners in our supply chain. Seeking

cooperation, coexistence, and co-prosperity withpartner companies, we will work with partners to secureskilled workers and support their development, not only
complying with the normalization of transactions but
also promoting improvement in the treatment of skilledworkers based on the Declaration of Abiding by Labor
Cost Quotations advocated by the Japan Federation ofConstruction Contractors.

Yuuei Kyoryoku Kai

The impacts of the COVID-19 pandemic are limited at present
Impacts on performance
Risks

Opportunities
Large

ImpactSmall● Decrease in capital expenditures by private-sector
companies due to uncertain outlook and recession(project delays or postponements)● Decrease in construction of hotels, etc. due to contraction of
inbound travel demand● Intensification of domestic competition due to a decrease inoverseas construction● Difficulty in negotiations over additional design changes, etc.
● Project delays due to interruption of construction● Project delays due to delays in delivery of materials● Increase in risk of bankruptcy among ordering clients andconstruction partners● Increased costs associated with infectious disease
countermeasures, etc.

● Increase in public works construction as an economic
support measure● Expansion and relocation of medical, warehousing, anddistribution facilities● New construction and relocation associated with thereturn of overseas production sites to Japan and theirreorganization● Development of living, social, and communications
infrastructure● Increase in renewal construction in line with changes inmodes of behavior● Shift from centralized to decentralized offices● Progress of M&A● Reduction of construction costs due to deflation● Decline in purchase cost of real estate related toredevelopment projects● Reduction of costs associated with teleworking, shift toonline work, etc.

Main items manifesting(-) Decline in private capital investment ... Significant decline in private capital investment, particularly in the manufacturing industry(-) Difficulty in negotiations for additional design changes, etc. ... Prolonging of negotiations due to online discussions andreduction in opportunities caused by restrictions on movement, etc.
(-) Increase in costs associated with infectious disease countermeasures ... Recording of approximately 300 million yen as an
extraordinary loss for infectious disease-related costs(+) Increase in public works construction ... Increase in government works construction in the industry as a whole. Expected toremain firm in the current term

50

Kumagai Gumi has formulated purchasing management
rules with the objectives of risk management, ensuringtransparency in the selection of business partners, andconsideration of the environment. In April 2021, we
formulated our Procurement Policy and Procurement Policy

Stakeholder engagement

activities in response to the demands of shareholders
and investors, including the new initiative of holding
financial briefings in a hybrid online and venue-basedformat. The "Impacts of the COVID-19 pandemic"
content in our securities report for the fiscal year ended
March 2020 was received positively by shareholders
and investors, and was included in a collection of
best-practice cases of written information disclosure
released by the Financial Services Agency in 2020.
Amid growing interest in ESG investment in recent
years, the Kumagai Gumi Group works to enhance ESGrelated content in its various tools, and, recognizing theimportance of non-financial information, holds ESGspecific meetings with institutional investors.

Kumagai Gumi works to properly, fairly, and promptly
disclose information pertaining to our management andbusiness activities.
In engagements with securities analysts andinstitutional investors, we held earnings briefings (2times in the fiscal year ending March 2021, both with top
management in attendance), small meetings (5 times inthe same period, all with top management in attendance),
and individual meetings and teleconferences (61 times
in the same period, including 4 with top management in
attendance).
Amid the spread of the COVID-19 FY2020, in
addition to small meetings using online tools andparticipation in overseas investor meetings hosted by
securities firms, we conducted flexible and proactive IR

The Yuuei Kyoryoku Kai is an organization of 859
Kumagai Gumi partner companies (as of April 1, 2021).
It engages in activities under a policy of Kumagai
Gumi and Yuuei Kyoryoku Kai working together as
close partners to take action in all areas of QCDSE
and to promote the creation of positive workplaceenvironments.
Activities in FY2020
Under the COVID-19 pandemic, Yuuei Kyoryoku
Kai continued taking contagion prevention into
consideration in its activities, through new initiatives
such as conducting branch hearings remotely.
The association conducted a questionnaire study
aimed at securing and training leaders, an urgent

issue within the construction industry, and undertook
measures to improve the working environment ofskilled construction workers. It also created a "Workers'
Basic Education, Pocket Edition" and safety posters
in Japanese, English, Chinese, Vietnamese, andIndonesian, as part of its consideration for positive
working conditions and safety for foreigners in theworkplace.
FY2021 activities
The association held best-practice presentations
on the themes of quality assurance and productivity
improvement. It plans to evolve and revitalize these into
presentations that are more focused than ever on bestpractices on-site and in branch activities.

Organizational chart of Yuuei Kyoryoku Kai
General AssemblyController

Board of Trustees
Planning and Steering Committee

Eight branches
nationwide

Secretariat* Chairman serves as Committee Chair

In charge of planning:
Vice Chairman

In charge ofreforming work styles:
Vice Chairman

In charge of construction
career advancement systems:
Vice Chairman

Financial safety

Planning Subcommittee

Workstyle Reform Subcommittee

Construction Career Advancement
System Subcommittee● Our capital adequacy ratio is relatively safe at over 40%● Our solvency is high, with current ratio in excess of 160%
● We have established a commitment line of 30 billion yen and have the capability to handle unexpected situations● Plan drafting● Subcommittee activity promotion● Collaboration with Kumagai Gumi working groups● Information development/promotion for members● Collaboration with Kumagai Gumi working groups● Information development/promotion for members

Hokkaido
TohokuTokyo Metropolitan
Area
NagoyaHokuriku
Kansai
Chugoku Shikoku
KyushuThe Kumagai Gumi Group Corporate Report 2021

51

Stakeholder engagement

Stakeholder engagement

Engagement with Communities

Evaluation by Society and Participation in
Initiatives

The Kumagai Gumi Smile Project
areas including our KUMAGAI STAR PROJECT social
contribution activities and disaster relief funds, as wellas support for four organizations working on social
issues.
Continuing from FY2020, we will continue supporting
the following organizations in FY2021.
● 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 patients,
awareness of cancer diseases)● Zenkoku Kodomo Shokudo Shien Center Musubie(Local network bases that serve meals)* 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.

Adoption in JPX Nikkei Index 400"Child-rearing support
company" certification(Kurumin Certification)

Entry into international
initiative RE100

Eruboshi certification
Acquisition of highest
3-star certification

Entry into Japan Climate Leaders' Partnership(JCLP) as a supporting member

Selection as"Nadeshiko Brand"enterprise

SBT Initiative certification

Inclusion in "New Diversity Management
Selection 100"

Stakeholder engagement

In May 2019, Kumagai Gumi launched the Kumagai
Gumi Smile Project as a means of engaging in uniquesocial contribution activities.
The project uses matching gifts that connect
individual employees' initiatives to even greater social
contribution. We total the number of employees who
have participated in social contribution activities in theregions of our workplaces and departments, and makedonations of social contribution expenses based on that
number for each fiscal year.
In FY2020, 812 employees engaged in 86 instancesof activities in areas including the environment,
education, welfare, and community contribution. In
FY2021, the company donated 11 million yen in social
contribution expenses. The donations were applied toExternal evaluation and participation in initiatives

Eco First Company
certification

Health and Productivity Management
Organization Recognition Program("White 500") certification

Selection as constituent brand in MSCI Japan
Empowering Women Index (WIN)
Receipt of Bronze rating in PRIDE
Index that evaluates companies'
LGBTQ efforts

Registration as
ZEB planner

Selection as constituent brand of S&P/
JPX Carbon Efficient Index* FY2021 social contribution expenses are converted from FY2020 activity points and carry-over points.

