Management Messages

JGC Group's Growth Strategy

Management Messages

Message from the
Chairman and CEO

Reinforcing Management
Resources for Continuous Growth"Sustainability Management"

Reinforcing Management
Results of Value Creation
Resources for Continuous Growth"Corporate Governance"

CEO Message
Critical phase for achieving sustainable growth
Masayuki Sato
Representative Director, Chairman, and Chief Executive Officer (CEO)Has worked in finance and accounting since joining JGC in 1979, overseeing finance for the Middle East, North Africa,
Southeast Asia, and CIS projects.
Appointed as a director in June 2010, CFO and Managing Director, Senior General Manager of the Corporate
Administrative & Financial Affairs Division in July 2011, and Executive Vice President in June 2012. Has served as
Representative Director and Chairman as of June 2014 and additionally CEO as of June 2017.

wake of the Russia-Ukraine situation, and there was major

plant in Japan, resulting in a high ¥824 billion in new con-for high-performance functional materials, and establishingprogress with new construction plans and expansion plans

tracts for the Total Engineering Business. The business had

future engines of growth. This is bringing about a shift in ourfor existing LNG plants in the U.S., the Middle East, Africa

significantly higher sales and earnings compared to fiscal

business portfolio, which had been centered on the oil and

In JGC Report 2022, the previous fiscal year's integrated

and other regions. As energy demand recovers in the wake

2021 levels, as a result of ensuring proper risk management

gas sector, toward the five business areas set for expansion

report, I outlined the fact that we are facing the challengeof COVID-19, efforts are being made for looking into restart-

for projects already underway in Japan and overseas, as wellin the 2040 Vision.

of having to address the two seemingly contradictory issues

ing LNG plans that had been temporarily put on hold, while

as market recovery in the Functional Materials Manufacturing

Meanwhile, we secured ¥824 billion in contracts in fiscalof responding to today's growing global demand for energy

oil and gas development plans are starting to take shape inBusiness. Above all, net profit attributable to owners of the2022, and set our fiscal 2023 forecasts to net sales of ¥800

and accelerating decarbonization efforts toward building a

Middle East oil-producing countries in response to growing

parent recovered to ¥30,665 million, following low figures inbillion, operating profit of ¥38 billion and net profit attributablesustainable society.

Significant boost to ROE in fiscal 2022

demand for energy. There are signs of new production plansfiscal 2019 and 2020, and the net loss posted in fiscal 2021,

to owners of the parent of ¥32 billion. This means we are well

As we work toward enhancing the five business areas

for hydrogen/fuel ammonia and sustainable aviation fuelwhile return of equity (ROE) improved to 7.8% from the lowon the way to achieving the financial targets of BSP 2025 of("Energy transition," "Healthcare & life sciences," "High-(SAF) becoming evident worldwide like the U.S., Australia

levels posted over the past several years.

net sales of ¥800 billion, operating profit of ¥60 billion andperformance functional materials," "Circular economy," andand the Middle East, and progress has also been made here

"Industrial & urban infrastructure") required by society andin Japan.

Setting our sights on achieving thefinancial targets of BSP 2025

We are anticipating ROE of around 7.8% for fiscal 2023,
which also brings the BSP 2025 target of 10% into sight.

by industry as set forth in the 2040 Vision, through the pro-With such international moves to respond to growing

cesses for achieving a sustainable society, I outlined how theenergy demands and accelerate efforts toward decarboniza-

JGC Group, based on its technical expertise, needs to be antion, the JGC Group fulfilled its role of playing an active roleequal partner—a collaborator—providing realistic solutions,

toward achieving these plans as a corporate group providing

Fiscal 2023 marks the third year of the BSP 2025 medium-the long-term management vision, 2040 Vision, and we arewhether to countries, clients, or a range of other stakehold-truly realistic solutions.

