2016 Annual Report

Takuma Provides New Value for Society in the Environ mental and Energy Fields.
Takuma develops a variety of technologies around a core set of combustion technologies, including
waste treatment and water treatment components.
Our businesses in the environmental and energy fields are dedicated to resolving environmental
issues such as global warming and to helping achieve a recycling-oriented society.
At Takuma, our mission is to pursue technologies for coexisting in harmony with nature in order thathumankind and the Earth might enjoy a truly rich and fulfilling future.

Contents
Corporate Information

3

The Takuma Group Network

5

Financial Highlights

7

Message from Top Management

912Municipal solid waste treatment plants

Industrial waste treatment plants

General-purpose boilers

We support the realization of a recycling-oriented society
using advanced waste treatment technologies that meet theneeds of local communities.

Using advanced incineration technologies, we can even treat
toxic substances suitably and we are supporting theenvironmental protection efforts of industry.

As the convergence of Takuma combustion technologies, ourboilers are a reliable brand that has earned the support of awide range of industries.

Takuma Group 11th Medium-Term
Management Plan — An Overview●

Energy from Waste plant
Pyrolysis gasification and melting plant● Resource recycling and collection plant● Bulky garbage crushing plant● Incineration ash and fly ash melting plant● Waste to solid fuel conversion plant● Transition and intermediate processing plant● Raw fuel (biogas) recovery plant● Various types of pollution prevention equipment●

Step grate stoker incineration plant
Rotary kiln and stoker incineration plant● Fluid bed incineration plant●●Once-through boiler (Eqos, Super Eqos)
Vacuum-type water heater (Vacotin heater)● Package water-tube boiler● Smoke tube boiler (RE boiler)● Heat-transfer oil boiler (thermoheater)● Radiation heating equipment (strip heater)● Various equipment for ships

Business Development●●

Note: These products are handled by Nippon Thermoener Co., Ltd., which is one of ourgroup companies.

1. Activities of Our Municipal Solid Waste
Treatment Plant Business
2. Activities of Our Energy Plant Business3. Activities of Our Water Treatment Business
4. Activities of Our Overseas Business

15
19
23
25

Contributing to Society throughOur Businesses and Products
1. Initiatives to Build a Comprehensive Operation,
Maintenance, and Management Support System
2. Jointly Developing a Gas-fired, High-efficiency
Simple Once-through Boiler
3. Launching a High-efficiency, Proportionalcontrol Gas-fired Once-through Boiler
4. Awards Received from Outside Organizations

27
29
30
31

CSR Initiatives
Energy from Waste plant

Bulky garbage crushing plantIndustrial waste treatment plant

Plant that generates power fromindustrial waste and provides heatto a plantation

Vacotin heater

Thermoheater

Super Eqos

RE boiler

Energy plants

Water treatment plants

Air-conditioning equipment and clean systems

Takuma’s core technologies are utilized in various types ofboilers such as biomass fuel boilers as well as total systems.

We are working to purify dirty water with a holistic
perspective through a “dialogue with water.”

We provide comfortable, clean environments to customers inthe semiconductor industry as well as locations such asuniversities, research institutions, and hospitals.

●

Biomass boiler
Fossil fuel boiler● Waste heat boiler● Power generation plant●

Sewage and wastewater processing plant
Various types of advanced sewage processing plants● Sludge processing plant● Sewage sludge-fueled power plant● Plant to process water that infiltrates final disposal sites

●

●

●

●

Building Equipment
Air-conditioning Equipment● Cleaning and Drying Devices● Clean Room
● Clean Devices● Chemical Filters

Consumer Issues
Activities Involving Product Quality
Corporate GovernanceCorporate GovernanceDirectors, Audit & Supervisory Committee
Members, Executive Officers
IR Activities / Stock Information
Risk Management Structure
Business Continuity Plan (BCP)
Participation in the Community
Contribution to Society
The Environment
Basic Environmental Policy / Environmental
Management
Takuma’s CO2 Reduction Technologies

32
33
34
35
36
37
38
38

39
40

Financial Information
Status of Business Activities
Financial Statement

Biomass power generation boiler

1

TAKUMA 2016 ANNUAL REPORT

Waste heat boiler

Continuous up-flow sand filter

Purification of park pond water

Chemical Filters

Clean Oven

41
47

Clean Booths

TAKUMA 2016 ANNUAL REPORT

2

Corporate Information
Company outline

The History of Takuma

Name:
Head office location:

TAKUMA CO., LTD.
2-2-33 Kinrakuji-cho, Amagasaki, Hyogo 660-0806, Japan
TEL +81-6-6483-2609 FAX +81-6-6483-2751 (operator)
Representative Director: Takaaki Kato, President and CEO
Established:
June 10, 1938
Capital:JPY 13,367,457,968 (as of March 31, 2016)
Main business areas:
The design, construction and superintendence of a wide variety of boilers, plant machinery, pollution
prevention plants, environmental equipment plants, and heating and cooling equipment andfeed-water / drainage sanitation equipment and facilities
The design, construction and superintendence of civil, architecture and other works
Number of employees (non-consolidated): 815 (as of March 31, 2016)
Number of employees (consolidated):
3,366 (as of March 31, 2016)

1912

1912

The first “Takuma boiler” introduced by our
founder, the venerable Tsunekichi Takuma
1920
1930
1938

1930

Takuma Boiler ManufacturingCo., Ltd. founded
Company Motto instituted:“Service to the nation throughboiler manufacturing”

The venerable Tsunekichi Takuma
commended as one of the ten great
inventors of Japan during the Meiji andTaisho periods (1868–1926)

The venerable
Tsunekichi Takuma

Amagasaki Factory

1940
1942

Permits and registrations

Operation begins at Harima Factory
1949
9 9

1949
9 9

Head Office, branch offices and other business offices
Construction license (Minister of Land, Infrastructure, Transport and Tourism license, Special 27-6129)
Construction consultant registration (Minister of Land, Infrastructure, Transport and Tourism registration, Construction 26-10202)
First-class architect office registration (01A02903)
ISO 9001 quality management system certification
Harima Factory
ISO 9001 quality management system certification
ISO 14001 environmental management systems certification
Manufacture of thermal equipment for power generation (Ministry of Economy, Trade andIndustry)
Permission to manufacture boilers and pressure vessels, permission to manufacture cranes
JQA-1952
JQA-EM0313
ISO 9001
ISO 14001(Ministry of Health, Labour and Welfare)certification
certification
Manufacture of specific high-pressure gas facilities (Ministry of Economy, Trade and Industry)
Head Office, Osaka Office,Harima FactoryTokyo Branch, Chubu Branch,
Manufacture of refrigerators (Governor of Hyogo Prefecture)

Company listed on the Osaka andTokyo stock exchanges

Bagasse fired boiler, the first product of its kind in theindustry, exported

Kyushu Branch, Hokkaido Branchand Harima Factory

Harima Factory under construction

1950
1953

1958

Head Office moved to Osaka’s Kita-ku District

Business expanded into the environmental facility sectors,
including waste incineration and water treatment plants
1960

1962

1963

Operation begins at Kyoto Factory（Current: Nippon Thermoener Co.,
Ltd. Kyoto Factory）

Japan’s first waste incineration plantdelivered
Sewerage treatment facility delivered
Japan’s first waste incineration plant

1970
1972
9

1975
9 5

Company renamed Takuma Co., Ltd.

Bulk production begins on “vacotinheater”, the world’s first vacuum-type hotwater heater

Corporate structure (as of June 28, 2016)

Vacotin heater

1980
1986

The first overseas delivery of a waste treatment facility
completed (U.S.A.)

Internal Audit Dept.
1990

Compliance & CSR Promotion Div.
Corporate Service Div.
Corp. Planning & Administration Div.
Committee of
Executive Officers
Board ofDirectors

President

Audit & Supervisory
Committee
Audit & Supervisory
Committee’s Office

1992
99

1992

New Company Motto instituted: “Value Technology,
Value People, Value the Earth”

The first delivery of a waste energy treatment facility
completed in Taiwan（Nei-Hu, Taipei City）

1995

Amagasaki Head Office Building completed
Corporate Marketing Group

1997

Environmental Plant Div.

1998

ISO9001 certification obtained

Administration Div.

Head Office

Japan’s largest Energy from Waste
plant delivered(Tokyo Shinkoto Waste Treatment
Plant capacity: 1,800 tons per day)1999

ISO14001 certification obtained for our Harima Factory
Energy Plant Div.

2000

International Operations Div.
Engineering Group

2005

2005

Takuma Hanyokikai Co., Ltd., a subsidiary
involved in the manufacture and sale of small
boilers, and Ebara Boiler Co., Ltd., merged
and renamed Nippon Thermoener Co., Ltd.

The first delivery of a waste energy
treatment facility completed in
China（Tianjin City）

Management Center

2010
2010
0 0

Technology Center

Energy from Waste plant deliveredin Europe (U.K.)

Project Center
Engineering Center2012
0 – 2013
02013

Construction Center
Harima Factory

3

TAKUMA 2016 ANNUAL REPORTHarima Factory

Operation of the Takuma Solar Power
Plant began (Harima Factory)

Installation and operation of temporary
incinerators to process disaster wastefrom the Great East Japan Earthquake

TAKUMA 2016 ANNUAL REPORT

4

The Takuma Group Network

3
4 9
11
24

10 6 17
7 19

18

14
21
22

16

26

10 1
8

2
12

13

20
23 15

5
1 2

25

Group companies in Japan

4

1

2

6

7

Nippon Thermoener Co., Ltd.

2

Takuma Technos Co., Ltd.

Maintenance, management and operation of waste
treatment facilities, excreta processing facilities andother facilities, as well as the design, installation andmanagement of various types of boilers, environmental
equipment and other equipment
10th Chuo Bldg., 1-5-6 Nihonbashi, Chuo-ku,
Tokyo 103-0023, Japan
TEL +81-3-3231-2911 FAX +81-3-3231-2917
http://www.takumatechnos.co.jp/

5

9

1

Sales of a wide range of boilers and related equipment
Shirokanedai Bldg., 3-2-10 Shirokanedai,
Minato-ku, Tokyo 108-0071, Japan
TEL +81-3-6408-8251 FAX +81-3-6408-8278
http://www.n-thermo.co.jp/

3

3

Hokkaido Sanitary Maintenance Co., Ltd.

4

Takuma Technos Hokkaido Co., Ltd.

5

Sun Plant Co., Ltd.

Operation and maintenance of sewage treatment facilities
Daigo Bldg., 5-11, Ohdori Nishi, Chuo-ku,
Sapporo, Hokkaido 060-0042, Japan
TEL +81-11-221-8398 FAX +81-11-221-8542
8

Takuma’s business offices
1

Head Office

2-2-33 Kinrakuji-cho, Amagasaki, Hyogo
660-0806, Japan
TEL +81-6-6483-2609 FAX +81-6-6483-2751
http://www.takuma.co.jp
2

Osaka Office

Daiken Bldg., 2-3-20 Tsukamoto, Yodogawa-ku,
Osaka 532-0026, Japan
TEL +81-6-6100-3301 FAX +81-6-6100-3302

Tokyo BranchOverseas group companies
6

Chubu Branch

Daitokai Bldg., 3-22-8, Meieki, Nakamura-ku,
Nagoya, Aichi 450-0002, Japan
TEL +81-52-571-5211 FAX +81-52-581-3005
7

Kyushu Branch

Yakuin Business Garden, 1-1-1 Yakuin, Chuo-ku,
Fukuoka 810-0022, Japan
TEL +81-92-717-2828 FAX +81-92-717-2830
8

Okinawa BranchCommons Bldg., 1-11-12 Mashiki, Ginowan,
Nomura Higashi-nihonbashi Bldg., 1-1-7 Higashi- Okinawa 901-2224, Japan
TEL +81-98-898-6650 FAX +81-98-898-6657
nihonbashi, Chuo-ku, Tokyo 103-0004, Japan
TEL +81-3-5822-7800 FAX +81-3-5822-7888 9 Harima Factory
1-2-1 Shinhama, Arai-cho, Takasago, Hyogo
4 Hokkaido Branch676-8540, Japan
Daigo Bldg., 5-11, Ohdori Nishi, Chuo-ku,
TEL +81-79-443-6511 FAX +81-79-443-6599
Sapporo, Hokkaido 060-0042, Japan
TEL +81-11-221-4106 FAX +81-11-241-0523 10 Taipei Branch
7F., No.16, Lane 35, Jihu Rd., Neihu District,
5 Tohoku Branch
NMF Sendai Aoba-dori Bldg., 2-1-2 Ichibancho, Taipei 114-92, Taiwan
Aoba-ku, Sendai, Miyagi 980-0811, Japan
TEL +886-2-8752-3838 FAX +886-2-2656-0584
TEL +81-22-222-3042 FAX +81-22-225-6759
35

TAKUMA 2016 ANNUAL REPORT

Operation and maintenance of waste treatment facilities
Daigo Bldg., 5-11, Ohdori Nishi, Chuo-ku,
Sapporo, Hokkaido 060-0042, Japan
TEL +81-11-221-4128 FAX +81-11-221-1030

1

Taiden Environtech Co., Ltd. (Taiwan)

Design, installation and superintendence of waste
treatment facilities and a wide variety of industrial
machinery and equipment
7F., No. 16, Lane 35, Jihu Rd., Neihu District,Taipei 114-92, Taiwan
TEL +886-2-2659-7137 FAX +886-2-2656-0584
2

SIAM TAKUMA Co., Ltd. (Thailand)

Sale of energy and environment-related plants,
sales of parts for the same plants and after-sales
service
77/53 Sinn Sathorn Tower, 15th Floor,
Krungdhonburi Road, Klongtonsai, Klongsarn,
Bangkok 10600, Thailand
TEL +66-2-4385616 FAX +66-2-4400114

Design, construction and superintendence of
air-conditioning equipment, feed-water/drainage
sanitation equipment, and electrical equipment
Nomura Higashi-nihonbashi Bldg., 1-1-7 Higashinihonbashi, Chuo-ku, Tokyo 103-0004, Japan
TEL +81-3-5825-0921 FAX +81-3-5825-1631
http://www.sunplant.co.jp/
6

Takuma Engineering Co., Ltd.

Design of environmental equipment plants and energy
plantsTakuma Bldg., 2-2-33 Kinrakuji-cho, Amagasaki,
Hyogo 660-0806, Japan
TEL +81-6-6487-4820 FAX +81-6-6487-4829
http://www.takuma-eng.co.jp/
7

Takuma System Control Co., Ltd.

Design of electrical instrumentation equipment, including
environmental equipment plants and energy plants
Takuma Bldg., 2-2-33 Kinrakuji-cho, Amagasaki,
Hyogo 660-0806, Japan
TEL +81-6-6487-4830 FAX +81-6-6487-4839
http://www.takuma-sc.co.jp/
8Dan-Takuma Technologies Inc.

Manufacture and sale of clean equipment, cleaning
equipment, chemical filters, clean rooms, drying
equipment and thermal chambers
3-12-16 Iwadokita, Komae, Tokyo 201-0004, Japan
TEL +81-3-3488-1111 FAX +81-3-3488-1118
http://www.dan-net.com/

9

Kyoritsu Setsubi Co., Ltd.

Design, construction and superintendence of Energy from
Waste Plant, mechanical equipment of sewage treatment
facilities, and boiler plants for general industries
5-1-38 Yurigahara, Kita-ku, Sapporo, Hokkaido
002-8081, Japan
TEL +81-11-770-2811 FAX +81-11-770-2822

18 Energy Mate Co., Ltd.

10 Kankyo Sol-Tech Co., Ltd.

Sale of cogeneration systems and systems for thegeneration equipment of the same and total service
for onsite energy systems for consumer use
Midosuji Daiwa Bldg., 3-6-8 Kyutaromachi,
Chuo-ku, Osaka 541-0056, Japan
TEL +81-6-6241-6200 FAX +81-6-6241-6210
http://www.energy-mate.co.jp/

11 Campo Recycle Plaza Co., Ltd.

Maintenance of a wide variety of boilers andenvironmental facilities
2-2-27 Kinrakuji-cho, Amagasaki, Hyogo
660-0806, Japan
TEL +81-6-6488-8434 FAX +81-6-6488-0300
http://www.takuma-ps.com/index.html

Analyzing and measurement for environment-related issues,
including water quality, exhaust gas and soil pollution
1-2-1 Shinhama, Arai-cho, Takasago, Hyogo
676-8540, Japan
TEL +81-79-443-6508 FAX +81-79-443-6510
http://www.k-soltech.co.jp/
Municipal solid waste and industrial waste treatment
services
1 Takayanishitani, Sonobe-cho, Nantan, Kyoto
622-0032, Japan
TEL +81-771-68-3636 FAX +81-771-68-3639
http://www.c-rp.co.jp/
12 Nagaizumi High Trust Co., Ltd.

Facility upgrading, operation and maintenance ofmunicipal solid waste final disposal sites
374-12 Higashino, Nagaizumi-cho, Suntou-gun,Shizuoka 411-0931, Japan
TEL +81-55-989-2268 FAX +81-55-987-9935
http://www.nagaizumi-ht.jp/

19 Takuma Plant Service Co., Ltd.

20 Biopower Katsuta Co., Ltd.

Sale of power generated using biomass energy fromwood fuel chips
1974-1 Koya, Hitachinaka, Ibaraki 312-0002, Japan
TEL +81-29-270-3341 FAX +81-29-270-3343
21 Kashihara High Trust Co., Ltd.

Operation and maintenance management of municipal
solid waste treatment facilities
1038-2 Kawanishi-cho, Kashihara, Nara
634-0826, Japan
TEL +81-744-26-6227 FAX +81-744-26-6228
22 Tochigi High Trust Co., Ltd.

13 Fujisawa High Trust Co., Ltd.

Industrial waste treatment services
18-3 Kinugaoka, Moka, Tochigi 321-4367, Japan
TEL +81-285-83-3966 FAX +81-285-83-6500
http://www.t-hitrust.co.jp/

14 Iwate-Kenpoku Clean Co., Ltd.

Industrial waste and municipal solid waste treatment
services
1968-2 Koya, Hitachinaka, Ibaraki 312-0002, Japan
TEL +81-29-270-3711 FAX +81-29-270-3712
http://www.eco-katsuta.com/

15 Hitachinaka-Tokai High Trust Co., Ltd.

Municipal solid waste, including waste home
appliances and office automation equipment, andindustrial waste treatment services
3059-20 Nakajima, Shikama-ku, Himeji, Hyogo
672-8035, Japan
TEL +81-79-243-1200 FAX +81-79-243-1202

Operation and maintenance management of municipal
solid waste treatment facilities
2168 Ishikawa, Fujisawa, Kanagawa 252-0815,
Japan
TEL +81-466-45-5411 FAX +81-466-45-5454
Industrial and municipal solid waste treatment services
48-34, Dai 20 Chiwari, Esashika, Kunohe-mura,
Kunohe-gun, Iwate 028-6505, Japan
TEL +81-195-42-4085 FAX +81-195-42-4550
http://www.iwate2cln.co.jp/
Operation and maintenance management of municipal
solid waste treatment facilities
103-2 Shinkocho, Hitachinaka, Ibaraki 312-0005,
Japan
TEL +81-29-265-5371 FAX +81-29-265-5372
http://hitachinaka-tokai-ht.com/
16 Anan High Trust Co., Ltd.

Operation and maintenance management of municipal
solid waste treatment facilities
1-5 Kokatsu, Tachibana-cho, Anan, Tokushima779-1631, Japan
TEL +81-884-49-5823 FAX +81-884-49-5824
http://www.ecopark-anan.com/
17 Takuma Energy Co., Ltd.

Power retail business
Takuma Bldg., 2-2-33 Kinrakuji-cho, Amagasaki,
Hyogo 660-0806, Japan
TEL +81-6-6487-4870 FAX +81-6-6483-2794

23 Katsuta Co., Ltd.

24 R.B.N. Co., Ltd.

25 Ichihara New Energy Co., Ltd.

Industrial and municipal solid waste treatment services
733 Mandano, Ichihara, Chiba 290-0549, Japan
TEL +81-436-50-8300 FAX +81-436-50-8400
http://www.ichihara-new.com/
26 Ecos Yonezawa Co., Ltd.

Final disposal of industrial waste
7028-1 Yanazawa, Yonezawa, Yamagata
992-0077, Japan
TEL +81-238-39-4050 FAX +81-238-39-4051
http://www.ecos-y.co.jp/

TAKUMA 2016 ANNUAL REPORT

6

Financial Highlights

Trend in Principal Management Indicatorsof( millions
)
yen

of
of
( millions) ( Thousands
yen
U.S.dollars )March 2011

March 2012

March 2013

March 2014

March 2015

March 2016

¥ 89,141¥ 101,015¥ 96,384¥ 96,334¥ 103,875¥ 113,088(inofmillions
yen )

(

)

150,000

March 2016

120,000
90,000$1,003,626

60,000Operating income

¥

3,563

¥

6,429

¥

6,241

¥

8,424

¥

8,223

¥

9,189

$

120,000

90,00060,00081,55330,00030,000Ordinary income¥

Profit attributableto owners of parent¥

Comprehensive
income

¥

4,397
1,821

¥
¥

7,336
4,212

¥
¥

7,168
6,145

¥
¥

9,449
8,835

¥
¥

9,116
8,030

¥
¥

9,646
7,817

$
$

85,6070

0

Fiscal yearyear

69,374107th 108th 109th 110th 111th 112th
,
,
,
,
,
,
16
11
12
13
14
15

Fiscal year
year

Operating income
638

¥

4,935

¥

6,712

¥

9,935

¥

9,398

¥

7,149

$

63,448113,088of( millions)
yen

103,875of( millions)
yen

96,334of( millions)
yen

Net salesin millionsof yen96,384of( millions)
yen

Value of orders received

101,015112th

89,141112th

99,919111th

148,025

110th

113,763

Net sales

109th

109,237

End of fiscal year

108th

90,362

Fiscal year

107th

97,040Trend in Principal Management Indicators and Other Financial Data

107th 108th 109th 110th 111th 112th
,
,
,
,
,
,
11
12
13
14
15
16

Net sales composition ratios(FY2015)(inofmillions
yen )

6.8%

10,000¥ 34,653¥ 43,889¥ 52,516¥ 58,809$ 521,916¥ 108,520¥ 123,127¥ 132,614$1,176,912

Net assets pershare¥ 286.27¥ 339.20¥ 415.92¥ 527.50¥ 631.53¥ 708.18$

6.28

Net income per
share

¥

¥

¥

¥ 106.86

¥

¥

$

0.84

6,000
4,000
2,000

22.03

50.94

74.32

97.12

94.55

Package Boiler

14.5%

0.7%

78.0%

Equipment and System
Business

0

32.2

40.2

42.4

44.1

44.1

Return on equity
(%)

7.8

16.3

19.7

22.7

16.8

14.1

14.1

Trend by Segment
Domestic Environment and Energy

270

¥

(59)

¥
¥

8,270
(1,430)¥ 21,727
¥

(160)

¥
¥

6,728
(445)

$
$

59,71170,000(3,953)

10,0003,235¥ 17,384
3,187¥(8,887)¥ 26,005
3,288¥(5,867)¥ 27,030
3,315¥(3,707)¥ 45,008
3,266¥(2,900)¥ 48,335
3,366$(25,733)$ 428,961

5,000

3,366

Notes:
1. Net sales do not include consumption and other taxes (as used in this document, consumption tax is defined as the sum of consumption
and local taxes).
2. Diluted net income per share has not been included as the company has no residual shares.
3. Ordinary income is a measure of accounting profit that equals operating income plus other income minus other expenses, except for
extraordinary items under Japanese GAAP.

