Nikko
Corporate
Report2019
Fiscal Year Ended March 31, 2019

Future creation that starts from anNikko Group s Management
Philosophy Framework

Contents
Corporate Philosophy

01

Editorial Policy/Table of Contents

02

Leadership and GovernanceRoundtable Talk on Governance

35

Executives

39

Background of Executives

41

Corporate Governance Framework

42(Chair of the Board of Directors and OutsideDirectors)

Business Model and Innovation

Mission(Goal)

Future creation that starts from anContribute to future society throughcorporate activities.

Vision(What we aspire to be)
Become a solution partner thathas broad trust from society
under a customer-first policy.

Value(Company s motto)
1. Serve society through business.
1. Work toward prosperity with sincerity andresponsibility.
1. Produce appropriate proﬁts through original ideas andimprovement eﬀorts.

Code of Conduct
1. Compliance2. Provision of better products and services
3. Communication with society

4. In search of safety and abundance
5. Environmental preservation
6. Elimination of anti-social forces

The Nikko Group is working on achieving sustainable growth and improving
its corporate value. Under the management philosophy that has been
continuously passed on since our foundation in 1919, we have established theCode of Conduct comprising six items as the basis on which we makedecisions in our workplace.

CEO s Message

03

Nikko Group s History Over 100 Years

07

Value Creation Process

09

Asphalt Plant-Related Business

11

Concrete Plant-Related Business

13

Environment- and Conveyor-Related Business

15

New Medium-Term Management Plan

17

Point 1

Mobile Plant Business

20

Point 2

Overseas AP-related business

21

Point 3

Maintenance Service Business23

CFO s Message

25

Sustainability Initiatives
Sustainability Initiatives

27

R&D Framework Underpinning Customer Satisfaction

28

Pursuit of Customer Satisfaction

29

Pursuit of Employee Satisfaction

31

Business Activities and Environment Management

33

Financial and Nonﬁnancial Highlights
FY2018 Business Summary and FY2019 Outlook

43

Financial Indicators of the Past 10 Years

45

Nonﬁnancial Performance Indicators

47

Stock Information

48

Company Overview and Oﬃces and Sites

49

Summary of Subsidiaries

50

Editorial Policy
Nikko Corporate Report 2019 aims to disclose Nikko Group s
medium- and long-term value creation eﬀorts from both ﬁnancial
and nonﬁnancial aspects to all stakeholders including ourshareholders and investors. The Report is edited referring to The
International Integrated Reporting Framework established by theInternational Integrated Reporting Council (IIRC) and the Guidanceon Integrated Disclosure and Dialogues for Joint Value Creation by
the Ministry of Economy, Trade and Industry of Japan.
Target readers：All stakeholders involved in the Nikko Group.
Reported period：The Report mainly covers FY2018 (April 1, 2018
to March 31, 2019) but also includes information
before and after this period.
Scope of reporting：T h e R e p o r t r e p o r t s o n t h e N i k k o G r o u pcomprising Nikko Co., Ltd. and eight subsidiaries(all of which are consolidated subsidiaries).
Company names： Nikko and the Company refer to Nikko Co., Ltd.
and the Nikko Group and the Group refer to the
Nikko Group including consolidated subsidiaries.
Note on forward-looking information
This Report includes statements on future outlook. We
appreciate that you understand that actual performance may
diﬀer from the Company s projections.

Each of our employees will strive forward to contribute to future society
through the daily performance of their duties embracing Nikko Group s
mission, future creation that starts from anclose to their heart.

01 N i k ko C o r p orate R ep or t 2019

N ikko Co r po rate Re po r t 201902

Business Modeland Innovation

CEO s Message

Session 1

Introduction

As you are taking the President s post, please share with us your background brieﬂy.

Future creationthat starts from an

I worked for a large shipbuilding company for a short period
after completing a graduate course before joining Nikko in
September 1987. I was initially assigned to the Design
Section in the Concrete Plant-Related Business (BP),where I joined a team promoting introduction of CAD. I wasthen assigned to the President s oﬃce, where I engaged insystem-related duties and designing of new business models
as the leader of the Corporate Planning Division. I then served
as Manager of Construction and Procurement Departments,
and also of Business Development Department ( N e w

Business), before becoming an Executive Ofﬁcer. Afterbecoming General Manager of Sales Department in 2011, I
became Representative Director, President and CEO on April
1 this year.
I think I have deep knowledge about people in each divisionat the company s Head Of ﬁce, as I have experienced abroad range of areas including technology, construction,
manufacturing, sales and corporate planning.

We are determined
to meet yourhigh expectations.

Representative Director
and President
Chief Executive Of ﬁcer

Please explain the position of Nikko in its industry (AP and BP).
Our unit share in the domestic asphalt plant (AP) market
is over 70%, and Tanaka Iron Works is the only rival in
direct competition with us. We take pride in our superior
product technology and development potential, andmaintenance service structure compared to rivals. Ourusers are mainly large road-paving companies, but noneof them use Nikko products for all of their asphalt plants.
So, I do not think there is much room for our APs to growin terms of the domestic market share. Meanwhile, in the
Chinese AP market, Nikko and two European companies,
i.e. Ammann and Marini, have largely equal shares in thehigh-end machine segment whose market size is 100 to
150 units a year. We think the tighter environmental
regulations in China and growing use of recycled mixture
should drive our growth.
The Batching Plant (BP) market used to be largely equally
split between ﬁve companies including us, which havesince decreased to three, i.e. KYC Machine Industry,● Nikko s shares in domestic AP and BP markets

Kitagawa, and us.
Nikko s steady-state share is the third largest at about 30%,
but our dynamic share is the largest at about 40%. We areaiming for a 50% dynamic share.

Domestic AP market share

（％）

100

Domestic BP market share

90

70%

80

AP market
share target

70
60

BP market
share target

50
40
30

42%

20
10
0

03 N i k ko C o r p orate R ep or t 2019

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018 (ﬁscal year)

N ikko Co r po rate Re po r t 201904

Business Modeland Innovation

CEO s Message

Session 2

Our Strategy

Session 3

Please talk about the initiatives on human resources management
and operational reforms.

Please give us a rundown on the Previous Medium-Term Management Plan
which ended in FY2018.
Our performance during the previous Medium-Term
Management Plan (FY2016-FY2018) was fairly good, withsales reaching a level close to the target. This was driven by
great ef fort by the staf f in the existing business areas.
However, we failed to achieve the target. When we
reviewed the results, net sales in the new areas, which wecall development areas, were insufﬁcient. Speciﬁcally, theseinclude Mobile Plant Business, and sales in overseas
markets, especially ASEAN countries, signiﬁcantly fell shortof targets. Political uncertainty and falling local currencies in
the ASEAN region, and the presidential elections had anegative impact, but it also made us aware of the limitationsof doing sales activity from Tokyo.

Please give us an overview of the New Medium-Term Management Plan
and background to the long-term group Basic Policy.
The New Medium-Term Management Plan was ﬁnalized in
2019, the year in which we are marking our 100th anniversary.
In our previous medium-term management plans, we ﬁrst
estimated demand for individual business areas and then set
targets for them based on the estimated demand levels.
When we worked out the New Medium-Term Management
Plan, we already had the overarching goal of boosting sales
by 50% to 50.0 billion yen over the next decade. So, for theﬁrst three years (FY2019-FY2020), we set targets for net
sales, operating income, etc. based on what we need toachieve for the overall goal. For the FY2021 performancetargets, we set 38.0 billion yen in net sales (vs. 31.8 billion
yen in FY2018), 3.0 billion yen in operating income (vs. 1.4
billion yen in FY2018) and 2.1 billion yen (vs. 1.34 billion yen
in FY2018).
We aim to achieve 10.0 billion yen in net sales from our new
businesses, including those we may acquire, in a decadefrom now. Details of the growth scenario are not much
dif ferent from what we assumed in the previous
medium-term management plan. Our aim is to double the

New Medium-Term Management Plan

net sales from the new Mobile Plant Business and overseas
operations from the level in FY2018 to 9.0 billion yen in 10
years. In order to expand overseas sales, we are discussing
options for setting up operations in the ASEAN region. These
are areas we failed to achieve in the previous medium-term
management plan.
In terms of key performance indicators in the New
Medium-Term Management Plan, we aim for ROE of at least
8% (vs. actual FY2018 ﬁgure of 4.4%). In FY2021, the ﬁnal
year of the New Medium-Term Management Plan, we aim
for a little less than 7% in ROE, and we do not expect toachieve 8% or higher, but we aim to keep capital costs inmind by limiting growth in net assets (by expanding
shareholder returns, for example). We have publicly pledged
to achieve dividend payout ratios of at least 60% as part ofour goal to expand shareholder returns.
We plan to conduct a ﬁve-for-one stock split of commonshares ef fective Sept. 30. By reducing prices per investment
unit, we aim to increase liquidity of shares and expand ourshareholder base.

Message For Our Stakeholders

There is no doubt education is a key part of humanresources management, and, to me, to do it by having
external instructors is an easy way out. So, we aim to createa structure in which employees can learn by acquiring skills
and improve them through work. To achieve this, we needto change the work processes and the way work is done.
This is what we are trying to do right now.
As a speciﬁc example of our work-process reform efforts, weassigned ﬁve tech staf f to the Tokyo of ﬁce so that they canvisit customers with sales staﬀ and of fer advice while theywork out product speciﬁcations. In the past, our sales staf fjust conveyed what customers told them to tech staf f(designers). If a customer asked for ﬁve sheets of plantdesign, our head-of ﬁce designers created ﬁve sheets.
Currently, however, our tech staf f who accompany the sales
staf f listen to what the customer wants, and if they recognize
any unnecessary designs, they explain that to the customer.

Therefore, excessive designs are not created. This way, we
are reforming the operational processes. If we reduce thenumber of design sheets from ﬁve to two, operationaleﬃciency will improve. Furthermore, the tech staf f can reﬁnetheir skills in the process of convincing customers.
We are also planning to introduce a system using wearable
devices so that experienced tech staf fs in remote locations
can monitor information about the younger service staf f andgive advice to them. You know, on-the-job-training once wasa buzzword, and we are trying to create work processes in a
way in which working itself can lead to improving skills.
Another of our endeavors in this area is a plan to manualize
operational procedures. But this is not to manualize existing
operational procedures. Instead, we aim to manualize what
we think are ideal operational procedures. Simple duties will
be performed using these manuals.

What is your view about changing criteria for listing stocks
on the Tokyo Stock Exchange, which has been in discussion behind the scenes?
We must protect our brand image which our predecessors
have built over the ﬁrst 100 years in the history of Nikko.
Likewise, we must protect our listing in the ﬁrst section of
TSE. This is an issue that could aﬀect the morale of ouremployees. The 10-year vision we worked out recently andour earnings targets are built on the basis that we are goingto maintain the listing on the ﬁrst section. A market
capitalization of 25.0 billion yen or over is a reachable levelfor us. So, we aim to increase our corporate value for the
stakeholders by enhancing shareholder returns andtransparency of management information, and sincerely
engage in dialogue with our shareholders.
So, a lot of thoughts are invested in our slogan, Future
creation that starts from an. We are determined tomeet your high expectations.

Long-term (10-year) Basic Policy, looking into the future

1

2

3

4

5

Strengthen revenue
base in Japan

Establish
overseas sales

Promotenew businesses(M&A)

Put work-style reform
into practiceMake ROE a KPI

Setting these ﬁve policy items at the center, we will strengthen corporate governanceand implement business management that is highly transparent and vibrant.

05 N i k ko C o r p orate R ep or t 2019

N ikko Co r po rate Re po r t 201906

Business Modeland Innovation

100-year history of Nikko Group

Our origins trace back to 1919, when our founders launched a business of manufacturing
and selling shovels, scoops and pickaxes. Since then, we have grown into a pioneer in asphalt and concrete plants,
while having helped create Japanʼs roads and towns over a century.
We have evolved along with the changing times and are now contributing to making our society more
comfortable and with more value.
1919●

Nihon Kogu Product Co., Ltd wasestablishedEstablishes August 13th as
foundation day
Tombo registered as trademark

1932

●

1933

Extraordinary general shareholders
meeting held
Matsusaburo Yano appointed to Senior
Managing Director
First product, a shovel, goes on sale.