I feel that we are fulfilling our role of "Enhancing planetary health" that the JGC Group redefined as purpose interm business plan covering the five-year period from fiscal

now approaching a critical phase for achieving sustainable

Specifically, the JGC Group secured contracts including

2021 to 2025, positioned as the first phase of the 2040

growth.

Looking back at fiscal 2022, I felt that it was a year marked

a floating LNG (FLNG) plant in Malaysia, an ethylene plant in

Vision. Over the past two years, we have made steady

The current issues faced worldwide are those for whichby significant moves worldwide toward addressing these two

the U.S., and a gas and oil separation plant in Saudi Arabia,

progress toward the three key BSP 2025 strategies of trans-

the JGC Group's 2040 Vision set out to develop solutions—pressing issues. Demand for LNG development soared in theas well as a hydrogen production plant and SAF production

forming EPC operations, expanding manufacturing businessbalancing energy stability with decarbonization and reducing

ers who face these contradictory issues.

5

net profit attributable to owners of the parent of ¥45 billion.

JGC Report 2023

JGC Report 2023

6

Management Messages

JGC Group's Growth Strategy

Reinforcing Management
Resources for Continuous Growth"Sustainability Management"

Reinforcing Management
Results of Value Creation
Resources for Continuous Growth"Corporate Governance"

Management Messages

Message from the Chairman and CEO
the environmental impact of resource consumption. In orderto achieve steady, ongoing growth, I firmly believe that the
JGC Group needs to significantly increase corporate value

Resources for sustainable growth—Further strengthening human capital

into the future, as an engineering company wholeheartedly

models that had been centered on the EPC Business underthe 2040 Vision. With this in mind, we are currently clarify-

Wrapping up

ing the required human resources portfolio and developing
diverse human resources training policies and specific train-

I have worked for the JGC Group for more than 40 years,ing programs.

since joining the Company in 1979 and being appointed

committed to expanding the five mentioned business areas,

In addition to pushing ahead with business strategies by

diversifying its business models, and providing realistic solu-

expanding business areas and diversifying business models,

We are also working to ensure those human resources

tions with its technical expertise, on the course charted in thethe JGC Group recognizes that reinforcing management

remain highly motivated, developing a workplace environ-2040 Vision.

resources that support these strategies is essential for

ment that brings growth in the human resources required

The JGC Group has long been engaged in the EPC

achieving sustainable growth.

director in 2010, as well as in my capacity as Chairman and
CEO starting from 2017.

by the Company. In fiscal 2022, the personnel system wasBusiness for plants in the oil and gas sector as its core opera-

increases in demand for LNG, and markets in the sustainabil-

I view strengthening human capital as the most importantchanged to one based on the Pay for VALUE concept, wheretions in the Total Engineering Business, and has achieved

ity sector are being developed at a rapid pace to create a sus-

issue to address among management resources that have aeach individual's compensation reflects their roles and job

close to consistent growth by constantly expanding markets

tainable society. Instead of viewing any unexpected changes

major impact on achieving sustainable growth for the JGC

responsibilities, and in fiscal 2023, compensation of employ-and diversifying our targeted plants. I view the key corpo-

like these that may arise going forward—or changes thatGroup. Our existing efforts toward improving human capitalees at JGC Holdings Corporation, JGC Corporation and JGC

rate values created by the JGC Group to be its contributions

are more intense than anticipated—as risks that adversely

involved systematic and ongoing training for design engi-

Japan Corporation was increased by an average of 10%.

toward the stable supply of energy, economic growth andaffect corporate value in markets closely associated with theneers and human resources associated with projects, such

We are also making a concerted effort toward inclusion andemployment opportunities in resource-rich countries, and the

JGC Group's business strategies, I feel that it will be vital toas project managers supervising the execution of projects

diversity, enhancing engagement with our employees, andadvancement of human resources.

fully embrace such changes into our business strategies as

under our main Total Engineering Business segment. I am

implementing a wide array of measures to enable diverse

As the world currently moves toward a sustainable society,

opportunities to achieve sustained growth.

confident that these human resources formed the linchpin ofhuman resources to make the most of their own capabilities.