()

Fiscal year 110th
,
year
14

0

(223)

111th
,
15

–500

112th
,
16

Equipment and System BusinessNet sales
Value of orders received
1,371

Operating in millions
incomeof yen(898)(inofmillions
yen )

2,000

10,000

1,000

5,000

896

Net sales
Value of orders received

0

209
0

111th
,
15

112th
,
16

Operating in millions
incomeof yen

(

)

1,000

45

Fiscal year 110th
,
year
14
TAKUMA 2016 ANNUAL REPORT

)

500

0

112th
,
16

20,00010,000

(

5,000

2,500

Package Boiler
in millionsof yenOperating in millions
incomeof yen2

16,450

Number of
employees(2,494)

16,653¥ 15,510¥

16,604End-of-year balanceof cash and cash
equivalents

8,000

17,453

¥

111th
,
15

Net sales
Value of orders received
213

0

Fiscal year 110th
,
14
year

(inofmillions
yen )

9,834

0

Cash flows fromfinancing activities

)

2,171

¥

¥ 17,465(

75,609

230

4,565

10.7

Operating in millions
incomeof yen88,494

¥

¥

10.7

9.7

88,004

Cash flows frominvesting activities(3,895)

6.9

79,962¥

7.4

122,392

Cash flows fromoperating activities

8.1

140,000

Net sales
Value of orders received
8,898
7,923

68,296

12.9(inofmillions
yen )Overseas Environment and Energy

861

26.2

7,331

23.5

830

Capital adequacy
ratio (%)

107th 108th 109th 110th 111th 112th
,
,
,
,
,
,
11
12
13
14
15
16

7,663

−

2,203

−

7,139

−

1,407

−

6,147

−

994

−

8,185

−

Fiscal year
year

8,150

Diluted net income
per share

Price-to-earnings
ratio

7

Overseas Environment
and Energy

6,241¥ 106,754

6,429¥ 107,028

3,563¥ 100,848

18,680Total assets

8,424

8,000

9,189

¥ 28,308

8,223¥ 23,901

16,390Net assets

Domestic Environment
and Energy

351
0

0

Fiscal year 110th
,
year
14

500

111th
,
15

112th
,
16
TAKUMA 2016 ANNUAL REPORT

8

Message from Top Management

Pursuing CSR management to achieve sustained growth alongwith society
in the future thanks to energy policies such as feed-in tariff
programs that facilitate fixed-cost purchases of power
generated using renewable energy.
At the same time, 2015 saw international society
embrace two new initiatives. First, new emissions reduction
targets for greenhouse gases were adopted at the 2015
United Nations Climate Change Conference (the 21st yearlysession of the Conference of the Parties to the 1992 United
Nations Framework Convention on Climate Change)∗1, andsecond, the 2030 Agenda for Sustainable Development∗2
was adopted at the UN Sustainable Development Summit.
We believe that Takuma’s technologies for processing
waste and reducing carbon dioxide emissions throughhigh-efficiency power generation using biomass will makea significant contribution to resolving these social issues,and that doing so will lead to the further development of
the Group’s businesses.

■ Achieving sustained growth
Currently, our society is grappling with a diverse range ofchallenges, including environmental issues; increased
demand for energy, water, and other resources in the faceof global population growth; global warming; aging social

capital; and diversity in people’s values. The Takuma Group
must adapt to changes in the business environment andstrengthen initiatives to treat these changes as business
opportunities. The Group has embraced the Company
Motto, Management Principles, Takuma Group Ethics
Charter, and Takuma Group Code of Conduct as thefoundation of CSR management. We believe that sincerity
is central to management, and, in keeping with the ideathat proper conduct is the natural course of action for thecompany, that the goal of CSR management is to cultivate
a corporate culture in which all executives and employees
can speak naturally. This approach embodies a path thatwill allow us to achieve sustained growth.
Takuma has been a signatory to the United Nations
Global Compact since 2006, and we support its 10
fundamental principles in the 4 areas of human rights,
labour, environment, and anti-corruption. We will work todevelop our business while understanding and supportingthese globally shared principles.
We at the Takuma Group encourage readers to offer
their candid views and advice, which we will carefully
review in order that we might better resolve social issues
and contribute to the sustained development of society.

July 2016■ Business policies
Takuma’s Management Principles state that thecompany will strive for “social contribution, corporate valueenhancement, long-term corporate development, and thesatisfaction of all stakeholders by providing goods andservices that are needed and recognized as valuable insociety.”
In keeping with this philosophy, we have identified two
goals: first, continuing to play an essential role for society
as a leading company in the utilization of renewable energy
and in the field of environmental protection; and second,of achieving ordinary profit of JPY 10.0 billion in FY2020 as
our target level of ordinary profit. Similarly, we haveembraced a corporate vision of building structures capableof earning JPY 10.0 billion in profit or more in a stable andconsistent manner even as the business environment
continues to undergo dramatic change, and we are
pursuing a series of business activities in pursuit of thatvision. We will achieve this vision not through the standalone
9

TAKUMA 2016 ANNUAL REPORT

efforts of the company, but as the result of the combined
capabilities of the entire Takuma Group. To that end, we
have adopted a basic management policy of maximizing
profits in our consolidated financial accounting and ofincreasing corporate value.
The Group will work diligently to implement the 11th
Medium-Term Management Plan (FY2015 to FY2017) in aneffort to build on past results to enhance its business sothat it can achieve sustained growth, both in terms of
quality and quantity.

Takaaki Kato
President and CEO
Takuma Co., Ltd.

∗ 1 Japan’s greenhouse gas emissions reduction target is to slash emissions by 26.0% compared to FY2013 by FY2030 (a reduction of 25.4%■ Business environment
In the Group’s key businesses, operators of waste
treatment facilities are planning to renovate and improveaging plants as a result of stepped-up efforts to prevent
global warming and conserve resources and energy due toincreased environmental awareness. In addition, demandfor biomass power facilities is expected to continue to risecompared to FY2005).

∗ 2 The Agenda consists of 17 Sustainable Development Goals (SDGs) and 169 targets for eradicating poverty and achieving a sustainable world.

The Takuma Group has joined the United Nations Global Compact (UNGC), which is a voluntary effort to create a
global framework for implementing sustainable growth by having companies and groups exercise responsible andcreative leadership while acting as good members of society.
Reference: UN Global Compact http://www.unglobalcompact.org/
Network JapanWE SUPPORTTAKUMA 2016 ANNUAL REPORT

10

Takuma Group 11th Medium-Term Management Plan — An Overview (FY2015 – 2017)— Achieving Sustained Growth
Company Motto

Value Technology, Value People, Value the Earth
1 Business Directions① Positioning of the 11th Medium-Term Management Plan

Management Principles
Takuma will strive for social contribution, corporate value enhancement, long-term corporate
development and the satisfaction of all stakeholders by providing goods and services that areneeded and recognized as valuable in society.

Achieve sustained growth by targeting growth markets while maintaining and expanding our market position in the EPC
business and using businesses that generate base profits as a foundation for growth.
∗ EPC: Plant engineering, procurement, and construction
Profit(illustration)

The founding spirit of Takuma was “Service to the nation through boiler manufacturing”∗ which in present-day languagemeans “contribution to society by supplying goods and services that we yield.” This spirit can also be applied to theconcept of Corporate Social Responsibility (CSR) that in recent years has become a vital issue for corporate management.
The management principles of the Takuma group companies are all based on the said founding spirit.

Maintenance and expansionof our market positionin the EPC business∗ Service to the nation through boiler manufacturing
It was the Company Motto of Takuma, then Takuma Boiler Manufacturing Co., Ltd., founded by Mr. Tsunekichi Takuma, one of the ten great
inventors of Japan during the period of Meiji and Taisho (1868–1926).

Takuma Group Ethics Charter(

Fields that are prone to theeffects of national policies
and the business environment

Takuma and the Takuma Group companies believe that it is essential for the sound development of the group that all of
the directors and employees remain aware of our social responsibilities and the circumstances surrounding us as well as
act in response to social ethics complying with applicable related laws and ordinances. Bearing the above in mind, we
have established and will promote this ethics charter as our code of conduct, aiming to realize our management
principles.

EPC

Waste treatment plants,
boiler plants, andwater treatment plants

)

(

c.
erseas markets, et
New products, ov

Initiatives targeting
growth markets

Operation and maintenanceWaste treatment plants,
boiler plants, andwater treatment plants

ducts
d pro
elope
v
e
d
Newly

)

Improvement ofbase profits
Time

Package boilers, Equipment and systems
1. We shall strive for proactive social contribution while establishing a harmonious coexistence with the global
environment as good corporate citizens.
2. We shall act in good faith in accordance with sound business custom, while complying with applicable laws andregulations and committing ourselves to fair, transparent and free competition, as well as conducting lawful
business activities.
3. We shall never have any relationship with antisocial forces or organizations, which may pose a threat to thesocial order and security of civil society.
4. We shall respect fundamental human rights and never practice discrimination.
5. We shall strive to provide high quality products and services, based on our advanced technologies, to attain highacclaim and confidence from our customers.
6. We shall strive to disclose corporate information to shareholders and investors through investor relations (IR) andother activities on a timely and equitable basis.
7. We shall strive to protect corporate properties as well as information, while never using either for improprieties or
any unjustifiable purpose other than normal business operations.

Profitability throughselection and concentrationof resources

Reinforcement of businessfoundation for stability
and profitability

Achieving sustained
growth (11th Medium-Term
Management Plan)

FY2009 – FY2011

FY2012 – FY2014

FY2015 – FY2017② Principal business domains
Enhance our businesses in terms of both quantity and quality by expanding on-site maintenance and management service,competitive product development, and regional reach around the existing EPC business.

Waste Treatment Plant BusinessO&M and equipment
sale market

Takuma Group Code of Conduct

Practice of compliance with laws and ordinances
as well as sound economic activities
4. Free competition and fair trade
5. Relationship with politics and public administration
6. Policies concerning business entertainment andgift-giving
7. Prohibition of involvement in anti-social activities
8. Appropriate export and import transactions

Making appropriate disclosure of information
14. Transmission of corporate information
15. Ensuring reliability of financial report
16. Prohibition of insider trading

Respect for basic human rights
9. Prohibition of discriminatory actions
10. Respect for individuality, personal quality, and privacy
11. Safe work environment

11

TAKUMA 2016 ANNUAL REPORT

Operation & Maintenance∗ DBO:

BiogasplantsDesign Build Operate

DBO

Waste
treatment
plantsWater treatment
plants

Large and compositefuel boilers
Maintenance(Adding FIT customers)

EPC market

O&M∗ O&M:

Practice of customer satisfaction
12. Safety of products and services as well as ensuring
reliability
13. Policies concerning advertising

Boiler Plant Business

New products,
peripheral markets,
overseas markets
Overseas
markets

Harmony with society
1. Coexistence with the global environment
2. Coexistence with international society
3. Practice of social contribution activities

FY2018 and onwards

Indonesia,
Vietnam, etc.

Boiler plants(Japan, Thailand)
Package boilers
Southeast Asia

Sand filtration

Protection of corporate properties andinformation
17. Management and proper use of corporate properties
18. Handling of confidential information
19. Intellectual property protection

Equipment
renewal demand
Sludge-fueled
power generation

Water Treatment Plant Business

Maintenanceand chemicals

Eastern Europe

Developed products

Package Boiler Business
TAKUMA 2016 ANNUAL REPORT

12

Takuma Group 11th Medium-Term Management Plan — An Overview (FY2015 – 2017)

2 Policies and Perspectives of the 11th Medium-Term Management Plan
Policies

Creation ofcustomer value❶ Maintenance and expansion of market position in the EPC
business❸ Initiatives that target growth markets

M
mar aintenance and expansion of
ket position in the EPC business❹ Further enhancement of the company’s financial strength❺ Human resources management❻ Cultivation of a robust organizational culture

Leveraging
thecompany’s
totalcapabilities

Perspectives

Accommodation ofenvironmental
changes and risk
management

Ongoinginnovation❷ Expansion of businesses that generate base profits

4 Core Business Units and Emphasis of Future Activities❶ Creation of customer value❸ Accommodation of environmental changes and risk
management

Water Treatment Plant BusinessBusiness Environment

Business Environment●

As facilities age, there is ongoing robust demand for renewal
and service life elongation.
● DBO project volume is growing, and there is also growth in
O&M services for existing facilities.

●

Emphasis of Future Activities

Emphasis of Future Activities

Develop the foundation of the business and enhance ouroperational capabilities.
● Further strengthen initiatives to prolong the service life offacilities.

●●

Expansithat ge on of businesses
nerate base profits

DBO Project

Cultivation of a robust
organizational culture

Achieving sustained growth

3 Financial Targets (Consolidated)

Boiler Plant Business (Overseas)

Business Environment

Business Environment

Demand for biomass power plants remains steady.
● The number of plants targeted for maintenance is increasing
as facilities are completed and transferred to customers.

●

Emphasis of Future Activities●(Billion JPY)
400

3,000

300

2,000

200

1,000

100

0

9th Plan

10th Plan

Order Value(left scale)11th Plan

Sales(left scale)(Billion JPY)

10th Medium-Term
Management Plan results

Business Environment

Business Environment●

Plans to build Energy from Waste plants are underway invarious regions worldwide against the backdrop of ongoingurbanization and increasing environmental awareness.

Develop schemes for entering the market that are suited toeach country and region.
● Develop structures to facilitate market entry.
●

other income minus other expenses, except for extraordinary terms under Japanese GAAP.

Bagasse Fired Boiler Plant (Thailand)

Package Boiler Business

Emphasis of Future Activities∗ Ordinary income is a measure of accounting profit that equals operating income plus

The domestic market has matured, and it is not reasonable
to expect a significant recovery of demand.
● The need for boilers is increasing overseas, particularly indeveloping nations.
●

Emphasis of Future Activities●●

Expand our overseas business.
Enhance our technologies and production capacity.

11th Medium-Term
Management Plan targets

2009

2010

2011

Total

2012

2013

2014

Total

FY 2015 – FY 2017

Order
Value

70.5

97.0

90.4

257.9

109.2

148.0

113.7

371.0

(3-year cumulative total)

Sales

95.1

89.1

101.0

285.3

96.3

96.3

103.8

296.5

(3-year cumulative total)

Ordinary
Profit

2.0

4.4

7.3

13.7

7.2

9.4

9.1

25.7

(3-year cumulative total)

TAKUMA 2016 ANNUAL REPORT

Maintain and enhance functionality for carrying out overseas
projects, including enhancement of the functions of our
local subsidiary (SIAM TAKUMA).
● Enhance price competitiveness and differentiate products.

Waste Treatment Plant Business (Overseas)0

Ordinary Profit(right scale)

Demand for biomass power plants in Thailand and surrounding countries remains robust.

Emphasis of Future Activities

Wood Chip Biomass Power Plant (Miyazaki Prefecture)

Financial Target: Ordinary income∗ (FY 2020) 10 billion yen

13

Secure more orders for biomass power plants (secure market
position).
● Enhance maintenance service and capabilities.
●

4,000

Sludge-Fueled Power System Demonstration Plant

Boiler Plant Business (Japan)●

9th Medium-Term
Management Plan results

Secure our position in the market for tapping the energy
potential of sewage sludge.
● Expand our share in the advanced-treatment sand filtration
market.

Management
base

Human resources management

We are currently striving to build structures capable ofconsistently earning an ordinary profit of JPY 10 billion evenas the business environment undergoes a process of significant change in keeping with our corporate vision of“aiming to maintain our role of being an indispensable
presence in society as a leading company in the field of
renewable energy utilization and environmental protection”
and our target of achieving ordinary profit of JPY 10 billion
in FY2020.
To facilitate the achievement of the goals outlined in thisplan, we will undertake initiatives to realize sustained
growth in accordance with the policies while seeking tosteadily improve our business in terms of both quantity andquality. To that end, we have established the financial
targets described below.

There is a growing need to recover energy from sewage
sludge.
● Renewal demand and service life elongation demand areincreasing as facilities age.

Initiatives
that target
growth markets
Further enha ment of thencecompany’s
financial strength❷ Ongoing innovation

Municipal Solid Waste Treatment Plant Business

400Billion JPY
360Billion JPY
27Billion JPY

Energy from Waste Plant (Beijing, China)

Once-through boiler

Hot Water boiler

TAKUMA 2016 ANNUAL REPORT

14

Business Development

1. Activities of Our Municipal Solid Waste Treatment
Plant Business
A leading company in the industry

1 Plant construction

Since completing Japan’s first fully continuous mechanical waste incineration plant in Osaka City in 1963, Takuma has built
more than 350 waste incineration plants in the country, more than any other company in the industry.
We have consistently led the municipal solid waste treatment industry, for example by starting operation of Japan’s firstcombined facility comprised of biological gasification plant and municipal solid waste incineration plant and building morethan 80 bulk garbage and resource waste recycling plants.
Takuma will continue to contribute to the realization of a recycling-based society as the industry’s leading company.

Stoker-type incinerators
Most Energy from Waste plants use stoker-type incinerators. Takuma has been delivering stoker-type incinerators tocustomers for half a century, allowing us to accumulate a variety of expertise in areas such as stable combustion, exhaust gas
treatment, and waste-fueled power generation.
Based on this well-established base of technological capability, we build and supply highly efficient waste treatment
systems by integrating the latest technologies, for example water-cooled stokers, real-time waste quality forecasting, exhaustgas recirculation systems, and furnace denitration and urea decomposition systems.
Technologies for increasing
generating capacity
Technologies for lowering
life cycle cost2
Filter-type
dust collector

Steam turbine
BoilerLaser H2O
meter

4
Incinerator
Catalyzer

Japan’s first fully continuous mechanical waste incineration plant(Sumiyoshi Plant, Osaka City)(Ota Incineration Plant, Clean Authority of Tokyo 23 cities)

6

Exhaust gas
circulating
fanState-of-the-art Energy from Waste plant

1

5
Stack

3
Water-cooled stoker +1 high-temperature/high-pressure boiler●●

This system uses a water-cooled stoker to ensure stablecombustion, even of waste streams with high calorific values.
The system uses a high-temperature/high-pressure boiler
that operates at 4 MPa and at least 400°

Real-time waste quality

5 Fly ash circulation system

2 forecasting●

The system checks the quality of waste
in real time by measuring theconcentration of moisture in combustion
gases with a laser H2O meter.

3 Exhaust gas recirculation system●

Fly ash captured by the filter-type dust
collector is circulated, allowing
effective use of unreacted chemical
agents remaining in the fly ash.

Catalyst regeneration

6 system●

The cost of catalyst maintenance can bedramatically reduced by regenerating
catalysts without removing the catalyst
from the associated equipment.

4 Furnace denitration and urea decomposition system

Generation of NOx and dioxins is dramatically reduced by stirring and mixing exhaust gases withhot circulating gases in the incinerator.
● Combined with real-time waste quality forecasting, this system makes possible low-air-ratio
combustion with an air ratio of 1.25.
●●●

Ammonia is ingested into the furnace at the optimal location to enable highly
efficient elimination of NOx.
A system that generates ammonia from urea has been incorporated to reduce LCC.

Biogas facilities
Composite facility combining biogas and waste incineration plants
Nantan Bio, Thermal and Material Recycle Center, Nantan(Integrated
Administration of a Large Region Work Association)

Large-scale recycling plant(Numagami Resources Circulation Center, Shizuoka City)

New Energy Awards.)

From construction to after-sales service
Takuma’s municipal solid waste treatment plant businessconsists of four components: plant construction, primaryequipment improvement, maintenance, and long-term
turnkey operation.
In each area of operations, we draw on technologicalcapabilities and expertise based on our extensive experienceto precisely meet the needs of local governments, regions,and society, allowing us to offer facilities that are
welcomed by their communities.

Recently the Ministry of the Environment has been encouraging the introduction of biogas facilities for use with municipal
solid waste. This is an area where Takuma is helping further lower CO2 emissions with a combined system of methane
fermentation and incineration for municipal solid waste to recover the maximum amount of energy from the waste treatment
and utilize it in high-efficiency power generation. (The system received the New Energy Foundation’s Chairman Award at the FY2014

Needs ofsociety

Combustible
waste

Needs oflocal
governmentsgogMethanegas
Methanefermentation tankFermentation
residue

Needs offiees
escommunities

Plastics, etc.
Takuma technologies
Takuma’sand expertise

Sorting system

Electric Power
company
Electricity
generation

Steam turbine
generator
Exhaust gas
treatment
systemIncinerator and boiler

TAKUMA 2016 ANNUAL REPORT

Gas-powered
generator

Steam

Exhaustgas

Facilities that are welcomed by their communities

15

Electricity
generation

Garbage
Wet paper

New EnergyAwardsStack

New Energy
Foundation
Chairman’s
Award

TAKUMA 2016 ANNUAL REPORT

16

Business Development

Activities of Our Municipal Solid Waste Treatment Plant Business2 Primary equipment improvements

3 Maintenance

Implementing high-value-added renovations

Ensuring stable waste treatment

Although waste treatment plants are required to operate over extended periods of time, equipment must be renovatedonce 20 or more years has passed since the plant began operating. In addition, changes in the regulatory environment andsociety sometimes make large-scale renovations necessary.
Takuma draws on the sophisticated heat utilization technologies and energy-saving technologies it has accumulated as aboiler and environmental plant manufacturer to carry out high-value-added and large-scale renovation projects. In this way,
we are able to help extend facilities’ service life while lowering CO2 emissions.

Annual maintenance is essential in order to ensure stable operation of waste
treatment plants.
However, maintenance demands both sophisticated technological capabilities
and experience, both because waste treatment plants draw on a range of expertiseand because the manner in which their equipment deteriorates over time varies
with the properties of the waste they process.
Takuma takes maximum advantage of its accumulated expertise to contribute tostable waste treatment and long-term facility operation by developing long-term
repair plans, carrying out elaborate site investigations, and then performing
maintenance that has been optimized in terms of both timing and content.