1920

1921
1923

●

1934

●

Head Office relocated to Akashi

1936
1937

Supplied materials for reconstruction
following major earthquake thatdevastated the Kanto region●●

Approves plans to construct forging
plant, install new machinery, andconstruct warehouse for wooden
handle material, all on existing property

Construction of rolling mill decided

1939

Key person
of
Nikko

Second Plant opens
Marks 15th foundation
anniversary with ceremony
●

1953

●

1955
1957

Third Plant goes online

Marks the 20th foundation anniversary
with a ceremony at the Akashi Auditorium

●

1958

1974

1975

JIS mark granted on shovel, scoop andfarming fork products

●

1976

Opens skills training center
Builds construction machinery planton the Third Plant property
●

1977

●

●

Relocates Head Office to Eigashima Plant

●

1991

Automates part of shovel finishing line
Develops asphalt plant with 240t/h capacity

1992

Signs technology tie-up with Benninghoven,a leading industrial burner maker thenbased in West Germany, and the Dutch
company Philips
●

1993
1994

Develops environmentally friendly
CNAP series of asphalt plants●

Launches Tombo-kai
Holds meetings of sales agents in 12
districts across Japan

●

●

1995

Develops recycling plant and mixture silo
designs
Completes unit-type (U-type)concrete plant design
●

●

1940~

1960~

1940
1941
1943

●

●

Establishes Nikko Co. in Mukden,
present-day Shenyang in China

Establishes Manchuria Machinery Manufacturing

1962

1944
1945
1946

●

1963

●

Shares listed on the Osaka Securities Exchange
Shares listed on the Kobe Stock Exchange
Setsuko, Princess Chichibu, visits company
●

1981

●

Completes 40t/h asphalt plant
Lists shares on the Tokyo Stock Exchange●

Completes first automated concrete plant
Starts manufacture and sale ofscaffolding parts

1964
1966
●

1968

Starts manufacture of fully automatedconcrete plants
Starts manufacture of belt conveyor system

●

1989

●

Company renamed to Nikko Co., Ltd.
Completes first crushing plant●

Opens operator training center
Announces company mission statement
Marks the 50th foundation
anniversary with ceremony●

2000

Conducts first BP operator
training
Develops recycling unit

2002
2004

●

Issues convertible bonds
denominated in Swiss francOpens Taiwan liaison office

Nikko Trading-Partner
Shareholding Association
established
Buys shares in Nikko Seisakusho*●●

Marks the 70th foundation
anniversary with events

●

2009

●

●

2011

2012

Signs asset purchase agreementwith Niigata Engineering Co., Ltd.

●

Major earthquake and tsunami disasterhits northeastern Japan; Nikko
launches emergency headquarters●

Launches quake-disasterrecovery project
Develops large soil decontaminating
plant
●

●

Holds completion ceremony for
Jiading Plant of Nikko (Shanghai)Construction Machinery Co., Ltd.
●

2013

●

2014
●

2015

Develops plant especially forquake-disaster recovery●

Develops MBD series forrecycled mixtures
Develops DASH-Hyper mixer●

Develops VP series asphalt
plants using new design●

Builds Techno Center on Akashi
head-office property
Opens showroom on the first floor of
the Head Office; strengthens CSC
Opens Tokyo mobile center
Mobile Plant Business starts
operating in earnest
Holds Nikko Messe
2018 marking 100th
foundation anniversary

Establishes Nikko group
corporate charter

2007
2008

Develops soil decontaminating plant●

Develops WELL turbo burner (NTB
burner) and concrete/recycled
aggregate manufacturing device
using new rubbing-massaging
technique.
Completes Nikko Shanghai NBD1

2005

●

●

2010~

Establishes Nikko (Shanghai)Construction Machinery Co., Ltd.

2001

●

*Predecessor to present Nikko
Machinery Co., Ltd.

●
●

1969

Relocates some head-office functions toEigashima Plant Office upon its completion

Develops twin-shaft Spiral
Flow mixer

●

●

●

Reiwa era (from 2019)

2000~

●

1988

Recycle4 canand bottle separator/crusher

Opens Beijing office

Heisei era (1989 -2019)

Establishes Nikko Gate Co., Ltd.
Completes BonD (Bag-filter on Dryer)
seriesDevelops WISE series of concrete
plants

1983

●

●

●

●

1980

●

●

1990~

Develops U-type concrete plant

1980~

Ceremony marking completion of first phaseof construction work for Eigashima Plant

Plants suffer extensive damage fromfire under military attack

Construction of the Fourth Plant starts.
Casting production starts
Company designated as manufacturer of
specified important products

1970~

●

Builds Malay Plant in Kuala Lumpur●

Nikko s ﬁrst asphalt plant(registration number: 321)●

First Plant back into operation
Construction work starts for the Second
Plant Wood processing and manufactureof wooden handles restart

1999

●
●

●

●

●

Ties up with Mitsubishi Heavy Industries, Ltd.
Starts manufacture of pile hammer frames

1961

Third Plant requisitioned as
facility to manufacture weapons
Third Plant starts to support Mitsubishi
Heavy Industries Mizushima Plant●

Establishes Nikko Sec Co., Ltd.

●●

Completes first asphalt plant that uses
electron tube-based control system

1960

Completes Top-Drum recycle unit

Spins off former industrial machinery businessand machinery manufacturing division (shovels,
scoops and small mixers) into Tombo Industry
Conducts the 100th AP operator training session
●

●

●

1950~

Participates in project to assemble on-siteasphalt plants for Kansai International Airport(Nikko provided all four APs used in KansaiInternational Airport construction)●

Obtains ISO9001 registration
Develops DSF-167 double spiral flow mixer and
DASH-167 high-performance concrete plant
Merges Nikko Sec Co., Ltd.
and Nikko Sec Industry Co., Ltd.
Marks the 80th foundation anniversary
with new product exhibition

1998

●

●

1930~

Develops command fuzic control systemand slump control function (SL-fuzic)●●

Marks the 60th foundation anniversary
with ceremony

1979

●

●

Signs capital tie-up with Benninghoven,a German industrial burner maker
Introduces new logo●

Establishes Nikko Machinery Co., Ltd. to takeover operations of Nikko Seisakusho
and Nikko Gate
Tombo Industry merges Tombo Nikko Shoji tointegrate manufacturing and sales operations.

1997

●

Nihon Kogu Product s employees pose for the
15th foundation anniversary photo at theSecond Plant in Akashi s Hayashisaki district.

1990

Establishes Nikko Electronics Co., Ltd.
Completes NAP3000 asphalt plant(200t/h), biggest of its kind in Japan
at the time●●●

Holds construction machinery
exhibition at the Third Plant
Tokyo office opens
Runs booth at Tokyo construction
machinery product exhibition
Marks 40th foundation anniversary
with ceremony at the Third Plant

1959

Showa era (1926-1989)

●

1972

Capital reaches 100 million yen
Japan Industrial Standards (JIS) markgranted on pickax products●●(Aug. 6, 1893 - Feb. 20, 1973)

1949

Starts sale of truck mixers,
winches and mixers●

Skills training center reorganized into
vocational training centerFirst asphalt plant completed
Osaka sales office opens

●

●

●

●

●

Matsusaburo Yano served the company for about a half
century from the time it started as Nikko Co., Ltd. (former
Nihon Kogu Product Co., Ltd.), as Senior Managing Director,
President and then Chairman. As a key person who led thedevelopment of Nikko through difficult times during and afterWorld War II, he still inspires our respect. Nikko would nothave been the company it is today without his contribution.

1948

●

Marks 35th foundation anniversary withceremony at Akashi Shoko Kaikan

1954

Purchases land, measuring 326 tsubo (1,078m2),
adjacent to the Third Plant
Holds Shinto ceremony to purify the landand starts construction work for the Third Plant●

Matsusaburo Yano

Taisho era (through 1926)

1971

●

Obtains land for the Third Plant measuring
over 3,600 tsubo (approximately 11,900m2)●

Senior Third Rank,
Fifth Order of Merit

1919~

1952

1970

●

Starts manufacture of
winches and mixers

1951

●

1938

Shovel demand surges following
the start of the Korean War

1950

●

2018

●

Acquire ownership of Maekawa
Kogyosho Co., Ltd.

●

●

●

●

Completes new plant to take overfunctions existing one at Nikko(Shanghai) Construction MachineryCo., Ltd.
●

●

●

2019

Marks the 100th
foundation anniversary●

WELL turbo burner

Snapshot of production line at the Second Plant
after recovery from ravages of war

07 N i k ko C o r p orate R ep or t 2019

Nikkoʼs ﬁrst belt conveyor system

Develops space- andenergy-saving BonD series

A WISE series ofconcrete plant

DASH-200N
mixer

Develops VP series asphalt plants
using new design

N ikko Co r po rate Re po r t 201908

Business Modeland Innovation

Value Creation Process

Nikko Group's value - Process of Creation
Outcomes

A century of providing machines that build cities,
helping to create recycling-oriented society
Nikko manufactures plant machinery that makes asphalt andconcrete, indispensable materials for infrastructure development. The
company s share in Japan s asphalt plant market reaches 70%, andour plants supply over 90% of asphalt used in the construction of
airports and expressways in the country. We support projects ofwide-ranging sizes, from huge infrastructure projects, including Akashi
Kaikyo Bridge, Haneda Airport and Kansai International Airport, toresidential roads.
In addition to infrastructure development projects in Japan, we haveconstructed over 1,000 plants for projects in 50 countries since ourestablishment in 1919. Presently, we are supporting efforts to create
comfortable cities in China and Southeast Asia, where there is strong
demand for infrastructure development.
We develop high value-added products that are environmentallyfriendly, using our four core technologies for kneading, heating,controlling and conveyance. The four core technologies, which
provide solutions to issues faced by customer companies, are thesource of Nikko s competitive advantage.
We have an integrated production process including fromplanning/designing to construction and maintenance. We are
currently focused on strengthening a remote maintenance system inwhich the customer support center at our Head Of ﬁce monitors
operation of plants at customer companies and dedicated staff
address any issues that may crop up at any time.

OutputChemistry

Environmental
engineering

Mixingand kneading

Communicationengineering

PhysicsCore
technologies
Original technologies
protected byhigh entry barriers

Conveyance

Consideration
for society
and environment

Economic values
More proﬁtablecustomer companies● Strong brandand excellent reputation(pages 29-30)● Improved employee
satisfaction(pages 31-32)● Improved shareholder returns(page 26)●

Introductionof recirculating plants
for energy saving(pages 33-34)● Noise, safety,anddisaster-prevention measures● Raising complianceawareness (page 42)●

Heating

Mathematics

Financial beneﬁts（pages 17-19, 25-26, 45-46）

Control

Cash ﬂow creation
Improvementin proﬁt margin● Internal reserves
for growth investment● Dividends
to shareholders●

Electricalengineering

●

Input

Systems and control
engineering

Solid ﬁnancial base (page 25)

Mechanicalengineering

R&D capability for meetingcustomer needs（page 28）●

Asphalt plants(pages 11-12)
Batching plants(pages 13-14)● Recycling plants(pages 11-12)● Remote maintenance(pages 23-24)●●

Biotechnology●

Products
and services

Civil engineering

We are working to improve values in a sustainable way
with an aim to contribute to creating future society, whichis part of our mission, with diversity of social values andcreation of economic values in mind.

●

Social values
Contribution to local
economies by helping develop
social infrastructure● Creation of recycling-oriented,
environmentally friendly
society (pages 33-34)● Contribution to eﬀorts
to create comfortable society
and improve quality of life
● Contribution to work-stylereforms at customer
companies (pages 23-24)● Co-existence with local
communities (page 27)●

Trusted by customer companies

Mixingand kneading

Heating

Control

ConveyanceTechnology to burn or
dry materials at hightemperatures

Technology to design
and make the brains ofplants and machinery
using IoT and AI

Technology to convey
and separate any
material, diagonally or
verticallyas a solutions partner (pages 29-30)●●

Partnership with suppliers

Collaboration with sales agentsand contractors (page 23)●●

Water and energy

Technology to mix andknead a wide variety
of materials fromliquids to solids

Source of competitive advantage

Understandingof local communities (page 27)
Conducting simulation tests
Listening tocustomers
and identifying issues

Order receipt

Business ﬂows
Maintenance service

09 N i k ko C o r p orate R ep or t 2019

Presentation of estimates

Construction work

Procurement
and manufacture

N ikko Co r po rate Re po r t 201910

Business Modeland Innovation

Asphalt Plant-Related Business● Asphalt mixture output and number of asphalt plants installed

We aim to increase the combined share of the strategic AP products, including
VP and MBD, to 50% of the overall unit domestic plant sales by the end of
FY2021 and implement work process reforms in order to improve proﬁtability.
In overseas operations, we aim to boost growth through an initiative to develop
offices in ASEAN countries, especially Thailand, where we see strong growthpotential. We also plan to aggressively seek growth in new business areas. For
example, we aim to expand sales of new crushing plants which have great
potential to achieve synergy with AP and MS.
Director andGeneral Manager of Business Division Tomomi Nakayama

SWOT of AP-related business

Strength

Overwhelming share indomestic market ;advantage in productdevelopment capacityand delivery turnaroundtimes

Weakness
Weakness in pricenegotiations

Opportunity

Potential for improved
AP productivity
attributed to work-stylereforms by users

Public works budgets

Asphalt mixture output volume

Recycled mixture (left scale)

Number of installed asphalt plants (right scale) (number of units)
2,000

80,0001,600

60,0001,200

40,000800

20,000400

0ThreatPotential decline inpublic works
budgets

Key macroeconomic indicators of AP-Related Business performance
Nominal construction investment

Virgin mixture (left scale)(thousand tons)
100,000

1989

1994

1999

0
2019 (ﬁscal year)(estimate)
Source: Japan Asphalt Mixture Association. FY 2019 ﬁgures are Nikko estimates
2004

2009

2014

Advantages of Asphalt Plant Business
The strengths of our APs lie in the broad range of productsthat are backed by our technology and development
capacity, in-house production of key devices, including
control panels and burners, and strong maintenanceservice capability. In overseas operation, we plan to focus

on high-end areas in China, which we see as the centerpieceof our overseas strategy. We expect business chances will
emerge in China, as there is a growing demand forenvironmental technologies we have developed in Japan,
including recycling and deodorizing technologies.