I believe the corporate value that will be generated by thethe JGC Group's prowess in the Total Engineering Business.

I am acutely aware that human capital is the most impor-

JGC Group will vastly and broadly exceed our past corporate

The Russia-Ukraine situation has brought about sudden

Implementing measures will be essential for securing moretant management foundation with which the JGC Group canvalue by providing realistic solutions for expanding the fiveskilled human capital to expand into a broad range of businessachieve sustainable growth, and I intend to make further

business areas that includes energy transition, as a corpo-

areas beyond the oil and gas sector and diversifying business

improvements in this area going forward.

rate group contributing to a healthy future for people andthe planet by redefining the purpose of the 2040 Vision as"Enhancing planetary health."
Looking back over the past 95 years of the JGC Group,
I strongly feel that fiscal 2023 represents a critical phase for
the JGC Group in achieving sustainable growth for the future
as a corporate group. As CEO, I am committed to fulfilling
my responsibilities with the goals of sustainable growth andfurther increased corporate value.
I sincerely request the continued support of all ourshareholders.

7

JGC Report 2023

JGC Report 2023

8

Management Messages

JGC Group's Growth Strategy

Reinforcing Management
Resources for Continuous Growth"Sustainability Management"

Reinforcing Management
Results of Value Creation
Resources for Continuous Growth"Corporate Governance"

Management Messages

Message from the President and COO

COO Message
Changes in the market environment
considered to be a tailwind
Tadashi Ishizuka
Representative Director, President and Chief Operating Officer (COO)
Managed numerous projects outside of Japan after initially working in the Domestic Project Construction Divisionin 1972. Appointed Managing Director and Senior General Manager of the Project Operation Services Division inJune 2008, Senior Managing Director in 2010, Executive Vice President and Board Director in June 2011, Senior
Executive Vice President and CPO in February 2017, President and COO in June of that year.

Overview of fiscal 2022
— Second-highest level of newcontracts recorded

beginning of the year. In particular, we achieved an 11.0%

three key BSP 2025 strategies—transformation of EPC

for use in newly secured projects going forward. In pharma-

gross profit ratio—which indicates the potential profitability ofoperations, expansion of manufacturing business for high-ceuticals where there remains a high level of capital invest-

an engineering company—two points higher than the 9.0%

performance functional materials, and establishment of future

ment, we secured numerous contracts in fiscal 2022 andforecast at the start of the fiscal year. This was due to factors

engines of growth—in order to achieve the numerical targets

established a strong position as an engineering company

that included the impact of a weaker yen, greater profitabilityof BSP 2025, as well as expanding the five business areas

specializing in sectors where strong demand is anticipated

As recovery of the post-pandemic resources market became

for projects underway in the Total Engineering Business, andand diversifying business models. I commend the results wein the future, such as vaccines and biopharmaceuticals. In

evident, we made sure to tap into the increasing capital

the recovery of demand in the chemical catalyst and finehave accomplished.

light of this, the construction project for a facility for the man-investments by oil majors and national oil companies in oil-chemical markets in the Functional Materials Manufacturing

For the transformation of EPC operations, we establishedufacture of small and mid-size molecule drugs for Chugai

producing countries, and secured contracts including a gas

Business. Ever since I was appointed President, I feel thatJGC INDIA EPC PRIVATE LIMITED in August 2022 as a new

Pharmaceutical Co., Ltd. was selected as the Category

and oil separation plant in Saudi Arabia, an FLNG plant in

the seeds of transformation have well and truly taken hold inoperations center in Chennai, India, and added staff with aWinner for Innovation in the Facility of the Year Awards of

Malaysia, and an ethylene plant in the U.S. As a result, we

the Total Engineering Business. This has been achieved byview to increasing capacity to work on EPC contracts that

the International Society for Pharmaceutical Engineering

recorded the second-highest level of new contracts ever incarefully examining and analyzing the risks of target projects

respond to the sudden growth in the market for LNG and(ISPE), reinforcing our position as a top contractor in thefiscal 2022 for the Total Engineering Business, amounting

and selecting those guaranteed to deliver profits, as well asother plants. From the stance of enhancing our EPC execu-

pharmaceutical sector.