Installation of
inverters on cranes●

Reducing power by installing
speed control-type inverters

Improvement ofheat recovery

Improvement of steam turbine capacity

Installing boilers on
water-injection furnaces● Expanding boilers’ heating surface

Improving generating capacity by increasing steam intake capacity andoptimizing design features● Improving the capacity of steam condensers●●

Repairing an incinerator’s refractory
Steam

G
Steam turbine

Waste craneElaborate site
investigation

Feedback

Maintenance work

Maintaining a conveyor

4 Long-term turnkey operation business

Steam condenser

Cooling tower

Safe, secure facility operation

Filter-type
dustcollector

BoilerIncinerator

Induceddraft fanStack

Ash conveyor

Adoption ofhigh-efficiency motors

Enhancement of combustion equipment efficiency
Improving stable combustion by changing furnace shape and stabilizing
the volume of steam generation and power generation● Reducing the volume of exhaust gases and increasing the volume ofheat recovery by adopting low-air-ratio combustion technology●

Measuring the thickness ofboiler water tubes

Development of along-term repair plan●

Reducing power use by adopting
high-efficiency motors

Installation of
inverters on fans●

Reducing power use by installing
speed control-type inverters

In recent years, the number of long-term turnkey operation projects such as DBO∗ projects that involve long-term
outsourcing of operation and maintenance management
over 10 to 20 years has been increasing. The Takuma
Group is pursuing this business actively, and as of June 30,
2016, we were operating 12 facilities and preparing for thestart of operation of 4 more.
Against this backdrop, we are dedicated to pursuingsafe, secure facility operation through initiatives that aredesigned to help establish a basis for future operations andto strengthen our capabilities in this area, for example bydeveloping plant plans with a view toward operation,
developing a turnkey operation and maintenance management support system, and strengthening self-monitoring.

Kurume Municipal Miyanojin Clean Center,
which began operation in FY2016∗ DBO projects: A business approach in which local governments secure funding and then place a single order encompassing facility design, construction, and operation.

Opening facilities to the community

Examples of primary equipment improvement works
17

TAKUMA 2016 ANNUAL REPORT

While waste treatment plants play an essential role indaily life for nearby residents, the facilities are also prone tobe perceived to be a nuisance.
Takuma strives to spread understanding of the facilities it
operates and the need to practice the 3Rs by hosting various
events in an effort to open facilities to the surrounding
community.

At an event (Kashihara Eco Summit)
TAKUMA 2016 ANNUAL REPORT

18

Business Development

2. Activities of Our Energy Plant Business—Transforming a variety of biomass resources into fuelTechnologies and experience in using a broad range of biomass fuels
Since its founding, Takuma has enhanced its technological capabilities as a pioneering boiler manufacturer to deliver a
total of more than 600 boilers designed to accommodate a wide variety of biomass fuels in Japan and overseas.
Going forward, we will continue to actively pursue development and improvement of technologies for effectively using
energy in a way that gives priority to both humankind and the planet while simultaneously meeting customer needs.

Social landscape
The Great East Japan Earthquake of 2011 threw the safety of nuclear power plants into question and led many tobegin focusing on “renewable energy,” which is characterized by a low environmental impact, as an alternative sourceof energy. Biomass-fueled power generation in particular promises beneficial ripple effects such as redevelopment of
the forestry industry and job creation as companies move to fill needs of fuel procurement, transport, and storage aswell as chip processing and other operations. Compared to solar and wind power, biomass also has the advantage ofbeing able to provide power in a relatively stable manner without being affected by weather. Currently, biomass-fueled
power plants are being planned and built in locations across Japan.

Delivery record of biomass boilers by area of Japan
Takuma is working on facilities that use biomass fuel throughout Japan.
● We have constructed facilities that use forestry-derived

biomass fuels such as thinned timber and waste fromlumber plants and industry-derived biomass fuels such as
plant waste and sludge from manufacturing plants inmany regions.

Hokkaido Region
Wood fuel: 11 plants● We have constructed many facilities in Japan that use

livestock-derived biomass fuels such as chicken and cattle
manure and agriculture-derived biomass fuels such as
bagasse (fiber remaining after sugarcane is crushed andsugar extracted), particularly in Kyushu and Okinawa.

Tohoku Region

Wood waste-fired
boilerChubu Region

Wood fuel: 23 plants
Other fuel:3 plants

Wood fuel: 32 plants
Other fuel:Chugoku Region

Renewable energy

Kanto Region

Wood fuel: 27 plants

Wood fuel: 25 plants

Chicken manure-fired
boilerOther fuel:

Wood fuel: 22 plants
Other fuel:

Wood fuel: 19 plants
Other fuel: 48 plants

Wind

Hydro

3 plants

Shikoku Region
Wood fuel: 10 plants

Geothermal

Biomass

9 plants

Kinki Region
Kyushu-Okinawa Regions

Solar

7 plants

Bagasse-fired boiler

Papermill sludge-fired
boiler∗ “Other fuel” includes livestock manure, bagasse, miscellaneous plant waste, and sludge.
(as of March 31, 2016)

Forestry-derived biomass fuels

Debris from demolitionof wooden houses

Waste fromlumber plants

Thinned timber

Livestock-derived biomass fuels

Industry-derived biomass fuels

Paper sludge

Miscellaneous
plant waste

Agriculture-derived biomass fuels

Wood chip-fired power plant
The introduction of Japan’s feed-in-tariff system forrenewable energy is driving expectations for biomass power
generation to new levels.
Anticipating these developments, Takuma has deployed
numerous biomass power generation facilities and createda subsidiary with a wood biomass generation business to
procure biomass fuels from various regions while operating,
maintaining, and managing biomass power generation
facilities.

Powergeneration 4,990 kW

Fluidized
bed boiler

Chicken manure

Cattle manure

BagassePruned fruit
tree branches

Rice husksPower 4,300 kW
generator

Wood fuel supply
feederBag filter

Multicyclone
Hot air
generator

Induceddraft fan Stack
Ash humidifier

Vibrating screen
Sand silo

Wood fuelGas

Condenser

Economizer

Wood fuelpit
Forced draft fan

Subsidiary profile
Subsidiary Biopower Katsuta Co., Ltd., operates a biomassfired power generating plant located in Hitachinaka City in
Ibaraki Prefecture. All the electricity the plant generates(with the exception of what is used to power the plant
itself) is sold to the grid.

Powertransmission

SteamturbineAsh pit

Ash
Electricity

Steam
Water

Hot air
Air

Sand

Flowchart
19

TAKUMA 2016 ANNUAL REPORTTAKUMA 2016 ANNUAL REPORT

20

Business Development

Activities of Our Energy Plant Business—Pursuing biomass power generation

Biomass fired power plants comprise one of our most skilled product areas. Activity in the segment has been sparked by
the prospect of stable profits made possible by the launch of Japan’s feed-in tariff system for renewable energy in July 2012,
and Takuma has received orders for numerous plants.
We have also received multiple orders for boiler fuel conversion projects to provide electricity and steam for internal plantuse.
Generating output scaleGreater than or equal to 10,000 kW
but less than 30,000 kW
Greater than or equal to 5,000 kW
but less than 10,000 kW
Greater than or equal to 1,000 kW
but less than 5,000 kW

Tsugaru Biomass Power Generation
Co., Ltd.

Conversion to biomass fuelIchinohe Forest Power Co., Ltd.
Hanamaki Biomass Energy Co., Ltd.

Utthi Kawai Co., Ltd.

SanyoPaper Mfg. Co., Ltd.
SGET Green Power
Sanjo Godo Kaisha

Pultec Energy Co., Ltd.
Matsue Biomass Power Co., Ltd.
Chugoku Mokuzai Co., Ltd.
Head Office Plant

DS Green Power Generation
Yonezawa LLC.

Wood One Co., Ltd.

Rengo Co., Ltd., Yashio Mill

Chugoku Mokuzai Co., Ltd.
Imari Factory

Tokushu Tokai Paper Co., Ltd.
Shimada Mill
Gifu Biomass Power Co., Ltd.

Ariake Green Energy Co., Ltd.

Ibuki Green Energy Co., Ltd.

Chuetsu Pulp & Paper Co., Ltd.
Sendai Factory

Mie Ene Wood Co., Ltd.

Proposing combustion furnaces that can accommodate the fuels customers use
For biomass power plants, combustion furnaces play an important role as core power generation equipment, and the
choice of combustion furnace type exerts a significant influence on biomass power businesses. This page introduces sometypical Takuma combustion methods that are widely used in wood biomass power generation.

Step grate stoker

Traveling stoker

This combustion method,which derives from waste
incineration technology, canbe used to uniformly burnfuels with different calorificvalues, moisture content,
shapes, and sizes. Anothercharacteristic of this method
is that it requires less power
to operate (known as facility
power) than other types.

With a traveling stoker, fuel isdistributed in the furnace sothat longer combustion times
are secured for fuel withlarger volumes. As with astep grate stoker, combustion
is comparatively gradual, andthe system can accommodatea wide range of fuels withdifferent calorific values, moisture content, and shapes.

Installation example: Sendai Factory, Chuetsu
Pulp & Paper Co., Ltd.

Installation example: Maniwa Biomass Power Co., Ltd.

Chuetsu Pulp & Paper Co., Ltd., is a large general
paper manufacturer that manufacturers, processes,
and sells pulp and paper products.
The facility we delivered at the company’s Sendai
Factory uses a step grate stoker that can accommodate
biomass fuels with a variety of properties and shapes in
anticipation of the future diversification of fuels.
[Equipment overview]○ Location: Satsumasendai City, Kagoshima Prefecture○ Generating output: 23,700 kW

Maniwa Biomass Power Co., Ltd.

Chugoku Mokuzai Co., Ltd.
Hyuga Factory

Tosa Green Power Co., Ltd.
Ehime Forest Generation, LLC

Maniwa Biomass Power Co., Ltd., one of only a few
wood biomass-fueled power generating companies inJapan, was established by 10 public- and private-sector
investors, including Meiken Lamwood Corporation,Ltd., one of Japan’s largest manufacturers of laminatedlumber.
The company’s generating plant, which utilizes
unused lumber from the Maniwa region as its primarysource of fuel, is expected to contribute to the growthof the area’s forestry and lumber processing industries
and to local job creation.
[Equipment overview]○ Location: Maniwa City, Okayama Prefecture○ Generating output: 10,000 kW

Bubbling fluidized bed

Circulating fluidized bed

Since sand that has been
fluidized by high-pressure air
burns away the surface of thechips, little unburned fuelremains, making high boiler
efficiency a characteristic of
fluidized bed systems. They
can accommodate a variety ofdifferent types of fuel, including fuels with high moisture
content.

Heated, fluidized sand burns
fuel as it circulates, keeping
temperatures inside thefurnace uniform to enablestable combustion. Since little
waste remains unburned,
boiler efficiency is high, andthe system can accommodate
a broad range of mixed fuelswith different caloric values.

Installation example: Gifu Biomass Power Co., Ltd.

Installation example: Hyuga Factory, Chugoku
Mokuzai Co., Ltd.

Japan Farm Co., Ltd.
∗ Biomass generating facilities ordered during or after July 2012(as of March 31, 2016)

Biomass fuel under the feed-in tariff program [JPY per kWh]: Unit price for sale of electricity under the FIT program (FY2016)
plant with output
Unused timber (ofGenerating) [JPY 32 per kWh]
2,000 kW or greater
plant with output(ofGenerating) [JPY 40 per kWh]less than 2,000 kW

In the forestry industry, leftover timber that cannot be
used and trees that have been felled during thinning but
whose value does not merit harvesting have gone
unutilized. By setting a purchase price for this type ofwood that is higher than that of other biomass
materials, the feed-in tariff program is intentionallypromoting use of these resources.

21

General timber [JPY 24 per kWh]
Timber other than unused timber and recycled timberis collectively known as general timber. This category
includes mill ends, sawdust, bark, pruned branches fromfarms and other sources, as well as driftwood fromdams and imported materials such as palm kernel shells(PKS).

Waste products [JPY 17 per kWh]

Recycled timber [JPY 13 per kWh]This category includes waste biomass such as
municipal solid waste and sewage sludge, biomass fromthe livestock industry such as livestock excrement, andindustrial biomass such as paper sludge and black
liquor.

This category includes construction waste, forexample from the demolition of houses. Constructionwaste has been used as a primary fuel in wood biomass
boilers for some time, and at present it constitutes themost commonly used wood fuel.

TAKUMA 2016 ANNUAL REPORT

Gifu Biomass Power Co., Ltd., is a wood biomassfueled power generating company established with
Gisen Co., Ltd., as an investor.
This system is designed specifically to burn unused
lumber, which had been considered to have low utility
value due to its high moisture content compared to
traditional construction waste-type fuels, as well as
general lumber, which is a manufacturing plant byproduct, as biomass fuel, allowing these resources to beeffectively utilized.
[Equipment overview]○ Location: Mizuho City, Gifu Prefecture○ Generating output: 6,250 kW

Chugoku Mokuzai Co., Ltd., is a large general lumber
company that offers an extensive product line ranging
from lumber to laminated lumber and precut lumber.
The facility delivered by Takuma to the company’s
Hyuga Factory uses a circulating fluidized bed boiler that
can accommodate the customer’s need to effectively
utilize a wide range of biomass fuels.
[Equipment overview]○ Location: Hyuga City, Miyazaki Prefecture

TAKUMA 2016 ANNUAL REPORT

22

Business Development

3. Activities of Our Water Treatment Plant Business
Takuma contributes to the preservation of the water environment by providing a variety of water treatment facilities.
In addition, we are working to develop new technologies to accommodate ongoing changes in society, for example byutilizing renewable energy and reducing emissions of greenhouse gases.

① Reaction tank facilities② Advanced treatment facilities[Principal equipment]● Aeration systems● Low power agitator (Bio Blade Mix)
Treatment capacity: 60,000 m3 per day
Facility: Hirano Sewage Treatment Plant
Osaka city, Osaka Prefecture

Initial settlingpond[Principal equipment]● Upflow moving-bed filtration(high-speed)(Uniflow sand filter)
Treatment capacity: 18,000 m3 per day
Facility: Kasumigaura Sewage Treatment
Plant
Tsuchiura City, Ibaraki Prefecture
Final settling
pond

Reaction tank

Sand filter

SewageintakeDischarge

P

CrudesludgeAnaerobic Anoxic
Aerobic
tank
tank
tank
Bio Blade Mix

Anoxic Aerobic
tank
tank
Aeration system
Drawn-offsludgeSludge treatment

Odors

Disinfection tank

P Excesssludge③ Sludge incineration New technology

F

Incinerator

Deodorization

Sludge treatment facility

Deodorization facility[Principal equipment]● Sludge dehydrator (Pressurized screw press)
Treatment capacity: 384 kg-DS per hour
per unit
Facility: Takasu Sewage Treatment Plant
Kochi City, Kochi Prefecture[Principal equipment]● Soil deodorization system
Treatment capacity: 340 m3 perminuteFacility: Matsubara
Preprocessing Plant
Tatsuno City, Hyogo
Prefecture③ Sludge incineration
Sewage sludge is a type of biomass, and it is expected to be used as a form of renewable energy. Past sludge incinerators
have required auxiliary fuel and used large amounts of electricity, making them net consumers of energy. Takuma has developed a sludge incineration system based on a new concept that shifts operation to an energy-saving and energy-yielding
footing, and we are working to develop a broad range of businesses using the system as a technology that can lower costs at
sewage treatment plants while simultaneously reducing energy use and greenhouse gas emissions.
● Demonstration Study of Power Generation System with

Sewage Sludge Incineration

This energy-yielding system consists of three technologies: sludge
dehydration using an inside double coagulation type centrifugal
dehydrator, energy recovery using an innovative step grate (with boiler),and energy conversion using steam generators (both centrifugal andbinary-type).
The technology was adopted by the Ministry of Land, Infrastructure,
Transport and Tourism’s Breakthrough by Dynamic Approach in Sewage
High Technology Project (B-DASH) in FY2013, and we constructed afull-scale demonstration plant capable of incinerating 35 tons (wet) per
day at the Wakayama Municipal Central Sewage Treatment Plant. Basedon data obtained from the plant’s operation, we were able to conclude
that it delivered the target level of performance that we had envisioned
at the outset, that operation is stable even without auxiliary fuel, that it
generates electricity using heat recovered by means of steam, and thatit generates more power than the incineration facility uses. The resultsfrom the demonstration project were published in September 2015 by
the Ministry of Land, Infrastructure, Transport and Tourism National
Institute for Land and Infrastructure Management in the form of aseries of “Guideline for Introducing a Technology (draft).”● High-temperature energy-saving sludge incinerator

As a result of joint research, we were able to verify that stoker
furnace-based sludge incineration technology satisfies the standards forhigh-temperature energy-saving incinerators as put forth by the Tokyo
Metropolitan Government Bureau of Sewerage (for Generation 2.0 and
2.1 incinerators), which require incinerators to address global warming,
improve energy savings, and reduce maintenance and management
costs. Consequently, the incinerator was approved as a compliant facility.
● Energy self-reliant sludge incinerator

Installation examples of water treatment facilities delivered by Takuma

23① Reaction tank facility② Advanced treatment facility

The reaction tank facility consists of an aerobic tank that
supplies oxygen (aeration) and oxidizes and breaks downorganic matter through the action of microorganisms
known as activated sludge. Anaerobic and anoxic tanks arealso provided for the purpose of biologically eliminating
nitrogen and phosphorus.
Takuma has developed energy-saving stirring machines tostir the contents of the anaerobic and anoxic tanks. We
have commercialized a low-power stirring machine inwhich two specially shaped stirring blades are powered by
an above-water drive unit. We have delivered 68 of thesemachines, which provide stirring capacity of about 1.0 W
per cubic meter at about 1/10 the power of a conventional
machine, to sewage treatment plants and other sites inJapan.

Measures undertaken to improve the quality of public
water sources and the need to reuse treated sewage are
spurring demand for more advanced water treatment. In
order to reuse treated water, it is necessary to reduce thebiochemical oxygen demand and suspended solid concentration in that water. Sand filtration is typically used as atechnology for eliminating suspended solids, and both fixedbed and moving-bed systems are available. Takuma hasdelivered a cumulative total of more than 2,500 upflow
moving-bed sand filtration systems (uniflow sand filters).
Since the filtration differential pressure can be kept low in
upflow moving-bed filtration ponds thanks to a purification
mechanism that continuously purifies the sand, the amountof power used by lifting pumps can be reduced. In addition,
Takuma has developed a high-speed sand filtration systemthat allows filter speeds of up to 1,000 meters per day, about
three times that of conventional systems, while simultaneously using less space than those systems. There are already
five of these facilities in operation.

TAKUMA 2016 ANNUAL REPORT

Demonstration plantTokyo Metropolitan
Government Bureauof Sewerage
Generation 1.0
incinerators<Incineration at 850°C>

Generation 2.0
incinerator
target values

Stoker furnace
joint research
results

N2O (2.3 kg-N2O/t-DS)

CO2 (230 kg-CO2/t-DS)

100%

100%

Reduction of about 50% due
to combustion improvements

50%

Reduction of about 20% due toauxiliary fuel and power use reductions

80%
Achievement of targets has been confirmed
using dehydrated sludge from Tokyo in thestoker demonstration furnace.

2% 43%

N2O emissions

CO2 emissions

0.05 kg-N2O/t-DS 100 kg-CO2/t-DS

Joint research results of high-temperatureenergy-saving incinerator

As a result of joint research, we were able to verify that our system combining stoker furnace-based sludge incineration
technology with steam-driven power generation technology satisfies the standards for energy self-reliant sludge incinerators as
put forth by the Tokyo Metropolitan Government Bureau of Sewerage (for Generation 3.0 incineration systems), which requirethat incinerators to generate more power than they use, that incinerators do not require auxiliary fuel (with the exception of
special operations such as incinerator startup and shutdown (∗1), and that incinerators help reduce the CO2 emissions associatedwith power use. Consequently, the incinerator was approved as a compliant facility.
Targets

Power use < Generated power

Auxiliary fuelPower use byincineration
facility

Generated
power

Energy self-reliant sludge incinerator
N2O emissions: 1.15 kg-N2O/t-DS or lessPower use: 161 kWh/t-DS or less (∗2)
Unit price of generated power: JPY 14/kWh or less

Results

Targets achieved

Auxiliary fuelPower use byincineration
facility

Generated
power

Research results of stoker furnace
N2O emissions: Target achieved
Power use: Target achieved
Unit price of generated power: Target achieved∗ 1 Except during incinerator startup and shutdown, when dehydrated sludge moisture content exceeds 74%.
∗ 2 When incinerating dehydrated sludge with a moisture content of 74% and an incineration capacity of 300 tons per day.
Some generated power may be used to operate the facility.

Joint research results for an energy self-reliant sludge incinerator
TAKUMA 2016 ANNUAL REPORT

24

Business Development

4. Activities of Our Overseas Business—Sales of biomass-fired power plants, municipal solid waste incineration plants,
and Energy from Waste plants overseas
For more than half a century, Takuma’s biomass boilers have contributed to industrial growth and economic development
in Southeast Asia. In addition, our power plants help materialize coexistence of both environmental protection and energy
supply.

Biomass-fired power plant sales in the Southeast Asian market
In the Southeast Asian market, the sugar industry in Thailand is undergoing a transition from a sector that focused on
expanding sugar production volume to an energy-supplying industry in which sugar production is joined by electricity sales
and bioethanol production as core business operations. Specifically, companies are combining bagasse (fiber remaining after
sugarcane is crushed and sugar extracted) as a main fuel with eucalyptus wood chips, rubber wood chips, cane leaves, ricehusks, and other materials as auxiliary fuels to effectively generate electricity, using comparatively high-temperature,high-pressure steam on the order of 10 MPa and 520°C, for sale to the grid.
Furthermore, impetus to this major change is being given by programs that give exemptions on import duties for building
power plants using biomass and other renewables, that lower corporate taxes for operators during a specific period and thatmaintain advantageous purchase prices for power by means of feed-in-tariff (FIT) mechanisms. As a result, there continues tobe a voracious appetite for investment in the Thai sugar industry despite the recent decline in sugar prices on international
markets.
There is also a noteworthy trend on the part of othercountries in Southeast Asia toward using the Thai programs
as a model in the use of biomass and other renewables.
Takuma will continue to draw on its extensive experience
Electricity
and outstanding technology to meet market demand by
Steam
supplying highly reliable power plants that deliver efficientand stable combustion of biomass.
Biomass
Water
In addition, we are confident that we will be able toGas
make an even broader contribution by building on ourrecord of success through delivery of biomass mixed-firingAir
high-efficiency, high-temperature/high-pressure boiler power
plants to the sugar industry in Thailand and thereby
earning praise in the market so that we can supply highly
reliable plants to the markets in nearby countries such as
Ash
Ash
Indonesia, Myanmar, Vietnam, Cambodia and Laos.
High-temperature/high-pressure boiler● Steam capacity:

165 tons per hour

● Design pressure:12.5 MPaG● Steam pressure:10.5 MPaG

Overseas Energy from Waste plant business
Through its overseas market research, Takuma has become aware that demand for Energy from Waste (EfW) plants is
growing rapidly worldwide against the backdrop of urbanization and growing environmental awareness. Particularly indeveloping countries where urbanization is occurring, there is pressure to take environmental factors into consideration alongwith infrastructure development (for example by preventing global warming through the use of renewable energy), andinterest in building EfW plants is rising rapidly.
At the same time, most developing countries needappropriate diagnostic information, advice, and guidance
Waste sorting
Consensus-building
concerning this type of facility, and due to the need toand collection
with local residents
understand waste treatment in each of these markets, itwill be essential for Takuma to strengthen partnerships
with stakeholders in each country and obtain more
Safe, secure, andaccurate information in order to pursue its business.
stable EfW plants
Takuma has been able to take advantage of its extensive
experience and track record, coming from the holding top
market share in Japan and the high praise that the nine
Technology popularization,
Takuma’s extensive
EfW plants delivered overseas have earned for stableawareness-raising, andexperience
operation and other performance, to provide optimal
environmental education
proposals in response to each country’s unique needs while
exchanging detailed information with stakeholders. We areinterested in working with Japanese local governments to help the public and private sectors in overseas countries cometogether to resolve waste-related issues, and we expect our expertise in areas such as waste sorting and collection, EfW
technology popularization and awareness-raising, environmental education, and consensus-building with local residents toplay an important role. We are confident that we can provide safe, secure, and stable plants to the people of these countries
and regions by pursuing these initiatives.
Although the market and competitive environment worldwide are becoming more challenging as Asian and European
companies join their domestic counterparts in competing for project orders, Takuma will conduct feasibility studies to gauge
the viability of building optimal business models that will enable it to take advantage of its strengths as the first step after
choosing target markets. In this way, we plan to contribute to environmental protection by building overseas EfW plantbusinesses that are optimally suited to each country and region.