Measures under the New Medium-Term Management Plan
Business development and future outlook
We started manufacturing asphalt plants in 1962 andsupported a past period of rapid land development,
introducing the ﬁrst domestically manufactured AP for
expressway projects in 1965, when demand for larger APs
surged. After about a decade-long beginning period since weﬁrst identiﬁed demand for recycling plant in 1977, we saw asigniﬁcant growth in APs with heat-recycling equipment
following the 1993 introduction of the TOP series. In 2002,
our share in the Japanese market exceeded 70%, driven inpart by a business purchase from Niigata Engineering. Morerecently, this has led us to develop new plants that use
recycled mixtures, including the VP and MBD series.
About 80% of the customers of our asphalt plants are large roadpaving companies. Asphalt mixture output, which has direct
bearing on earnings of road paving companies, fell slightly below
40 million tons in FY2018. We expect the ﬁgure to remain in arange between 3 million tons above and below the current
levels for a medium term, accounting for a slow growth in public
works spending. Demand for asphalt plants in Japan will remain
on a plateau for a foreseeable future, considering the expected
impact of update projects that have been postponed.
As a result, we expect the growth driver will be overseas
markets, including China, where we have Nikko Shanghai,
and the ASEAN countries, especially Thailand and Indonesia.
In particular, we aim to focus on Thailand, where many
second-hand asphalt plants by Nikko is in operation.

We target net sales of 20.0 billion yen for AP-related
business in FY2021, the ﬁnal year of the New Medium-Term
Management Plan (vs. 16.4 billion yen in FY2018). As we
expect only a small increase in Japan for AP, growth inoverseas business is the key. For new crushing plants, wetarget 0.5 billion yen in FY2021. The KPI target for the APbusiness is to improve margin by expanding the combined
sales share of VP and MBD, our strategic products, to over
50% from the FY2018 level of 37.5% by the end of FY2021.
We estimate the market size for our new crushing plants isabout 10.0 billion per year. It is an area we see a signiﬁcant● Sales share of strategic products(number of units)
5
4
3

15.4％

Number of MBD units

28.6％

30％

Number of VP units
37.5％

44.4％

● Net sales, operating income and operating margin of asphalt plants

Combined sales share
50％
33.3％

Net sales(in million yen)
30,00025,00020,00015,000

2

9.8％
7.5％

Operating margin

12.3%
9.9%

6.7%

8.1%

Operating income

7.8%
8.3% 9%7.2%7.6%
5.9%

9.5%

10,0001
0potential for synergy with APs and MS. In order to narrow
the gap in price competitiveness with top rivals, we plan tostart internally manufacturing the existing medium-grade
impact crusher models and expand our scope to include
high and low grade models, for a total sales target ofcrushing plants of 3.0 billion yen, a half of which will be frommaintenance service. In addition, we plan to introduce new
products to follow VP and MBD, and expand maintenanceservice by taking advantage of expected growth inenergy-conserving products and introduction of work-stylereforms.

5,000
2015

2016

2017

2018

2019 2020 2021 (ﬁscal year)(estimate) (estimate) (estimate)02009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 (ﬁscal year)(estimate)(estimate)(estimate)

Issues for AP business

VP

APs that mainly use recycled materials

11 N i k ko C o r p orate R ep or t 2019

MBD

APs that mainly use recycled materials (medium to large sizes)

Burners

New burner with higher combustion efficiency

A key issue for the AP business is our weak position in pricenegotiations with our customers, who are large road-paving
companies, which has led to small margins. We regard
expansion of sales of VP and MBD, our strategic products, as
the key. We aim to achieve synergy between crushing plants

and asphalt plants by starting to internally manufacture
impact crusher series products, which are key devices. In
overseas markets, we plan to work out plans for setting up a
local office and starting local production in Thailand, where
180 secondhand units are in operation.

N ikko Co r po rate Re po r t 201912

Business Modeland Innovation

Concrete Plant-Related Business● Ready-mixed concrete: shipment volume and number of plants in Japan

We expect a decrease in domestic ready-mixed concrete plants amid
consolidation moves, but aim to boost the dynamic unit share to 50% by the endof FY2021, by focusing on the new BP DASH-Progress. We aim to utilize allavailable resources in this area, including sales expansion in the precast concrete
industry, where work-style reforms and i-construction are expected to boost
demand, and differentiation measures through introduction of new products thatuse IoT and AI, and the positive impact from the new Customer Support Center.
We also address environmental issues, including the increasingly serious issues
associated with returned concrete and sludge water treatment.
Executive Officer in Charge of Business Department
Manager, Industrial Machinery Sales Management Department

SWOT of BP-related business

Strength

Coordination between
manufacture and sales;
in-house maintenanceservice structure

Morie Okaaki

Weakness

Relatively
high ﬁxed cost ratio

Opportunity

Increasing introductionof precast concrete inconstruction materials

ThreatDecrease andconsolidation ofready-mixed
concrete plants
in operation

Key macroeconomic indicators of BP-Related Business performance
Nominal construction investment

Cement shipment volume

Number of ready-mixed concrete
plants and their shipment volume

Business development and future outlook
We started to develop concrete mixers, which form our coretechnology, in 1951, and announced the SF double-spindle
mixer in 1980. The DSF mixer, introduced in 1998, played a
key role in expanding our market. The model had the mixer
capacity of 100 times per hour, compared to the 60 times
per hour of existing products. Needs for batching plants
subsequently shifted to manufacture of high-strength
concrete and simplified maintenance, which led to the 2014
development of the DASH-Hyper mixer that addresses boththese needs. Other key batching plant products include
DASH-Progress and Cyber Advance.
Majority of batching plant customers are construction
companies. However, percentage of concrete secondary
products, including construction materials, segments andpiles, in the products for precast concrete (PC) is gradually

Number of plants (left axis)(in number of plants)
6,000

rising (13.6% in FY2018), and we expect this trend to remainover the medium to long term.
The number of Japan s concrete plants totaled 3,298 at theend of March 2019, continuing a decreasing trend since theend of March 2013, when it totaled 3,456. We thinkconsolidation of plants could accelerate after a demand
surge driven by large projects ahead of the 2020 Tokyo
Olympics runs its course.

Ready-mixed concrete shipped (right axis)（in 10,000 m3）
18,0005,500

15,0005,000

12,000

4,500

9,000

4,000

6,000

3,500

3,000

0
2018 2019 (ﬁscal year)(estimate)
Source: National Federation of Ready-Mixed Concrete Industrial Associations and Ministry of Economy, Trade and Industry. FY 2019 ﬁgures are Nikko estimates.
3,000

1998

2003

2008

2013

Advantages of Batching Plant Business
The key advantage of our batching plants is our Customer
Support Center, which can reduce downtime for plants ofour uses by remotely monitoring their operation. Since wemanufacture control panels in-house, we aim to replacethose manufactured by other companies with ours to help
boost BP update orders in the future. Our share in thecontrol panel market has exceeded 50%, higher than theshare of the main batching plants, which is slightly over 40%.

Measures under the New Medium-Term Management Plan
We target 9.4 billion yen in sales for BP-related area in FY2021,
the final year of the New Medium-Term Management Plan (vs.
7.9 billion yen in FY2018). Japan Construction Equipment
Manufacturers Association estimates the value of batching plant
shipment, including maintenance fees, will decrease to 20.0
billion yen in FY2021 from 22.0 billion yen in FY2018, but we
aim to increase our industry share to 47% in FY2021 from 35%
in FY2018. As a KPI target for the batching plant business, we
aim to achieve a unit share of over 50% by FY2021.
In order to boost our share, key measures will be to: (1)● BP steady-state share(number of units)
6,000
5,000
4,000

27.4％

● Net sales, operating income and operating margin of batching plants

Units by Nikko

27.8％

27.9％

Units by others
28.7％

29.3％

Nikko share
30.1％(in million yen)
16,00014,00012,00010,000
8,000

3,000

6,000

0％

Net sales

Operating margin

Operating income

10.8％
8.4％
8.6％ 8.6％
9％ 9.5％
5.4％
10.7％
8.1％
7.9％
-3.2％
-0.8％

4,000

2,000

2,000

1,000
0

steadily capture repeat demand and (2) expand sales toconcrete secondary product plants. We aim to expand repeat
customers by efforts through the new Customer Support Centerand strengthen measures to increase replace orders for control
panels by other companies, to tide over the difficult period ofplant consolidation moves. Amid the progress of work-stylereforms and introduction of i-Construction, we need to expand
the increase of precast concrete. We aim to focus efforts on
segment, construction materials, piles and anti-disaster productindustry.

2013

2014

2015

2016

2017

2018 (ﬁscal year)0-2,0002009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021(ﬁscal year)(estimate)(estimate)(estimate)

Issues for BP business

DASH-Hyper mixer

Mixer for ultra-strong concrete,with improved ease of maintenance

13 N i k ko C o r p orate R ep or t 2019

Cyber AdvanceNew control panel that can be operated
from a tablet device

DASH-Progress

New batching plantwith improved ease of maintenanceA key issue for the batching plant business is a relatively
high fixed costs due partly to our operating manufacture,sales and maintenance service function in-house. A key
theme over the medium to long term is to expand businessareas with growth potential. Specifically, we aim to expand
granular material and coordinate efforts with the mobile

business (crushers and soil improvers).
In the area of environmental conservation, we aim to
introduce measures for crushing of returned waste concreteand processing of sludge water from concrete truck mixers,
while closely monitoring developments leading to JIS
revisions.

N ikko Co r po rate Re po r t 201914

Business Modeland Innovation

Environmentand Conveyor-Related Business● Net sales, operating income and operating margin for Environment- and Conveyor-Related BusinessWe aim to shorten delivery turnaround time for the mainstay modular
conveyors as the key theme of the conveyor-related business, while
seeking to create a high quality and low-cost production structure. We also
aim to eliminate the risk of having prolonged turnaround time on custom
orders, one of our weaknesses. In the environment business, we aim to
reduce emissions of greenhouse gas by producing carbonated fuel fromdust coal burner under development for small- to medium-sized garbage
processing facilities, and use it for asphalt plant fuel.

(in million yen)
6,000
5,000

Net sales
21％

17％

12％

10.6％

4,000

18.5％

14.7％

Operating income
15％

13.9％

17.2％

Operating margin
17％

17％

7.8％
8.5％

3,000
Business Division
Manager, Industrial Machinery Sales Department

Tokuhiro Mitsumune

2,000
1,000

SWOT of Conveyor-Related Business

Strength

Weakness

Capable of meetingcustomer needfor short turnaround time

Risk of prolonged
turnaround time
when accepting
custom orders

Opportunity

Demand in industry
remains ﬂat

Threat

0

2009

2010

Development and advantages of Conveyor-Related BusinessOur advantage is in our ability to establish mass-production
structure through modular configuration, which allows
manufacture of high-quality, low-cost products in shortperiod. In the market for ship bottom-shaped BC, demandhas shrunken to about 5,000 units currently, from slightly
less than 5,800 units in FY2013 and from 25,000 units in
FY1989, with rival companies decreasing in number.

Conveyor-Related Business outlook and issues
We aim to shorten delivery turnaround time to about 10
days from the current figure of about two weeks as a way to
improve profitability as demand remains flat in theconveyor-related business.
Specifically, we set the target industry share of 60% in
FY2021 (vs. 62% in FY2018) and sales of 3,000 units. We

Modular belt conveyor

Conveyor using pipe frames whose lengths can be adjusted
in increments of 10cm

15 N i k ko C o r p orate R ep or t 2019

target 2.3 billion yen in sales for Conveyor-Related Business
in FY2021, the final year of the New Medium-Term
Management Plan (vs. 2.13 billion yen in FY2018), andimprove gross margin by 5 points from the level in FY2018.
A key issue is for our delivery turnaround to become
prolonged for custom orders, which affects profitability.

Super modular conveyor

A sealed-type conveyor that ensures higher safety

2012

2013

2014

2015

2016

2017

2018

2019
2020
2021 (ﬁscal year)(estimate) (estimate) (estimate)

Increasing importof cheaper
products

SWOT of Environment-Related BusinessConveyor-Related Business started selling modular belt
conveyors, our mainstay product, in 1979, and subsequently
introduced the super modular conveyor products. Our share
was the largest in the portable conveyor product industry at
62% in 2018. One prominent characteristic of theConveyor-Related Business in sales aspects is that we sell
products to machinery traders and plant makers ascomponents, rather than directly to final users.