to ¥824 billion—around 2.5-fold that of fiscal 2021—madeensuring the utmost risk management for projects that havetion capabilities, the use of our proprietary J・・
I ModuleTM

To address the objective of "expansion of manufactur-

up of ¥696 billion in the overseas sector and ¥128 billion in

been secured. Going forward, we will continue monitoring(JGC Integrated Module) construction method in the LNG

ing business for high-performance functional materials" thethe domestic sector, against target contracts of ¥840 billion.

the various developments related to our projects, and con-Canada Project currently in progress in Canada was suc-holding company JGC Holdings Corporation appointed

Fiscal 2022 was also the year we made a concerted effort

tinue focusing on curbing project risks to the extent possible.

cessful for completing the modules forming part of thea new Chief Manufacturing Officer (CMO) and highlighted

project. With an increase in projects calling for modular con-our commitment to the Functional Materials Manufacturing

struction anticipated in the future, I feel that our advanced

Business. We developed systems for rolling out measures

EPC execution capabilities left a strong positive impression

such as rapidly made capital investments in this businessamongst our customers. Fiscal 2023 marked the first yearthat is prone to significant changes. In the Catalysts andto carve out a market in the sustainability sector such ashydrogen/fuel ammonia and SAF, where we secured orders
for EPC projects in Japan, as well as feasibility studies (FS)and front-end engineering and design (FEED) contracts

Steadily engaging in key BSP 2025
strategies

overseas.

9that EPC DX was rolled out of full-scale deployment, and it

Fine Chemicals sector, we began full-scale investments in

In terms of business performance, both net sales and prof-

During fiscal 2022, the second year of the medium-term

is already being used in projects underway in regions such

fiscal 2023 by acquiring new land in Fukuoka and Niigata

its for each quarter exceeded the business forecasts at thebusiness plan BSP 2025, we continued to work on theas Canada, Iraq and Saudi Arabia, with further plans in place

prefectures with a view to achieving growth by 2030. In FineJGC Report 2023

JGC Report 2023

10

Management Messages

JGC Group's Growth Strategy

Reinforcing Management
Resources for Continuous Growth"Sustainability Management"

Reinforcing Management
Results of Value Creation
Resources for Continuous Growth"Corporate Governance"

Management Messages

Message from the President and COO
Ceramics sector, we made decisions on capital investments

capabilities of the JGC Group. With many requesting oursources of income by expanding applications. We will be

Japan Corporation, as part of ongoing initiatives for thefor increasing production of high thermal conductivity siliconcooperation to achieve their plans, I gained a keen sense ofrevising production plans and systems for fine ceramics insustainability sector. New developments that are expected

nitride substrates for EV power semiconductors, and also

anticipation going forward.

anticipation of recovery in the semiconductor market fromto have a significant impact on the status of future manu-acquired land for a new plant in Miyagi Prefecture. In thisIn Sustainable Solutions, we are aiming to secure FEED

fiscal 2024. With the continuing strong demand for highfacturing industries include biomanufacturing. With thisway, we are moving ahead with capital investments with anand other contracts for hydrogen/fuel ammonia projects

thermal conductivity silicon nitride substrates for power

mind we began operations of the Integrated Biofoundry®

eye firmly on meeting growing demand in the future.

planned by Japanese trading companies and local subsidiar-semiconductors, we will be pressing ahead with our plans tobusiness together with Bacchus Bio Innovation, Co., Ltd.

increase production capacity as scheduled.