THE INCLUSION OF KUMAGAI GUMI CO., LTD. IN ANY MSCI INDEX, AND THE USE OF MSCI LOGOS,
TRADEMARKS, SERVICE MARKS OR INDEX NAMES HEREIN, DO NOT CONSTITUTE A SPONSORSHIP,
ENDORSEMENT OR PROMOTION OF KUMAGAI GUMI CO., LTD. BY MSCI OR ANY OF ITS AFFILIATES.
THE MSCI INDEXES ARE THE EXCLUSIVE PROPERTY OF MSCI. MSCI AND THE MSCI INDEX NAMES AND
LOGOS ARE TRADEMARKS OR SERVICE MARKS OF MSCI OR ITS AFFILIATES.

External commendations
KUMAGAI STAR PROJECT
Launched in 2015, this KUMAGAI STAR PROJECT
engages in school building construction as a contribution
to international society in countries in which Kumagai
Gumi has business sites.
So far, we have constructed three elementary andjunior high school buildings in the Republic of the Unionof Myanmar.
As a new initiative, we have begun offering "KUMASTAR" scholarships to 10 students from the third school.
We established a "watch-over employee system" forinteraction with students through letters and othermeans until graduation from junior high school. This isexpanding into an activity involving many employees.
The activity has been praised by outsiders, and wasintroduced in online teaching materials for elementaryand junior high school students in Japan, as well as
among high-quality infrastructure project best practices
collected by the Ministry of Land, Infrastructure,
Transport and Tourism.
* In FY2020, we postponed activities related to construction due to the COVID-19
pandemic.

July 2020

Public Buildings Association., Ltd.
17th Public Building Awards, Award for Excellence
Meijo Park Campus, Aichi Gakuin University

October 2020

Japan Council for Advancement of Timber Utilization
2020 Timber Utilization Excellent Facility Contest
Chairman's Award, Japan Council for Advancement of Timber Utilization
Meijo Park Campus, Aichi Gakuin University
Government Office, City of Nagato
3Rs (Reduce, Reuse, Recycle) Promotion CouncilChairman's Award, 3Rs (Reduce, Reuse, Recycle) Promotion Council
Grand Maison Kotodai-dori The Tower "3R activities aimed at on-site reduction and recycling through sorting"Japan Society of Civil Engineers 75th Annual Academic Lecture Excellent Paper Award, 2020 Annual Meeting of the Japan Society of Civil Engineers
FY2018-FY2020 Construction of new Kusaka River floodway (outlet side)
Keiko Hama, Civil Engineering Management Division, "Construction of a pneumatic caisson using ground surface surveying near key structures"Japan Society of Dam Engineers FY2019 Japan Society of Dam Engineers Awards Technology Award
Saigo Power Plant Dam Sediment Throughing Prevention Construction
November 2020

19th Twenty-five Year Award Toyama Children's Center

Aso Ohashi Bridge Area slope disasterprevention construction

December 2020

Japan Federation of Construction Contractors Award 2020 Japan Federation of Construction Contractors
61st BCS Prize Hyuga City Hall
1st Civil Engineering Award Aso Ohashi Bridge Area slope disaster prevention construction

May 2021

Japan Society of Civil Engineers FY2020 Japan Society of Civil Engineers Awards, Technology Award II Group
Delhi Metro Urban Railway Construction Project (Phases 1/2/3)(High-quality infrastructure development project that instilled awareness of safety and efficiency at construction sites in India and provided residents with safe,
secure, and comfortable transportation)

YangonSecond activity
Tepu Chaung Elementary
and Junior High School

The Japan Institute of Architects

Japan Society of Erosion Control Engineering 2020 Japan Society of Erosion Control Engineering Awards,
Technology Award"Erosion control disaster-related emergency project (direct supervision)" slope disaster-readiness measures in the
Aso Ohashi Bridge area following the 2016 Kumamoto earthquake
Shinichi Nomura, Kumamoto Reconstruction Project Office of the Kyushu Regional Development Bureau,
Ministry of Land, Infrastructure, Transport and Tourism (current Kyushu Regional Development Bureau
Disaster Readiness Office)Shigetaka Ishihama, Tsuyoshi Nakade, Masahiro Katayama, Civil Engineering Management DivisionFirst activity
Tirain Elementary
and Junior High School

Third activity
Mrohuang East Elementary
and Junior High School

Government Office, City of Nagato

Delhi Metro Rail Corporation Limited; Japan International Cooperation Agency; Railway Bureau of the Ministry of Land, Infrastructure, Transport and Tourism; Oriental Consultants Global
Co., Ltd.; Japan Railway Technical Service; Tonichi Consultant Co., Ltd.; RITES; Tokyo Metro Co., Ltd.; Kumagai Gumi Co., Ltd.; Itochu Corporation; Shimizu Corporation; Mitsubishi
Corporation; Mitsubishi Electric Corporation; Sumitomo Corporation; Nippon Steel Corporation; Mitsui & Co., Ltd.; Nippon Signal Co., Ltd.

Japan Society of Civil Engineers 2020 Japan Society of Civil Engineers Awards, Innovative Technique Award
Development of precast PC floor slab design and construction technology for bridges using cotter joints (Cotter Floor slab method for bridges)
Teruyasu Watanabe, Civil Engineering Management Division; Masayuki Sakurai, GAEART Co., Ltd.; Kengo Hara, Oriental Shiraishi Co., Ltd.;
Yoshinori Takamatsu, GEOSTR Corporation

52

The Kumagai Gumi Group Corporate Report 2021

53

Governance

List of the Board of Directors

Koji Hidaka
Shin Ueda
Koji Okaichi

Junji Konishi
Masaaki Ayukawa
Tatsuru Sato
Yutaka Takehana

Front row, from right

Front row, from left

Sakae Yoshida
Shigeru Okada
Kimie Sakuragi

Yasunori Sakurano
Yoshihiko Kato
Yoshiaki Ogawa

Yasunori Sakurano

President andRepresentative Director
CEO and President

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

Yoshihiko Kato

Representative Director
Executive Vice President, all Civil Engineering
In charge of Technology

April 1981
April 2012
April 2013
April 2015
April 2016
April 2017
June 2018
April 2020
April 2021

Joined Kumagai Gumi Co., Ltd.
Deputy General Manager of the Administration Division
Executive Officer
General Manager of the Administration Division (current)
In charge of Discipline, In charge of Personal Information Protection
Managing Executive Officer
Managing Director
Director (current), Senior Managing Executive Officer (current)
In charge of Compliance (current)

Shin Ueda

Director
Senior Managing Executive Officer, General Manager ofthe Architectural Management Division

April 1984 Joined Kumagai Gumi Co., Ltd.
April 2014 Executive Officer
Deputy General Branch Manager of the Tokyo Metropolitan
Area Office, General Manager of the Architectural Construction
Department, Tokyo Metropolitan Area Office
June 2015 Project Management Office
April 2017 Managing Executive Officer, General Branch Manager of Tokyo
Metropolitan Area Office
April 2020 Senior Managing Executive Officer (current)
April 2021 General Manager of the Architectural Management Division (current)
June 2021 Director (current)

Representative Director
Executive Vice President, All Architecture
In charge of Occupational Health and Safety,
In charge of Quality and the Environment