2011

StrengthIntegrated operation ofdesign, manufacture,sales and after-sales
serviceAccumulated coretechnologies

Weakness

Trials-and-errors may
happen due tofrequent need todevelop newtechnologies

Opportunity

Expansion of legal
requirements related
to FIT system and useof waste plastics

ThreatSpeed at which
legal measureschange and failure
to catchupwith them

Development and advantages of Environment-Related Business
Environment-Related Business started in 2006 with apurpose to take advantage of Nikko s core technologies,
including conveyance, mixing and kneading and heating, inan effort to expand business into various areas. Its key
customers include large steelmakers, power utilities andindustrial waste processing companies. We have won
customer trust by conducting realistic tests using demo units

and performance evaluation. Net sales in FY2018 was 0.5
billion yen.
The strength for the Environment-Related Business is in its
integrated processes to AS, by utilizing our coretechnologies. We are seeing customers in industries otherthan asphalt plants or batching plants, leading us to believe
there is strong potential for further growth.

Environment-Related Business outlook and issues
We think the industry climate for the Environment-Related
Business will remain solid in the medium to long term as
new regulations, including FIT, have been introduced as partof effort to create a recycling-oriented society and a growing
need for resolving climate change issues, including reduction
in CO2 emissions. We have had booths at trade shows andran promotions on the website and ads, and impact of these
efforts started to be felt since a few years ago.
Specifically, we have high expectations for growth in theareas of recycling, including recycling of waste plasterboards
and drink bottles, CO2 emission reduction, including reuse of
biomass energy, and soil decontamination. For the mainstay
multi-dryer, we aim to strengthen sales of a new productthat improves on the existing product. We also focus oureffort on technology to turn waste plastics, cattle manureand chaff into subfuels and environment-related products
aimed at reducing CO2 emissions. We aim for an
Environment-Related Business net sale of 1.1 billion yen in
FY2021, the final year of the New Medium-Term

Management Plan.
A key issue for us is the difficulty to have clear outlook due tothe long time it takes to conduct tests, examines outcomes
and then decide specifications. We also need to takemeasures for many deals that require continued servicing
due to developed No.1 unit products.

Multi-dryer

A dryer that can be used for a wide variety of purposes

N ikko Co r po rate Re po r t 201916

Business Modeland Innovation

New Medium-Term Management Plan

Five Basic Policies established for the next 100 years
Long-term Basic Policies in New Medium-Term Management Plan
years. The New Medium-Term Management Plan has fivelong-term Basic Policies.
Specifically, they are: (1) Strengthen revenue base in Japan;(2) Establish overseas sales; (3) Promote new businesses(M&A); (4) Carry out work-style reforms; and (5) Include
ROE in our KPIs. In addition, we will strengthen corporate
governance and implement business management that is
highly transparent and vibrant (see pages 3-6).

Nikko has established the New Medium-Term Management
Plan covering a period from FY2019 to FY2021. The New
Medium-Term Management Plan is different from the pastmedium-term management plans in that we first painted avision of what the Nikko Group wants to be in 10 years andthen set numerical targets that need to be achieved in thefirst three years. Specifically, we aim to increase net sales by
about 50% from the current level to 50.0 billion yen in 10

New Medium-Term Management Plan
Long-term (10-year) Basic Policies

Strengthen revenue base in Japan2

Establish overseas sales

Make ROE a KPI

We, as a manufacturer, aim to establish new
overseas bases to spread Nikko products, which
are the best in the world, in the ASEAN region(doubling overseas sales to 9.0 billion yen fromthe current 4.5 billion yen).

We aim to achieve market capitalization of atleast 50.0 billion yen and ROE of at least 8%. We
will also aim for a dividend payout ratio of
minimum 60% and enhance shareholder returns.

3

4

Put work-style reform into practice
We will improve operating efficiency andsignificantly boost labor productivity (centralizing
clerical processes and using IoT and AI).

Promote new businesses (M&A)

We will invest management resources in
expansion of new businesses and nurture productsthat will become new pillars of the industrial andconstruction machinery fields (generating 10.0
billion yen in sales from new businesses).

(in million yen)
45,000Year-end dividends

FY2018). The ROE target in FY2021, the final year of the
New Medium-Term Management Plan, is 6.5%, still short of
8%, but we aim to further improve the figure by controllingincreases in net assets and keep capital costs in mind in
making management decisions (see pages 25-26).

4.6%
200
100
0

17 N i k ko C o r p orate R ep or t 2019

4.9%
30.8%

4.4%

Interim dividends
6.5%
76.6%

ROE
5.8%
61.5%

Net sales (left axis)

40,000● Nikko s ROE and dividend payout ratio(in yen)300

mainly produce recycled mixtures, to over 50% of the overall
domestic plant sales (FY2021). We also aim to boost sales ofcrushing plants, a new business area (see pages 11-12).
In batching plant business, we expect a drop in the number ofready-mixed concrete plants due to consolidation, but see thepossibility that this may lead to a renewed appetite for capitalspending as consolidation runs its course to optimum levels. As
we expect demand for batching plants to remain flat, we aim
to take advantage of the DASH brand s strength to boost themarket share to 50% from the current 40%. We also aim toboost sale of concrete secondary products, including precast
concrete, for which demand is increasing, by differentiating our
products by developing and the new, high-performance mixer
that forms the core of our BP products (see pages 13-14).

Let us explain the KPI targets we set for the five Basic Policiesof the New Medium-Term Management Plan and measures toachieve them.
In terms of measures to bolster the domestic revenue base, we
aim to achieve 10% in operating margin. This requires us toenhance the functions of sales, service, technology andmanufacturing, as well as make our products more appealing.
In the mainstay AP-Related Business, we expect a gradual
downtrend in shipment volume of asphalt mixture to remain,
but see a major business chance in the expected arrival of
update demand for asphalt plants that were installed in large
numbers in 1994 and before. Taking advantage of thisopportunity, we aim to improve profitability by raising the
combined share of MBD and VP, our new AP models that

● Medium-Term Management Plan: net sales, operating income and operating margin

Setting these ﬁve policy items at the center, we will strengthen corporate governanceand implement business management that is highly transparent and vibrant.
In terms of key performance indicators in the New
Medium-Term Management Plan, we aim for ROE of at least
8% in the long term. Furthermore, we pledge a dividend
payout ratio of at least 60%, aiming to enhance shareholder
returns (vs. 4.4% ROE and 34.1% dividend payout ratio in

Net sales remained solid mainly in the existing businessareas, but results from the new, development areas,
including ASEAN- and mobile-related businesses, fellsignificantly short of targets.
However, we were able to confirm strong interest in our
products, especially VP, an asphalt plant that mainly
produce recycled mixture, at NIKKO Messe 2018 productexhibition held at the head office plant in October 2018.
This led us to form positive outlook on the earnings in
FY2019 and beyond.

During the period covered by the previous Medium-Term
Management Plan (FY2016-FY2018), shipment volumes ofasphalt mixture and concrete remained on a gradual
downward trend in Japan, but the capital expenditureappetite of road-paving and ready-mixed concrete
companies, our key customers, remained strong, driven inpart by a surge in update demand.
Average net sales of 32.0 billion yen and average operating
income of 7.0% were targeted over the three years coveredby the previous medium-term management plan, and theactual figures were 33.2 billion yen and 5.7%, respectively.

Key aspects and speciﬁc measures of the New Medium-Term Management Plan

1

We aim to improve profitability by boostingproduct appeal by raising the level of alldivisions of sales, service, engineering, andmanufacturing (profit margin of 10%)

5

Review of previous Medium-Term Management Plan

Dividend payout ratio
6.5%

35,00030,0004.4%
1.1% 0.7%

1.0% 0.7%
-0.2%

1.1%

Operating margin (in million yen)
4,500
7.9%
7.1%
7.0%
6.4%
6.0%
5.9% 6.0%
4,000
4.8%
4.5%

Operating income (right axis)

2.0% 2.2%

3,500

-0.4%

3,000

25,0002,500

20,0002,000

15,0001,500

10,000

1,000

5,000

500

60.9%

34.1%

31.8%
0

2016

2017

2018

2019
(estimate)2020(estimate)2021(estimate)(ﬁscal year)-5,000Previous Medium-Term
Management Plan

Period coveredby the New Medium-Term
Management Plan

0-500
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 (ﬁscal year)(estimate)(estimate)(estimate)

N ikko Co r po rate Re po r t 201918

POINT

1

New Medium-Term Management Plan

In Maintenance Services Business, we aim to introduce awide variety of measures to achieve a future shift to abusiness model centered on asset management, paying
attention to work-style reforms at customers and ourcompany. We aim to encourage replacement to ourmanpower-saving, maintenance saving products, reform our
methods of inspections by introducing the IoT technologies,● AP-Related Business(in million yen)
30,00025,000Net sales(left axis)

7.8%

7.6%

Operating income(right axis)
8.3%

5.9%

Operatingmargin (in million yen)
6,000
9.5%
9.0%
5,000

20,0004,000

15,0003,000

10,000

2,000

5,000

1,000

0

2016

2017

2018

0
2019 2020 2021 (ﬁscal year)(estimate) (estimate) (estimate)(in million yen)
20,000Net sales(left axis)

10.8% 10.7%
15,000Operating income(right axis)

8.4%

8.1%

9.0%

13.9%

7.8%

1,000

5,000

500
0

1,500

3,000
1,000

2,000

500

1,000
0

2016

2017

6,000
5,000

4,000

2018

2019 2020 2021(ﬁscal year)(estimate) (estimate) (estimate)0

We aim to achieve 9.0 billion yen in net sales, one of the
KPIs, from the 4.5 billion yen currently, for the overseas
business. Nikko Shanghai in China, the centerpiece of ouroverseas strategy, is expected to remain in positive businessenvironment for a foreseeable future, thanks to tighter
environmental regulations in the country. Asphalt plants in
China have so far been mainly for mobile systems forexpressway construction, but demand for statistic systems is
expected to increase, as in Japan. We also expect the shareof recycled mixtures will increase in terms of both usage andamount mixed in. We expect this is positive for Nikko
Shanghai. One concern is that Nikko Shanghai s AP output
ability has come close to its capacity at 25 units per year,
which has led us to expect only a slight increase to 3.6
billion yen in net sales in FY2021, the final year of New
Medium-Term Management Plan period. We thus aim to
expand margins by increasing added value of the plants. If
more large, static APs are installed, it will create opportunity
for us to increase the ratio of maintenance service, which
has remained a little over 10% (see pages 21-22).

3,000

1,500

2016

2017

2018

2019 2020 2021(ﬁscal year)(estimate) (estimate) (estimate)(in million yen)
7,000

5,000

9.5%

Takeshi Sone

3,500

2,000

10,000(in million yen)
6,000

Operatingmargin (in million yen)
2,500
17.2% 17.0% 17.0%
15.0%
2,000

Executive Oﬃcer, Business Division
Manager, Mobile Plant Business Department

2,500● Other Business-Related Business

Operating income(right axis)

In Mobile Plant Business, which is a new
business area, we aim to achieve the top
industry share and proﬁtability in ﬁve years
under a strategy centered on mobile
crushers by Kleemann, which has highglobal sales share and superior
performance.

Operatingmargin (in million yen)
4,000

● Environment- and Conveyor-Related BusinessNet sales(left axis)

Mobile Plant Business aims
to establish operation early

including the use of wearable sensors, and enhance ourmaintenance service by shifting from the current method ofaddressing issues after occurrences to what we call before
maintenance in which maintenance work is performed
based on results of diagnosis for signs of potential issues.
We also plan to strengthen back-up structure for the
Customer Support Center (see pages 23-24).
● BP-Related BusinessNet sales(left axis)

Operating income(right axis)

Operatingmargin (in million yen)
2,500
13.0%
10.7% 10.4% 11.1%
2,000
10.0% 10.3%
1,500

4,000
3,000

1,000

2,000

500

1,000
0

0

2016

2017

2018

2019 2020 2021(ﬁscal year)(estimate) (estimate) (estimate)0

For ASEAN countries, including Indonesia and Thailand,
which represent much of operations other than China, we
aim to increase net sales to 2.5 billion yen in FY2021 fromthe 0.6 billion yen in FY2018. In particular, we boost sales inThailand, where 180 units of used Nikko-made asphalt
plants are in operation, by opening a new local subsidiaryand starting used product business.
In new business areas (including M&A), we aim to achieve a
10.0 billion yen in long-term net sales, a key performanceindicator. For this, Mobile Plant Business is expected to play a
key role. In Mobile Plant Business, Kleemann s mobile crusher isthe mainstay. We aim to achieve net sales of 1.3 billion yen in
FY2021, the final year of the New Medium-Term Management
Plan (vs. 0.12 billion-yen F Y 2 0 1 8 ) b y c o m b i n i n g t h eknow-how we acquired through existing businesses and new
product strategies, sales strategies and maintenance service
strategies. Customer crushing plant companies in Japan are
experiencing aging of their equipment, which has led us to
expect an increased demand for mobile plants to replace
aged ones (see page 20).