Biomanufacturing is considered an area that could become

Toward "establishing future engines of growth," we accu-

ies in regions that include the U.S., Australia, the Middle East,

rately identified the rapid pace of growth of the market inand Southeast Asia, and I hope to leverage these orders to

Fiscal 2025 will be the final year of BSP 2025 and, tothe hydrogen/fuel ammonia and SAF sectors, and played

secure EPC contracts in fiscal 2024 and beyond. For Facility

achieve the set numerical targets, we recognize that it willa significant role as the leader in these sectors, by secur-

Solutions, we are looking to secure contacts for renewable

first be essential to achieve the target orders and earnings

We will continue to carefully monitor changes in the market

ing a contract for the blue hydrogen and ammonia produc-energy, semiconductors and chemical-related projects in theforecasts for fiscal 2023. We will be doing our utmost toenvironment of our company, and we will implement suitabletion pilot facility for INPEX CORPORATION, establishing

Middle East and the U.S. Following on from fiscal 2022, we

accomplish these goals.

measures with a sense of urgency.

SAFFAIRE SKY ENERGY LLC with Cosmo Oil Co., Ltd. andare aiming to secure additional contracts for pharmaceuticals

Revo International Inc. to start the SAF project, as well as

plants, hydrogen/fuel ammonia facilities and battery projects

securing a contract for a SAF production plant planned atin the domestic EPC business.

fore planning to ramp up investments in this area.

Wrapping up

the Sakai Refinery of Cosmo Oil Co., Ltd. Overseas. In fiscal

Forecasts for fiscal 2023 are net sales of ¥800 billion,

2023, we secured a contract for a hydrogen production plantgross profit of ¥68 billion, operating profit of ¥38 billion,

in Australia planned by Sumitomo Corporation and otherordinary profit of ¥45 billion, and net profit attributable topartners, helping Japanese trading companies to achieveowners of the parent of ¥32 billion. We recorded new con-

As COO, I am aware that the JGC Group needs to implement

putting forth every effort toward achieving the fiscal 2023

sustainable projects planned for overseas.

tracts exceeding ¥824 billion in fiscal 2022, and as net sales

measures with a sense of speed to respond to changes inorder target and earnings forecast, while also viewing

are expected from these projects, we anticipate significantly

the market environment, such as the sudden growth in thechanges in the market environment of the JGC Group as anhigher sales compared to fiscal 2022, with increased profits

market for plants and the rapid pace of development ofimpetus for us. I will be implementing measures in a speedy

forecast for each stage with the exception of ordinary profit.

markets in the sustainability sector. Accordingly, we havemanner to achieve the numerical targets of BSP 2025 andMeanwhile, the gross profit ratio is forecast to drop 2.5

made every effort to increase our project execution capacity

pressing ahead with business strategies.

points to 8.5% from the 11% recorded in fiscal 2022. It isin response to the increase in projects following the sudden

More than simply focusing on fiscal 2025, the final year

possible that this figure will rise going forward owing to fac-

growth in the market for plants, as well as continuing toof BSP 2025, I will be fulfilling my responsibilities by setting

During fiscal 2023, we will continue to build on efforts
toward the three key strategies.

Fiscal 2023 order target andearnings forecast

We recognize that fiscal 2023 is a pivotal year for the JGCGroup for achieving sustainable growth. As COO, I will betors such as greater profitability of projects underway and theappropriately allocate resources in the sustainability sector

my sights even further ahead. Thank you for your continued

We are targeting the same ¥800 billion level of orders as inweakening yen; however, the transient effects of employee

where markets are being generated at a rapid pace while

support.

fiscal 2022 for the Total Engineering Business in fiscal 2023,

benefits in the Total Engineering Business and worsening

coordinating efforts with industry peers.

made up of ¥620 billion for the overseas EPC Business andsemiconductor market conditions in the Functional Materials

We implemented measures to increase our project execu-¥180 billion for the domestic EPC business, based on the

Manufacturing Business are some of the factors behind thetion capacity, including personnel increase at the afore-

continued strong appetite for investment by oil majors andforecasted drop in the profit ratio.

mentioned JGC INDIA EPC PRIVATE LIMITED located innational oil companies in oil-producing countries, as well as

In the Total Engineering Business, we will continue to exam-

Chennai, India from fiscal 2022. Plans are in place to raise

progress with plans for hydrogen/fuel ammonia and SAF in

ine and analyze the risks of target projects and move ahead

the present approximate 400 staff to around 1,000 as soon

the sustainability sector in Japan and overseas, and the ongo-

with selecting contracts, as well as ensure the utmost risk

as possible. Following on from the alliance we forged withing capital investment forecast in the pharmaceuticals sector

management for secured projects in order to generate profits.