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

April 1982 Joined Kumagai Gumi Co., Ltd.
April 2011 Executive Officer, General Manager of the Architectural
Construction Department, Kansai Office
April 2012 Deputy General Branch Manager of the Kansai Office
April 2013 Managing Executive Officer, General Branch Manager of the
Kansai Office
April 2017 Senior Managing Executive Officer, General Manager of theArchitectural Management Division
June 2017 Senior Managing Director
April 2020 Director, Executive Vice President (current)
April 2021 Representative Director (current), All Architecture (current)
In charge of Occupational Health and Safety (current), In
charge of Quality and the Environment (current)

54

Director
Senior Managing Executive Officer,
General Manager of the Administration Division
In charge of Compliance

Koji Hidaka

April 1982 Joined Kumagai Gumi Co., Ltd.
April 2013 Executive Officer/Deputy General Branch Manager of the Tohoku Branch
April 2014 Managing Executive Officer, General Manager of the Civil
Engineering Management Division
June 2014 Managing Director
May 2016 General Manager of the Railway Project Promotion Division of the
Civil Engineering Management Division
April 2017 Senior Managing Director, Senior Managing Executive Officer
April 2020 Director, Executive Vice President (current)
April 2021 Representative Director (current), All Civil Engineering (current)
In charge of Technology (current)

Yoshiaki Ogawa

Governance

Back row, from left
Back row, from right

Koji Okaichi

April 1984 Joined Kumagai Gumi Co., Ltd.
April 2016 Executive Officer
Deputy General Manager of the Civil Engineering Management
Division, General Manager of Civil Engineering, Civil
Engineering Management Division
April 2017 General Branch Manager of the Kansai Office
April 2018 Managing Executive Officer
April 2019 Kansai Yume Project Office Director, Kansai Office
April 2020 Senior Managing Executive Officer (current)
April 2021 General Manager of the Civil Engineering Management Division (current)
General Manager of the Railway Project Promotion Division of the
Civil Engineering Management Division (current)
June 2021 Director (current)

Sakae Yoshida

Director *1

April
1981
April
2009
April
2010
January 2015

Joined Dainippon Ink and Chemicals Inc. (current DIC Corporation)
Factory Manager, Sakai Factory, DIC Corporation
Factory Manager, Chiba Factory of the above company
Executive Officer and General Manager of the Production
Supervising Division of the above company
January 2018 Advisor to the above company
June2020 Director, Kumagai Gumi Co., Ltd. (current)

Junji KonishiStanding Audit &Supervisory Board Member

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

Masaaki Ayukawa
Shigeru Okada
April 1975
June 2005
June 2008
June 2010
June 2011
April 2016
April 2017
April 2018
June 2018
June 2021

Director *1

Joined Showa Sangyo Co., Ltd.
Executive Officer of the above company
Managing Director of the above company
Senior Managing Director of the above company
President and Representative Director of the above company
Chairman and Representative Director of the above company
Chairman and Director of the above company
Director of the above company
Special Advisor to the above company
Director, Kumagai Gumi Co., Ltd. (current)

Kimie Sakuragi
March

1981

April

1995

November 1998
January 2003
June

2003

April
June
June

2007
2019
2021

Director *1

Joined Fukutake Publishing Co., Ltd.
(current Benesse Holdings, Inc.)
Supervisor, Publications Department, Publishing Divisionof the above company
Section Manager, Business Ethics Committee of the above
company
Manager, Corporate Ethics and Compliance Office of theabove company
Standing Audit & Supervisory Board Member of the above
company
Project Professor, The University of Aizu (current)
Outside Director, Toyobo Co., Ltd. (current)
Outside Director, Isuzu Motors Ltd. (Audit Supervisory
Committee Member) (current)
Director, Kumagai Gumi Co., Ltd. (current)*1 Mr. Sakae Yoshida, Mr. Shigeru Okada, and Ms. Kimie Sakuragi are Outside Directors.
*2 Mr. Masaaki Ayukawa and Mr. Yutaka Takehana are both Outside Audit & Supervisory
Board Members.

Audit & Supervisory Board Member *2

April

1969 Joined ChuoAoyama Accounting Corporation(subsequently ChuoAoyama Audit Corporation)
February 1971 Registered as Certified Public Accountant
March 1983 Representative Partner, ChuoAoyama Audit Corporation
May
2000 Senior General Manager of ChuoAoyama Audit Corporation
March 2009 Tonen General Sekiyu K.K. (current ENEOS Corporation)
Standing Audit & Supervisory Board MemberJune2014 Audit & Supervisory Board Member, Kumagai Gumi Co., Ltd. (current)
March 2016 Outside Director (Audit Supervisory Committee Member) of
AUCNET INC. (Current)

Tatsuru Sato

Audit & Supervisory Board Member

April 1978
April 2011
June 2012
April 2013
June 2013
April 2016
April 2018

Joined Sumitomo Forestry Co., Ltd.
General Manager of the Human Resource Division of the above company
Executive Officer of the above company
Managing Executive Officer of the above company
Director of the above company
Senior Managing Executive Officer of the above company
Representative Director of the above company (current), Executive
Vice President and Executive Officer of the above company (current)
June 2018 Audit & Supervisory Board Member, Kumagai Gumi Co., Ltd. (current)

Yutaka Takehana
April
1973
September 2001
June
2003
April
2009
June
2013
June
2015
September 2017
June
2019

Audit & Supervisory Board
Member *2

Joined National Police Agency
Chief of Police, Hiroshima Prefecture
Vice Governor of Tokyo Metropolis
Senior Executive, Panasonic Corporation
President & CEO, Tokyo Big Sight Inc.
Outside Director, SOHGO SECURITY SERVICES CO., LTD. (ALSOK)
Advisor, Meiji Yasuda Life Insurance Company
Audit & Supervisory Board Member, Kumagai Gumi Co., Ltd. (current)
The Kumagai Gumi Group Corporate Report 2021

55

GovernanceCorporate GovernanceFundamental concepts and system

Evaluation of the effectiveness of the Board of Directors

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, a Boardof Corporate Auditors, and an independent accounting
auditor to enhance the effectiveness of our corporate
governance.
To achieve clarity in management responsibilities andto build an optimal management system in response tochanges in the business environment, the term of officeof Directors is set to one year. We also appoint three
Outside Directors who provide counsel to managementfrom an objective standpoint.
The nomination of Directors and Executive Officers
and amounts of compensation are determined by
the Board of Directors on the basis of reports by the
Nomination & Compensation Advisory Committee,
composed of the President and Representative
Director and Outside Directors, to ensure objectivity
and transparency.
With regard to Audit & Supervisory Board Members,
we appoint Outside Audit & Supervisory Board Members

Meeting the Corporate Governance Code
Details are noted in the Corporate Governance Report,
which is available at our website or the Tokyo Stock
Exchange website.
Corporate Governance System
General Meeting of Shareholders
Appointment
Nomination &Compensation
Committee

Accounting Auditor

Appointment

Appointment
Advise(Board of)
Directors
ReportAudit &
Supervisory
Board

AuditsControl

Business Execution
Management
Meeting

AuditsAuditsExecutive Officers(including those
concurrently serving
as Directors)

Instruct

Instruct

Instruct
Audit Office(Internal audit
functions)AuditsOperating
Division

Guidance

Administration Division
Legal & ComplianceDepartment(checks & balances)(FY)

Appointment
of 1

2021

12

Change in the number of Directors in the
Articles of Incorporation (from 18 to 12)

Toward appointmentof 3 people

Establishment of Nomination & Compensation Advisory Committee
Adoption of stock compensation system

Improvement of the effectiveness of internal controls
Kumagai Gumi reviews internal rules and management
conferences appropriately, and otherwise improves andoperates structures to assure appropriateness in work,
based on our Basic Policy to Establish Internal Control
Systems.