U.K.: 1 plant

U.S.A.: 2 plants

China: 2 plants● Steam temperature: 520°C● Design:

Single drum, Vertical type,Taiwan: 4 plants

Natural circulation,
Membrane design● Combustion method: Traveling stoker● Fuel:Bagasse● Principal emissions treatment:

Electrostatic precipitator
EfW plants delivered by Takuma overseas

25

TAKUMA 2016 ANNUAL REPORTTAKUMA 2016 ANNUAL REPORT

26

Contributing to Society through Our Businesses and Products

1. Initiatives to Build a Comprehensive Operation,
Maintenance, and Management Support System
1 Developmental Background

3 Functional enhancements

The Takuma Group has offered waste incineration plant monitoring services for more than 10 years since launching the
Total Operational Support System (TIPLOS) in 2004. With the increase in DBO and O&M (∗1) projects in recent years, there is
growing demand for service characterized by greater stability and higher cost performance.
In an effort to deliver higher-quality operation, maintenance, and management services for such projects, we leveraged the(∗3) comprehensive operation, maintenance, and management system, a newlatest ICT (∗2) technologies to build thesystem designed to provide more extensive functionality and to utilize data more effectively.

The enhanced functionality provided byfalls into the four categories of Daily Management, Operational
Information, Maintenance and Control Information, and Analysis and Evaluation. This functionality both makes possible
efficient facility operation and provides an environment in which data can be effectively utilized.

∗ 1 O&M: Operation and Maintenance∗ 2 ICT: Information and Communication Technology∗3: Plant Optimization Comprehensive Support Systemcomprehensive operation, maintenance, and2 Overview of the
management support systemaugments the DCS (∗4) operational data captured by our previous TIPLOS system by capturing inspection record
data and maintenance information, gathering and storing that data on a dedicated server, and facilitating central
management of data from multiple plants. By comprehensively analyzing and evaluating the stored data, the system is able
to provide higher-quality operation, maintenance, and management services.
In addition,
makes possible more stable operation through advanced, data-based operation, maintenance, andmanagement, contributing to user-friendliness and the safety of everyone involved with managed facilities.
∗ 4 DCS: Distributed control system

Collection and central management ofoperation, maintenance, and management data

network architecture

Operational information
Forecasting of fluctuations in waste quality and quantity
based on past data
● Optimization of operational planning, for example tomaximize power sales● Visualization of the amount of utility use● Visualization of the amount of power generated, theamount of power consumed, and the amount of powerpurchased and sold●

Maintenance and management information
Central management of information about equipment
issues, repairs, etc.
● Listings of maintenance plans and maintenance results● Management of operating time by piece of equipment● Forecasting of service life based on measurement
records●

Analysis and evaluation
Functionality for graphing stored data
Visualization of equipment performance● Functionality for advanced data analyses such as
multivariate analysis●●

DCS operational data

PlantsWirelessLAN
access point

DCS

Local
server
OPC/FTPserverDaily management
Computerization of daily inspection record-keeping
using tablets● Computerization of operational handoff notes● Incorporation of inspection records into a database● Management of inventory and order history
information for spare parts, chemical agents, oils, etc.
●●●

TabletInspection record data

Maintenance andmanagement terminal●

Webserver

1

DCS continuous operation data
DCS graphic screen monitoring(Remote operator console function)

2

3

4

5

6

7

8

9 10 11 12 13 Year

4 Creation of new added value

Daily patrol inspection records(Computerization using tablets)● Measurement and analysis data

During FY2016, the operator of a waste incineration plant in the Kyushu region began using, and we areplanning on a progressive deployment at new and existing facilities for which the Group provides operational management
services in DBO and O&M projects.
Furthermore, we will strive to create new added value through initiatives such as the following that utilize.

Maintenance information
Records of functional diagnoses of
non-operating furnaces● Repair and upgrade history● Precise functional inspection results

Establishing next-generation combustion technologies

Data from other facilities

We will analyze combustion characteristics that are influenced by multiple factors contained in stored data and operational
characteristics, and in the future we will strive to establish next-generation combustion technologies to provide real-time
feedback of analysis results to combustion control.

●Internet (via VPN)
TakumaHead Office

Branch offices
and branches

Operation and management
terminals

Operation andmanagement terminal

Analysis andevaluation

Integrated
serverAnalysisterminal

27

RemoteconsoleTAKUMA 2016 ANNUAL REPORT

RemoteconsoleExpanding remote monitoring and operation support services

Improvement of the quality of operation,
maintenance, and management services

We will further expand the remote monitoring and operation support service offered as part of the TIPLOS system to datein an effort to establish operation support structures with a view to reducing manpower requirements through remote
operation of plants.

Realization of advanced,
stable operation

Streamlining of maintenanceand management

Bringing innovation to private-sector plants

Optimization ofoperational planning

Acceleration of
information sharing

By deploying
to private-sector boiler plants such as biomass power plants and expanding the maintenance andmanagement services that use it, we will help ensure customer profits while reducing CO2 emissions.
TAKUMA 2016 ANNUAL REPORT

28

Contributing to Society through Our Businesses and Products

By reducing the minimum output from the 50% ratingused in previous models to 25% and adopting a four-stage
combustion control system that controls output at fourstages (100%, 50%, 25%, and 0%), we were able to reduce
the number of combustion start-stop events (i.e., the on/off
frequency)∗3 and thereby to improve the boiler’s operating
efficiency ∗4 during periods of low-load operation. The
design is the first simple once-through boiler in Japan touse a four-stage combustion control system. In addition, bydeveloping a multi-path flow of combustion gas in the
boiler body ∗5 and implementing low-air-ratio combustion,
we were able to improve the boiler efficiency during rated
Improvement of 1%during rated operation❶ Improved operating efficiency

The new product achieves a rated load efficiency∗1 of 99%(and a partial load efficiency∗2 of 101%).
∗ 1 For the 0.98 MPa

model (0.49 MPa,
air supply temperature of 35°C,
water supply temperature of 15°C)∗ 2 At a boiler loadfactor of 40%

Partial load efficiency
0.98 MPa model

1.57/1.96 MPa model

102

Partial load efficiency(40% load)

101

Boilerefficiency 100(%)

Rated load
efficiency

99

Boiler 96
efficiency
(%)
94

98

20

30

40

50

60

70

80

90

Combustion gas
channels
Water tube

100

Furnace

Load factor (%)

Load factor ∗7 and boiler efficiency

Multi-path flow in the boiler body (cross-section)∗ 1 Once-through boiler: A boiler made up of tubes in which water enters on one end and leaves the other end as steam. Because the design is

∗2
∗3

∗4
∗5
∗6
∗7

compact and lightweight, and because it holds a little boiler water, it can be started in a short period of time. Once-through systems are classified asboilers, small boilers, or simple boilers depending on specifications such as their maximum operating pressure and heating surface area. Simple
boilers are the smallest type of once-through boiler, and no special license is required in order to operate them.
Equivalent evaporation: An index of boiler capacity. Equivalent evaporation indicates the amount of evaporation that occurs when water at 100°C
is converted into steam at 100°C.
Reduction in the number of combustion start-stop events (i.e., the on/off frequency): Boilers control the evaporation by switching output
levels such that the steam usage does not fall below the minimum output level. Where steam usage would fall below that level, the evaporation isregulated by cycling combustion on and off. After stopping combustion and when restarting the boiler, the furnace is purged with fresh air to ensure
safety. During this purge process, heat inside the boiler escapes to the outside, causing thermal loss. Reducing the number of combustion on-off
events serves to limit thermal loss, helping to increase the boiler operating efficiency.
Boiler operating efficiency during low-load operation: The ratio of the amount of heat absorbed by steam produced to the total amount of heat
supplied to the boiler during low-output operation ranges from 50% of the rating to 25% of the rating.
Boiler body: The part of the boiler in which steam is generated. The new boiler’s heat transfer efficiency has been improved thanks to innovations
such as the optimization of the combustion gas channels (registered utility model No. 3196892, “Multi-pass Multi-tubular Once-through Boiler”).
Boiler operating efficiency: The boiler’s overall efficiency under actual operating conditions including operation during load fluctuations as well as
stops.
Load factor: The ratio of steam generation to the boiler’s rated output.
Basic specifications

kg/hEquivalent evaporation%
Boiler efficiency during rated operation
Turndown ratio∗8 (minimum output)
Combustion
Combustion control method
Air flow rate control methoddB
Equipment ambient noise
mm
Width
mm
Depth
Boiler dimensionsmm
HeightNew product(EQRH-1001NM)

Previous model(EQRH-1000NM)
1,000

97
4 : 1 (25%)
Four-stage control
Damper + inverter
73 or less
920
2,210
2,300

TAKUMA 2016 ANNUAL REPORT❷ High-quality steam supply
The new productdelivers steam drynessof at least 99.5%
across a broad rangeof pressures.

Steam dryness during rated operation(relative to boiler pressure)
100
99.9

Steam 99.8
dryness(%) 99.7

100% boiler load

99.6
99.5
0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

Boiler pressure (MPa)96
2 : 1 (50%)
Three-stage control
Damper76 or less
920
2,340
2,400

❺ Feed water flow rate fluctuation-response blow flow rate
control (patent No. Blow control
5826539)
Conventional
Feed water flow rate fluctuationSince the blow flowrate changes to accommodate changes in feedwater flow rate duringcontinuous blow operation, the boiler canrecover heat from blow
water efficiently under
all boiler loads.

blow control
response blow flow rate control<Under 100% load><Under minimum load>
Blow
flow
rate
Feed
water
flow
rate

Time (t)Time (t)❸ High load-tracking performance through PI control❻ Continuous pilot control (it is available as an option)

The new productuses proportional integration (PI) pressure
control, allowing it
to supply high-quality
steam by maintaining
stable steam pressureand high steam dryness under all evaporation loads.

The new boiler canminimize the drop-off
in boiler pressure as
the load increases
from 0%.

Range of pressure fluctuation±
under static load:Range of pressure fluctuation
under fluctuating load:±

0.005 MPa0.025 MPa

Automatic operating steam pressure andsteam dryness (under fluctuating load)

Load fluctuation-response performance
during continuous pilot operation

0.9

Boilerpressure 0.8
(MPa)

0.9

With continuous pilot
Without continuous pilot

0.82 MPa

0.6 0% load

0.7

0.5

0.6
99.9

0

❼ Quietness

Steamdryness 99.7(%)

90% load
5

10

15

20

Time (min.)Thanks to a quiet design, the new boiler generates 74 dB
or less noise measured in front of the unit (6 dB less thanthe previous model), making it compliant with the Boiler
Noise Labeling Program (administered by the Japan Societyof Industrial Machinery Manufacturers).

99.6

99.5
100
Steam 80load 60
(%)
40
20
0.6

Load fluctuation
0% to 90%

1.0

Boiler 0.8
pressure(MPa) 0.7 Set pressure:

1.0

99.8

∗ 8 Turn-down ratio: A ratio indicating how much the combustion amount can be limited during operation relative to the boiler’s rated combustion amount.
29

Load factor (%)

Blow control start90
10

10 20 30 40 50 60 70 80 90 100

The boiler’s newly developed burner is capable of low-air-ratio
combustion, and it
Corrected NOx and CO values for O2
achieves NOx emisO2
NOx
COsions of 55 ppm or6
O2
less at an air ratio of
5
O2
1.2. Furthermore, pro(%)
4
portional control that3varies the combustion
60
60
amount from 12% toNOx
40
100% allows the O2 = 0% 55 NOx
CO) 50
boiler to accommo- (corrected
20 (ppm)(ppm)
COdate load requests in a45
0
10 20 30 40 50 60 70 80 90 100
fine-grained manner.

Load factor (%)

New productPrevious model

92

0❹ High turn-down ratio (8:1) and exceptional combustion performance

Blow control stop
Blow control start

98

Improvement of up to 6%
during low-load operation

Features

Blow control start

100

operation while simultaneously reducing the fan power
consumption and improving its quietness. As a result of
improvements in the boiler efficiency during low-load andrated operation, we were able to improve the operating
efficiency∗6 by about 3% to 6%.
Furthermore, by implementing fine-grained control over
the water level in the boiler in response to output, we areable to supply high-dryness, high-quality steam over a broad
range of operating pressures, from low to high loads.
Going forward, we will propose the product to a broad
range of customers, including dry cleaners, food plants andother business uses.

Other product features include the ability to supply high-dryness, high-quality steam
across a broad range of operating pressures; to recover heat from blow water at a higher
level of efficiency than previous designs; and to take up less space when used inconnected installations.
Going forward, Nippon Thermoener will propose the product as a heat source for a broad
range of customers operating facilities such as manufacturing plants and large buildings.

Blow control stop

Features

In January 2016, Takuma Group company Nippon Thermoener Co., Ltd., launched the SUPER EQOS EQi(H)-6001NM (withequivalent evaporation of 6,000 kg/h), a high-efficiency once-through boiler that achieves 99% rated load efficiency (and 101%
partial load efficiency) while improving load tracking by means of high-turndown 8:1
proportional control.

Blow control stop

Working jointly with Tokyo Gas Co., Ltd.; Osaka Gas Co., Ltd.; and Toho Gas Co., Ltd., Takuma Group company Nippon
Thermoener Co., Ltd., developed the EQRH-1001NM high-efficiency simple once-through∗1 boiler (with equivalentevaporation∗2 of 1,000 kg/h) featuring improvements in the operating efficiency thanks to innovations such as reduced
minimum output and use of a four-stage combustion control system.
Simple once-through boilers, which are distinguished by the fact that no special license is required in order to operatethem, are being used by facilities in a broad range of fields, from small businesses to manufacturing plants. The company’s
corporate partners proposed the product in August 2015, and it is being sold by Nippon Thermoener.

Blow control stop
Blow control start—Improving operating efficiency by up to 6% through innovations such as reduced
minimum output and use of a four-stage combustion control system

3. Launching a High-efficiency, Proportional-control Gas-fired
Once-through Boiler

Blow control stop

2. Jointly Developing a Gas-fired, High-efficiency Simple Once-through Boiler❽ Connected installations
0

15

30

45

60

Time (min.)

75

90

105

Multiple units can be connected together, yielding a spacesavings of about 20%∗3.
∗ 3 Compared to previous models

TAKUMA 2016 ANNUAL REPORT

30

Contributing to Society through Our Businesses and Products

CSR Initiatives

4. Awards Received from Outside Organizations

Consumer Issues—Takuma’s on-site regeneration system for catalyst denitrification equipment receives
the METI Industrial Science and Technology Policy and Environment Bureau Director’sAward at the 41st Outstanding Environmental Systems Awards∗
Takuma’s on-site regeneration system for catalyst denitrification equipment received the METI Industrial Science andTechnology Policy and Environment Bureau Director’s Award at the 41st Outstanding Environmental Systems Awards, which
are hosted by the Japan Society of Industrial Machinery Manufacturers. As a leader in waste treatment, we look forward tocontinuing to propose systems which enable customers to reduce the environmental impact.

Catalyst denitrification equipment

Overview of Takuma’s award-winning system

Municipal waste incineration facilities typically installcatalyst denitrification equipment to efficiently eliminate
nitrogen oxides and dioxins from their exhaust gases. The
catalysts, which are set in the catalyst denitrificationequipment, must be regenerated at a regular interval inorder to restore system functionality. In conventional
systems, catalyst regeneration requires catalyzing
equipment to be removed and transported to a specialized
plant for regeneration.

Takuma’s on-site catalyst regeneration system allows
catalyst regeneration to be performed without removing
the catalyst from the catalyst denitrification equipment,
dramatically reducing the risk that the equipment will bedamaged as well as the time and cost associated with theregeneration process.
The system consists of a fan, slaked lime charging tank,heater, and circulating duct. With the exception of thecirculating duct, a single system’s equipment can be sharedby multiple incinerators, thereby reducing the initial cost.
The figure below illustrates the flow of gases through thesystem as well as the regeneration procedure.

⑤ SO2 is rendered harmless in the slaked
lime charging tank.

ClosedFan④ Some NH3 is oxidized to form nitrogenoxides (NOx), which reacts with thedecomposed NH3 to break down into
water (H2O) and nitrogen (N2).

SO2
H2O
N2
NOx

③ Ammonium sulfate and acidic
ammonium sulfate break down into
ammonia (NH3) and sulfur oxide (SO2).

NH3
SO2
Ammoniumsulfate and acidic
ammonium sulfate

HeaterCatalyst
denitrificationequipment

ClosedThe Outstanding Environmental Systems Awards are held by the Japan Society of Industrial Machinery Manufacturers. The
awards are conceived to contribute to the preservation of the environment and to facilitate R&D into environmental
protection technologies as well as the widespread adoption of outstanding environmental systems by selecting outstanding
environmental systems designed to address an increasingly diverse range of domestic- and global-scale environmental issues
and recognizing their developers, manufacturers, and development partners.

TAKUMA 2016 ANNUAL REPORT● Improving organizational operations● Improving individual employees’ capabilities

As measures for heightening the quality of theorganization as a whole, we establish quality objectives in each section and department at the beginning of the fiscal year and regularly report (twice peryear) the status of achievements to the QM committee (quality management review).

We create a “Work (Technical Capability) Achievement Checksheet” in order to improve the work
capability of the personnel required for each process.
In addition to allowing us to assess current skill levels
of individual employees on a regular basis, thissystem is used to review targets.

● Internal quality audit● Review of quality control and processes

We raise the accuracy of each job throughstandardization of the work procedure within eachprocess, confirm the operating status of the quality
management system by carrying out internal quality
audits in each section and department, and enhance
work content as necessary.
These audits are carried out on a regular basis byemployees who have been certified as internal audit
members by completing internal quality audit
member training seminars that are taught by lecturers from outside organizations. These seminars
enable those personnel to acquire knowledge ranging
from fundamental knowledge about ISO 9001 to
specific methods for implementing internal audits.

Quality is an important aspect of producing
excellent products.
When a non-compliant product is discovered, we
implement the measures (remedies) provided in thecorresponding manual (standard). Even in processes
that did not go so far as to produce a non-compliant
product, a review is carried out on processes thatmight have caused the issue as a preventive measure.
In order to also prevent procurement of noncompliant products, we provide further education(instruction) for all suppliers.

● Customer satisfaction survey∗ Outstanding Environmental Systems Awards

31

In 1997, in addition to defining our Quality Policy of “Manufacturing products that result in customer satisfaction,”
registering for “ISO 9001: Management Systems” certification (Registration No.: JQA 1952), and improving product quality
based on our quality management system, we carried out concrete activities to enhance customer satisfaction. The present
status for ISO 9001 certification includes having switched to ISO 9001:2000 in FY2002 and then to ISO 9001:2008 in
FY2010.
In order to produce products that customers truly appreciate, it is necessary not only to boost the quality of the productitself, but also to improve the content of that work as well as each individual’s ability to create a good product in eachprocess up to delivery (sales, design, procurement, manufacture, construction, and management).
Based on that Quality Policy, Takuma is pursuing a variety of measures in each sales, design, procurement, manufacture,
construction, and management process towards improving the quality of our products and services.

Denitration
catalyst② Ammonium sulfate and acidic ammonium
sulfate, which cause degradation of thecatalyst, are separated, and the catalyst isregenerated.

① Hot air at a temperature of 380°C is
supplied to the system.

Slaked lime
charging
tank

Activities Involving Product Quality

We created the Customer Satisfaction Survey Committee in FY2007 and have been conducting customer satisfaction
surveys since as an initiative to improve quality by asking customers how they feel about delivered products and Takuma staff
and using their feedback to improve quality.

Decide where to
conduct thequestionnaire survey

Conduct thequestionnaire
surveyInvestigate the questionnaire results
Analyze problem factors and investigate
recurrence prevention countermeasures(if results are lower than our standard)(Particularly praiseworthy aspects)
Praiseworthy factor analysis

Follow up with recurrence
prevention measures
Undertake in parallel elsewhere(only when necessary)

Customer satisfaction surveys
FY2007: 73.4 points (37 plants)
FY2015: 88.2 points (19 plants)
Average evaluation scores from questionnaire surveys (out of a possible 100 points)
TAKUMA 2016 ANNUAL REPORT32

CSR Initiatives

Corporate GovernanceDirectors, Audit & Supervisory Committee Members, Executive Officers

Corporate GovernanceIn order to strengthen the supervisory function of theBoard of Directors and to enhance corporate governance,
Takuma transitioned from an Audit & Supervisory Board toan Audit & Supervisory Committee at the General Meetingof Shareholders held on June 28, 2016.
As of June 28, 2016, the Board of Directors wascomprised of six directors (excluding directors who aremembers of the Audit & Supervisory Committee) and four
directors (of whom three were outside directors). The Boardof Directors meets regularly once a month as a rule andwhenever else it is necessary to make decisions about
important issues related to business management andissues established by law and ordinances, as well as tooversee the execution of the directors’ duties.
In order to accelerate management decision-making andclarify where management responsibilities are placed, we
have adopted an operating officer system in which we
appoint operating officers who are entrusted with the
responsibility of executing our business activities. As of June
28, 2016, there were 14 operating officers (including those
who also serve as directors). Moreover, we have also established an Executive Execution Committee, which is chairedby the president/chief operating officer, as an organizationthat deliberates matters that are brought up at meetings ofthe Board of Directors and other important issues related tothe execution of our business activities. This committee
communicates and provides direction about items decided
by the Board of Directors and other important items related

to the execution of our business activities appropriately tothe divisions that are to execute them.
An Audit & Supervisory Committee that consists of four
members, of whom three are outside directors, is responsible for accounting and operational audits. Members of
the committee attend important meetings, including thoseof the Board of Directors and the Executive Execution
Committee, and they strive to understand and observe thestatus of business execution in a timely and appropriatemanner. Drawing on their professional background andexperience, they express their opinions as necessary from an
objective perspective, and they conduct strict auditing of
the business execution performed by the directors.
To facilitate the effectiveness of audits carried out by the
Audit & Supervisory Committee, the president holds regularmeetings with committee members to ensure goodcommunication, and we have established an Audit &Supervisory Committee’s Office to provide staff to help
carry out the committee’s work.
In addition to the above, we have established a Human
Resources & Remuneration Advisory Committee comprisedof independent officers, representative directors, and theofficer in charge of human resources. The committee works
to increase transparency and objectivity in the selection ofcandidates for director and operating officer positions andin the determination of compensation as well as to enhance
the supervisory function of the Board of Directors.