History of business development and features of products
Mobile Plant Business started in 2015 when we signed acontract for a distributorship in Japan with Kleemann, aGerman company whose mobile crusher commands thesecond largest global share. We launched a department
specializing in the business in April 1, 2018. Our lineup also
includes mobile belt conveyors by Northern Ireland s
TrackStack, with which we have a Japanese distributorshipcontract, and small mobile crushers by Britain s Redrhino, in
addition to Mobix, our mobile soil improver. In October 2018,
we opened a Mobile Center in Yoshikawa, Saitama Prefecture,
where we hold stocks and perform maintenance service.
Main customers of Mobile Plant Business are stone crusher
companies, companies recycling aggregates andsteelmakers. According to the Japan Construction
Equipment Manufacturers Association, the market size ofmobile crushers was annual 120 units, increasing 20% froma year earlier, in FY2018 and it is expected to further
expand, driven by the superior efficiency they provide. Nikko

currently has about 1% to 2% of the market, but aims to
expand it to 33% over the next five years. Our rivals in Japan
include Komatsu, Nakayama Iron Works, Ube Industries andKurimoto.
The advantage of Kleemann s mobile crushers lies in theirsuperior performance, including their sturdy construction,high crushing efficiency and low fuel efficiency (a half to
one-third of rival product levels) thanks to the use of a directengine driven mechanism that allows for minimal loss inenergy conversion. We can sell them in combination with
TrackStack s belt conveyors. Redrhino s products areoffered customers needing small mobile crushers. However,
our weaknesses of this business include our relatively low
recognition in the domestic market due to us being alatecomer and relatively high pricing compared to rivals. We
also need to enhance our service so that we can better
perform maintenance work on engine and hydrauliccomponents.

Plans and Measures under the New Medium-Term Management Plan
We set the target of 1.3 billion yen in sales of mobile
products by the end of FY2021, the final year of the New
Medium-Term Management Plan (vs. 0.12 billion yen
achieved in FY2018). Crushing plants in Japan, our main
target, are experiencing aging of equipment noticeably,leading us to expect an increase in demand for mobile
plants. Going forward, we plan to carry out measures
including: (1) strengthening sales forces and build up service
structure; (2) enhancing management and backup structures;and (3) enhancing functions of Mobile Center.
● Demand for mobile crushers(number of units)140

Large jaw crushers

Other

120
100
80
60
40
20
0
Kleemann products

19 N i k ko C o r p orate R ep or t 2019

Business Modeland Innovation2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 (ﬁscal year)

Source: Japan Construction Equipment Manufacturers Association

N ikko Co r po rate Re po r t 201920

POINT

2

Business Modeland Innovation

Strong appetite in China and ASEAN
Overseas AP-Related Business
capturing infrastructure demand
VOICE

Visit to local customer

We chose Nikko Shanghai as we wanted to build an asphalt plant that has the best
environmental performance in China.
We manufacture paving materials for expressway construction in Shandong Province.
When we built a plant here, our focus was environmental, recycling and energy-savingfeatures, and that is why we chose a Nikko Shanghai product. This is a composite plantthat has 320 tons of virgin mixture and 120 tons of recycled mixture, and it is working
without a problem now, after two years since it was installed. It in particular excels inenergy conserving performance, and it has highly regarded for its output that meets thecatalog performance. As the Chinese government requires high environmental
performance, we want Nikko Shanghai to work to improve their products especially inthe area of dust control.

We aim to contribute to roadinfrastructure development byaddressing the needs of overseas
customers using the technologies
and know-how we accumulated
over the 60 years of manufacturingasphalt plants.

CEO, Shandong Hi-Speed Lu Bin

AP Sales Department, Business Division
Manager, Overseas Sales Department

Asphalt plant demand in Thailand holds key to overseas business expansion

Masahiro Ohashi

Fact and future
Overseas business represents 12.1% of Nikko s net sales in
FY2018, after growing rapidly over the past few years. Nikko
Shanghai, our Chinese subsidiary established in 2001 andthe key driver of the business, completed the Shanghai
Jiading Factory in 2004 and opened the Shanghai office in
2006.
In China, which represents 88% of our overseas sales, weare focused on high-end asphalt plants as a strategy todifferentiate from local rivals. Due to the growing need toaddress tighter local environmental regulations, there is anincreased demand for recycling plants. We also recognize ashift from mobile to static systems. ASEAN and Russian Far
East operations, the remaining part of overseas business,represented only 12% of overseas sales in FY2018. The New
Medium-Term Management Plan aims to boost this figure
significantly.

● Nikko Shanghai: shipment unit volume and breakdown(number of units)
25

VirginRecycling

Virgin and recycling plants

20
5
15

1

1
1

3

10
14

9

0

2

1

14

5

1

8

4
8

3

6

3

3
9

7

12

15
9

2011 2012 2013 2014 2015 2016 2017 2018 2019 (ﬁscal year)(estimate)

Medium-term outlook on overseas business net sales
We aim to increase overseas net sales to 6.1 billion yen in
FY2021, the final year of New Medium-Term Management Plan,from the 3.8 billion yen in FY2018. We expect only a slightincrease in net sales to 3.6 billion yen at Nikko Shanghai (vs, 3.5
billion yen achieved in FY2018), accounting for the output
nearing its full production capacity. But we aim for an increase
to 2.5 billion yen in net sales from the ASEAN operations, led
by Thailand (vs. 0.6 billion yen achieved in FY2018). In order toensure the sales boost in the ASEAN region, we are planning toopen a new local office. In Thailand, 180 secondhand units of
Nikko asphalt plants, aged over 30 years, are in operation. We
thus aim to step up sales effort to capture the opportunity
when these units are replaced with new ones. We also plan tolaunch a secondhand product business.

● Overseas business: net sales and share in net sales(in million yen)
5,000
4,000

Net sales

Nikko s overseas business started with the start of asphalt plant
export to Thailand in 1967. Since then, we signed a tie-up deal
with South Korea s Dong Ah Construction Industrial and atechnology tie-up on burners with Germany s Benninghoven.
Our overseas business centered on deals mediated by trading
companies through the 1990s, but shifted to deals through thelocal office in China in the 2000s. We set up International
Business Department in 2001, and opened the Beijing officeand set up Nikko Shanghai in 2002. Outside China, sales toThailand, Indonesia, Taiwan and Far East Russia are growing.
For overseas business excluding China, we target 1.14 billion
yen in net sales in FY2019 and 2.0 billion yen in FY2021, thefinal year of the New Medium-Term Management Plan,

Characteristics of China s asphalt plant industry and Nikko Shanghai s strategy
China s asphalt plant users are mainly comprised ofstate-owned construction companies. There are no
private-sector road paving companies. These companies
mainly use NBD320 and 400, asphalt plants designed forurban projects, and TOPα120 and 160 recycling plants.
There is an observed tendency for them to use larger units.
They also seek better outward appearance.
Share of recycled mixtures used in China is estimated at
10% to 20% in China, compared to 75% in Japan, and theratio of recycled mixtures mixed in is estimated at 20% to
30% in China, compared to 50% in Japan. We expect theuse of recycled mixture to increase, driven by the difficulty
to obtain virgin mixtures and the need to reduce production

costs. As environmental regulations are expected to betightened and this includes tighter odor control, we expect
demand for deodorizing equipment will increase, a positive
factor for Nikko Shanghai s earnings. We also aim to boost
sales from maintenance service, which currently represent
about 10% of Nikko Shanghai s sales.
Nikko s strength in the Chinese market include our ability toprovide viable environmental measures and achieve catalog
performance, low occurrence of troubles, product durability,
high fuel efficiency and easy-to-service designs. Our issues
include the need to improve brand recognition, find new
subcontractors, and hire more talents.

Share in net sales

9.2% 8.7% 9%
8.5％ 8.4％ 8.3%

11.3%
12.1%

3,000
2,000
1,000
0

2011 2012 2013 2014 2015 2016 2017 2018 (fiscal year)
CBD100AWD

Standard asphalt plant model designed for Indonesian market, first delivered in 2016

21 N i k ko C o r p orate R ep or t 2019

compared to 0.6 billion yen achieved in FY2018. Over a longer
term, we aim for 6.0 billion yen in FY2029. We think growth ofThai business and increase in used units are essential forachieving this target.
In particular, sales growth in Thailand is important as we expect
a demand increase in the country as local customers currently
using 180 used units of Nikko-made asphalt plants start toreplace them with new models. We are thinking of setting up a
local subsidiary in Thailand to take advantage of the expecteddemand growth, with a target to increase sales to 10 units per
year, from current levels of two to three units per year. Demandin Thailand is mainly for standard products in medium sizes,
with no special options.

NBD120MBD‑AR

Asphalt plant for adding heat-recycling function targeted at Thai market, first delivered in 2016

N ikko Co r po rate Re po r t 201922

POINT

3

Business Modeland Innovation

Maintenance Service Businessthat supports solid customer baseNikko s Strategy for MS
Under the circumstances, Nikko is implementing a new
strategy in the MS business. Specifically, we are introducing
what we call a Nikko One CRM Platform, under which we
aim to establish a new business model for the maintenanceservice business by connecting with customers andequipment. In this concept, One reflects views andphilosophy for Nikko as a whole. We aim to look at
customers from all angles on a customer relationshipmanagement (CRM) platform.
To achieve this, we aim to centrally manage information
required for our service activity and share it among divisions

We take advantage of our 30
years of experience to provide newvalues in addressing maintenanceneeds that change with times andperformance improvement indevices.
Senior Executive Officer, Business Division
Manager, Service Planning Department

within the company and introduce a remote support
system using wearable devices and an online conferencing
system in the company. The final target vision for Nikko s
CRM is work-style reforms that take advantage of systems,
which will include creation of a free call center andcustomer portal site, customer equipment maintenancesystem, parts order center, before maintenance using AI,
voice recognition and automated translation, robotic
processing of formulaic work processes. It is necessary to
respond to a trend where customers outsource
maintenance.

Nikko One CRM Platform

Minoru Tanaka

Marketing process
Customer Support Center

Recognition

Fact and future

Collaboration
with sales● Service solution

Service
network
Product
proposition

Subcontractors
providing service

Plant diagnosis
systemPlant information
magazine
Plant training

Understandingof customers

Repairand complaints

Product andservice suggestion
Customers

Progress madevisible/shared

Potential deals

Customer
consultation center

Quick response

Maintenance service: Net sales and medium-term forecasts
Sales of MS reached 12.6 billion yen in FY2018, but growth
has remained slow since FY2013. We target sales of 11.5
billion yen to 11.8 billion yen in the period covered by the
New Medium-Term Management Plan (FY2019-FY2021),
and do not expect net sales to increase. The major reason
for this is a relative decrease in budget for maintenanceand service as we plan to focus more on capturing stronguser demand Nikko expects for plant equipment, led byasphalt plants. Maintenance of components and various
repairs represent a combined 66% in the sales of MS. But
we expect no sales from this area due to construction of
new plants.

Sales support

Information
on successful
examples shared● Maintenance Service: net sales and sales share(in million yen)
Net sales
Share in overall sales
18,000
64.8％
62.8%
62.2%
59.5%
16,000
53.9%
49.4%
60.7%
56.5%
14,00054.2%
51.5%
12,00010,000
8,000
6,000
4,000
2,000
0

23 N i k ko C o r p orate R ep or t 2019

Sales and support process

Regular visits

Varied inquiries

Real-time management

Maintenance service (MS) business represents about 60% of
combined sales of AP and BP businesses. It works to
improve plant management at our customers.
Our maintenance service is provided through our service
network consisting of 180 staffs in 17 locations nationwide
as well as Akitsu, an organization comprised of 200
subcontractors nationwide. In October last year, we set up a
new Customer Support Center (CSC) on the first floor of our
Head Office where we aim to establish a Nikko One CRM
Platform under a variety of initiatives over a medium to longterm.
The advantages of MS are its high flexibility, which is
supported by Akitsu, and wide-ranging information on plants
in operation, collected at CSC, while its weakness is
declining skills due to a generational change of staffs
engaging in maintenance service.

Interest

Increase numberof consultation
instances

Issues for Maintenance Service
We expect proﬁtability of MS to improve during the New
Medium-Term Management Plan period. For this to happen,a shift from the current after, or after-the-fact
maintenance to before, or preemptive, maintenanceregime is essential. For the expansion of before
maintenance regime, we think it is necessary to increase

remote maintenance contracts with customers by, forexample, expanding sales of new control panels and boost
skills of all service personnel. Including a shift to asset
management, we aim to boost Nikko s net sales, whichcurrently represent only 50% of customer MS, to 70% to100% (= expansion of MS territory).

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 (ﬁscal year)()

N ikko Co r po rate Re po r t 201924

Business Modeland Innovation

CFO s Message● Cash conversion cycle(days)
240
200
160

We aim to simultaneously work toincrease growth investment andshareholder returns, with the next
100 years in mind. We set ROE as afinancial KPI, actively seek to sell
strategic shareholdings andimprove cash conversion cycle, andtarget an ROE of 6.3% in the New
Medium-Term Management Plan.
Managing Director
and General Manager of Financial Division

Hiroshi Fujii

Let me discuss four points
from my capacity as CFO.