2021
18

Discontinuation of Directors inroles below Vice President

Toward appointment of 2 persons (including 1 woman)

Executive compensation

2020

Change to structure of 3 Outside Directors

Introduction of Executive Officer system

2020

2019

( peopleto )Change in the number of Directors in the Articles of Incorporation
Discontinuation of Directors in roles below Vice President

2019

Start of evaluation of effectivenessProcesses for nomination anddetermination of compensation

56

Adoption of stock compensation system

Outside Directors

2018

2018

Appointment of 1

Separation of oversight andexecution of business
Clarification of responsibility

2017

2017
Establishment of Nomination & Compensation Advisory Committee

Improvement of the effectivenessof the Board of Directors

2016

2016
Start of evaluation of effectiveness of the Board of Directors
Female Director (Outside) Appointment of 1
Change to structure of 2 Outside Directors

2015

2015
Outside Director

2001

Introduction of Executive Officer system

Major changes in strengthening of Corporate Governance 2001

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.

Once a year, Kumagai Gumi Directors and Audit &Supervisory Board Members take part in an anonymousquestionnaire survey evaluating the effectiveness of
the Board of Directors. We verify the results of thesurvey and consider improvements. From the FY2018
evaluation onward, we are conducting reviews of ourevaluation item settings and evaluation results throughexternal experts.
In FY2020, based on issues for improvement from theprevious fiscal year, we worked to energize deliberationin the Board of Directors through review of the number
and ratio of Outside Directors, revision of somestandards for Board of Directors agendas, measures
for strengthening compliance and group governance,
exchanges of opinions following proceedings, and othermeans. Based on subsequent results of self-evaluation
and reviews by external experts, we confirmed thatthe effectiveness of the Board of Directors as a wholeis secured. We also shared issues for consideration,
including 1) further promotion of delegation of
authority through revisions to standards for agendas,
2) promotion of medium- to long-term discussions
concerning management, and 3) further strengtheningof compliance and group governance.
Related information P54-55

Directors’ compensation and selection of Outside Executives
Compensation for Directors is based on a systemof compensation linked to shareholder interests,
functioning appropriately as an incentive to continuously
improve corporate value. When determining individualcompensation, our basic policy is to set an appropriate
level based on the responsibility of the individuals, and,within the limit of the total amount of compensation for
Directors decided at General Meetings of Shareholders,determine amounts through the Board of Directors
based on findings reported by the Nomination &Compensation Advisory Committee.
Specific compensation for Directors consists ofmonetary compensation (fixed compensation andbonuses) and stock compensation. For Outside
Directors who bear supervisory functions, it consists of
only monetary compensation (of fixed compensation,
an amount of compensation according to position). The
fixed compensation is monthly monetary compensation,and consists of compensation according to position andcompensation according to contribution to businessperformance. In addition, the company has adopted a

Governancefrom among persons who have appropriate experienceand capabilities and who have knowledge of finances,accounting, and legal matters, in order to conduct audits
with high efficacy.
Regarding accounting audits under the Companies
Act and the Financial Instruments and Exchange Act,
we undergo impartial audits by GYOSEI & CO.

In order to make our Management Philosophy of "We
aim to serve as a corporate group that contributes
to society through business activities centered on
construction" a reality, we consider enhancement of theefficacy of our corporate governance a priority issue.

List of the Board of Directors

stock compensation system employing trusts, by which
the company grants points based on position, etc. eachfiscal year to eligible persons, and, generally at thetime of retirement, grants shares of stock based on the
cumulative number of points.
Compensation for Audit & Supervisory Board
Members is determined through deliberation by Audit &Supervisory Board Members, within the limit of the total
amount of compensation for Audit & Supervisory Board
Members decided at General Meetings of Shareholders.
Compensation, etc. for Directors and Audit & Supervisory Board Members (FY2020)(¥ million)

Total amount by type of
Total
compensation, etc.
Executive category amount of
Fixed
Stock
compensationcompensation Bonus compensation

Directors(Outside Directors
among these)

Audit & Supervisory
Board Members(Outside Audit & Supervisory
Board Members among these)

173
(20)

42

(20)

157

-

16

42

-

-

(20)

(20)

Numberof eligible
Executives

9

(-)

(3)

4

(2)

* The stock-based compensation noted is the amount of provisions for stock
benefits for Directors recorded in FY2020.

Reasons for appointment of Outside Executives / Attendance at Board of Directors meetings (FY2020)
Attendance

Name

Independent
Executive

Reason for appointment

Mikie Yumoto○

Mikie Yumoto has a track record of participation in corporate management as an executive in charge of human resources, primarily
in another industry. 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 to the company's management.

Board ofDirectors

16 times /16 times

Sakae Yoshida○

Sakae Yoshida has a track record of participation in corporate management as an executive in charge of production departments,
primarily in another industry. 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.

Board ofDirectors

13 times /13 times

Shigeru Okada○

Shigeru Okada has a track record of participation in corporate management as a representative director and president, andchairman, primarily in another industry. 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.

-

Kimie Sakuragi○

Kimie Sakuragi has a track record of participation in corporate management as a standing auditor, primarily in another industry.
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 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 expectation that he will leverage his resulting extensive experience and expert
knowledge to provide appropriate auditing of the company's management from an objective standpoint.

Board ofDirectors
Board ofCorporate
Auditors

16 times /16 times
11 times /12 times○

Yutaka Takehana has a track record of participation in key government office positions and corporate management in otherindustries. 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.

Board ofDirectors
Board ofCorporate
Auditors

16 times /16 times
12 times /12 times(resigned June 2021)(appointed June 2020)(appointed June 2021)(appointed June 2021)

Masaaki Ayukawa

Yutaka Takehana(Number of times attending /Number of meetings)

Website Corporate Governance https://www.kumagaigumi.co.jp/en/company/governance.html
The Kumagai Gumi Group Corporate Report 2021

57

GovernanceRisk Management
Fundamental concepts of compliance

Compliance system
Kumagai Gumi's compliance system consists primarilyof three internal functions: Autonomous functions by
Headquarters and branch offices, support functions by the
Administration Division and other specialized divisions, andauditing functions by the Audit Office (refer to figure below).
In addition, the Legal Compliance Audit Committee, anorganization independent of management, periodicallycarries out evaluations of the company from an outsider'spoint of view and advises management of any problems
uncovered, in order to strengthen the enforcement ofcompliance.
Legal Compliance Audit Committee
The Legal Compliance Audit Committee is composedof internal company committee members as well as
outside committee members who include attorneys andother experts. It convenes every year.
Compliance System

Internal whistleblower system
The Kumagai Gumi Group has set up a hotline forquickly assessing, correcting, and preventing problems
involving compliance. We are working to root out
compliance violations by accepting a wide range ofwhistleblower reports, including from our employees,
group company employees, and partner businesses.
We have also introduced an in-house leniency program(measures reducing penalties for whistleblowers) to
encourage use of the voluntary whistleblower system.
Internal whistleblower system
Whistleblowers

Means ofwhistleblowing

Kumagai Gumi andgroup companies

E-mail/Telephone

Full-time
employees

Senioremployees

Contract
employees

Part-time
employees

Advisors

Temporaryemployees

Partner firms

Evaluation by outsiders

Midosuji Legal
Profession Corporation

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

Legal & ComplianceDepartment●Implementation of factual investigation●Examination of recurrence prevention
measures●Enactment of appropriate measures

InstructAudit
findings

Support functions
Administration
Divisions, etc.