Directors★ President and Representative Director

Takaaki Kato★

Kengo Numata

Hiroaki Nanjo

Chief Executive Officer

Senior Managing Executive Officer

Managing Executive Officer

Masahiko Izumi

Tsuyohito Nishiyama

Hideki Takeguchi

Executive Officer

Executive Officer

Executive Officer

General Meeting of Shareholders
Appointment
and removal

Appointment
and removal

Reporting
Auditing andreportingBoard of Directors
AdviceSelection,
dismissal,
andAppointment supervisionand removal

Executive Execution
Committee
Deliberation of(important matters)

Issuance of
instructions andcommunicationof information

Discussion ofand reportingon importantmatters

Appointment
and removal

ReportingDirectors (Audit & Supervisory Committee Members)∗ Outside

Accounting Auditors
Cooperation

Assistance

Recommendations

Representative
Directors

Reporting
Reporting

Audit & Supervisory
Committee

Discussion
andHuman Resources &reporting

Remuneration
Advisory Committee

Reporting andstatement of
views

Auditing ofaccounts

Audit & Supervisory
Committee’s Office
Cooperation

Auditing
Reporting
Reporting

Reporting

Variouscommittees

Yasushi Enomoto

Hiromichi Satake∗

Osamu Iwahashi∗

Minoru Murata∗

Reporting

Audit
Department

Internal auditing

Compliance & CSR
Promotion Division

Managing Executive Officers
Education,
instructions,and reporting

Internal auditing

Operating Officers

Observing
and guidance

Shiro Matsumura
Shunichi Matsuhashi
Takashi Manabe

Executive Officers
Ryoji Tani
Norito Uchiyama
Yoshiki Kita

Mitsuaki Adachi
Akira Taguchi

Execution of
responsibilities

Divisions and centers

Corporate governance structure
33

TAKUMA 2016 ANNUAL REPORT(As of June 28, 2016)

TAKUMA 2016 ANNUAL REPORT34

CSR Initiatives

Corporate GovernanceIR Activities

Risk Management Structure

In keeping with the “Takuma Group Code of Conduct,”
we provide our shareholders and investors with accurate
corporate information in a timely and fair manner. As apart of this, we provide notifications on the convening ofGeneral Meetings of Shareholders, balance sheet
information, timely disclosure information, marketablesecurities reports, annual reports in English and otherbusiness information, all on our website.
[Takuma website > IR information]
http://www.takuma.co.jp/english/investor/index.html

Individuals, others: 11.0%

Financial and securities∗:
14.0%
Trust banks: 28.6%

Foreign corporations,etc.: 31.1%

Other domestic
Japanese
corporations: 15.3%

Takuma follows a “Risk Management Policy” that connects company-wide risks and separately classifies them into “projectrisks” related to our core business, i.e., plant construction, “DBO project risks” and “DBO project operation, maintenance andmanagement risks” related to our DBO business, and “potential risks,” “actualized risks,” and “financial reporting risks”
related to other corporate business activities.
We are also building the risk management organization shown below and constructing a system of risk management andpromoting the strengthening of management for group companies as well through our “Takuma Group Coordinating
Committee for Compliance and CSR Promotion.”∗ Banks, life insurance companies, nonlife insurance companies,

Risk Management Policy

securities firms, and other financial institutions
Composition of shareholders (as of March 31, 2016)

Basic purpose of risk management
Risk refers to all phenomena that interfere with the group’s ability to achieve its business objectives or cause losses orharm to the interests of stakeholders.
The Takuma Group practices risk management with the goal of increasing its corporate value by working tomaximize returns while minimizing the negative impacts of risk.

Stock Information
1. Total number of authorized shares: 321,840,000
2. Total number of outstanding shares: 83,000,000
3. Total number of shareholders: 4,168 (as of March 31, 2016)
4. Major shareholders (top 10)(as of March 31, 2016)

Shareholder

Number of shares

Stake

The Master Trust Bank of Japan, Ltd. (Trust Account)

7,173,000

8.6%Japan Trustee Services Bank, Ltd. (Trust Account)

5,928,000

7.1%

Mizuho Trust & Banking Co., Ltd. (Retirement Benefits Trust, Mizuho Bank, Ltd. Acoount)
Trust & Custody Services Bank, Ltd. (Re-entrustment)

4,022,000

4.8%

Nippon Life Insurance Company

3,593,282

4.3%

PIONEER FUNDS

2,121,000

2.6%

STATE STREET BANK AND TRUST COMPANY

2,039,925

2.5%

TAKUMA CO., LTD. Kyoueikai

1,692,607

2.0%

Sumitomo Mitsui Banking Corporation

1,621,875

2.0%

NIPPON TOCHI-TATEMONO Co., Ltd.

1,305,000

1.6%

GOLDMAN SACHS INTERNATIONAL

1,111,932

1.3%

Risk management action guidelines
1. The president and CEO is responsible for risk management at Takuma.
2. All officers and employees participate in risk management activities.
3. Risk management activities are carried out in accordance with applicable guidelines such as the Risk Management
Rules.
4. Risk management activities are carried out in line with the Medium-Term Management Plan and annual plan, andwe work to make improvements on an ongoing basis.
5. When risk manifests itself, we respond by taking responsible action quickly to minimize any damage and creating
provisional organizational entities as necessary.
6. Group companies carry out risk management activities in accordance with their own policies and plans, with support
from Takuma.

Reportingpg
Board ofDirectors

President
Executive Execution
Committee

Request for
decision/
reporting

5. Dividend Policy
Takuma returns profits to investors in line with a comprehensive assessment of business performance and other factors
based on a policy of maintaining stable dividends while working to enhance the quality of its business. Our overriding goal isto remain competitive in an increasingly challenging marketplace.
Two dividends are paid each fiscal year: an interim dividend offered by resolution of the Board of Directors and a year-end
dividend offered by resolution of the annual meeting of shareholders.
In keeping with this policy, the year-end dividend for the consolidated fiscal year under review was 6 yen per share, which,combined with the interim dividend, brought the annual dividend to 11 yen per share.
We plan to continue to build internal reserves to strengthen our financial foundation and to use funds to increase
corporate value through capital investment, R&D investment, and other avenues in order to lay the groundwork for the
future growth and expansion of our businesses.

Request for
decision/
reporting

Report oninternal
controlevaluation
concerning
financialreporting

Reporting

Reportingpg
Risk Management
Department

Audit
Department

Planning/
reporting

TAKUMA 2016 ANNUAL REPORT

Project risk
DBO Project risk
DBO Project operation, maintenanceand management risk
Manifest risk

Risks
concerning
corporate
activities
Eachdivision

Potential risk
Risks
concerning
financialreporting

Evaluation

Evaluation
Takuma Group Coordinating
Committee for Compliance & CSR
Promotion (including risk matters)

35

Risk Management Code, Crisis Management Code
Project Risk Management CodeDBO Project Risk Management CodeRisk Management Code for DBO Project Operation,
Maintenance and ManagementgGroupcompanies

TAKUMA 2016 ANNUAL REPORT36

CSR Initiatives

Corporate GovernanceParticipation in the Community

Business Continuity Plan (BCP)

Disaster Preparedness Agreement Signed

Takuma has formulated a Business Continuity Plan based on the following policies to ensure proper and appropriate
continuity of business operations in the event of a large-scale disaster, pandemic, or other emergency:

Takuma has entered into an “Agreement on Use as a Temporary Evacuation Center in Case of
Tsunamis, Etc.,” a Disaster Preparedness Agreement, with Amagasaki City.
Our corporate Head Office is located in Amagasaki where, based on lessons learned from of theGreat East Japan Earthquake, they are advancing the establishment of temporary evacuation areas inpreparation for disasters, such as those that may be generated by tsunamis from earthquakes in the
Tonankai and Nankai areas that are anticipated in the near future, as well as those from flooding
caused by typhoons, heavy rain, and high tides.
To that end, we concluded a Disaster Preparedness Agreement with that city defining our Head
Office as a temporary evacuation center and enabling the local populace free access whenever there isa possibility of one of the above disasters occurring. Our corporate Head Office is thus designated by
Amagasaki City as a “Temporary Evacuation Center in Case of Tsunamis, Etc.”

1. In addition to implementing disaster-related measures to secure the safety of corporate officers and employees,
maintain structures so as to enable continuity of business operations while minimizing damage in an emergency.
2. Strive to respond to customer needs and recover from damage quickly by working closely with suppliers and partnercompanies to continue business operations.
3. Earn the trust of numerous stakeholders, including employees, their families, shareholders, and nearby residents, andfulfill social needs by continuing business operations.

Disaster rule system diagram

Yotteko-mura, Arai

Risk management policy

Takuma offers the “Takuma Club” recreation facility located in our Harima Factory
free of charge as the village office for “Yotteko-mura, Arai,” which was launched in
Takasago City’s Arai district with support from Hyogo Prefecture’s “Kenmin Koryu
Hiroba” (Civic Exchange Plaza) project. “Yotteko” means “come on over” in Banshu(southwestern part of Hyogo Prefecture) dialect, and “Yotteko-mura” is being used asa new local community venue in which anyone can participate at any time.

Risk management code
Crisis Management CodeOverseas Risk Management CodeDisaster Prevention Management CodeFire Prevention Plan

∗Based on Fire Service Act Enforcement
Regulations.

Earthquake Countermeasure Manual
Storm and Flood Damage Countermeasure Manual
Novel Influenza Countermeasure Manual

BCP activation
Business Continuity
Plan (BCP)

Safety Confirmation System Administration Rules

Takuma strives to contribute to society through activities such as the following:● WFP fundraising activities● Disaster prevention and earthquake resistancefeatures of the Takuma Building
The current Takuma Building was completed in December
1995.
To increase the earthquake resistance of the building,which was designed to serve as the company’s head office,engineers placed unbonded braces on key walls and used a
concrete-filled tube (CFT) structure, which was entering into
widespread use at the time as a successor to the reinforced
concrete (RC), steel-reinforced concrete (SRC), and steel (S)architectural structures.
The building also incorporates a number of equipment
systems, including a rooftop generator designed to provide
power for use in the event of a natural disaster or otheremergency (see photograph∗). The system can be used to
power the building’s fire suppression system pumps, smoke
exhaust fans, and emergency elevators, among otherequipment. Based on numerous reports of generators withwater-cooled engines failing in the event of the Great
Hanshin-Awaji Earthquake when their source of coolingwater was cut off, we chose a system with an air-cooledengine.

37

TAKUMA 2016 ANNUAL REPORT

Contribution to Society
Takuma serves on the Board of Trustees of the Japan Association for the World Food Programme,
the official supporting partner of the World Food Programme in Japan.
Each year, we display WFP posters at the entrances to company buildings and in cafeterias during
a campaign that lasts from June through August. The campaign serves both to increase employee
interest in the world’s food problems and to collect donations to address them. According to the UN
WFP, about 800 million people suffer from hunger worldwide. Through the Japan Association for theWorld Food Programme, we will continue to raise funds to help people suffering from food scarcity.

● Contributions to NPOs

• Purchasing UNICEF Christmas cards
Takuma purchases UNICEF Christmas cards. A portion of the proceeds is used to fund UNICEF
in their work to help children around the world.
• Donating calendars to a charity calendar market
Takuma donates unused calendars to a calendar market sponsored by the NPO “Nippon
Volunteer Network Active in Disasters.”
In FY2015, we donated more than 100 calendars. The proceeds are used to provide aid forvictims of natural disasters and other crises.
Emergency rooftop generator forproviding emergency power ∗● Activities at schools
In October 2015, second-graders at Amagasaki City’s Kinrakuji Elementary School, which is locatedadjacent to our Head Office, toured the Head Office building during a “Town Explorer” field trip.
Ms. Serizawa, Manager of the Technology Planning & Administration Dept., provided aneasy-to-understand explanation of Takuma’s businesses as well as waste incineration plants,
recycling facilities, and sewage treatment plants using slides. The children exhibited a high level ofawareness of waste-related issues, showing great interest and asking many questions.
TAKUMA 2016 ANNUAL REPORT38

CSR Initiatives

The Environment
Basic Environmental Policy

Takuma’s CO2 Reduction Technologies

Our company has established the “Basic Environmental Policy” as follows; aiming to ensure employees contribute to global
environmental conservation. This basic policy applies to the activities of all company departments.

We convert waste/biomass into energy and reduce CO2!

Environmental Philosophy

In 1 year,
uma p
produ
Takumaproducts

Takuma is committed to preserving the environment and realizing an affluent society
through business activities under the Company Motto: “Value Technology, Value People,
Value the Earth.”

abouttOperational Guidelines

4. Address resource conservation, energy efficiency, recycling, and minimization of waste generated
by all business activities.
5. Improve employee awareness and understanding about the importance of preserving the environment through environmental education and internal promotional activities.
6. Provide the community with information on the activities of Takuma to preserve the environment.

∗Assuming one Japanese cedar
tree absorbs 14 kg of
CO2 per year.

Reducing CO2 with biomass power generation boilersrrs
A classic example of biomass power generation can be found in sugar refineries.
Factories that make sugar produce large quantities of pomace form sugarcane, the raw
material used to make sugar. Sugarcane is crushed into a pulp, and sugar is extracted in
a compressor. The remaining fiber is called bagasse and can be used as boiler fuel. The
steam produced is used as the plant’s heat source, and any remaining steam is used togenerate electricity that is utilized to operate the plant and, if any remains, sold to a
power company. The amount of power generated at sugar refineries has grown greatly,with examples of single plants that generate 50,000 kW.

Environmental Management
Our Harima Factory has acquired ISO 14001 certification and has been implementing environmental management
activities based on the environmental management system established to comply with international standards. Our groupcompanies Nippon Thermoener Co., Ltd., Takuma Technos Co., Ltd., and Dan-Takuma Technologies Inc. have also acquired
ISO 14001 certification.

Even as total environmental impacts must be reduced, it isnecessary from a business management standpoint to pursue
environmental initiatives that are characterized by a high degreeof economic efficiency. We report environmental efficiency using
an index calculated in accordance with examples provided by the
Ministry of the Environment in its Environmental Performance
Indicators Guidelines for Organizations.
At the Takuma Group, we calculate environmental efficiency as
the ratio of consolidated net sales to greenhouse gas emissions.
In FY2015, this value improved compared to FY2014.

Consolidated net sales (million JPY)
Greenhouse gas emissions (tons-CO2)
29.12

30
20

21.03

21.04

22.46

24.42

down

4

million
tons!

about

CO2 reduction achieved by
Takuma’s biomass power
generation boilers(as of end of FY2015)

EnergyPalm
Bagasse kernel
shellsBiomass power
generation boiler

Biomass is any recyclable organic material derived from a livingorganism, but does not include fossil fuels, such as oil and coal. For
example, even though CO2 is emitted if wood waste products areincinerated, when trees grow again, they absorb CO2 to offset theemissions from incineration, so there is no increase in CO2 in theatmosphere. By using the heat produced by incinerating biomass togenerate power, the amount of power generated using fossil fuels
can be reduced, and this contributes to decreasing CO2.

CO2 reduction from waste incineration plants
Garbage, or waste, is an important source of energy. About 500 kW∗∗ of power canbe generated from one ton of garbage. Waste incineration plants are often called
Energy from Waste (EfW) plants. Waste must be seen as a “resource,” so Takuma isseeking to be the best in the world with our technologies to convert waste into energy
and reduce CO2.
∗∗Presumes waste with a calorific value of 8,800 kJ per kg and a power generation efficiency of 20%

10

2011

2012

2013

2014

Environmental efficiency

TAKUMA 2016 ANNUAL REPORT

Woodchips

The Takuma Group’s definition ofenvironmental efficiency

039

In 1 year,

What is biomass?

■ The situation concerning the acquisition of ISO 14001

Environmental efficiency

5

milliontons!

(Equivalent to the CO2 absorbed
by about 350 million Japanesecedar trees∗)

1. All Takuma Group companies will recognize the importance of maintaining a balance between
preservation of the environment and business activities.
2. Continuously develop activities to preserve the environment that comply with applicable environmental laws and ordinances, and ensure environmental control and assessment systems conformto international environmental standards.
3. Promote development of improved technologies and products for society that preserve theenvironment.

cut2015 (FY)

1 ton ofgarbage

Waste
combustion

In 1 year,

down

about

1

milliontons!

CO2 reduction achieved by Takuma’smunicipal solid waste incineration
plants and industrial waste
incineration plants(as of end of FY2015)

About
500 kW of
power
generated

TAKUMA 2016 ANNUAL REPORT

40

Financial Information

Status of Business Activities(2) Status of Cash Flow

1. Overview of Business Performance

Cash and cash equivalents at the end of the consolidated fiscal year under review rose 3,327 million yen from the previous
consolidated fiscal year to 48,335 million yen.

(1) Business Performance
During the consolidated fiscal year under review, the future direction of the Japanese economy remained unclear with aslowdown in China and other emerging nations combined with a shift from a weak yen to strong yen to prompt expectationsof a decline in corporate results which had been generally improving prior to those developments.
Against this economic backdrop, the Group’s primary waste treatment plant business benefitted from planned upgrades
and improvements in superannuated facilities due to efforts to prevent global warming and to conserve resources and energy
as a result of rising environmental awareness. Demand for biomass power plants is also expected to continue as a result ofenergy policies such as the feed-in tariff system for electricity generated from renewable sources.
Looking to our business performance during the consolidated fiscal year under review, we received a steady flow oforders for construction projects involving biomass power plants amidst numerous inquiries, and we also received orders forprimary equipment upgrades and periodical maintenance at waste treatment facilities as well as for the operation andmanagement of such facilities. However, a lack of orders for construction of waste treatment plants until this April caused
order volume to fall 13,843 million yen (12.2%) from the previous consolidated fiscal year to 99,919 million yen.
Net sales rose 9,213 million yen (8.9%) from the previous consolidated fiscal year to 113,088 million yen on significant
progress in the construction of waste treatment plants that were ordered during the previous fiscal year, leaving an
outstanding order balance of 139,425 million yen.
Operating income increased 966 million yen (11.8%) from the previous consolidated fiscal year to 9,189 million yen on
the increase in net sales. Although non-operating income fell due to factors including the elimination of negative goodwill
amortization, ordinary income rose 530 million yen (5.8%) from the previous consolidated fiscal year to 9,646 million yen.
The absence of any extraordinary gains combined with a decline in extraordinary losses and an increase in tax expenses
resulting from a decline in loss carried forward resulted in profit attributable to owners of the parent to fall 213 million yen(2.6%) from the previous consolidated fiscal year to 7,817 million yen.

Cash Flows from Operating Activities
Net cash provided by operating activities totaled 6,728 million yen (compared to net cash provided by operating activitiesof 21,727 million yen during the previous consolidated fiscal year). Principal factors included net income before taxes of
9,379 million yen as an increase of 6,867 million yen in accounts payable offset decreases of 7,951 million yen and 1,731
million yen in receivables and provision for loss on construction contracts, respectively.

Cash Flows from Investing Activities
Net cash used in investing activities totaled 445 million yen (compared to net cash used in investing activities of 160
million yen during the previous consolidated fiscal year). Income of 243 million yen from collection of loans receivable wasoffset by expenditures of 656 million yen on the purchase of property, plant and equipment.

Cash Flows from Financing Activities
Net cash used in financing activities totaled 2,900 million yen (compared to net cash used in financing activities of 3,707
million yen during the previous consolidated fiscal year). Principal factors included expenditures of 1,896 million yen on
repayment of long-term debt and payment of 827 million yen as dividends.

2. Production Output, Orders Received and Sales(1) Production Results
The following table summarizes the Group’s production results during the consolidated fiscal year under review bybusiness segment:

Results by Business Segment

Production output(millions of yen)

Year-on-year(%)

Domestic Environment and Energy

64,195

13.9

Overseas Environment and Energy

830

(2.9)

Segment

Domestic Environment and Energy
In addition to receiving a steady flow of orders amidst numerous inquiries for construction projects involving biomass
power plants, we received orders for primary equipment upgrades and periodical maintenance at waste treatment facilities aswell as for the operation and management of such facilities. However, a lack of orders for construction of waste treatment
plants until this April caused order volume to fall 12,431 million yen (14.1%) from the previous consolidated fiscal year to75,609 million yen. Nonetheless, net sales rose 8,532 million yen (10.7%) from the previous consolidated fiscal year to 88,494
million yen on the back of major progress in the construction of waste treatment plants ordered during the previous fiscal year.
Operating income rose 935 million yen (10.5%) from the previous consolidated fiscal year to 9,834 million yen thanks toan increase in net sales.

Overseas Environment and Energy
Order volume fell 1,342 million yen (60.9%) from the previous consolidated fiscal year to 861 million yen as a failure toreceive any orders for biomass power boilers during the consolidated fiscal year under review offset orders for maintenanceof overseas plants. Net sales fell 577 million yen (41.0%) from the previous consolidated fiscal year to 830 million yen,reflecting the fact that none of the biomass power boilers for which we have previously received orders are at a stage of
construction in which significant progress can be made.
Performance declined as operating income of 2 million yen during the previous consolidated fiscal year turned into an
operating loss of 223 million yen.

Package Boiler
Despite efforts to secure upgrade demand for high-efficiency once-through boilers and vacuum-type water heaters andmaintenance demand for parts sales and repairs, order volume fell 203 million yen (1.2%) from the previous consolidated
fiscal year to 16,450 million yen. Net sales fell 214 million yen (1.3%) from the previous consolidated fiscal year to 16,390
million yen.
Operating income fell 2 million yen (0.2%) from the previous consolidated fiscal year to 896 million yen.

Equipment and System Business
Order volume rose 192 million yen (2.7%) from the previous consolidated fiscal year to 7,331 million yen thanks togrowth in orders for building equipment and a steady flow of orders for semiconductor-related equipment. Net sales rose
1,516 million yen (24.7%) from the previous consolidated fiscal year to 7,663 million yen.
Operating income rose 305 million yen (665.3%) from the previous consolidated fiscal year to 351 million yen.

41

TAKUMA 2016 ANNUAL REPORT

Package Boiler

10,602(3.3)

Equipment and System Business

6,456

23.3

82,084

11.8

Internal transactions between segments

(279)

25.9

Total

81,805

11.7

Subtotal

Notes:
1. Amounts are expressed as total manufacturing expenses.
2. Amounts do not include consumption tax or other taxes.