120
80
40
0

2010

2011

2012

2013

2014

2015

2016

In terms of shareholder returns, we targeted a dividend
payout ratio of around 30% until FY2018. In the period
under the New Medium-Term Management Plan throughFY2021, however, we aim for at least 60%. Our dividend
payout target of 200 yen per share in FY2019 translates toan estimated 76%, 100 yen of which is a commemorative
dividend. As we said above, we will be aggressive inpursuing growth investment opportunities, but as we havea high level of retained earnings currently, we will seek toincrease both growth investment and shareholder returns

at the same time.
In terms of financial KPI, we aim to focus on ROE. ROE
remained above 4% during the period of the previous
medium-term management plan, but we aim for an average
6.3% for the three-year period of the New Medium-Term
Management Plan. We aim to achieve ROE of at least 8% in
10 years, and for this, we think it is essential to make profit
in the new business areas. We aim to use our funds
actively on investments that can lead to making profits.

● ROE of Nikko vs. machinery industry

We target net sales of 38.0 billion yen and operating incomeof 3.0 billion yen in FY2021, the final year of the New
Medium-Term Management Plan, and net sales of 50.0
billion yen and ROE of at least 8% in 10 years. These are not
the figures we came up with through extrapolation of thecurrent levels of these indicators. Instead, we aim to achievethese ambitious targets by seeking growth in new businessareas and overseas markets. In other words, these targets
are our message that we have decided to focus on growthstrategies with the next 100 years in mind, on the occasionof our 100th foundation anniversary, even if that means wemust take some risks. I am determined to support financial
aspects of these growth strategies.

2018 (fiscal year)
Source: Bloomberg

Increasing both growth investment and shareholder returns: We set ROI as financial KPI（％）
10

We aim to focus on growth strategies centered on new business areas and overseas development.

2017

Nikko

Machinery industry

8
6

6.6

4
2
0

4.8

3.6
3.4

2.0

4.6

4.9

2016

2017

4.4

0.5
2010

2011

2012

2013

2014

2015

2018 (fiscal year)
Source: Bloomberg

Capital + financial strategy: We will liquidate assets lying dormant on balance sheet into cash.
Nikko currently has assets totaling 44.0 billion yen, net
assets totaling 30.0 billion yen and cash and deposits
totaling 11.0 billion yen, meaning it has ample capacity tocontinue making investments. But there are still dormant
assets on our balance sheet, and we are going to dig into
them. Specifically, we aim to squeeze out cash of about 2.0
billion yen by selling strategic shareholdings and about 3.0
billion yen by improving cash conversion cycle (CCC).
The policy for the sale of strategic shareholdings is to sell all
shares in business partners with whom we do not havestrong relationship. We believe we can improve CCC byasking customers, in principle, to make down payment when
we receive orders for plants and eliminating bills whose
repayment deadlines exceed 120 days.

25 N i k ko C o r p orate R ep or t 2019

As explained above, we are ready to carry out newinvestment of about 10.0 billion yen without taking out loans
or raising capital. If we find an opportunity to acquire abusiness that will help our growth, we aim to actively pursue
such opportunity even if the purchase price was as large as
10.0 billion yen, although, of course, we will examine therisk and opportunity before doing so.
We will also aggressively take on opportunities forinvestment that we regard as leading to our growth byconsidering use of loans, if our existing funds are short. We
do not see any cause for concern about our financial
position, considering the about 30.0 billion yen in net
assets we currently have.

IR and SR policy: We aim to enhance information disclosure and commit further to dialog with shareholders.
Finally, I am going to discuss IR. As we operate on a BtoB
business model, our recognition among individual investors
is low. Our shares have had low liquidity on the stock
market due partly to a large percentage of strategically held
shares. Recognizing that active information disclosure andactive engagement with shareholders are a key part ofinvestor relations, we aim to bolster information disclosureand dialog with shareholders starting in FY2018. Specifically,
we started to hold telephone conferencing in the first andsecond fiscal quarters, in addition to results briefings whichhave been held twice each fiscal year. At NIKKO Messe
2018 held at the end of October last year, we also provided

an opportunity for individual and institutional investors andanalysts to visit our plants and see new products.
Furthermore, we have started to disclose summary of ourpresentations and question and answer sessions at results
briefings and telephone conferences, as part of efforts toprovide a variety of information to institutional and individual
investors in a timely manner. These down-to-earth initiatives,
we believe, have led to a significant improvement in ourshares liquidity in the current fiscal year. We aredetermined to keep these improvements going and commit
further to improving information disclosure and maintaining
dialog with shareholders.

N ikko Co r po rate Re po r t 201926

Sustainability Initiatives

R&D Framework Underpinning
Customer Satisfaction

The Nikko Group s business is deeply connectedwith society and the environment. We consider it
essential to provide solutions for social issues,
satisfy our customers and employees, and co-exist
with local communities, for the Nikko Group tocontinue improving our corporate value.

Utilizing the unique technologicalknow-how of the Group, we work withour customers to ﬁnd solutions forchallenges they face and provide
products and services that they
appreciate and choose to use.

Managing Director andGeneral Manager of Corporate Planning Division

Director and Head of Techno Center,
Technology Division

Toshifumi Kinugasa

Hiroyuki Sakurai

To achieve our mission, future creation that starts from an(contribute to future society through corporate activities), it
is essential that we co-exist with society and have a
harmonious relationship with the environment.

1

Provide solutions for social issues andpursue business opportunities.

We identify the following four themes as key items in oureﬀorts to achieve sustainability based on the interest society
has and the level of their importance for the corporate valueof the Nikko Group.

Make cities and human settlements
inclusive, safe, resilient, and sustainable

Take urgent action to combat
climate change and its impacts

Techno Center

Employeesatisfaction(In 100 million yen)
50
40

2

Pursue customer satisfaction30

3

Pursue employee satisfaction

20

4

Co-exist with local communities

Impact on the Nikko Group s corporate value

Our Head Oﬃce is located in Akashi City, Hyogo
Prefecture--the place our factory was located when thecompany was established. In addition to ourinvolvement in regional revitalization projects
implemented by Hyogo Prefecture and Akashi City, the
Nikko Business Foundation has been oﬀering grantscholarships for 30 years since 1989 to domestic andoverseas students enrolled in the universities andinstitutes of technology oﬀering a ﬁve-year program
specializing in technology/engineering in Hyogo
Prefecture and students from Hyogo Prefecture.

27 N i k ko C o r p orate R ep or t 2019

Furthermore, the Foundation provides research grants
to researchers (supervisors) who conduct research ontechnology development in the research laboratories of
the universities and technology/engineering colleges in
Hyogo Prefecture or researchers who reside in Hyogo
Prefecture and work for universities or other similar
institutes.
The Foundation was established in the 70th anniversaryof Nikko Co., Ltd. with the aim of contributing to the
local communities through the development oftechnologies and competent human resources.

Net sales

Share in net sales
9.0%

7.4%

7.0%
4.8%

4.0%

5.0%

Development Departmentand (4) overseas strategy. As its KPIs, the Development
Department aims to achieve a 9.0% share in net sales of new
products in the ﬁscal year ending March 2022 (compared to 4.8%
in FY2018) and to maintain a 40% share in the medium-term
themes in the R&D budget (compared to 12% in FY2018).
● R&D expenses/share in medium- and long-term themes(In million yen)
700
600
500

R&D expenses
78%
33%

Share in medium- and long-term themes
12%

40%

40%

40%

400
300
200

10
0

Co-existence with local communities

Toshifumi Kinugasa, Head of Techno Center (Director)

Improve R&D Management Know-how and Expedite Product Development● Net sales/share in net sales of new products
Customersatisfaction

Masaru Tsuji, General Manager (Representative Director and President)

Engineering Department

The Development Department is at the core of Nikko stechnologies. The New Medium-Term Management Plan
identiﬁed the following as the important goals of theDevelopment Department: (1) develop products in the existingareas; (2) cultivate new businesses; (3) expedite development;

Co-existencewith local
communities

Interest of society

SDG 13

Technology Division

Design Department

Key items for sustainability

SDG 12

Nikko s R&D Organization

Materiality

SDG 11

Ensure sustainable consumption
and production patterns

ビジネスモデル&Sustainability
イノベーション
Initiatives

100
2016

2017

2018

2019
2020
2021 (ﬁscal year)(estimate) (estimate) (estimate)

To achieve these KPIs, it is essential that we develop humanresources for the Development Department. Under the New
Medium-Term Management Plan, we consider it necessary to
not only improve our technological know-how through four coretechnologies (heating, mixing and kneading, machinery, control)
but also enhance management skills to make adjustments
across diﬀerent areas depending on development themes.
For further development of the core technologies, we will
create a roadmap for the development of each coretechnology, clarify priorities, and concentrate resources inpriority areas. We will also actively facilitate joint developmentwith other industries and companies to make up for what islacking in our company. To expedite product development, it is

0

2016

2017

2018

2019
2020
2021 (ﬁscal year)(estimate) (estimate) (estimate)important that we raise the eﬃciency of testing andexperiments. At the same time, we will promote thedigitalization of operations and the systematization andvisualization of the existing technologies.
Of the 102 staﬀ members in the Technology Division, 26 areassigned to the Development Department (as of March 31,2019), which comprises ﬁve teams specializing in AP, BP, plantengineering, control, and intellectual properties. The
Development Department and Engineering Department, whichused to be in diﬀerent locations, moved to the same oﬃce
when Techno Center was built on the site of the Head Oﬃce in
September 2018. This led to the strengthening of theircollaboration for product development.

N ikko Co r po rate Re po r t 201928

ビジネスモデル&
Sustainability
イノベーション
Initiatives

Pursuit of Customer Satisfaction

We regularly oﬀer operator training programs to provide managers andengineers of our corporate customers with training on the operation ofmachines and technologies used in their plants.

Since its opening in 1969 which coincided with the 50th
anniversary of Nikko, the operator training center has
been providing two-week training programs for 50 years
to Nikko s AP/BP plant users throughout Japan for thesafe use of our products. The program consists of 38
hours of lectures and 38 hours of practical training and isdesigned to improve the operating skills of plants and toprovide advanced knowledge on machinery and electric
control.

New training center

LectureCustomer s Voice

1

Customer s Voice

We have so far oﬀered over 200 operator training programs
for a cumulative total of more than 5,000 participants. The
past participants of this operator training program havebecome senior managers and often recommend junior staﬀ
or younger colleagues to take part in the program. The
program has also provided networking opportunities forcustomers who have participated from their workplaces
throughout Japan. It has become a main pillar for our pursuitof customer satisfaction.

Practical session using a burner

Practical session on conveyor maintenance2

Showa Hodou K.K.

Ozawa Corporation

Showa Hodou K.K. upgraded their aggregate supply unit, virgin dryer, back wash
bag ﬁlter, top-drum recycling unit AS tank, and heavy oil tank in 2016 and replaced
their asphalt plant and skip elevator in May 2019.

Ozawa Corporation, a group member company of the Kanto Ube Concrete
Corporate, introduced a batching plant equipped with Nikko s latest-model 2.75
cubic meter mixer (DASH-Hyper) and the latest-model network console (Cyberadvance) in 2018.

Q &A

Q &A

Q：Can you explain why your company upgraded your plantfacilities?
A：Our old plant was purchased in 1992 when our company
was established and was 27 years old. We decided that it
was time we upgraded the aged plant to a plant thatwould care about the surrounding environment so that we
could broadly supply high-quality asphalt mixtures.
Q：Was there anything that you particularly found diﬃcult,needed to be careful, or place importance whenrebuilding your plant?
A：Because our site is extremely small and the land issloping, we decided to use the top-drum recycling unit
and the BonD type which has a bag ﬁlter on top of thevirgin dryer to achieve a very compact layout.
We also re-planned the circulation ﬂow in the site. By
reviewing the traﬃc line of dump tracks and the waiting
position of tanker trucks, we tried to improve the safety
and eﬃciency of plant operation.
Q：What kind of improvements have been made comparedto the previous plant? How do you evaluate the new
products?

29 N i k ko C o r p orate R ep or t 2019

A：The previous plant was installed in 1992. It used the dual
motor dryer (DMD) manufactured by Niigata Tekko.
Replacing it with the direct heating recycling unit has
raised the production of recycled materials with less timeand increased the mix rate of recycled mixtures.
Furthermore, the back-wash bag ﬁlter we purchased at
the same time was not a pulse-type. As it uses a blower
to remove dust, it only produces a very small noise anddoes not blow oﬀ much dust. We are happy with it. The
new burner is also fuel eﬃcient and low noise, which is
better for nearby residents. Despite the compact layout,
there is a large maintenance space and wide paths foreach equipment. Feeders with ﬁns to stop spillage is also
well received within the plant.
Q：Finally, can you give us a brief message?
A：We greatly appreciate Nikko Co., Ltd. and others involvedin the building of our plant for their eﬀorts to safely
complete the building of the plant as scheduled without
any accident in a site with a limited space. We willappreciate your support for many years to come.