Autonomous functions
Head andBranch Offices

Auditing functions
Audit Office

The Kumagai Gumi Group complies with the Financial
Instruments and Exchange Act and related laws andregulations, and has established Internal Regulations
on the Prevention of Insider Trading to enhancethe effectiveness of compliance. Based on theseregulations, we have established an Insider Information
Management Committee to perform information
management across the company.

Setting of Tax Policy
In March 2020, the Kumagai Gumi Group clarified
its existing initiative direction concerning tax affairs
to create the Kumagai Gumi Group Tax Policy, withthe aim of further improving corporate governanceand compliance regarding tax affairs and fostering
proper awareness of taxation payment matters among
executives and staff members.

Company-wide Legal
Compliance and Legal
Support Systems

Enforcementof prior judgments

Systems improvement
and legal support

Unbiased audits

Auditing and corrective
advising measures

Status of legal suits and violations of laws
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 established a program for dealing
with anti-social forces, and educate our employees on
specific ways of eliminating such forces.

As of the end of March 2021, our company is involved
in five civil cases in Japan.
In FY2020, no serious legal violations (including
administrative sanctions, administrative measures, etc.)
occurred that involved measures such as suspension ofdesignated bidding at a national level.

Initiatives for legal compliance

58

Submission of written pledge from all employees
To raise all employees' awareness in enforcing
compliance with laws and ordinances, every year
executives and staff members of Kumagai Gumi Groupsubmit a written pledge concerning compliance (100%submission rate).

Protection of Private Information
Kumagai Gumi has established fundamental rules
and regulations, such as the Basic Principle, thePrivacy Policy, and the Private Information Protection
Regulations, and engages in initiatives to properly
handle and protect the private information of all

Prevention of insider trading

Management
Instruct

information assets from unauthorized access, leakage,falsification, loss, disaster, and other threats. We havealso appointed an Information Security Officer andestablished an Information Security Committee.

stakeholders, including shareholders and employees.

Contact desk

Reporting on investigation
findings and response(except where anonymous)

AdviseKumagai Gumi's Compliance Rules of Conduct stipulate
that, in the receipt of orders for construction work, actsthat violate criminal law, antitrust law, or other law,or that impair fairness and impartiality in bidding, areprohibited. Through means including training and thecollection of pledges, we ensure that employees are
not involved in violations, and have built a structure toprevent the occurrence of violations through an internalreporting system.

(from August 2021)

etc.

Outside evaluation
functions
Legal Compliance
Audit Committee

System for prevention of collusion andprevention of bribery, etc.

GovernanceIn order for Kumagai Gumi to continue earning theappreciation and trust of customers and society, we
believe that all of our officers and employees must takeresponsibility for their daily actions, comply with laws,social sensibilities, and corporate ethics, and maintainan awareness of compliance.

Compliance training and compliance reinforcementmonth
To improve basic understanding of compliance, from
October 2020 through February 2021 our company
conducted an internal training program on topics
including antitrust law, bribery, and corruption, targeting
employees of Kumagai Gumi as well as groupcompanies, from a perspective of strengthening thegroup's compliance structure.
In addition, we have designated October of every
year as a compliance reinforcement month.

Information security
Kumagai Gumi established its Information Security
Policy in 2007, and takes concrete measures to protect

Business Continuity Plan (BCP)
In the event of a major disaster, Kumagai Gumi will
make every effort to achieve rapid recovery of sites
under construction and the restoration of infrastructure,and to respond to requests for restoration aid from
customers and local residents. We have formulated
a Business Continuity Plan (BCP) as a basic policy
for contributing to prevention of secondary accidents,
restoration of urban functions, safety of local residents,
and recovery of the private economy.
Operation of the Safety Confirmation
Communication System
In preparing support systems based on business
continuity plans, confirmation of the safety of employees
is the most important matter. We operate a system thatallows confirmation of safety status, extending evento group companies and partner companies, and the
Kumagai Gumi Group has established systems to
support quick recovery.
Measures to the COVID-19 pandemic
Kumagai Gumi has set up a COVID-19 task force headedby the President, to carry out swift decision-making andexecution of measures. From the perspective of ensuring
the health and safety of employees, their families,
and people in cooperating companies, we provide
employees with guidelines for dealing with COVID-19
pandemic (infection countermeasures, restrictions on
activities, business continuity, etc.). In accordance withthe state of the pandemic and government policy, weare continuing with business through the promotionof telework and staggered commuting, guidance forpartner companies, and contagion control measures.

The Kumagai Gumi Group Corporate Report 2021

59

GovernanceInterview with an Outside Director

Kumagai Gumi appoints Outside Directors to bringdiverse perspectives into management and to enhance
its corporate governance. President Yasunori Sakurano
spoke with Sakae Yoshida, who took the position of
Outside Director in June 2020.

Yasunori Sakurano President

Surprised by progress in active participation
by women
Sakurano A year has passed since you became an
Outside Director. What impressions do you have ofKumagai Gumi?
Yoshida The atmosphere inside the company seems
positive, flat and lively. I was a little surprised, as thecompany has a history of 120 years, and before taking
the position I had an image of it as stolid.
In particular, I was impressed by how far active
participation by women has progressed, beyond what
I'd imagined. Women are demonstrating capabilities not
only in office managerial positions but also in sales andin the field.

The company experienced stagnation forsome time, but in recent years has begun to grow again.
In line with this, we're undertaking various activities
with the aim of "management with participation of all."Efforts to promote active participation by women havetaken root in recent years, and it seems to me that theatmosphere within the company is changing.
Incidentally, what's your impression of the Board of
Directors?
Sakurano

Yoshida I think the Board of Directors is alsofunctioning well in terms of diversity. The Outside
Directors and Audit & Supervisory Board Members
have diverse careers and experience, and I'm often
inspired by the discussions.
However, it also seems to me that discussions by theentire Board of Directors could go even further.

Engaging in active discussions throughcompeting opinions from diverse perspectives

Governance

We hold active discussions
from varied perspectives at
Board of Directors meetings.
Our aim is to further enhance
corporate governance.

Outside Director

in business execution responding to questions from
Outside Directors and Audit & Supervisory Board
Members.
I think we should take it forward a step from there.
Isn't it ideal to instead draw conclusions throughvigorous debates that transcend participants' respective
positions? That's another reason why the role ofOutside Directors is very important. For my part, I try
to stir things up with statements that trigger discussion.
I think that discussions in Board of Directors
meetings have been invigorated with the addition of
Outside Directors, but I think we're still halfway alongthat path, as you note.
You were originally a chemical engineer, and you havea wealth of experience in production and engineering
departments. You also have experience overseas. It's
my hope that you can leverage that manufacturingexperience in this different field of construction.
Sakurano

Yoshida In the engineering department of a chemical
manufacturer, I was also in a position to orderconstruction work, such as for production equipment.
In short, my standpoint differed 180 degrees from thatof a construction company. I want to make use of thatexperience too.