(2) Orders Received
The following table summarizes orders received by the Takuma Group during the consolidated fiscal year under review bybusiness segment:
Orders received(millions of yen)

Year-on-year(%)

Backlog(millions of yen)

Year-on-year(%)

Domestic Environment and Energy

75,609(14.1)

130,709(9.0)

Overseas Environment and Energy

861(60.9)

1,462

2.2

Package Boiler

16,450

(1.2)

3,415

1.8

Equipment and System Business

7,331

2.7

3,950

(7.8)

100,251(12.1)

139,537(8.6)

Segment

SubtotalInter-segment order volume
Total

(332)

21.2

(112)

59.3

99,919(12.2)

139,425(8.6)

Notes:
1. Amounts do not include consumption tax or other taxes.
2. Package Boiler figures include some speculative production. In addition to order-driven production, the order volume and order balance
figures in the above table include that portion of speculative production for which delivery to a specific customer has been finalized.

TAKUMA 2016 ANNUAL REPORT

42

Financial Information(3) Sales• Safety and quality

The following table summarizes the Takuma Group’s sales results during the consolidated fiscal year under review bybusiness segment:

Operating performance, financial standing, reputation, and other aspects of the Group’s operations may be impacted by
accidents or incidents caused by human error or product defects occurring during the manufacture, installation orconstruction, operational management, or subsequent use of Group products. In addition, the Group may be affected byunanticipated cost overruns or other adverse developments due to unforeseen issues or other problems at plants and otherfacilities for which it has received orders, in particular when new technologies are introduced or deployed.

Sales amount(millions of yen)

Year-on-year(%)

Domestic Environment and Energy

88,494

10.7

Overseas Environment and Energy

830(41.0)

Package Boiler

16,390(1.3)

Equipment and System Business

7,663

24.7

Segment

SubtotalInter-segment sales

113,378

8.9

(290)

17.8

113,088

8.9

The Group’s business activities may be impacted if it becomes unable to protect intellectual property rights such as
patents and trademarks that it owns or has acquired, if those rights are infringed upon by other parties, or if the Group musttake steps to avoid infringing on the intellectual property rights of other parties.

• Other risks

Note:Amounts do not include consumption tax or other taxes.

The Group’s operating performance and financial standing may be impacted in a variety of ways by factors such as
government regulations, vendor supply capability, its ability to hire and retain human resources in Japan and abroad, loss of
key personnel, lawsuits, and other contingencies as it carries out its business activities.

3. 11th Midium-Term Management Plan (FY2015 to FY2017)

5. Research and Development Activities(1) Target Management Indicators

Having identified the fields of environmental protection and renewable energy utilization as its principal business domains
in an effort to achieve a sustainable, recycling-oriented society that is not excessively dependent on nuclear power or fossil fuels,
the Takuma Group is focusing its management resources on business in these domains as it pursues research and developmentin keeping with the corporate vision it has set forth of being an indispensable presence in society as a leading company.
The Takuma Group has consolidated its technology-related departments into the Engineering Group, through which it isactively working to strengthen and pass on its technological capabilities and develop new technologies, products, andservices through collaboration between the Takuma Group companies and joint research with outside research institutions
and universities.
Expenditures on research and development during the consolidated fiscal year under review totaled 743 million yen.
Principal research and development activities by business segment were as follows:

Total

The Group considers consolidated ordinary income to be its most important management indicator.
The 11th Medium-Term Management Plan sets forth the following quantitative targets in an effort to steadily expand ourbusiness in terms of both quantity and quality so as to facilitate sustained growth (all figures consolidated-basis):① Cumulative order volume during plan term (FY2015 to FY2017): 400.0 billion yen② Cumulative net sales during plan term (FY2015 to FY2017): 360.0 billion yen③ Cumulative ordinary income during plan term (FY2015 to FY2017): 27.0 billion yen(2) Policies① Maintenance and expansion of market position in the EPC business② Expansion of businesses that generate base profits③ Initiatives that target growth markets④ Further enhancement of the company’s financial strength⑤ Human resources management⑥ Cultivation of a robust organizational culture

4. Business and Other Risks
Although the Takuma Group strives to neutralize business and other risks on an organizational and systematic basis, we
believe the risks described below may influence investor decisions due to their potential to impact operating performance,
financial standing, and other aspects of the Group’s operations.
Forward-looking statements represent the Group’s judgment as of the end of the consolidated fiscal year under review.

• Economic trends
The Group’s operating performance and financial standing may be impacted by trends in public investment and private
capital investment, structural changes in price competitiveness and markets due to factors such as entry of new companies
into the market, changes in the pricing of raw materials and other inputs, stock market conditions, and other factors.

• Natural disasters
Large natural disasters such as earthquakes, storms, and flooding may impact the Group’s operations.

• Country risk
As the Group expands its business operations overseas, it becomes exposed to the potential impact not only of economic
conditions and exchange-rate fluctuations in the countries in which it operates, but also of acts of God such as regional
terrorism, conflict, natural disasters, and infectious disease.

43• Intellectual property rights

TAKUMA 2016 ANNUAL REPORT(1) Environment and Energy① In the area of waste treatment, we constructed a demonstration incinerator with a next-generation stoker (with aprocessing capacity of 10 tons per day) at one of our plants with the principal goal of developing proprietary technology
to aid in reducing life cycle cost and boosting energy recovery. We are utilizing this demonstration incinerator to carry out
development into such aspects of equipment operation as the reduction of harmful substances (e.g., nitrogen oxides anddioxins) through combustion improvements and increases in power generation efficiency. We also completeddevelopment, and began sales, of a safe, inexpensive, and high-efficiency nitrogen oxide reduction system that uses urea
instead of ammonia gas. Furthermore, we continue to conduct trials to verify that use of water-cooled stokers, whichhave a track record of standing up to the demands of use in industrial waste incinerators over extended periods of time,in municipal waste incinerators can reduce maintenance and management costs compared to conventional air-cooled
stokers due to their improved durability. These trials include efforts to address material improvements.
② In the area of energy, we continue to develop constituent technologies for burning a variety of fuels including unutilized
wood biomass to generate power, an area in which we are receiving many inquiries in connection with Japan’s newfeed-in tariff program for power generated from renewable sources. We are also developing technology for effectively
utilizing combustion ash from wood biomass as a Forestry Agency subsidy project, and we have adopted the goal ofusing that resource as fertilizer.
③ In the area of water treatment, we continued to develop a sewage sludge incineration and power generation system aswell as a new system for eliminating nitrogen by means of the anammox process. For sewage sludge incineration andpower generation, we developed and commercialized technology for generating power by incinerating sewage sludge
without the need for an auxiliary fuel— an accomplishment previously thought to have been impossible— and forsignificantly lowering emissions of greenhouse gases compared to applicable Ministry of the Environment ordinances.
Furthermore, we carried out trials in mixed fuel combustion with dried sludge and screen residue (an impurity contained
in sewage) as part of an effort to broaden the range of conditions and applications in which the system can be used. We
also developed technology for use with the anammox process to make significant reductions possible in facility
construction, maintenance, management, and other costs as well as in energy use compared to conventional
technologies. We continue to conduct research in an effort to achieve even greater cost reductions and to broaden therange of conditions and applications in which these technologies can be used.
The research and development budget for this segment of our business was 598 million yen.
TAKUMA 2016 ANNUAL REPORT

44

Financial Information(2) Package Boiler

6. Analysis of Financial Position and Operating Results

We developed and launched new models in our Eqos series of once-through boilers, which deliver quieter performanceand reduced CO2 emissions thanks to a more energy-efficient design. These newly developed models are described below.
In addition to delivering quieter operation than previous models, the oil-fired EQS-101 to 301 and gas-fired EQS-121 to
351 once-though boilers feature improved operability in the form of additional display items on the control panel andimprovements in how information is displayed along with additional capabilities such as functionality for controlling automatic
chemical injection. In addition, we developed the gas-fired EQRH-1001 once-through boiler as part of a joint project with
Tokyo Gas Co., Ltd.; Osaka Gas Co., Ltd.; and Toho Gas Co., Ltd. The new boiler not only delivers higher operating efficiency by
being the first boiler of its kind to use four-point combustion control to reduce the number of combustion start and stop
events, but also features a fan that consumes less power and produces less noise. Furthermore, the gas-fired EQi(H)-6001
compact boiler features a high-efficiency, low-noise, space-saving design that uses proportional integration control to deliver
stable steam pressure and high-quality steam.
The research and development budget for this segment of our business was 41 million yen.

(3) Equipment and System Business
Reacting to expectations that the development of the Internet of Things (IoT) will spur growth in demand for small-radiuswafer (the material used as a substrate for semiconductors), we developed and launched a small-radius wafer washingsystem for use by semiconductor plants featuring a sheet-type design that offers outstanding washing effectiveness.
Going forward, we will continue to develop products that meet customer needs by refining this small-radius wafer
washing system, for example by increasing its washing effectiveness and reducing chemical use by utilizing fine foam.
The research and development budget for this segment of our business was 103 million yen.

(4) Contracts of Major Importance in the Group’s Business① Technology In-licensing Contracts
Contractee
Contract target
Takuma Co., Ltd. Continuous bed filtration of liquids

Contract date
April 1979

Name of other party
Nordic Water Products AB(Sweden)Contract term
Until December 2018
(See Note 2.)

Takuma Co., Ltd. Process for the organic andanaerobic treatment of waste

December 2011

Hitachi Zosen Inova AG(Switzerland)

For 10 years, then automaticallyrenewed every year

Notes:
1. Most of the above contracts entail payment of a fixed percentage of sales in addition to a one-time payment at the time the contract wasentered into.
2. The contract has been revised to extend its term to December 2018.

(1) Financial Position
The Takuma Group has formulated a financial policy of maintaining an appropriate level of liquidity, securing funding forbusiness activities, and maintaining a robust balance sheet.
Total assets at the end of the consolidated fiscal year under review increased 9,487 million yen from the end of theprevious consolidated fiscal year to 132,614 million yen as an increase of 6,878 million yen in notes and accounts receivable
and an increase of 3,266 million yen in cash and deposits offset a decrease of 877 million yen in investment securities.
Liabilities rose 3,194 million yen from the end of the previous consolidated fiscal year to 73,805 million yen as an increaseof 7,068 million yen in notes and accounts payable offset a decrease of 1,996 million yen in short-term loans payable andlong-term debt and a decrease of 1,731 million yen in provision for loss on construction contracts.
Net assets rose 6,293 million yen from the end of the previous consolidated fiscal year to 58,809 million yen as anincrease of 7,817 million yen in retained earnings due to the posting of profit attributable to owners of the parent offset a
decrease of 827 million yen in retained earnings due to the payment of dividends and a decrease of 511 million yen invaluation difference on available-for-sale securities.
As a result, the equity capital ratio rose 1.7 points from the end of the previous consolidated fiscal year to 44.1%, andnet assets per share rose 76.65 yen from the end of the previous consolidated fiscal year to 708.18 yen.

(2) Operating Results
Net sales during the consolidated fiscal year under review rose 9,213 million yen from the previous consolidated fiscal
year to 113,088 million yen.
Gross profit was 23,344 million yen, and selling, general, and administrative expenses were 14,155 million yen. After
deducting the latter, operating income was 9,189 million yen.
Non-operating income of 800 million yen and non-operating expenses of 343 million yen yielded ordinary income of
9,646 million yen.
Extraordinary losses of 267 million yen without any offsetting extraordinary gains yielded income before income taxes andminority interests of 9,379 million yen.
Profit attributable to owners of the parent after deducting income taxes of 1,569 million yen and loss attributable tonon-controlling shareholders of 7 million yen was 7,817 million yen. An overview of net sales and operating income bysegment can be found in “Status of Business Activities: 1. Overview of Business Performance.”② Technology Out-licensing Contracts
Contractor
Contract target
Contract date
Name of other party
Takuma Co., Ltd. N-type palm wastes fired water-tube September 1982 P.T. Super Andalas Steelboiler(Indonesia)
Takuma Co., Ltd. Auxiliary agent for filter-type dust
collector

July 1993

Contract term
For 15 years, then automaticallyrenewed every year

MITSUI MINING & SMELTING For 10 years, then automaticallyCO., LTD. (Japan)
renewed every year

Takuma Co., Ltd. Dust elimination technology inNovember 2005
exhaust gas treatment systems using
impulse waves

Nihon Spindle Manufacturing For 10 years, then automaticallyCo., Ltd. (Japan)
renewed every year

Takuma Co., Ltd. Coal firing boiler

P.T. Panca Mandiri Essencia(Indonesia)

June 2007

For 10 years, then automaticallyrenewed every year

Note:
Most of the above contracts entail receipt of payment of a fixed percentage of sales in addition to a one-time payment at the time the contract
was entered into.

45

TAKUMA 2016 ANNUAL REPORTTAKUMA 2016 ANNUAL REPORT

46

Financial Information

Financial Statement■ Consolidated Balance Sheets
TAKUMA CO., LTD. and Consolidated Subsidiaries
As of March 31, 2016 and 2015

Thousands of
U.S. dollars(Note 1)Millions of yen

ASSETS
Current assets:
Cash and time deposits (Notes 5, 7 and 9) .....................
Notes and accounts receivable (Note 7):
Trade ..........................................................
Unconsolidated subsidiaries
and affiliated companies ...........................
Other ..........................................................
Less allowance for doubtful accounts ...........
Total ............................................
Inventories (Note 6) .......................................................
Deferred tax assets (Note 16) .........................................
Other ............................................................................
Total current assets .................................
Property, plant and equipment:
Land (Note 9) ................................................................
Buildings and structures (Note 9) ...................................
Machinery, equipment, lease assets
and construction in progress .......................................
(Note 9) ........................................................................
Less accumulated depreciation ......................................
Total property, plant and equipment ....
Investments and other assets:
Investment securities (Notes 7, 8 and 9) .........................
Investments in:
Unconsolidated subsidiaries
and affiliated companies (Note 7) ..............
Other ..........................................................
Less allowance for doubtful accounts ...........
Total ............................................
Deferred tax assets (Note 16) .........................................
Other ............................................................................
Total investments and other assets .......
Total assets ............................................................................

2016¥ 48,916

2016

2015
¥

45,650$434,115

44,93538,057398,786

1,457
289
(39)
46,642
4,041
2,803
607
103,009

1,281
456
(51)
39,743
3,812
3,359
722
93,286

12,9302,565(349)
413,932
35,86624,873
5,387
914,173

3,018
12,2193,082
12,22826,789108,437

11,12326,360(16,764)
9,596

11,91827,228(17,372)
9,856

98,713233,939(148,774)
85,165

11,136

12,013

98,825

5,556
823
(467)
5,912
2,648
313
20,009

5,702
784
(477)
6,009
1,709
254
19,98549,313
7,301(4,145)52,46923,501
2,779
177,574¥ 132,614¥ 123,127$ 1,176,912

Thousands of
U.S. dollars(Note 1)Millions of yen

LIABILITIES AND NET ASSETS
Current liabilities:
Short-term loans payable (Notes 7 and 10) ....................
Current portion of long-term debt (Notes 7 and 10) ......
Notes and accounts payable (Note 7):
Trade ..........................................................
Unconsolidated subsidiaries
and affiliated companies ............................
Other ..........................................................
Total ............................................
Accrued income taxes ....................................................
Advances received .........................................................
Allowance for guarantees on completed work ...............
Allowance for losses on sales contracts ..........................
Other ............................................................................
Total current liabilities .............................
Long term liabilities:
Long-term debt (Notes 7 and 10) ..................................
Allowance for directors’, executive officers’ andcorporate auditors’ retirement benefits ........................
Net defined benefit liability (Note 11) ............................
Other ............................................................................
Total long term liabilities ........................
Total liabilities ..........................................
Contingent liabilities (Note 12)
Net assets (Note 13):
Common stock ..............................................................
Authorized: 321,840,000 shares
Issued: 83,000,000 shares
Capital surplus ...............................................................
Retained earnings ..........................................................
Treasury stock, at cost ...................................................
328,764 shares in 2016 and 324,240 shares in 2015
Total shareholders’ equity ............................
Unrealized gains on securities ........................................
Deferred gains and losses on hedges .............................
Foreign currency translation adjustments .......................
Remeasurements of defined benefit plans ......................
Total accumulated other comprehensive income ..
Non-controlling interests in consolidated subsidiaries .....
Total net assets ........................................
Total liabilities and net assets ..............................................

2016
¥

7,750
673

2016

2015
¥

7,850
1,896

$

68,7795,969

34,58427,516306,924575
1,111
36,270
1,256
7,700
141
5,164
4,190
63,144694
1,075
29,285
304
8,692
70
6,895
4,620
59,612

5,108
9,856
321,888
11,146
68,336
1,257
45,82937,182560,386

1,396

2,069

12,393

189
8,668
408
10,66173,805

181
8,294
455
10,99970,611

1,676
76,9253,616
94,610654,996

13,367

13,367

118,632

3,768
38,754(232)

3,768
31,764(228)

33,442
343,934(2,066)55,657
3,586
(27)
(11)
(660)
2,888
264
58,809¥ 132,614

48,671
4,097
24
25
(605)
3,541
304
52,516¥ 123,127

493,942
31,825(236)(100)(5,855)25,6342,340
521,916$ 1,176,912

See accompanying notes.

47

TAKUMA 2016 ANNUAL REPORTTAKUMA 2016 ANNUAL REPORT

48

Financial Information■ Consolidated Statements of Operations■ Consolidated Statements of Comprehensive Income

TAKUMA CO., LTD. and Consolidated Subsidiaries
For the years ended March 31, 2016 and 2015

TAKUMA CO., LTD. and Consolidated Subsidiaries
For the years ended March 31, 2016 and 2015

Thousands of
U.S. dollars(Note 1)
2016

Millions of yen
2016
2015
Net sales (Note 19) ................................................................
Cost of sales (Notes 11, 14, 15 and 19) ..............................
Gross profit ...................................................................
Selling, general and administrative expenses(Notes 11, 15 and 19) .........................................................
Operating income (Note 19) ..........................................
Other income (expenses):
Interest and dividend income .........................................
Interest expense ............................................................
Amortization of negative goodwill .................................
Gain on sales of investment securities ............................
Loss on disposal of property, plant and equipment ........
Equity in earnings of affiliated companies ......................
Reversal of provision for loss on litigation ......................
Impairment loss (Note 17) .............................................
Other, net .....................................................................
Other income (expenses), net .................

¥ 113,088
89,744
23,344¥ 103,875
81,774
22,101$ 1,003,626
796,452
207,174

14,1559,189

13,8788,223

125,62181,553

366
(105)
(167)
287
(267)
76
190

310
(157)
195
262
(25)
431
523
(1,425)
140
254

3,253
(934)
(1,483)2,543(2,368)675
1,686

Income before income taxes ................................................
Income taxes (Note 16):
Current .........................................................................
Deferred ........................................................................
Total income taxes ...................................

9,379

8,477

83,239

1,558
11
1,569

903
(468)
435

13,828100
13,928

Profit .......................................................................................

7,810

8,042

69,311

Profit (loss) attributable to non-controlling interests
in consolidated subsidiaries ...............................................

(7)

12

(63)

Thousands of
U.S. dollars(Note 1)
2016

Millions of yen
2016
2015
Profit ........................................................................................
Other comprehensive income:Unrealized gains (losses) on securities ............................
Deferred gains and losses on hedges .............................
Foreign currency translation adjustments .......................
Remeasurements of defined benefit plans ......................
Total other comprehensive income .....................
Comprehensive income (Note 18) .............................................
Comprehensive income attributed to:
Owners of the parent .........................................
Non-controlling interests ....................................

¥

7,810

¥

(511)
(41)
(55)
(54)
(661)
7,149

¥

7,165
(16)

¥

8,042

¥

1,606
8
81
(339 )
1,356
9,398

¥

9,358
40

$

69,311$(4,536)
(362)
(484)
(481)
(5,863)63,448$63,587(139)■ Consolidated Statements of Changes in Net Assets
TAKUMA CO., LTD. and Consolidated Subsidiaries
For the years ended March 31, 2016 and 2015
Millions of yen

Profit attributable to owners of parent ..............................

Per share:
Net income ...........................................................................
Diluted net income ...............................................................
Cash dividends applicable to the year ....................................

¥

7,817

¥

8,030

$

U.S. dollars(Note 1)

Yen
¥

94.55
11.00

69,374

¥

97.12
9.00

$

0.84
0.10

Commonstock

Capitalsurplus

Total
ForeignaccumuNonDeferred currency Remeasure- lated other controlling
Treasury Total share- Unrealized gains and translation ments of compre- interests in
Retained stock,holders’ gains on losses on adjustdefined
hensive consolidated
earnings at costequitysecurities hedges
ments benefit plans income subsidiaries

For the years ended March 31, 2016
Balance at the beginning of current period .. ¥ 13,367 ¥ 3,768 ¥ 31,764 ¥Cash dividends (¥9.00 per share) ........
(827)
Profit attributable to owners of parent ..
7,817
Purchase of treasure stock ..................
Other changes during the year, net .....
Balance at the end of current period ....... ¥ 13,367 ¥ 3,768 ¥ 38,754 ¥(228) ¥ 48,671 ¥ 4,097 ¥
(827)
7,817
(4)
(4)
(511)
(232) ¥ 55,657 ¥ 3,586 ¥

Total
net
assets24 ¥(51)(27) ¥

25 ¥(36)(11) ¥(605) ¥ 3,541 ¥
(55)
(653)
(660) ¥ 2,888 ¥304 ¥ 52,516
(827)
7,817
(4)
(40)
(693)
264 ¥ 58,809

Millions of yen
For the years ended March 31, 2015
Balance at the beginning of current period .. ¥ 13,367 ¥ 3,841 ¥ 27,799 ¥ (3,606) ¥ 41,401 ¥ 2,491 ¥16 ¥Cumulative effect of changes in accounting policies..
(175)
(175)
Restated balance ................................... 13,367
3,841
27,624(3,606) 41,226
2,491
16
Cash dividends (¥7.00 per share) ........
(579)
(579)
Profit attributable to owners of parent ..
8,030
8,030
Change in scope of consolidation .......
(6)(6)
Purchase of treasure stock ..................
(1)(1)
Sales of treasury stock ........................
(0)
1
1
Retirement of treasury stock ................
(73)(3,305)
3,378
Other changes during the year, net .....
1,606
8
Balance at the end of current period ....... ¥ 13,367 ¥ 3,768 ¥ 31,764 ¥ (228) ¥ 48,671 ¥ 4,097 ¥24 ¥(29) ¥
(29)
54
25 ¥

(266) ¥
(266)
(339)(605) ¥

276 ¥ 43,889
(175)
276
43,714
(579)
8,030
(6)
(1)
1
28
1,357
304 ¥ 52,516

2,212 ¥
2,212
1,329
3,541 ¥

Thousands of U.S. dollars (Note 1)
For the years ended March 31, 2016
Balance at the beginning of current period .. $118,632 $ 33,442 $281,897 $ (2,028) $431,943 $ 36,356 $ 213 $ 226 $ (5,374) $ 31,421 $ 2,698 $466,062(7,337)(7,337)(7,337)
Cash dividends ($0.08 per share) ........
Profit attributable to owners of parent ..
69,374
69,374
69,374Purchase of treasure stock ..................
(38)
(38)
(38)
Other changes during the year, net .....
(4,531)
(449)
(326)
(481)
(5,787)(358)(6,145)
Balance at the end of current period ....... $118,632 $ 33,442 $343,934 $ (2,066) $493,942 $ 31,825 $ (236) $ (100) $ (5,855) $ 25,634 $ 2,340 $521,916

See accompanying notes.