Q：What was the key point when your company decided to
upgrade your plant?
A：The main reason was the ageing of the plant. Our plant
was built in the Showa era (except for the mixer and scale
which were renewed in 2002). We were spending a
sizeable sum on the maintenance and repair for its
facilities. In addition, we aimed to achieve consistency inquality through the upgrading to the latest model.
Q：How do you feel now that the upgrade work wascompleted?
A：The defects of machinery have reduced dramatically. We
are now able to supply ready-mixed concrete withconsistent quality. The mixer also achieves highperformance in mixing high-strength, high-ﬂow concretewith less mixing time, which allows us to ship products
eﬃciently.
Q：How do you ﬁnd Cyber advance, which is the latest-model
console equipped with a tablet?
A：We were initially puzzled by it because the layout of
buttons diﬀers from that of our previous console. But once

we have got used to it, it was easy to use and learn it. We
normally use the tablet as a display monitor for slump
testing. When maintenance work is taking place, we bring
the tablet into the plant and use it to operate machineryfrom there. We ﬁnd it very useful because one person can
now safely manage the work that used to be done by two
or more people.
Q：Lastly, can you tell me if you have any opinion on orrequest to Nikko?
A：We want Nikko to develop even better products thatconsider the ease of use for end users. We especiallyhope them to create products that focus on the ease ofmaintenance such as daily cleaning. We are already using
remote maintenance and other services and look forward
to further advance in trouble prevention technologies.

N ikko Co r po rate Re po r t 201930

Sustainability
Initiatives

Pursuit of Employee Satisfaction

Participants in the Roundtable Talk

Rie Imada

Cost Management
Department(Joined Nikko in 2015)

Sayoko Taketsugi

Legal Section,
Financial Division(Joined Nikko in 2019as a mid-career recruit)

Daiki Sawaguchi
Production Control Oﬃce,
Manufacturing Division(Joined Nikko in 2012)●

Tetsuya Higuchi

Quality Assurance
Oﬃce, Manufacturing
Division(Joined Nikko in 2016)

Yuki Tachiki

General Aﬀairs
Oﬃce(Joined Nikko in 2013)

Toshiyuki Kitazume
Techno Center
Design Department(Joined Nikko in 2015)

The sections the participants belong to were as of the date of the talk (July 2, 2019).

All employees are the most valuable asset for Nikko. The workplace environment where each person is able to unleash
their abilities to the maximum and to endeavor to improve the quality of life is a source that creates new values.
Six people of the Millennials generation who drive the next generation of Nikko have come together to discussworkstyles and a sense of fulﬁllment gained from work.
Although the participants were initially a little shy, they gradually got to know each other and started revealing
their true feelings.

Reality and challenges ofworkstyle reform
Tachiki: This is the seventh year since I joined Nikko. I am
currently responsible for recruitment in the General Aﬀairs
Oﬃce. Workstyle reform is an important management
theme. We launched a system reform project in April thisyear and are currently examining speciﬁc measures that are
unique to Nikko and will go further than simply complying
with laws and ordinances. Can you tell me what changes are
occurring in your workplace?
Higuchi: This is my fourth year in Nikko and I belong to the
Quality Assurance Oﬃce. There is a strong awareness about
promoting the use of annual leave entitlements and there is
an atmosphere to come up with ideas to enable everyone totake ten days of annual leave each year.
Sawaguchi: This is my eighth year in Nikko and I work in the
Production Control Oﬃce. We used to sometimes work until
9 or 10 o clock at night, but currently, we are working on
reducing after-work hours and are encouraged to take one
day of annual leave a month.
Kitazume: This is my ﬁfth year in Nikko and I work on
designing conveyors in Techno Center Design Department.
In the Techno Center Design Department, there is a stronger
awareness about leaving work early. But there has been nochange to our workload. This means we need to change theway we work. We are currently working on standardizing
drawings and reducing the number of drawings we prepare.
This, however, makes it harder for the manufacturing section
to understand the drawings. We need an understanding andcooperation from diﬀerent departments.
Taketsugi: It has been three months since I joined Nikko. I
moved to Kansai after my marriage and joined Nikko as a
mid-career recruit. I currently work for the Legal Section in
the Financial Division. We are strongly encouraged to leaveoﬃce on time. To do this, we are making eﬀorts such as
clearly prioritizing our duties and setting a deadline for eachtask and writing it down in our schedule.

31 N i k ko C o r p orate R ep or t 2019

Imada: This is my ﬁfth year in Nikko. I prepare quotes forasphalt plants (AP) in the Cost Management Department. I
returned to work this April after taking maternity leave.
Because we have more members in our team, I am well
supported even when I have to suddenly take a day oﬀ due
to my child s illness or other reasons. Quote preparation for
AP is standardized to a certain extent. I myself try to support
other staﬀ members when I have time so that speciﬁc
people do not shoulder an excessive share of the workload.
Kitazume: Designing relies heavily on individual work and it
is currently diﬃcult to share work within a team. In manycases, a person in charge of a certain job is the only person
who can answer inquiries about it. It would be better if we
can make each person s work more visible.

Workstyle and eﬃciency
Tachiki: Each workplace seems to have diﬀerent challenges.
If you are doing anything to work eﬃciently within the
stipulated work hours, can you share it with us?
Higuchi: Quality Assurance receives many requests fromrelevant sections. If I am not sure whether a particular
request falls under the scope of our duties, I will seek advice
from my supervisor. When I ﬁrst joined Nikko, I justdoggedly did whatever work I was given, partly because I
did not understand the scope of our duties well. But I now
feel it is necessary to be brave enough to say No when alot of high-priority tasks are waiting to be processed.
Sawaguchi: Production Control is also an indirect section forthe production site and handles a wide range of work. As I
have some experience now, I can prioritize tasks from theviewpoint of how it will contribute to improving the eﬃciencyof the entire plant.
Kitazume: The Techno Center Design Department is asking
sales sections to provide supplementary information when
they give us design requests. If we are asked to do a task
urgently without any information, we cannot judge whether

we should prioritize their request or the work that we aredoing at the moment. This will suddenly increase ourworkload and force us to work long hours.
Taketsugi: The Legal Section is working on preparing
manuals for what we do so that we do not depend on
particular individuals for certain work. We are recording thework we have done and organizing manuals so that otherstaﬀ members can handle it without stress.
Tachiki: Information technology is essential for raising
operational eﬃciency. Are you doing something about this?
Higuchi: Quality Assurance is working on the digitalization of
the inspection result report. We believe that being able tosearch inspection records as data will raise eﬃciency.
Imada: We are looking into upgrading the quotation system.
We are hoping that digital processing of data will makeinput operation unnecessary, reduce errors, and dramatically
improve eﬃciency.
Kitazume: Design is working on the introduction of 3D CAD.
When we prepare drawings using the existing 2D CAD,
subtle discrepancies often arise between the drawings andcustomer needs. We then have to revise the drawings. With
3D CAD, we can show a 3D image while we are designing.
This will make it easier for sales staﬀ to talk about productswith customers and we expect that there will be lessdo-over work like this. Having said that, we are concernedthat using 3D CAD may lower our operation eﬃciency in ashort term because we are not used to using it. It will be of agreat help if there is a specialized support team that helps us
from the introduction of a new system to training.
Sawaguchi: I totally agree! Please make an IT support teamthat dedicates itself to raise operational eﬃciency (laugh).

Motivation and a sense of
fulﬁllment gained from work
Tachiki: We have heard various opinions about how tomake your work easier. What do you think is needed to give
you a greater sense of fulﬁllment from work?
Sawaguchi: In Production Control, we look at ﬁgures suchas an output of each project or proﬁt margins. Recently, we
received an award in the company for our achievement in an
operation improvement process. I felt that we wererewarded for our eﬀorts. I was very happy to hear words ofencouragement and praise from my supervisors.

Imada: When we prepare quotes, we do not necessarily get
contracts; as a result, we do not feel a sense of achievement
often. But when I can produce a quote in a shorter timeusing my experience, I feel that I have grown. I think a simple
word of Thank you! from people in sales sections will raise
my motivation even higher (laugh).
Sawaguchi: It will be great to have opportunities for
employees and their families to get together to makecommunication at workplace easier. It is said that people in
my generation tend to avoid participating in drinking
sessions with bosses or colleagues or events organized by
the company. But personally, I want more opportunities totalk with people in my workplace in a more casual
atmosphere. I would appreciate support for leisure activitiesof each workplace.
Higuchi: I am still single, but I support family events! (Laugh)
Imada: I am working shorter hours after returning to workfrom maternity leave and will be happy to see more optionsin terms of work hours and career paths. Nikko has a strong
image as a conservative, male-centered, building machinery
manufacturer. If we can communicate that women are
working in Nikko with various options, I think we can changethat image slightly.
Taketsugi: If we have a ﬂexible human resources systemwith many options such as ﬂexible work hours, it will bemuch easier for women to work. It may be diﬃcult to
introduce this to the manufacturing site, but there seems ascope for maneuvering.
Imada: I was able to imagine that I would be able tocontinue working after childbirth because there was an
option of working shorter hours as long as I worked six
hours a day. I hope that there are structures that allow not
only women but also employees who have some restrictions
to continue working and that many people use them.
Tachiki: I value your input as we are having an uphill battle
recruiting new female graduates. Thank you for sharing
valuable opinions on workstyle and a sense of fulﬁllment
from work today. I would like to create an opportunity likethis again and deliver the honest voice of younger
employees to our management. I appreciate yourparticipation in today s talk.

N ikko Co r po rate Re po r t 201932

Sustainability
Initiatives

Business Activities
and Environment Management

To reduce greenhouse gas emissions from asphalt plants, Nikko is mobilizing its technological knowhow
Nikko s environmental initiatives began in the 1970s when
we took on the challenge of recycling asphalt pavement
waste, which was a social issue at the time. In 1977, Nikko
commercialized a new plant that would recycle asphalt
pavement waste. We have contributed to building a
recycling-oriented society as almost all of such waste are
currently recycled.
One of the major for modern society is to reducegreenhouse gas emissions to address climate change risks.
The Paris Agreement which took eﬀect in 2016 as a newframework for combating global warming requires eﬀorts tokeep a global temperature rise well below 2 degrees Celsius
compared to pre-industrial levels.
Japan is one of the countries that have ratiﬁed theAgreement and aims to reduce emissions by 26% by 2030
compared to 2013. Japan produces 1.34 billion tons ofgreenhouse gases, accounting for 2.7% of the global
emissions. (Actual ﬁgures in 2016)
Asphalt plants (AP) all over Japan produce approximately 1
million tons of greenhouse gases a year. We recognize thatand accelerating the development of new products.
contributing to the creation of a low-carbon society by
reducing their emissions is a major challenge Nikko faces. As
alternative fuels that will replace heavy oil, we use various
types of biomass fuels (e.g. wood chips produced from thedebris left by earthquakes and carbonized fuels generated in
garbage processing facilities) in the combustion system of
APs to achieve both high combustion eﬃciency andgreenhouse emission reductions.

South Korea
1.3%（17.9）

Iran
1.4%
（7.1）
Canada1.5%（7.3）
Democratic Republicof the Congo
2.3%（11.1）
Japan
2.7%（13.4）

China
23.2％(114.6)

Other
26.7%
（131.9）

Greenhouse emissions
by country

BrazilIndonesia
3.2%
3.8%（16.1） （18.9）

U.S.A.
13.6%（67.3）

EU-28
10.0%
Russia India（49.5）
5.1% 5.1%（25.1）（25.1）

Source: Website of the Agency for Natural Resources and Energy, Ministry of
Economy, Trade and Industry(The ﬁgures are actual results for 2016, percentages are shares in total emissions,and the ﬁgures in the brackets are the volume of emissions in 100 million tons.)

Nikko s eﬀorts in combating climate change challenges using environmental technologies

Reduce carbon dioxide (CO2) emissions from asphalt plants using
The reduction of environmental stress caused by diesel engines used in mining andconstruction machinery, including reduction in greenhouse gas emissions, has been
rapidly progressing due to the tighter global emission control. In this situation,asphalt plants produce over 40 million tons of mixtures in Japan and use 10 liters offuel (heavy oil) to produce 1 tons of asphalt mixtures. The emission volume of CO 2,
which is one of greenhouse gases, from asphalt plants is estimated at 1 million tons
a year. Of construction machinery, asphalt plants are the largest CO2 emitters. Whileroad paving companies are trying to reduce CO2 emissions by reducing a plant s
heating temperature, this has not produced a satisfying outcome.
Nikko, together with Kawasaki Heavy Industries, Ltd., is working on the evaluation
project of pioneering waste management systems, etc. in small- and medium-sized
waste management facilities sponsored by the Ministry of Environment, under athree-year plan covering FY2018 to FY2020. The project aims to develop
carbonized fuel burner to burn carbonized fuel (harmless fuel created fromgarbage) generated in garbage processing facilities (whose processing volume is
100 tons or less a day) of local governments spread in Japan. Using this burner infacilities that use fossil fuel will reduce CO 2 emissions. Using this carbonized fuelburner through this project, we aim to reduce CO2 emissions of asphalt plants
located in approximately 1,100 places throughout Japan.

If asphalt plants using carbonized fuel produced from garbage can be introduced forpractical use, road paving companies that use it can cut fuel costs and reduce CO 2
emissions at the same time. Furthermore, turning ﬂy ashes and bottom ashes
produced in garbage processing units into molten slag and eﬀectively using it asaggregates for road paving will contribute to the building of a recycling-based society.

Nikko s environmental equipment is enhancing its ability to address
climate change risks by incorporating core technologies of drying,heating, mixing and kneading, and control, in a cross-sectoral manner.