Social contribution activities that reveal "selfpowered" employees
Sakurano In addition to the active participation by
women that you mentioned, are there other things thatyou've felt about Kumagai Gumi?
Yoshida I feel that employees have very highawareness of diversity and environmental issues.
Perhaps it's a matter of being "self-powered," but it's
my impression that employees work proactively on theirown, without having to be pushed by the company. The
company also implements a unique structure that uses
matching gifts, with employees taking active part insocial contribution activities.
Sakurano

You mean the Kumagai Gumi Smile Project.

Right. The company supported the Kosodate
Hiroba Zenkoku Renraku Kyogikai (Activities to support
Childcare in the community) as a project under this, andI took part in the activities with employees.
YoshidaSakae Yoshida

Activities such as compliance training are carried out
extremely thoroughly. Looking ahead, I think we needstructures to monitor the effects of these. The thing
about corporate compliance is that even if 99 people
get it, negligence by just 1 person can lead to serious
problems. Building up solid mechanisms is important.

The backbone of the company must not beshakenSakurano As a final topic, tell me your thoughts on the
new Medium-Term Management Plan.
Yoshida I think it's important that we make a clear
distinction between our commitments to investors andother stakeholders, and the targets that indicate thedirection that the company should take. If these are
confused and are not accompanied by results, we may
not be able to earn the trust of society, and employee
motivation may not be enhanced.

Thank you very much. We will continue
making use of the opinions of Outside Directors
and other stakeholders to enhance our corporate
governance.
Sakurano

Creating structures for the enforcement ofcompliance
Sakurano Compliance is another very important topic
for Kumagai Gumi in earning the trust of society. What
are your thoughts on those efforts?
Yoshida It's my feeling that we're solidly tacklingcompliance, including the enforcement of legal
compliance. At the same time, I think there are someconcerns.

In what sort of way?
I think this is common among Japanesecompanies, but discussions in Board of Directors
meetings tend to be one-way, with Directors involved
Sakurano
Yoshida60

The Kumagai Gumi Group Corporate Report 2021

61

Financial Information

Commentary on and Analysis of Management Performance* Numbers are rounded down to the nearest 100 million yen.

During the consolidated fiscal year, the Japanese economy
showed some signs of increase in capital investment,
production, and exports, despite no move toward subsidenceof the COVID-19 pandemic that spread globally from the
beginning of 2020. Private consumption struggled under
repeated requests to the public to remain at home; corporate
profits also fell sharply, particularly in industries related to
private consumption, and GDP declined for the first time since
the period of the Lehman Brothers collapse.
In the construction industry, corporate construction investment
was restrained, particularly in the manufacturing industry.
Housing investment was weak but remained flat overall,while public investment remained firm under the execution of
relevant budgets. Accordingly, a firm business environment
continued overall.

Management performance

62

Sales (+3.2% year on year) With the steady completion ofexisting construction projects, sales increased by 14.0 billion
yen (3.2%) from the previous consolidated fiscal year to 450.2
billion yen.
Gross profit (+5.7% year on year) Due to an increase insales and improvement in gross profit margin, gross profit
increased by 2.5 billion yen (5.7%) to 48.0 billion yen.
Selling, general and administrative expenses Althoughpersonnel expenses increased due to factors including an
increase in personnel, sales activities and movement ofofficers and employees were restrained under the COVID-19
pandemic, resulting in expenses decreasing by 40.0 million
yen (0.2%) from the previous consolidated fiscal year to 20.0
billion yen.
Operating income (+10.3% year on year) Due to factors
including increased gross profit, operating income increasedby 2.6 billion yen (10.3%) from the previous consolidated
fiscal year to 28.0 billion yen.
Non-operating income and loss Due to factors including an
increase in dividend income, non-operating income increased
by 200.0 million yen from the previous consolidated fiscal
year to 900.0 million yen.
Non-operating expenses increased by 100.0 million yen fromthe previous consolidated fiscal year to 500.0 million yen, due toan increase in syndicated loan fees and other factors.
Ordinary income (+10.4% year on year) Due to an increasein operating income and improvement in non-operating income
and loss, ordinary profit increased by 2.6 billion yen (10.4%)
from the previous consolidated fiscal year to 28.4 billion yen.
Extraordinary income and loss The company recorded
a total extraordinary income of 100.0 million yen, including
100.0 million yen in settlements received and 10.0 million yen
in compensation income for expropriation.
The company recorded a total extraordinary loss of 2.4
billion yen, including 1.2 billion yen in provision for contingent
loss as an additional expense related to the condominium
in Nishi-ku, Yokohama, Kanagawa Prefecture, in which ourconstruction defects were identified in 2014, as well as a loss
on transfer of claims of 400.0 million yen.
Income taxes, etc. The company recorded adjusted income
taxes of 1.5 billion yen due to income taxes, residential taxes,
and business taxes of 6.6 billion yen, and adjustments in income
taxes, etc. due to a decrease in deductible temporary differences.
Net income attributable to owners of parent (-7.8% year on year)
Despite an increase in ordinary income from the previous
consolidated fiscal year, net income attributable to owners ofparent decreased by 1.5 billion yen (7.8%) from the previous
consolidated fiscal year to 17.9 billion yen due to the effects
of extraordinary losses.

Management performance by segment
Civil Engineering Orders received for public projects
declined from the previous consolidated fiscal year, but private
sector orders increased in the fields of electricity, energy, andrailways, growing 8.4% from the previous consolidated fiscal
year to 100.1 billion yen.
Although the amount of construction brought forward
at the beginning of the term was significantly lower than at
the beginning of the previous consolidated fiscal year, sales
declined only 0.6% to 121.4 billion yen due to an increase inconstruction volume at the end of the period.
Operating income increased 1.2% from the previous
consolidated fiscal year to 7.7 billion yen due to factors
including significant cost reductions in completed delivery
work and the acquisition of additional design changes.
Building Construction Although orders received increasedin the housing sector, orders declined in the warehouse andlogistics facility sector, rebounding from the several orders
for large projects received in the previous consolidated fiscal
year. In addition, some orders for large projects scheduled forthe end of the fiscal year were carried over to the following
fiscal year. Accordingly, orders received decreased by 21.2%
to 183.2 billion yen.
Although the amount of construction brought forward at
the beginning of the term was at the same level as in theprevious consolidated fiscal year, sales increased 3.8% fromthe previous consolidated fiscal year to 238.7 billion yen due
to steadily increasing sales of large-scale construction work.
Operating income increased 16.7% from the previous
consolidated fiscal year to 14.7 billion yen due to factors
including significant cost reductions in completed delivery
work and the acquisition of additional design changes.
Subsidiary Sales increased by 7.2% from the previous
consolidated fiscal year to 105.7 billion yen due to an increasein the amount of construction carried forward at the beginningof the term at GAEART Co., Ltd. and Taiwan Kumagai Co.,Ltd.
Operating income increased 8.0% from the previous
consolidated fiscal year to 5.5 billion yen due to an increasein gross profit associated with an increase in sales, as wellas improved profitability primarily due to a decline in crude oil
prices at GAEART Co., Ltd.