49

TAKUMA 2016 ANNUAL REPORTTAKUMA 2016 ANNUAL REPORT

50

Financial Information■ Consolidated Statements of Cash Flows■ Notes to Consolidated Financial Statements

TAKUMA CO., LTD. and Consolidated Subsidiaries
For the years ended March 31, 2016 and 2015

TAKUMA CO., LTD. and Consolidated Subsidiaries

Cash flows from operating activities:
Income before income taxes ...........................................................................
Adjustments to reconcile income before income taxes
to net cash provided by operating activities:
Depreciation ...............................................................................................
Impairment loss ..........................................................................................
Amortization of negative goodwill ..............................................................
Gain on sales of investment securities ..........................................................
Increase (decrease) in allowance for doubtful accounts ................................
Increase (decrease) in allowance for bonuses ...............................................
Increase (decrease) in allowance for losses on sales contracts .......................
Increase (decrease) in allowance for losses on litigation ...............................
Increase (decrease) in net defined benefit liability .........................................
Interest and dividend income ......................................................................
Interest expense ..........................................................................................
Equity in losses (earnings) of affiliated companies ........................................
Net decrease (increase) in notes and accounts receivable and advances received ......
Decrease (increase) in inventories .................................................................
Decrease (increase) in other current assets ...................................................
Net increase (decrease) in notes and accounts payable and advance money .......
Increase (decrease) in other current liabilities ...............................................
Other ..........................................................................................................
Subtotal ..................................................................................................
Interest and dividend received .....................................................................
Interest paid ................................................................................................
Income taxes received (paid) ........................................................................
Net cash provided by operating activities .................................................
Cash flows from investing activities:
Net decrease (increase) in time deposits ..........................................................
Purchase of property, plant and equipment .....................................................
Purchase of intangible fixed assets ..................................................................
Purchase of investment securities ....................................................................
Sale of investment securities ...........................................................................
Disbursement for loans receivable ...................................................................
Collection of loans receivable ..........................................................................
Other ..............................................................................................................
Net cash used in investing activities .............................................................

9,379

$

The accounts of overseas subsidiaries are based on their accounting records maintained in conformity with generally accepted accounting
principles prevailing in the respective countries of domicile. However, necessary adjustments are made upon consolidation. The accompanying consolidated financial statements have been restructured and translated into English from the consolidated financial statements of
TAKUMA CO., LTD. (the “Company”) prepared in accordance with Japanese GAAP and filed with the appropriate Local Finance Bureau of
the Ministry of Finance as required by the Japanese Financial Instruments and Exchange Law. Some supplementary information included in
the statutory Japanese language consolidated financial statements, but not required for fair presentation, is not presented in the accompanying consolidated financial statements.

¥

8,477

83,239

840
267
(21)
107
(1,731)
325
(367)
105
(287)
(7,951)
(237)
42
6,867
(587)
152
6,903
623
(108)
(690)
6,728

900
1,425
(195)
(262)
(67)
268
3,956
(690)
69
(310)
157
(431)
2,468
(598)
1,224
6,714
(835)
73
22,343582(160)(1,038)21,727

7,455
2,368
(189)
948
(15,365)
2,880(3,253)934(2,543)(70,565)(2,105)374
60,940(5,210)1,352
61,2605,529(954)(6,124)59,711

42
(656)
(82)
(91)
152
(25)
243
(28)
(445)

13
(346)
(40)
(209)
181
(31)
187
85
(160)

377
(5,823)
(736)
(813)
1,352
(222)
2,160
(248)
(3,953)

Cash flows from financing activities:
Net increase (decrease) in short-term bank loans .............................................
Proceeds from long-term debt ........................................................................
Payment of long-term debt .............................................................................
Purchase of treasury stock ...............................................................................
Payment of cash dividends ..............................................................................
Dividends paid to non-controlling interests .....................................................
Other ..............................................................................................................
Net cash used in financing activities ............................................................

(100)(1,896)
(4)
(827)
(25)
(48)
(2,900)(450)200(2,805)
(1)
(579)
(16)
(56)
(3,707)(887)(16,823)(38)(7,337)(219)(429)(25,733)

Effect of exchange rate changes on cash and cash equivalents ............................
Net increase (decrease) in cash and cash equivalents ....................................
Cash and cash equivalents at beginning of year .........................................
Increase in cash and cash equivalents from newly consolidated subsidiary ...........
Cash and cash equivalents at end of year (Note 5) .....................................

(56)
3,327
45,008¥ 48,335

69
17,92927,03049
45,008(495)
29,530399,431428,961

See accompanying notes.

51¥

1. Basis of presenting financial statements

Millions of yen
2016
2015

Thousands of
U.S. dollars(Note 1)
2016

TAKUMA 2016 ANNUAL REPORT¥$The accompanying consolidated financial statements have been prepared in accordance with the provisions set forth in the Japanese
Financial Instruments and Exchange Law and its related accounting regulations and in conformity with accounting principles generally
accepted in Japan, which are different in certain respects as to application and disclosure requirements from International Financial Reporting Standards.

The translation of the Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan,
using the prevailing exchange rate at March 31, 2016, which was ¥112.68 to U.S.$1.00. The translations should not be construed as
representations that the Japanese yen amounts have been, could have been or could in the future be converted into U.S. dollars at this or
any other rate of exchange.

2. Summary of significant accounting policies(1) Principles of consolidation
The consolidated financial statements include the accounts of the Company and its 19 significant subsidiaries (the “Companies”).
Takuma Energy Co., Ltd., which was a newly established subsidiary, has been included in the consolidation from the consolidated fiscal
year ended March 31, 2016. All significant intercompany transactions and unrealized profits among the Companies have been
eliminated in consolidation. Investments in certain significant affiliates over which the Company and/or its subsidiaries are able to exert
influence to a material degree with regard to financial and operating decision making, other than consolidated subsidiaries, areaccounted for by the equity method after the elimination of unrealized intercompany profits.
Investments in the remaining unconsolidated subsidiaries and affiliated companies are not accounted for by the equity method becauseof the immaterial effect on the consolidated financial statements. Therefore, such investments are carried at cost, adjusted for any
substantial and non-recoverable decline in value. Income from those unconsolidated subsidiaries and affiliated companies is recognized
only when the Companies receive dividends therefrom.
(2) Foreign currency translation
Revenue and expense are translated at the rates of exchange prevailing on the transaction date. Assets and liabilities denominated inforeign currencies are generally translated at the rate of exchange prevailing at the balance sheet date, and the resulting translation
gains and losses are included in earnings.
The financial statements of a consolidated overseas subsidiary are translated into Japanese yen at the year-end rate, except that net
asset accounts are translated at historical rates and income statement items resulting from transactions with the Company aretranslated at rates used by the Company. The resulting translation adjustments are shown as “Foreign currency translation adjustments,” a separate component of net assets.
(3) Cash and cash equivalents
In preparing the consolidated statements of cash flows, cash and cash equivalents include cash on hand, readily available deposits andshort-term investments with maturities not exceeding three months from the date of acquisition and which have high liquidity and low
risk of price fluctuation.
(4) Securities
Equity securities issued by subsidiaries and affiliated companies which are not consolidated or accounted for using the equity method
are stated at cost determined by moving average cost. Available-for-sale securities with available fair market value are stated at fairmarket value, and unrealized gains and losses on these securities are reported net of applicable income taxes as a separate componentof net assets. Realized gains and losses on the sale of such securities are computed at cost using moving average cost. Available-for-salesecurities with no available fair market value are stated at cost determined by moving average cost.
If the market value of equity securities issued by unconsolidated subsidiaries and affiliated companies or available-for-sale securities
declines significantly, such securities are stated at fair market value and the difference between fair market value and the carrying
amount is recognized as loss in the period of the decline. If the fair market value of securities is not readily available, such securities
should be written down to net asset value with a corresponding charge in the income statement in the event the net asset value
declines significantly. In these cases, the fair market value or the net asset value will be the carrying amount of the securities at the
beginning of the next year.
(5) Allowance for doubtful accounts
The Companies provide the allowance for doubtful accounts by estimating the uncollectible amounts of certain individual accounts andby applying a percentage based on collection experience to the remaining receivables.
(6) Inventories
Merchandise and finished goods are stated at cost using the moving average method. Work-in-process is stated at cost determined by
the identified cost method. Materials and supplies are stated at cost using the average method. For these inventories, the carrying
amounts on the balance sheet are written down to reflect decreases in profitability.

TAKUMA 2016 ANNUAL REPORT

52

Financial Information(7) Property, plant and equipment
Property, plant and equipment are depreciated principally using the declining balance method over the estimated useful life of theasset. However, buildings acquired after March 31, 1998 are depreciated using the straight-line method. The range of useful lives isprincipally from 3 to 60 years for buildings and structures and from 2 to 20 years for machinery, equipment and other. Maintenanceand repairs, including minor renewals and improvements, are charged to income as incurred.
Lease assets under finance leases in which the ownership of the lease assets is not transferred to the lessee are depreciated using thestraight-line method over the lease term with an assumption of no residual value.
(8) Allowance for losses on sales contracts
For sales orders on hand at the balance sheet date for projects in which the estimated cost is expected to exceed the price of the orderby a wide margin, an allowance for losses on sales contracts is recognized at the estimated aggregate amount.
(9) Allowance for guarantees on completed work
Allowance for guarantees on completed work is based on estimated amounts of expenditure in the warranty period after products aredelivered.
(10) Allowance for directors’, executive officers’ and corporate auditors’ retirement benefits
Directors, executive officers and corporate auditors are generally entitled to receive retirement benefits based on the Companies’
internal rules. The Companies provide allowance for directors’, executive officers’ and corporate auditors’ retirement benefits based on
the amount that would be required if all directors, executive officers and corporate auditors retired at the balance sheet date.
(11) Net defined benefit liability
In calculating retirement benefit obligations, the method of attributing expected benefits to period employs principally a benefit formulabasis. Actuarial gains and losses are recognized in expenses using the straight-line method principally over 10 years commencing withthe following period. Prior service costs are recognized in expenses using the straight-line method principally over 10 years.
(12) Revenue recognition
When the outcome of an individual contracts can be estimated reliably, the domestic companies apply the percentage-of-completion
method to work performed during the year, otherwise, the completed contract method is applied. The degree of completion, or thepercentage of the contract performed during the period under review, is measured by the proportion of the cost incurred during theperiod to the estimated total cost.
(13) Income taxes
The Companies are subject to corporation tax, inhabitants tax and enterprise tax based on taxable income. The Companies recognize
the tax effects of the temporary differences between the carrying amounts of assets and liabilities for tax and financial reporting. The
provision for income taxes is computed based on the pretax income of each of the Companies, with certain required adjustments. The
asset-liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary
differences.
The Companies adopted the consolidated tax return system.
(14) Net income and cash dividends per share
Net income per share is computed based on the weighted average number of shares of common stock outstanding during each period.
Diluted net income per share is computed with the assumption that all convertible bonds were converted into common stock at the
beginning of each period. Cash dividends per share represent interim dividends declared by the Board of Directors in each year andyear-end dividends approved by the shareholders at the annual meeting held subsequent to the end of the fiscal year.
(15) Derivatives and hedge accounting
The Companies generally state derivative financial instruments at fair value and recognize changes in the fair value as gains or losses
unless the derivative financial instruments are used for hedging purposes. If derivative financial instruments are used as hedges andmeet certain hedging criteria, the Companies generally defer recognition of gain or loss resulting from a change in the fair value of thederivative financial instrument until the related loss or gain on the hedged item is recognized.
The Companies use currency forward contracts to hedge accounts receivable and payable denominated in foreign currencies (mainly
U.S. dollars) against the risk of fluctuation in exchange rates that comes from foreign currency transactions.
Interest rate swaps that qualify for hedge accounting and meet specific matching criteria are not re-measured at market value.
(16) Reclassifications
Certain prior year amounts have been reclassified to conform to the 2016 presentation.

3. Changes in accounting policies
The Company and its domestic subsidiaries adopted “Revised Accounting Standard for Business Combinations” (ASBJ Statement No.21,
September 13, 2013 (hereinafter, “Statement No.21”)), “Revised Accounting Standard for Consolidated Financial Statements” (ASBJ
Statement No.22, September 13, 2013 (hereinafter, “Statement No.22”)) and “Revised Accounting Standard for Business Divestitures”(ASBJ Statement No.7, September 13, 2013 (hereinafter, “Statement No.7”)) (together, the “Business Combination AccountingStandards”), from the current fiscal year. As a result, the Company changed its accounting policies to recognize in capital surplus thedifferences arising from the changes in the Company’s ownership interest of subsidiaries over which the Company continues to maintaincontrol and to record acquisition related costs as expenses in the fiscal year in which the costs are incurred. In addition, the Company
changed its accounting policy for the reallocation of acquisition costs due to the completion following provisional accounting to reflect
such reallocation in the consolidated financial statements for the fiscal year in which the business combination took place. The Company
also changed the presentation of net income and the term “non-controlling interests” is used instead of “minority interests”. Certain
amounts in the prior year comparative information were reclassified to conform to such changes in the current year presentation.
With regard to the application of the Business Combination Accounting Standards, the Company followed the provisional treatments inarticle 58-2 (4) of Statement No.21, article 44-5 (4) of Statement No.22 and article 57-4 (4) of Statement No.7 with application from the53

TAKUMA 2016 ANNUAL REPORT

beginning of the current fiscal year prospectively.
There is no effect on the consolidated financial statements of the current fiscal year.

4. Accounting standards issued but not yet adopted“Revised Implementation Guidance on Recoverability of Deferred Tax Assets” (ASBJ Guidance No. 26, March 28, 2016 (hereinafter,“Guidance No.26”)(a) Overview
Following the framework in Auditing Committee Report No. 66 “Audit Treatment regarding the Judgment of Recoverability ofDeferred Tax Assets”, which prescribes estimation of deferred tax assets according to the classification of the entity by one of five
types, the following treatments were changed as necessary:1) Treatment for an entity that does not meet any of the criteria in types 1 to 5;
2) Criteria for types 2 and 3;3) Treatment for deductible temporary differences which an entity classified as type 2 is unable to schedule;
4) Treatment for the period which an entity classified as type 3 is able to reasonably estimate with respect to future taxable income
before consideration of taxable or deductible temporary differences that exist at the end of the current fiscal year; and5) Treatment when an entity classified as type 4 also meets the criteria for types 2 or 3.
(b) Effective date
Effective from the beginning of the fiscal year ending March 31, 2017(c) Effects of application of the Guidance
The Company and its consolidated domestic subsidiaries are currently in the process of determining the effects of the guidance on the
consolidated financial statements.

5. Cash and cash equivalents
Amounts of cash and cash equivalents as of March 31, 2016 and 2015 were reconciled with cash and time deposits as follows:
Millions of yen
Cash and time deposits ................................................................
Time deposits with maturities exceeding three months
from the date of acquisition .....................................................
Total cash and cash equivalents ....................................................

2016¥ 48,916(581)¥ 48,335¥

2015
45,650Thousands of U.S. dollars
2016$
434,115¥(642)
45,008

$

2015
720
1,785
1,307
3,812

Thousands of U.S. dollars
2016
$
4,785
18,335
12,746$35,866(5,154)428,961

6. Inventories
Inventories were summarized as follows:
Millions of yen
Merchandise and finished goods ..................................................
Work-in-process ...........................................................................
Materials and supplies .................................................................
Total inventories ..........................................................................

¥

¥

2016
539
2,066
1,436
4,041

¥

¥

7. Financial instruments(1) Status of financial instruments(a) Financial instruments policy
Under Group policy, investment in financial instruments is limited primarily to short-term deposits and bank loans for raising funds.
Derivative transactions are used to hedge risks of fluctuations in foreign exchange and interest rates.
(b) Financial instruments, risks and risk management structure
The Companies are working to reduce customer credit risk associated with notes and accounts receivable and operating receivables
through customer based due dates and other balance controls in accordance with the Companies’ regulations. Investment securities
consists mainly of stocks and are periodically checked for the fair value of listed shares.
Long-term loans receivable are made mainly to affiliated companies whose financial status is checked periodically.
Notes and accounts payables, or operating payables, are due within one year.
Short-term financing is primarily for operating funds while long-term debt is for capital investment.
With floating rate loans, which are exposed to interest rate fluctuation risk, Group companies use derivative transactions (interest rate
swaps) as a part of their long-term loans to hedge the risk of interest rate fluctuation on bank loans and to fix interest payments.
To cope with operating receivables and loans exposed to liquidity risk, each Group company manages its cash position by preparing
monthly cash-flow plans and other means.
(c) Supplementary remarks on fair values of financial instruments
The fair values of financial instruments do not reflect the market risks concerning the derivative trading.
(2) Fair value of financial instruments
Amounts recognized on the consolidated balance sheets, fair values and differences as of March 31, 2016 and 2015, except items forwhich no fair value was obtainable, were as follows:

TAKUMA 2016 ANNUAL REPORT

54

Financial Information(Cash and time deposits)
The fair value of cash and time deposits is based on relevant book value because they are mostly settled within a short period of time andthe fair value is nearly equal to the book value.
Millions of yen
Thousands of U.S. dollars
2016
2015
2016
Amounts recognized on the consolidated balance sheets .............
¥
48,916¥45,650$434,115
Fair value .....................................................................................
48,91645,650434,115
Difference ....................................................................................
¥¥$(Notes and accounts receivable)
The fair value of notes and accounts receivable is based on the relevant book value because they are mostly settled within a short periodof time and the fair value is nearly equal to the book value.
Millions of yen
Thousands of U.S. dollars
2016
2015
2016
Amounts recognized on the consolidated balance sheets .............
¥
45,178¥38,196$400,940
Fair value .....................................................................................
45,17838,196400,940
Difference ....................................................................................
¥¥$(Investment securities)
The fair value of stocks is based on stock exchange prices, and fair values of bonds are based on stock exchange prices or prices provided
by financial institutions.
Millions of yen
Thousands of U.S. dollars
2016
2015
2016
Amounts recognized on the consolidated balance sheets .............
¥
11,051¥
11,928$98,071
Fair value .....................................................................................
11,051
11,92898,071
Difference ....................................................................................
¥¥$(Long-term loans receivable)
The fair value of long-term loans receivable is calculated by a method that discounts total principal plus interest by an assumed interest
rate for a similar new loan.
Millions of yen
Thousands of U.S. dollars
2016
2015
2016
Amounts recognized on the consolidated balance sheets .............
¥
964
¥
1,097
$
8,555
Fair value .....................................................................................
962
1,096
8,539
Difference ....................................................................................
¥
(2 )
¥
(1 )
$
(16 )
(Notes and accounts payable)
The fair value of notes and accounts payable is based on the relevant book value because they are mostly settled within a short period oftime and the fair value is nearly equal to the book value.
Millions of yen
Thousands of U.S. dollars
2016
2015
2016
Amounts recognized on the consolidated balance sheets .............
¥
35,120¥28,166$311,683
Fair value .....................................................................................
35,12028,166311,683
Difference ....................................................................................
¥¥$(Short-term loans payable)
The fair value of short-term loans payable is based on the relevant book value because they are settled within a short period of time andthe fair value is nearly equal to the book value.
Millions of yen
Thousands of U.S. dollars
2016
2015
2016
Amounts recognized on the consolidated balance sheets .............
¥
7,750
¥
7,850
$
68,779Fair value .....................................................................................
7,750
7,850
68,779Difference ....................................................................................
¥¥$(Long-term debt)
The fair value of long-term debt is calculated by a method that discounts total principal plus interest by an assumed interest rate for asimilar new loan. Short-term financing is primarily for operating funds, while long-term debt is for capital investment.
Millions of yen
Thousands of U.S. dollars
2016
2015
2016
Amounts recognized on the consolidated balance sheets .............
¥
2,069
¥
3,965
$
18,362
Fair value .....................................................................................
2,080
3,971
18,457
Difference ....................................................................................
¥
11
¥
6
$
95
Items for which no fair value was obtainable(Non-listed equity securities)
Millions of yen
Amounts recognized on the consolidated balance sheets
Equity securities issued by affiliates ...............................................
Debt securities issued by affiliates .................................................
Other ...........................................................................................

55

TAKUMA 2016 ANNUAL REPORT

¥

2016
4,548
50
85

¥

2015
4,565
50
85

Thousands of U.S. dollars
2016$
40,359444754(3) Redemption schedule of monetary assets with contractual maturities and repayment schedule of short-term loans payable and long-term
debtMillions of yen
As of March 31, 2016
Cash and time deposits ..................
Notes and accounts receivable ........

Less than
1 year¥ 48,916
43,745

1 to 2 years¥
1,433

2 to 3 years¥-

3 to 4 years¥-

4 to 5 years¥-

More than
5 years¥-

Investment securities ......................
Long-term loans receivable .............
Total ..............................................

¥ 92,661

¥

223
1,656

131
131

106
106

160
160

344
344

Short-term loans payable ...............
Long-term debt ..............................
Total ..............................................

¥

¥

¥

As of March 31, 2015
Cash and time deposits ..................
Notes and accounts receivable ........

Less than
1 year¥ 45,650
37,131

1 to 2 years¥
1,065

2 to 3 years¥-

3 to 4 years¥-

4 to 5 years¥-

More than
5 years¥-

Investment securities ......................
Long-term loans receivable .............
Total ..............................................

¥ 82,781

¥

242
1,307

222
222

131
131

105
105

393
393

Short-term loans payable ...............
Long-term debt ..............................
Total ..............................................

¥

¥

¥

As of March 31, 2016
Cash and time deposits ..................
Notes and accounts receivable ........

Less than
1 year$ 434,115
388,221

1 to 2 years$
12,7192 to 3 years$-

3 to 4 years$-

4 to 5 years$-

More than
5 years$-

Investment securities ......................
Long-term loans receivable .............
Total ..............................................

$ 822,336

1,979$ 14,698

$

1,161
1,161

936
936

1,422
1,422

3,057
3,057

Short-term loans payable ...............
Long-term debt ..............................
Total ..............................................

$ 68,779
5,969$ 74,748

$

$

7,750
673
8,423

¥

468
468

¥

¥
¥

470
470

¥
¥

116
116

¥

¥
¥
¥

80
80

¥
¥

262
262

¥

Millions of yen

7,850
1,896
9,746

¥

672
672

¥

¥
¥

468
468

¥
¥

470
470

¥

¥
¥
¥

117
117

¥
¥

342
342

¥

Thousands of U.S. dollars

$

4,151
4,151

$

4,169
4,169

$
$

1,036
1,036

$

$
$
$

710
710

$
$
$

2,327
2,327

8. Securities(1) Acquisition costs and book values of available-for-sale securities with available fair values as of March 31, 2016 and 2015 were as
follows:
As of March 31, 2016
Securities with book values exceeding acquisition costs:
Equity securities .....................................................................
Subtotal ................................................................................
Securities with book values not exceeding acquisition costs:
Equity securities .....................................................................
Subtotal ................................................................................
Total ......................................................................................