Toyo Engineering Corporation in fiscal 2021 in the hydrogen/Despite less favorable market conditions for general-

fuel ammonia sector in anticipation of market changes and

For Energy Solutions of the overseas EPC business, we

purpose chemical catalysts and semiconductor manufactur-

growth in the sustainability sector, in fiscal 2022 we con-are aiming to secure LNG contracts in regions such as theing equipment that spearheaded business performance included another alliance with Toyo Engineering Corporation

Middle East and Africa, with a primary focus on the LNG

fiscal 2022, the net sales results for the Functional Materials

in the domestic SAF sector as part of measures to improvesector, where demand is soaring.

for vaccine production and biopharmaceuticals in Japan.

11

Making every effort to build aframework capable of responding tomarket changes

a future growth engine for our company, and we are there-

Manufacturing Business is forecast to increase slightly incompetitiveness in securing orders and reinforce project

I attended "LNG2023," the largest global LNG industry

fiscal 2023 thanks to other product groups, but operating

execution capacity.

conference and exhibition held in Vancouver, Canada fromprofit is expected to remain flat throughout the year. In the

To allocate suitable ongoing resources to the sustain-

July 10 to 13, where I had the opportunity to meet with

Catalysts sector, we will expand our business to overseas

ability sector, in fiscal 2022 we established the "Sustainable

numerous clients from oil majors and national oil companies

clients, with a focus on oil-related catalysts for which there

Solutions" division to serve the sustainability sector ofin oil-producing countries. Clients planning investments in

is strong demand, as well as the advanced development of

the overseas EPC operating company JGC Corporation.

LNG developments to tap into the soaring demand for LNG

low-carbon and carbon-free products. In the Fine Chemicals

Further, we established the Renewable Energy Solutions

highly praised the technical expertise and project executionsector, we will accelerate our efforts toward diversifying

department at the domestic EPC operating company JGC

JGC Report 2023

JGC Report 2023

12

Management Messages

JGC Group's Growth Strategy

Reinforcing Management
Resources for Continuous Growth"Sustainability Management"

Reinforcing Management
Results of Value Creation
Resources for Continuous Growth"Corporate Governance"

Management Messages

Message from the CFO

CFO Message
Driving financial strategies aimed at further
enhancing capital efficiency
Kiyotaka Terajima
Director, Senior Executive Vice President, and Chief Financial Officer (CFO)
After joining JGC in 1981, established business alliances and developed contracts for domestic and overseas projects in the
Legal Department. Appointed Executive Officer and Deputy General Manager of the Corporate Administrative & Financial Affairs
Division in 2014, Director, Executive Officer, and Senior General Manager of the division in 2016 (Senior Executive Officer in 2017),
Executive Vice President and CFO in April 2018, and Senior Executive Vice President in April 2020.

Overview of fiscal 2022

the business forecasts at the beginning of the year, with sig-

In BSP 2025, the numerical target for fiscal 2025 had beennificantly higher sales and earnings achieved compared to

set at net sales of ¥800 billion, but there is the possibility that

fiscal 2021 levels.