Financial status
Assets (+1.3% year on year) Assets increased by 4.7 billion
yen (1.3%) from the end of the previous consolidated fiscal
year to 379.5 billion yen.
Current assets increased by 1.1 billion yen (0.4%) from theend of the previous consolidated fiscal year to 311.7 billion
yen. Although cash deposits decreased by 3.8 billion yen
due to factors including advance expenditures for large-scaleconstruction and the relaxation of payment terms to vendors,
notes receivable and accounts receivable from completed
construction contracts increased by 6.5 billion yen due to anincrease in sales.
Fixed assets increased by 3.6 billion yen (5.7%) from theend of the previous consolidated fiscal year to 67.8 billion
yen. Investment securities increased by 6.8 billion yen due toreasons including an increase in the market value of shares
held.
Liabilities (-4.9% year on year) Liabilities decreased by 11.0
billion yen (4.9%) from the end of the previous consolidated
fiscal year to 215.7 billion yen.

Current liabilities decreased by 10.9 billion yen (5.4%) fromthe end of the previous consolidated fiscal year to 190.6 billion
yen. In addition to a decrease in provisions for contingent
loss due to reasons including draw-down associated with theimplementation of provisions, notes payable and accounts
payable from completed construction contracts, plus
electronically recorded obligation and other accounts payable,
decreased by 4.0 billion yen, and the amount received for
unfinished contracts decreased by 8.0 billion yen.
Fixed liabilities decreased by 80.0 million yen (0.3%) fromthe end of the previous consolidated fiscal year to 25.1 billion
yen. Long-term loans payable decreased by 400 million yen.
Net assets (+10.7% year on year) Net assets increased
by 15.8 billion yen (10.7%) from the end of the previous
consolidated fiscal year to 163.8 billion yen. Retained earnings
increased by 12.3 billion yen due to factors including therecording of 17.9 billion yen in current net income attributable
to shareholders of the parent company, despite the distributionof 5.6 billion yen in surplus. Capital adequacy ratio increasedby 3.7 points from the end of the previous consolidated fiscal
year to 43.2%.
Status of consolidated balance sheet (billion yen)Total
assets

374.8

374.8

Liabilities

226.8

Property,plant andequipment

Current
25.3 assets

Intangible
assets0.5

310.6

Investments
and otherassets38.2

Deferred
assets 0

Non-current
assets64.1

Total
assetsTotal liabilities
and net assets
Shareholders'equity

379.5

147.2

Accumulated
other

Current comprehensive
incomeliabilities
0.8
Current
201.5
Property, assets
Non-current
plant andequipment
311.7
liabilities
25.6
25.2
IntangibleNet
assets148.0

83rd term(as of March 31, 2020)

Total liabilities
and net assets

379.5
Liabilities
215.7
Current
liabilities
190.6
Non-current
liabilities
25.1

assetsNet
assets0.5

Investments
and otherassets Non-current
41.5
assetsCapital resources and liquidity of funds
Short-term working capital is based on self-funding and shortterm borrowings from financial institutions. Capital related
to equipment investment and long-term working capital are
based on self-funding and long-term borrowings from financial
institutions.
Our balance of interest-bearing debt at the end of theconsolidated fiscal year was 11.8 billion yen, while our current
ratio was 163.6% and our fixed long term conformity rate was
35.9%.
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 inorder to efficiently procure working capital. The total amountof the agreements at the end of the consolidated fiscal year
was 30.0 billion yen (with outstanding borrowings of 0 yen).
We have secured stable means of raising funds, and we canfully 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
Currency and deposits

Shareholders'equity120

Accumulated
othercomprehensive
income

80

159.5

4.2

163.8

Interest-bearing debt

108.5

100

82.4

73.9

71.3

40
20

67.8

15.4

14.4

12.8

12.2

11.8

2017/3

2018/3

2019/32020/32021/3084th term(as of March 31, 2021)

75.1

60

billion yen

Status of cash flow
Return to Shareholders

Cash flow from operating activities Cash flow fromoperating activities was positive 6.5 billion yen (positive 300
million yen in the previous consolidated fiscal year) due tofactors including the recording of 26.0 billion yen in profit
before income taxes.
Cash flow from investing activities Cash flow from investing
activities was negative 4.3 billion yen (negative 2.2 billion
yen in the previous consolidated fiscal year), due to factors
including the acquisition and renewal of equipment and theacquisition of shares of affiliated companies.
Cash flow from financing activities Cash flow fromfinancing activities was negative 6.1 billion yen (negative 5.3
billion yen in the previous consolidated fiscal year) due tofactors including payment of dividends.
Cash and cash equivalents The balance of cash and cash
equivalents at the end of the consolidated fiscal year, including
increases due to currency conversion, decreased by 3.8
billion yen (5.1%) from the end of the previous consolidated
fiscal year to 71.3 billion yen.

Our basic policy for distribution of profits is to fairly and stably
return profits to shareholders, taking into account factors
including our current business performance, our medium- tolong-term business outlook, and the business environment,
while striving to enhance internal reserves for the purposeof enhancing our management foundation and expanding
business income.
At the end of the 84th term, we paid a dividend of 120 yen
per share. Looking ahead, we will further weigh the return ofprofits to shareholders, and will continue returning profits withthe goal of a 30% payout ratio. Regarding the acquisition andretirement of treasury stock, our policy is to carefully consider
these actions with capital efficiency and cash flow conditions
taken into consideration.

Status of consolidated statement of cash flows (billion yen)

Payout Ratio

Cash flow from
Cash flow
operatingfrom investing
Cash and cash activities
activities Cash flow fromequivalents atfinancing-4.3
beginning ofactivities
6.5
Translation Cash and cash
periodadjustment equivalents at-6.1
end of term

75.1

0
71.3

Profit attributable to owners of parent
25
20
15
10
5

Total dividends

35.0
16.4

15.7
23.1

40.0

17.9

19.4

31.2

28.8

13.3

30.0
20.0

15.9

10.0

2.6

4.2

4.6

5.6

billion yen 2017/3

2018/3

2019/32020/30

Payout ratio

5.6
2021/30.0%

The Kumagai Gumi Group Corporate Report 2021

63

Financial Information

Key Financial Data over 10 Year Period

Orders received

Performance75th term

76th term

77th term

78th term

79th term

80th term

81st term

82nd term

83rd term

84th term

2012/3

2013/3

2014/3

2015/3

2016/32017/3

2018/3

2019/32020/32021/3

208,479

223,429

291,024

329,495

293,558

284,711

381,784

454,007324,959

283,361

Civil engineering

73,082

63,410100,805

115,764

109,463

103,718

129,891

155,751

92,371

100,106

Building construction

135,396160,019

190,219

213,730

184,094

180,992

251,892

298,255

232,587

183,255

Sales

257,581

260,753

328,900

362,090343,647

344,706

374,019

389,058

436,151

450,232

Gross profit

14,385

10,40818,35929,03839,06841,08040,23045,53045,49848,084

5.6

4.0

5.6

8.0

11.4

11.9

10.8

11.7

10.4

10.7

SG&A Expenses

11,931

11,575

11,75012,934

14,52815,945

17,18819,06520,05720,015

Operating income (loss)

2,454(1,167)

6,608

16,10424,54025,13523,041

26,46425,44028,069

1.0

(0.4)

2.0

4.4

7.1

7.3

6.2

6.8

5.8

6.2

Ordinary income

2,904

65

6,791

15,65825,77225,35822,682

26,55325,71828,400Net income (loss) attributable to owners of parent

1,593(1,083)