Acquisition cost

Millions of yen
Book value¥¥

As of March 31, 2015
Securities with book values exceeding acquisition costs:
Equity securities .....................................................................
Subtotal ................................................................................
Securities with book values not exceeding acquisition costs:
Equity securities .....................................................................
Subtotal ................................................................................
Total ......................................................................................

Acquisition cost

Millions of yen
Book value

¥

¥

¥

¥

5,139
5,139
743
743
5,882

5,831
5,831
50
50
5,881

¥

¥

10,356
10,356¥695
695
11,051

11,87911,87949
49
11,928Difference

¥

5,217
5,217
(48 )
(48 )
5,169

Difference
¥

¥

6,048
6,048
(1 )
(1 )
6,047

TAKUMA 2016 ANNUAL REPORT

56

Financial Information

As of March 31, 2016
Securities with book values exceeding acquisition costs:
Equity securities .....................................................................
Subtotal ................................................................................
Securities with book values not exceeding acquisition costs:
Equity securities .....................................................................
Subtotal ................................................................................
Total ......................................................................................

Acquisition cost$$

45,60245,602
6,593
6,593
52,195

11. Employees’ retirement benefits

Thousands of U.S. dollars
Book value$$

91,902
91,902
6,169
6,169
98,071

Difference$$

46,30046,300(424 )(424 )
45,876(2) Available-for-sale securities sold for the years ended March 31, 2016 and 2015 were as follows:
Information on the available-for-sale securities sold for the year ended March 31, 2016 is not provided because there was no significant
gain.
Millions of yen
2016
Total sales amount ........................................................................
Gains ............................................................................................

¥

-

¥

2015
333
262

Thousands of U.S. dollars
2016
$
-

9. Pledged assets
The following assets were pledged to secure short-term loans payable, long-term debt, contingent liabilities under guarantees for bankloans of affiliated companies and fulfillment of contracts as of March 31, 2016 and 2015:

Buildings and structures ................................................................
Machinery and equipment .............................................................
Land .............................................................................................
Investment securities .....................................................................
Cash and time deposits .................................................................
Time deposits as construction contract guarantees ........................
Total .............................................................................................

¥¥

Millions of yen
2016
342
¥
61
94
150
218
57
922
¥

2015
994
72
564
150
198
57
2,035

Thousands of U.S. dollars
2016
$
3,035
536
836
1,331
1,935
506
$
8,179

Millions of yen
2016
650
¥
7,100
7,750
¥

2015
650
7,200
7,850

Thousands of U.S. dollars
2016
$
5,769
63,010$68,779

¥

2015
266
1,630
1,896

Thousands of U.S. dollars
2016
$
601
5,368
$
5,969

Millions of yen
2016
178
¥
1,218
1,396
¥

2015
246
1,823
2,069

Thousands of U.S. dollars
2016
$
1,582
10,811$
12,393

10. Short-term loans payable and long-term debt
Short-term loans payable as of March 31, 2016 and 2015 were as follows:

Secured .........................................................................................
Unsecured .....................................................................................

¥¥

Current portion of long-term debt as of March 31, 2016 and 2015 was as follows:
2016
¥
¥

68
605
673

¥

Long-term debt as of March 31, 2016 and 2015 was as follows:

Secured .........................................................................................
Unsecured .....................................................................................

¥¥(2) Defined benefit plans
Movement in retirement benefit obligations (except plan applied simplified method) for the year ended March 31, 2016 and 2015
was as follows:
Millions of yen
Thousands of U.S. dollars
2016
2015
2016
Balance at April 1, 2015 and 2014 ................................................
¥
7,734
¥
6,865
$
68,636
Cumulative effect of changes in accounting policies ...................
270
Restated balance ...........................................................................
7,734
7,135
68,636
Service cost ................................................................................
546
518
4,848
Interest cost ...............................................................................
53
88
473
Actuarial loss (gain) ...................................................................
141
458
1,249
Benefits paid .............................................................................
(381)
(465)
(3,384)
Balance at March 31, 2016 and 2015 ............................................
¥
8,093
¥
7,734
$
71,822
Movement in net defined benefit liability for the year ended March 31, 2016 and 2015 was as follows:

Balance at April 1, 2015 and 2014 ................................................
Retirement benefit costs ............................................................
Benefits paid .............................................................................
Contributions paid by the employer ...........................................
Other ........................................................................................
Balance at March 31, 2016 and 2015 ............................................

¥

¥

57

TAKUMA 2016 ANNUAL REPORT

2015
600
64
(39)
(75)
10
560

Thousands of U.S. dollars
2016
$
4,972
1,003
(424)
(384)
(65)
$
5,102

Reconciliation from retirement benefit obligations and plan assets to net defined benefit liability as of March 31, 2016 and 2015 was asfollows:
Millions of yen
Thousands of U.S. dollars
2016
2015
2016
Funded retirement benefit obligations ...........................................
¥
613
¥
621
$
5,437
Plan assets ....................................................................................
(424)
(447)
(3,764)
189
174
1,673
Unfunded retirement benefit obligations .......................................
8,479
8,120
75,252
Total net defined benefit liability (asset) at March 31, 2016 and 2015 ....
8,668
8,294
76,925Net defined benefit liability ............................................................
Total net defined benefit liability (asset) at March 31, 2016 and 2015 ....

¥

Service cost ...................................................................................
Interest cost ..................................................................................
Amortization of actuarial differences .............................................
Amortization of prior service cost ..................................................
Retirement benefit costs based on the simplified method ...............
Total retirement benefit costs for the fiscal year ended
March 31, 2016 and 2015 ..........................................................

¥

¥

8,668
8,668

¥

8,294
8,294

Millions of yen
2016
546
¥
53
134
(49)
113

2015
518
88
98
(121)
64

$

76,92576,925

2016
0.7 %
1.6
1.7

2015
0.7 %
1.9
1.8

797

¥

647

Thousands of U.S. dollars
2016
$
4,848
473
1,184
(435)
1,003
$

7,073

Remeasurements of defined benefit plans for the year ended March 31, 2016 and 2015 were as follows:
Millions of yen
2016
¥

(49)
(7)

¥

2015
(121)
(360)

¥

(56)

¥

(481)

The annual average interest rate applicable to bank loans at March 31, 2016 and 2015 was as follows:
Short-term loans payable ..............................................................
Current portion of long-term debt .................................................
Long-term debt .............................................................................

Millions of yen
2016
560
¥
113
(48)
(43)
(7)
575
¥

Retirement benefit costs for the year ended March 31, 2016 and 2015 were as follows:
Millions of yen

Secured .........................................................................................
Unsecured .....................................................................................

(1) The outline of the adopted retirement benefit scheme
The Companies provide three types of post-employment benefit plans, unfunded lump-sum payment plans, funded non-contributory
pension plans and defined contribution plan, under which all eligible employees are entitled to benefits based on the level of wages
and salary at the time of retirement or termination, length of service and certain other factors.

Actuarial gains and losses ..............................................................
Prior service costs ..........................................................................
Total remeasurements of defined benefit plans for the fiscal years
ended March 31, 2016 and 2015 ................................................

Thousands of U.S. dollars
2016
$
(435)
(65)
$

(500)

TAKUMA 2016 ANNUAL REPORT

58

Financial Information

Accumulated remeasurements of defined benefit plans as of March 31, 2016 and 2015 were as follows:
Millions of yen
Actuarial gains and losses yet to be recognized ..............................
Prior service costs yet to be recognized ..........................................
Total balance at March 31, 2016 and 2015 ...................................

¥
¥

2016
108
(1,059)
(951)

¥
¥

2015
157
(1,051)(894)

16. Income taxes
Thousands of U.S. dollars
2016
$
956
(9,392)$(8,436)The Companies are subject to a number of taxes based on income, which, in the aggregate, indicated a statutory rate in Japan ofapproximately 33.0% and 35.6% for the years ended March 31, 2016 and 2015, respectively.
The significant differences between the statutory tax rate and the Companies’ effective tax rate for financial statement purposes were set
forth in the table below.
Statutory tax rate ............................................................................

2016
33.0%

2015
35.6%

12. Contingent liabilities

Nondeductible expenses ..................................................................
Dividend income .............................................................................
Amortization of negative goodwill ...................................................
Equity in earnings of affiliated companies ........................................
Intercompany cash dividend ............................................................
Council tax ......................................................................................
Decrease in deferred tax assets resulting from change in statutory rate ..
Valuation allowance ........................................................................
The Companies’ effective tax rate ....................................................

1.0(4.7 )(1.0 )
4.3
0.7
2.4(18.9 )
16.7%

0.8
(9.1)
(0.8)
(1.8)
8.6
0.7
4.0
(32.8)
5.1%

The Companies were contingently liable under guarantees for bank loans of affiliated companies and other companies as of March 31,
2016 and 2015 as follows:

Components of the Companies’ deferred tax assets and liabilities as of March 31, 2016 and 2015 were as follows:

The principal actuarial assumptions at March 31, 2016 and 2015 were as follows:
Discount rate
Expected rate of salary increase

2016
principally 0.64%
principally 7.0%

2015
principally 0.64%
principally 6.9%

(3) Defined contribution plan
The amount of contribution required to the defined contribution plan of the Companies for the years ended March 31, 2016 and2015 was 136 million yen ($1,209 thousand) and 127 million yen, respectively.

Millions of yen
Millions of yen
Unsecured ...................................................................................

¥

2016
502

¥

2015
682

Thousands of U.S. dollars
2016
$
4,453

13. Net assets
Under Japanese laws and regulations, the entire amount paid for new shares is required to be designated as common stock. However, acompany may, by a resolution of the Board of Directors, designate an amount not exceeding one half of the price of the new shares asadditional paid-in capital, which is included in capital surplus.
Under the Japanese Corporate Law (the “Law”), in cases in which a dividend distribution of surplus is made, the smaller of an amountequal to 10% of the dividend or the excess, if any, of 25% of common stock over the total of additional paid-in capital and legal earnings
reserve must be set aside as additional paid-in capital or legal earnings reserve. Legal earnings reserve is included in retained earnings in
the accompanying consolidated balance sheets.
Under the Law, legal earnings reserve and additional paid-in capital can be used to eliminate or reduce a deficit or be capitalized by aresolution of the shareholders’ meeting.
Additional paid-in capital and legal earnings reserve may not be distributed as dividends. Under the Law, all additional paid-in capital andall legal earnings reserve may be transferred to other capital surplus and retained earnings, respectively, which are potentially available fordividends.
The maximum amount that the Company can distribute as dividends is calculated based on the nonconsolidated financial statements of
the Company in accordance with Japanese laws and regulations.
The appropriation of retained earnings with respect to a given financial year is made by resolution of the shareholders at a general
meeting held subsequent to the close of such financial year. The accounts for that year do not, therefore, reflect such appropriations.

2016
Deferred tax assets:
Net defined benefit liability ..................................................
Allowance for losses on sales contracts .................................
Impairment loss ...................................................................
Loss carryforwards for tax purposes ......................................
Accrued cost of sales ............................................................
Other ...................................................................................
Total deferred tax assets .......................................................
Valuation allowance .............................................................
Net deferred tax assets .........................................................
Deferred tax liabilities:
Unrealized gains on securities ...............................................
Valuation difference in land of consolidated subsidiary .........
Other ...................................................................................
Total deferred tax liabilities ...................................................
Net deferred tax assets .........................................................

¥

¥
¥

¥

2015

2,669
1,524
1,260
1,214
1,150
3,473
11,290(4,110)7,180¥(1,568)(152)(198)(1,918)
5,262

¥

¥

¥

Thousands of U.S. dollars
2016

2,696
2,247
1,263
2,754
732
2,607
12,299(5,121)
7,178$(1,935)(136)(224)(2,295)
4,883

$

$

$

23,68913,526
11,183
10,768
10,20530,823
100,194(36,471)
63,723(13,913)(1,351)(1,759)(17,023)
46,700Adjustment of deferred tax assets and liabilities for enacted changes in tax laws and rates
On March 31, 2016, amendments to the Japanese tax regulations were enacted into law. As a result of these amendments, the statutory
income tax rate for the Companies will be reduced to 30.8% for years beginning on or after April 1, 2016 and 30.6% for years beginningon or after April 1, 2018. Based on the amendments, the statutory income tax rate used for the measurement of deferred tax assets andliabilities expected to be settled or realized from April 1, 2016 to March 31, 2018 and on or after April 1, 2018 are 30.8% and 30.6%,
respectively, as of March 31, 2016.
Due to these changes in statutory income tax rates, net deferred tax assets (after deducting deferred tax liabilities) decreased by ¥222
million as of March 31, 2016, deferred income tax expense recognized for the fiscal year ended March 31, 2016 increased by ¥304
million, unrealized gains on securities increased by ¥98 million, deferred gains and losses on hedges increased by ¥(1) million andremeasurements of defined benefit plans increased by ¥(16) million.

14. Provision for losses on sales contracts
Provision for losses on sales contracts included in cost of sales for the years ended March 31, 2016 and 2015 was as follows:
Millions of yen
2016
¥

29

¥

2015
4,239

Thousands of U.S. dollars
2016
$
255

Research and development expenses are charged to income as incurred. Such expenses included in cost of sales and selling, general andadministrative expenses for the years ended March 31, 2016 and 2015 were as follows:¥

TAKUMA 2016 ANNUAL REPORT

Information on the impairment loss for the year ended March 31, 2016 is not provided because there was no significant loss.
Impairment loss for the year ended March 31, 2015 was as follows:
PurposeWaste treatment facilities

15. Research and development expenses

59

17. Impairment loss

Millions of yen
2016
743
¥

2015
586

Thousands of U.S. dollars
2016
$
6,594

Type
Machinery and equipment, etc.

Location
Nantan City, Kyoto

In Campo Recycle Plaza Co., Ltd., a consolidated subsidiary of the Company, the profitability of some noncurrent assets had declined due
to a significant aging of the waste treatment facilities. Accordingly, the subsidiary decreased the book value of these assets to therecoverable value and reported the reduced amount, ¥1,425 million, as impairment loss under the extraordinary loss category. Includedin this impairment loss was impairment of buildings and structures in the amount of ¥321 million, machinery and equipment ¥615
million, land ¥486 million, and other ¥3 million.
In the Company, assets held by our waste treatment facilities were grouped for the purpose of this valuation.
Recoverable values are determined based on the value in use. Because no positive future cash flows were expected, the recoverable values
were estimated at 0.

TAKUMA 2016 ANNUAL REPORT

60

Financial Information

18. Comprehensive income
Amounts reclassified to net income in the current period that were recognized in other comprehensive income in the current or previous
periods and the tax effects for each component of other comprehensive income were as follows:
Millions of yen
2016
Unrealized gains on securities
Increase (decrease) during the year .....................................
Reclassification adjustments ...............................................
Subtotal, before tax ...........................................................
Tax (expense) or benefit .....................................................
Subtotal, net of tax ............................................................
Deferred gains and losses on hedges
Increase (decrease) during the year .....................................
Reclassification adjustments ...............................................
Subtotal, before tax ...........................................................
Tax (expense) or benefit .....................................................
Subtotal, net of tax ............................................................
Foreign currency translation adjustments
Increase (decrease) during the year .....................................
Reclassification adjustments ...............................................
Subtotal, before tax ...........................................................
Tax (expense) or benefit .....................................................
Subtotal, net of tax ............................................................

¥

¥

¥

¥

¥

¥

(64)
(64)
23
(41)

¥

¥

¥

¥

(55)
(55)
(55)

¥

¥

Remeasurements of defined benefit plans
Increase (decrease) during the year .....................................
Reclassification adjustments ...............................................
Subtotal, before tax ...........................................................
Tax (expense) or benefit .....................................................
Subtotal, net of tax ............................................................

¥

(140)
84
(56)
2
(54)

Total other comprehensive income ................................................

¥

(661)

¥

Thousands of U.S. dollars
2016

2015
(879)
(0)
(879)
368
(511)

2,436
(262)
2,174
(568)
1,606

11
11
(3)
8

$

$

$

$

(7,798)(2)(7,800)3,264(4,536)

(567)
(567)
205
(362)

81
81
81

$

$

¥

(458)
(23)
(481)
142
(339)

$

(1,248)
748
(500)
19
(481)

¥

1,356

$

(5,863)

¥

$

(484)
(484)
(484)

19. Segment information(Supplemental information – Accounting Standard for Disclosures about Segments of an Enterprise and Related Information)(1) General information about reportable segments
In the Group, businesses for which separate financial information is available are grouped into the following four reporting segmentsin accordance with the similarity of products and services of the respective business, and results of each reporting segment are
reviewed periodically by the Board of Directors to assess the segment’s business performance:
Domestic Environment and Energy
General waste treatment plants, industrial waste treatment plants, waste recycling plants, wastewater treatment plants, sludge
combustion plants, biomass power plants and gas-turbine cogeneration systems
Overseas Environment and Energy
Waste combusting power plants and biomass power plants
Package Boiler
Compact through-flow boilers and vacuum water heating systems
Equipment and System Business
Construction equipment, equipment for semi-conductor industry and cleaning systems(2) Basis of measurement about reported segment profit or loss and other material items
Accounting methods used for reporting segments are the same those explained in the Note 2, “Summary of significant accounting
policies.”
Profits of reporting units are operating incomes. Internal revenues and transfers between reporting segments are recorded using
prevailing market prices.

61

TAKUMA 2016 ANNUAL REPORT(3) Information about reported segment profit or loss and other material items
Reportable segment information for the years ended March 31, 2016 and 2015 was as follows:Year ended March 31, 2016
Sales:
Outside customers ..........................
Intersegment ..................................
Total ..........................................
Reportable segment income (loss) .......
Others:Depreciation ..................................

Year ended March 31, 2015
Sales:
Outside customers ..........................
Intersegment ..................................
Total ..........................................
Reportable segment income (loss) .......
Others:Depreciation ..................................

Year ended March 31, 2016
Sales:
Outside customers ..........................
Intersegment ..................................
Total ..........................................
Reportable segment income (loss) .......
Others:Depreciation ..................................

Domestic
Environment
and Energy

Overseas
Environment
and Energy¥ 88,292
202
88,494¥ 9,834

¥

¥

830
830
(223)

¥

¥

12

608

Domestic
Environment
and Energy

Overseas
Environment
and Energy¥ 79,828
134
79,962¥ 8,899

¥

¥

1,407
1
1,408
2

¥

¥

11

683

Domestic
Environment
and Energy

Overseas
Environment
and Energy$ 783,566
1,796
785,362$ 87,276

$

$

7,367
7,367
(1,980)

$

$

111

5,395

Package
BoilerMillions of yen
Equipment
and System
Business¥ 16,31575
16,390
¥
896

¥

¥

7,651
13
7,664
352

¥

¥

25

144

Package
BoilerAdjustment

Consolidated¥ 113,088
290
113,378¥ 10,859

¥

¥

(290)
(290)
(1,670)¥ 113,088
113,088¥ 9,189¥¥

51

Millions of yen
Equipment
and System
Business¥ 16,513
91
16,604
¥
898

¥

¥

6,127
20
6,147
46

¥

¥

24

124

Total

789

Total

$ 144,793
665
145,458
$
7,952

$

$

67,900115
68,015
3,119

$

$

221

1,278

Consolidated¥¥ 103,875
103,875¥ 8,223

¥

(246)
(246)
(1,622)¥¥

58

Thousands of U.S. dollars
Equipment
Packageand System
BoilerBusiness
Total

840

Adjustment¥ 103,875
246
104,121¥ 9,845
842

¥

¥

900

Adjustment

Consolidated$ 1,003,626
2,576
1,006,202$ 96,367$$(2,576)(2,576)(14,814)$1,003,626
1,003,626$ 81,553

$

$

450

7,005

$

7,455

Adjustments in reportable segment income (loss) include eliminations of transactions between segments and corporate expenses notallocated to reportable segment expenses, including selling, general and administrative expenses not attributable to reportable segment.
Total reportable segment income (loss) is adjusted with operating income reported on the consolidated income and loss statement.
Disclosure of information relating to segment assets is omitted since assets are not allocated to business segments.
(Related information)
Reportable segment information for the years ended March 31, 2016 and 2015 was as follows:(1) Information about products and services
Disclosure of this information is omitted since similar information is disclosed in Note 19, “Segment information.”(2) Information about geographic areas
Revenues
Since over 90% of net sales reported on the consolidated income statements were sales to outside customers within Japan, disclosureof this information is omitted.
Tangible fixed assets
Since 90% of tangible noncurrent assets reported on the consolidated balance sheet (in terms of values) were located within Japan,
disclosure of this information is omitted.
(3) Information about major customers
Since no outside customer accounted for 10% or more of net sales reported on the income statement, disclosure of this information isomitted.

TAKUMA 2016 ANNUAL REPORT

62

Financial Information(Information related to noncurrent asset impairment loss by reporting segment)

Year ended March 31, 2016
Impairment loss ...............................

Year ended March 31, 2015
Impairment loss ...............................

Year ended March 31, 2016
Impairment loss ...............................

Domestic
Environment
and Energy

Overseas
Environment
and Energy

Package
Boiler

¥

¥

¥

267

-

-

Domestic
Environment
and Energy

Overseas
Environment
and Energy

Package
Boiler

¥

¥

¥

1,425

-

Millions of yen
Equipment
and System
Business
¥

-

Total
¥

Millions of yen
Equipment
and System
Business-¥-

Consolidated

¥

¥

267

Total
¥

Adjustment-

267

Adjustment

Consolidated

¥

¥

1,425

-

1,425

Domestic
Environment
and Energy

Overseas
Environment
and Energy

Thousands of U.S. dollars
Equipment
Packageand System
BoilerBusiness
Total

Adjustment

Consolidated

$

$

$

$

$

2,368

-

-

$

-

$

2,368

-

2,368

(Information related to amortization and unamortized balance of goodwill)

Year ended March 31, 2016
Negative goodwill:
Amortization ...................................
Balance as of March 31, 2016 .........

Year ended March 31, 2015
Negative goodwill:
Amortization ...................................
Balance as of March 31, 2015 .........

Year ended March 31, 2016
Negative goodwill:
Amortization ...................................
Balance as of March 31, 2016 .........

Domestic
Environment
and Energy

Overseas
Environment
and Energy

Package
Boiler

¥

¥

¥

-

-

-

Domestic
Environment
and Energy

Overseas
Environment
and Energy

Package
Boiler

¥

¥

¥

123
-

-

Millions of yen
Equipment
and System
Business
¥

-

Total
¥

Millions of yen
Equipment
and System
Business

38
-

¥

34
-

195
-

Domestic
Environment
and Energy

Overseas
Environment
and Energy

Thousands of U.S. dollars
Equipment
Packageand System
BoilerBusiness
Total

$

$

$

-

-

-

$

-

$

Consolidated

¥

¥

-

Total
¥

Adjustment

-

-

-

Adjustment

Consolidated

¥

¥

-

195
-

Adjustment

Consolidated

$

$

-

-

(Information related to gains on negative goodwill by reporting segment)
Not applicable

63

TAKUMA 2016 ANNUAL REPORTTAKUMA 2016 ANNUAL REPORT

64

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