Utilizing capital in an effective manner

we will exceed this figure based on the potential growth ofCash and deposits as of March 31, 2023 was ¥332.9 bil-

In fiscal 2021, we formulated the 2040 Vision and com-

Going forward, we will continue to press ahead with athe future market for plants. Accordingly, we are aware of thelion, an increase of ¥44.7 billion from the beginning of themenced the medium-term business plan BSP 2025 as thesteady financial strategy while monitoring changes in thegrowing need to maintain an equity ratio of 50% or higher by

year due to collecting receivables following the settlement of

first phase covering the span from fiscal 2021 to 2025. Sincemarket environment, in order to achieve medium- to long-

further concentrating on our equity capital.

disputes related to projects completed in the past.

then, I have been actively focusing on my responsibility ofterm growth for the JGC Group.

implementing growth strategy investments for boosting net
profit attributable to owners of the parent, considered crucial
for maintaining a sturdy financial foundation, strategic capi-

The normal practice in our core operations of Total
Engineering Business is to allocate cash received as

Equity ratio

Equity capital conditions

advances from clients to projects that are already underway,

(%)

60.0

tal policies for enhancing capital efficiency, and increasing

59.0

ROE deemed essential for keeping the Total Engineering

We believe that maintaining sound finances is essential for

58.0

Business as the main business. During fiscal 2022, I feel that

the Total Engineering Business, one of the JGC Group's core

57.0

we moved ahead with effective financial strategies in all ofbusinesses, for business continuity and earning client trust

56.0

these aspects.

meaning the amount of capital on hand varies depending

59.4
57.7

on the contract conditions or degree of progress of current

58.2

projects. To ensure steady operation of current projects
even when subjected to changes in external factors such
55.8

55.7

as sudden turmoil hitting financial markets, we ensure thatfrom the standpoint of ensuring risk resilience, for continu-

55.0

we have working capital of around two months of annual

As resource markets underpinning the Total Engineering

ally expanding business. To achieve this, we are working in

54.0

net sales in addition to the cash received as advances. We

Business showed signs of recovery in fiscal 2022 andline with the approach of maintaining the equity ratio at a0clients began moving ahead in earnest with their capitalstable 50% or higher. The equity ratio as of March 31, 2023

investments, we recorded our second-highest level of new

was 55.7%, as we continued to maintain a sound financial

contracts of ¥824 billion. In terms of business performance,foundation.

view cash exceeding these advances and working capital as
2018

2019

2020

2021

2022

(FY)

being positioned as capital that can be allocated to growthstrategy investments.

consolidated net sales and profits at each stage exceeded

13

JGC Report 2023

JGC Report 2023

14

Management Messages

JGC Group's Growth Strategy

Reinforcing Management
Resources for Continuous Growth"Sustainability Management"

Reinforcing Management
Results of Value Creation
Resources for Continuous Growth"Corporate Governance"

Management Messages

Message from the CFO

We utilize cash flows from operating activities in addition
to cash on hand for both expanding existing businesses andToward raising ROE

As CFO, I am seeking to increase ROE by working toward
these key strategies with a credible and tactical financial

growth strategy investments, but in addition to the outlook

greater increase in cash dividends per share.

approach. We are also planning growth strategy investments

With this in mind, in February 2023 we purchased 12

for the business environment and medium-term cash flow,

Capital efficiency is essential for expanding businesses andamount to around ¥200 billion over the five-year span of BSP

million treasury shares totaling ¥20 billion for the first timefinancing with the optimum amount and timing in line withgrowth strategy investments, and we are targeting ROE of2025 from fiscal 2021 to fiscal 2025, and we have alreadyin 20 years, after comprehensively taking into consideration

trends in financial markets is also deemed to be a key option

10% or higher over the medium- to long-term span relative toinvested around ¥32 billion over the two years of fiscal 2021

aspects such as the current state of cash flow from operat-that is available. The main use of proceeds will be invest-

capital costs. For the JGC Group with the Total Engineeringand fiscal 2022. The amount of investment by key strategy

ing activities and future outlook, as well as the future market

ments in SAF, biomanufacturing and high thermal conductiv-

Business as its core area of operations, as mentioned earlier,is around ¥5 billion for transforming EPC operations, aroundenvironment and business outlook. The purchase of treasury

ity silicon nitride substrates for EV power modules, and going

it will be vital to determine ways of increasing profit attribut-¥17 billion for expanding high-performance functional materi-shares is viewed by our Company as a crucial initiative forforward, we will consider interest-bearing debt financing ifable to owners of the parent to maintain further equity capitalals manufacturing, and around ¥10 billion for stabilizing future

shareholder returns akin to shareholder dividends, and wenecessary, similar to the Green Bonds issued in September

while increasing ROE, and there is a priority on maximizing

engines of growth. Together with around ¥68 billion in invest-

will continue examining the feasibility of purchasing treasury

2023.