4,299

5,458

12,092

16,433

15,783

13,312

19,447

17,925Comprehensive profit

2,435

123

6,313

6,683

12,157

16,947

14,098

12,956

17,851

21,414

Net assets

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

134,883

148,034

163,835

Total assets

200,568

202,800

235,929

255,514

255,525

271,908

333,665

353,718

374,841

379,573

Property, plant and equipment

13,845

14,19314,08015,053

15,745

17,19919,504

24,83625,34725,658Interest-bearing debt

25,62622,527

21,161

19,93817,821

15,422

14,47912,84912,258

11,889

Capital adequacy ratio (%)

21.9

21.7

20.7

21.0

25.4

29.5

37.9

38.1

39.5

43.2

Cash flows from operating activities

1,317

3,540

21,816

18,262

4,234

8,625

17,641(12,398)

345

6,572

Cash flows from investing activities(526)(1,426)(369)(3,042)(448)(3,090)(14,010)(7,379)(2,298)(4,306)

Cash flow from financing activities(2,862)(3,208)(1,472)(1,338)(2,926)(4,024)30,856(6,126)(5,361)(6,112)

Cash and cash equivalents, end of term

37,734

37,16657,60971,702

72,42273,926

108,532

82,44675,15571,335Book-value per share (BPS) (yen)135.42135.70142.09143.27173.762,150.32

2,707.51

2,894.41

3,177.22

3,516.06

8.79(5.91)

19.71

15.72

32.35

439.93389.63285.48417.34384.68Dividend per share (yen)

-

-

-

2.00

4.00

7.00

90.00

100.00120.00120.00

Payout ratio (%)

-

-

-

12.7

12.4

15.9

23.1

35.0

28.8

31.2

88

99

255

375

286

290

3,420

346.0

2,501

3,005

Price-earnings ratio (PER) (multiple)

10.0

-

12.9

23.8

8.8

6.6

8.8

12.1

6.0

7.8

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

0.6

0.7

1.8

2.6

1.6

1.3

1.3

1.2

0.8

0.9

Orders received (Non-Consolidated)

Gross profit margin (%)

Operating income margin (%)

Financial status

Cash flow

Per-share
information

Stock priceindicators

Earnings (loss) per share (EPS) (yen)Stock price at end of term (yen)Number of issued shares at end of term

Other

(Unit: millions of yen)

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

46,805,660

Return on equity (ROE) (%)

3.6

(2.5)

9.3

10.9

20.4

22.6

15.3

10.2

13.7

11.5

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

1.5

0.0

3.1

6.4

10.1

9.6

7.5

7.7

7.1

7.5

Capital investment

846

1,279

1,272

2,018

2,234

3,187

4,183

7,374

2,636

2,500

1,368

1,323

1,374

1,285

1,516

1,784

1,987

2,348

2,581

2,660

976

939

951

1,045

1,268

1,344

1,684

1,911

2,062

2,011

3,531

3,524

3,510

3,579

3,702

3,798

3,892

4,032

4,154

4,259

Research and development expenses
Depreciation
Number of employees*1 The company performed a stock merger at a ratio of 1 share per 10 shares of common stock, effective October 1, 2017. Total 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.

Website To our investors https://www.kumagaigumi.co.jp/en/ir/index.html

64

The Kumagai Gumi Group Corporate Report 2021

65

Organizational Chart

JPY 30.1 billion■ Number of Employees: 4,259 consolidated;		
2,620 non-consolidated(as of March 31, 2021)■ Scope of Business:
To investigate, survey, plan, design, execute, and supervise
construction works, and to provide technical guidance,
provide comprehensive engineering, management, andconsulting services, as well as related contracting

Stock Information
Current Status

Shareholder Composition■ Securities Code:1861■ Stock Exchange Listing: First Section of the Tokyo
Stock Exchange■ Total number of Shares 71,400,000 shares
Authorized to Be Issued:■ Total number of Shares 46,805,660 shares
outstanding:■ Share Unit:
100 shares■ Number of Shareholders: 38,261 (as of March 31, 2021)■ Administrator of
Sumitomo Mitsui Trust
Shareholders Registry: Bank, Limited■ Fiscal Year:
From April 1 through March 31■ Base Date for Annual
March 31
Dividend:■ Ordinary General
June of the Year
Meeting of Shareholders:

Treasury stock:52,176 shares (0.1%)

Securities firms:
43
885,990 shares (1.9%)
Foreign investors:
285
12,126,068 shares(25.9%)

Number ofshareholders:

38,261

Total number ofshares outstanding:Financial
institutions:55
12,463,676 shares(26.6%)

46,805,660 shares(as of March 31, 2021)

Other Japanese
corporations:438
10,633,621 shares (22.7%)

Individuals
and others:
37,43910,644,129 shares(22.7%)

Legal & Compliance Department
Human Resources and General Affairs Department
Diversity Promotion Department
Finance Department
Examination Department
Accounting Department

Safety, Quality and Environment Division

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

Civil Engineering Management Division

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

Audit Office■ Capital:

Administration Division

Fukui Office

Yasunori Sakurano,
President and Representative Director

Corporate Planning Department
Secretarial Department
Corporate Communication Department
DX Promotion Department

Headquarters■ Representative:

Management Strategy Office

Railroad Project Promotion Division

Building Management Division

Directors/Branch Managers Meeting

January 6, 1938

Management Conference■ Incorporated:

Legal Compliance Audit Committee

January 1, 1898

as of July 01, 2021

Audit & Supervisory Board Member■ Founded:

2-6-8 Chuo, Fukui,
Fukui Prefecture 910-0006, Japan■ Headquarters: 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■ Overseas Offices:
China (Hong Kong), Taiwan, Vietnam, Indonesia, Myanmar■ Group Companies:
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.

President■ Head Office:

Auditors Committee■ Company Name: Kumagai Gumi Co., Ltd.

Board of Directors

Corporate Information

Planning Promotion Department

Marketing & Management
Department

Sales Promotion 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 OfficeMedium- to Large-Scale Wood Structure Promotion OfficeArchitectural Design
Management Division

Stock Trading Data
Stock priceTurnover150,000,000

5,000

Kumagai Gumi turnover
4,000

120,000,000

Kumagai Gumi stock price
TOPIX (Tokyo stock price index)

3,000

90,000,000

2,000

60,000,000

International Division

Administration Department
Project Management Department
Project Development Department

New Business Development Division

New Business Promotion Office
Alliance Promotion Office
Project Creation Promotion Office

Technical Research & Development Division

Planning Group
Technical Research & Development Institute
New Technology Innovation Center

Hokkaido Office
1,000

30,000,00000Architectural 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

Tohoku Office
Tokyo Metropolitan Area Office
Nagoya Office

March
2010

March
2011

March
2012

March
2013

March
2014

March
2015

March
2016

March
2017

March
2018

March
2019

March
2020

March
2021

*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.

66

Hokuriku OfficeKansai Office
Chugoku Shikoku Office
Shikoku Office
Kyushu Office

The Kumagai Gumi Group Corporate Report 2021

67

The cover depicts works by children from Tsukudo Elementary School in Shinjuku, Tokyo, on the theme of "Cities of the Future."* Kumagai Gumi supports opportunities to faster a mindset that treasures nature and 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 learning and 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.

Kumagai Gumi Co., Ltd.
2-1 Tsukudocho, Shinjuku-ku, Tokyo 162-8557
https://www.kumagaigumi.co.jp
Inquiries
Management Strategy Office Corporate Communication Department
TEL 81-3-3235-8114 FAX 81-3-5261-9665
E-mail info@ku.kumagaigumi.co.jp