operating profit, the results of business activities.

ment projects for which decisions have already been made,shares based on the future outlook and cash flow outlook

growth strategy investments will amount to around ¥100

including growth strategy investments.

In fiscal 2021, the first year of BSP2025, we recorded a
net loss attributable to owner of the parent of ¥35.5 billion

Free cash flow(¥ billion)
120

110.7
99.2

100
80

20

Australia, but this rebounded back into the black to the tune

acutely aware of the sudden market changes that haveof ¥30.6 billion in fiscal 2022, leading to a significant improve-occurred after fiscal 2021 when BSP 2025 began—such as

ment in our ROE from -8.8% to 7.8%. A figure of aroundfuture growth in the market for plants and the rapid pace of

7.8% is anticipated for fiscal 2023 based on the businessdevelopment of markets in the sustainability sector. We also

forecasts at the beginning of the year.

invested in projects such as establishing an overseas opera-

40

tion center for increasing our project execution capacity, and35

getting the SAF business off the ground.

30

11.6

under the holding company JGC Holdings Corporation

10

0
-20

The Group Investment and Loan Committee established

(%)

19.3

7.8

8

-7.6

-11.4

2021

2022

■■ Cash flows from operating activities■■ Cash flows from investing activities ■■ Free cash flow

Cash allocation

conducts quantitative analyses that factor in capital costs

7.8

when making investment decisions, and also carefully and

6
(FY)

4
2

1.0

1.3

Cash dividends per share(Yen)
45

5

The Committee also monitors the progress of projects after0

study whether to withdraw from certain businesses.

28.5

15.0

15

based on their potential to lead to future business expansion.

-2

40.0

20

10

investments are made, as part of a system that can properly

38.0

25

cautiously deliberates research and development projects

0

2018

12.0

12.0

2019

2020

2021

2022

2023
(Forecast)

(FY)

-4
-6

Greater shareholder returns

-8
-10

-8.8
2019

2020

Cash

GrowthStrategy
Investments

2021

2022

2023
(Forecast)(FY)

We view shareholder returns as a key management issue
for the Company, and the shareholder return policy seeks a

Shareholder
Returns(dividends)

Working
CapitalJGC Report 2023

Thank you for your continued support.

In selecting growth strategy investment projects, we are

ROE

40

billion.

due to the extraordinary loss recorded for the LNG project in60

15of the parent of ¥45 billion in fiscal 2025, and achieve an even

By expanding the five business areas and diversifying busi-

payout ratio of about 30% of net profit attributable to owners

ness models under BSP 2025, we have set ourselves theof the parent during the BSP 2025 period. Cash dividends

numerical targets of ¥800 billion in net sales, ¥60 billion inare generally once per year, with a minimum annual dividend

operating profit, ¥45 billion in net profit attributable to ownersof ¥15 per share. The Company considers share buybackof the parent, and 10% ROE. From fiscal 2021 that marked

when needed, factoring aspects such as the business out-

the beginning of BSP 2025, we have been working on thelook and state of free cash flow.

three key strategies of transforming EPC operations, expand-

Cash dividends per share were increased due to improve-ing high-performance functional materials manufacturing,ments in business performance after fiscal 2021, the first year

and establishing future engines of growth in order to achieveof BSP 2025. I hope to move ahead with effective financial

these numerical targets.

strategies toward achieving net profit attributable to owners

JGC Report 2023

16