33 N i k ko C o r p orate R ep or t 2019carbonized fuels generated in garbage incineration facilities
Symbiotic communitythat recycles local resources

Carbonized fuelproduced fromgeneral waste
Carbonized fuels
produced from cut
grass, street trees,remaining materials
in the forest land

Carbonized fuelproduced fromsewage sludge

Virgin mixture

Biomass fuelAsphalt mixture

Recycled mixture

Resource recycling

Roadbed materials

Alternative
fuels
Reduce CO2
emissionsCombustion facilities(carbonized furnace)
Sewage sludge treatment
facilities
Industrial waste
pretreatment facilities

Asphalt mixture plants
Road

Asphalt plants
Eﬀectiveuse ofresources

Recycled materials

Burned ashes
Molten slag
producedfrom burned
ashes

Recycling

Pavement waste

Asphalt/
concrete blocks

N ikko Co r po rate Re po r t 201934

Leadershipand GovernanceRoundtable Talk on GovernanceDiscussion points in the Board of Directors“ The lack of aggressiveness might reflect the shortage of human resources.”“ Learning from the mistakes madein the past management decisions is also important.”

Nagahara“ I am aware that human resources development
is a management theme we need to urgently deal with.”

Masaru Tsuji

Representative Director and President(Chair of the Board of Directors)

V S Tsutomu Yuasa / Noriaki Nagahara
Outside Director(Independent Director)

Outside Director(Independent Director)

President Tsuji (Chair of the Board of Directors) and two Outside Directors (Independent
Directors) spoke about enhancing governance, which is a foundation for Nikko s(The talk took place in a meeting room in the Head Office on July 22, 2019.)
sustainable growth.

Tsuji The Board of Directors wants to discuss now for the
future. In other words, we want to clarify Nikko s vision in ten
years time and what we should do in the short- andmedium-term to approach this vision. Your perspectives andadvice as Outside Directors are very helpful because you set
the course of the Board s discussions right, which tend to berather skewed if we only rely on the internal perspectives.
Yuasa I believe I express honest opinions based on myexperience in managing listed companies including a home
appliance maker and ready-made food producer. In-housedirectors sincerely listen to my opinions. I feel there is an
open atmosphere that makes it easy to express different
views. However, if I may give one scrupulous opinion, I feelthat there is a lack of speed when implementing what theBoard has decided to do.
Nagahara I utilize my experience as a lawyer to actively voice
my opinions on governance required by law. I am alsoendeavoring to respect the position of minor shareholders. I
also feel that Nikko s Board respects opinions of outsiders.
Tsuji When the Board was discussing the contents of theMedium-Term Management Plan, which would start afresh
this term, I felt that we somewhat lacked the gumption to

Tsujiboldly take risks to achieve growth.
Yuasa I think the lack of aggressiveness might reflect the
shortage of human resources. In my previous workplace, I
was taught to create people before making things. I think
Nikko urgently needs to enhance the development ofinternal human resources and recruit from outside.
Tsuji As you pointed out, it is true that we tend to lack
personnel who can oversee the whole, partly due to thesegmentation of the operation process for productivity
improvement. Even if we do M&A, our problem will be who
we should dispatch as management. I am aware that humanresources development is a management theme we need tourgently deal with.
Nagahara Aiming to achieve growth through M&A is a major
management challenge. With respect to M&A, however,learning from the mistakes made in the past management
decisions may also be important. I think Nikko has the pastcases that it should reflect on.
Yuasa When we conduct M&As in overseas markets, weneed to overcome racial and cultural differences. We need
to work on the diversification of our human resources
together with human resource development.

Masaru Tsuji

Tsutomu Yuasa

Noriaki Nagahara

1985
1987
2007
2008
2011
2015

1970 Joined Matsushita Electric Industrial Co.,
Ltd. (currently Panasonic Corporation).
2002 Joined Rock Field Co., Ltd.; appointed
as Director.
2005 Managing Director, Rock Field Co., Ltd.
2008 Senior Representative Managing
Director, Rock Field Co., Ltd.
2014 Vice-Chairman, Board of Directors,
Rock Field Co., Ltd.
2016 Outside Director, Nikko Co., Ltd.
(current)

1984 Registered as attorney.
Joined Harada Law Office.
2007 Established Kobe Jugobankan Law
Firm; appointed as Director (current)
2015 Outside Director, Nikko Co., Ltd.
(current)

Joined Hitachi Zosen Corporation.
Joined Nikko Co., Ltd.
Executive Officer, Nikko Co., Ltd.
Director, Nikko Co., Ltd.
Managing Director, Nikko Co., Ltd.
Senior Managing Director, Nikko
Co., Ltd.
2019 Representative Director and President,
Nikko Co., Ltd. (current)

35 N i k ko C o r p orate R ep or t 2019

Yuasa

N ikko Co r po rate Re po r t 201936

Leadershipand GovernanceRoundtable Talk on Governance
Masaru Tsuji V S Tsutomu Yuasa / Noriaki Nagahara

Board of Directors Independence“ Nikko should organize a structure from the levelof Executive Off icer candidates so that Outside Directors can be involvedin the selection of the next generation of management staff.”“ I believe we are not allergic to changing ourselves
into a structure that can increase effectiveness.”“ We need to reconstruct
the personnel evaluation system for successor candidates.”
Tsuji We currently have two Outside Directors. We havealso appointed two new Outside Corporate Auditors, who
are Independent Directors. In total, four out of twelve, i.e.
one-third of the Board, are Independent Directors. I havefollowed the precedents and became the Chairman of theBoard when I became the President. However, I believe weare not allergic to changing ourselves into a structure that
can increase the effectiveness of the Board of Directors bylistening to the opinions of Independent Directors.
Yuasa We need to reconstruct the personnel evaluation
system for successor candidates to allow Outside Directors
to get involved in the selection process. Unless we have
objective numbers at the individual level, for instance, thedegree of one s contribution to achieving the management
plan, it may be difficult to make an accurate decision fromthe position of outsiders.
Nagahara Nikko should organize a structure from the level of
Executive Officer candidates so that Outside Directors canbe involved in the selection of the next generation ofmanagement staff. In addition to objective, quantitative
assessment, I would like opportunities to get to know officer

Nagahara

Tsuji

Yuasa

candidates as people. We should have more in-depth
discussions on this issue together with the establishment of
the voluntary nomination committee and remunerationcommittee, which are currently earmarked as the issue toexplore.
Tsuji Our Board of Directors comprises internal personnel
who are well conversed with sales, technology,
manufacturing, administration, and overseas business plus
Outside Directors in order to make accurate management
decisions. In terms of the skills, knowledge, and experienceof the Board members, I believe we have secured a certain
level of diversity. Having said that, I am aware that we needto make more efforts given that the Board does not include
any female or non-Japanese member.
Nagahara The Board also does not have a younger person in
their 40s. I want to see diversity in terms of age in addition
to gender and nationality. However, I think it is an issue that
we should work on patiently through, for instance,
expanding the scope of candidates for the Board members,
while valuing the characteristics of Nikko, instead of rushinginto it to simply make it appear better.

the culture of gaining profits as the consequence of services
to society is embedded in the organization.
Tsuji As our efforts to combat climate change, we areaccelerating our efforts to develop technologies andcommercialize products for significantly reducing
greenhouse gas emissions from asphalt plants. Asphalt
plants largely rely on fossil fuel for their operation andproduce approximately 1 million tons of greenhouse gases ayear. We want to develop alternative fuels that will
significantly reduce greenhouse gas emissions and produce
plants that can be operated with alternative fuels as soon as
possible to contribute to the building of a low-carbon
society.
Yuasa I think it is important that each employee can feelthat their daily work leads to the creation of social values.
Tsuji
You are right. If we just prepare drawings in the
Head Office, we tend to become insensitive to the demandsof society. To sincerely face social issues that our customers
have, we transferred five staff members from the technology
section in the Head Office to our Tokyo office. They workwith their customers to provide solutions for their problems
by directly listening to their customers concerns andchallenges and discuss them as engineers.
Yuasa That is a very good attempt. There are always social
demands behind customers. Thinking about them together
will make Nikko employees more confident and raise theirmotivation if they can feel that their work helps society.
Tsuji We uphold customer-first policy as our corporate
philosophy. We aim to gain their trust and become theirsolution partners. One of the challenges facing ourcustomers is Workstyle reform. They are working on
improving the work environment for operators working inasphalt or concrete plants. If the accuracy of the remote
maintenance service Nikko offers increases, it can reducethe burden on operators. Going forward, we have our sights
set on the introduction of unmanned plants. The
introduction of unmanned plants that can completely
guarantee safety will significantly reduce our customers

personnel and repair expenses. I think this will literally leadto a win-win relationship.
Yuasa Workstyle reform is a major management theme for
Nikko as well.
Tsuji I t h i n k i n v e s t i n g i n p e o p l e i s m o s t i m p o r t a n t .
Workstyle reform is synonymous to operation reform. We
need to fundamentally review how we work and create anenvironment where workers can exercise their
independence. We have launched a project related tooperation reforms. We will invest where we should makeinvestment to achieve results. As a company whose mission
is to serve society, I believe we are gutsy enough to thinkthat we cannot contribute to society if we can t even giveback to our employees.
Yuasa I will say something that may sound a little harsh.
Isn t it true that simply hoarding money cannot be called
management? It is important that funds are circulated
through investments in growth areas in Japan and overseas
and investments in human resources. I understand the urge
to accumulate cash to prepare for the time when the
management environment becomes tough. However, I thinkmoney should be used where it should be used including
M&As for future growth.
Nagahara There is no doubt that a solid financial foundation is
an important management resource. I disagree with taking
risks recklessly following the prevailing trend. There havebeen numerous examples of M&As that have gone wrong.
To reward Nikko s shareholders who expect stable growth, I
think we should have exhaustive discussions on this issue.
Tsuji All our Directors are well aware that our shareholders
expect a return that exceeds the cost of capital. Under the
Medium-Management Plan that starts from this fiscal year,
we have introduced new indicators on the rate of return,capital productivity, and shareholder return. We will
endeavor to empathize with our stakeholders more andmeet the mandate given by our shareholders, while listening
to the honest opinions of Outside Directors.

Sustainability Initiatives“ I believe we are gutsy enough to think that we cannot contributeto society if we can’ t even give back to our employees.”“ Simply hoarding money cannot be called management.”“ I feel that the culture of gaining prof its as the consequenceof services to society is embedded in the organization.”

Tsuji One of Nikko s company mottos is to serve society
through business. This still resonates deeply with my hearteven at my age. For Nikko to survive, it is essential thatsociety needs us. The first thing we need for disasterrehabilitation efforts is our plants. In addition, asphalt
mixtures are almost fully recycled through our long years of

37 N i k ko C o r p orate R ep or t 2019

Tsuji
Yuasa

Nagaharaefforts to reduce environmental burdens and build a
recycling-oriented society.
Nagahara Nikko s business purpose is deeply related to society
and the environment. I think we are in a privileged position
when it comes to sustainability because we have no choice
but to move together with society. As an outsider, I feel that

N ikko Co r po rate Re po r t 201938

Leadershipand Governance

Executives<Back row, left to right>

Director and General Manager
of Business Division

Tomomi Nakayama<Front row, left to right>

Director/
Director of Techno Center

Toshifumi Kinugasa

Director[outside]

Tsutomu Yuasa

39 N i k ko C o r p orate R ep or t 2019

Managing Director/
General Manager
of Financial Division

Managing Director/
General Manager
of Corporate Planning Division

Representative Director
and President

Director[outside]

Hiroshi Fujii

Masaru Tsuji

Hiroyuki Sakurai

Representative Director/
Chairman

Takahisa Nishikawa<Left to right>

Corporate Auditor[outside]

Shigeru Sadakari

Corporate Auditor[outside]

Naoki Ota

Corporate Auditor[outside]

Tsuyoshi Fukui

Full-time Corporate
AuditorNobutaka Yasuda

Noriaki Nagahara

N ikko Co r po rate Re po r t 201940

Background of Executives

Corporate Governance Framework

Basic Approach to Corporate GovernanceDirectors
Takahisa Nishikawa
Born on March 31, 1959
April 1982
June 2007
June 2008
June 2011
June 2012
June 2012
April 2019
April 2019

Joined Nikko Co., Ltd.
Executive Officer, Nikko Co., Ltd.
Director, Nikko Co., Ltd.
Managing Director, Nikko Co., Ltd.
Representative Director andPresident, Nikko Co., Ltd.
Internal control in-charge andGeneral Manager of Technology
Division, Nikko Co., Ltd.
Representative Director andChairman, Nikko Co., Ltd. (current)
Affiliates in-charge and General
Manager of Manufacturing
Division, Nikko Co., Ltd. (current)

Masaru Tsuji

Born on June 4, 1960
September 1987
June 2007
June 2008
June 2011
April 2015
June 2015
April 2016
April 2019
April 2019

Shareholding in the Company: 20,800 shares

Joined Nikko Co., Ltd.
Executive Officer, Nikko Co., Ltd.
Director, Nikko Co., Ltd.
Managing Director, Nikko Co., Ltd.
General Manager of Business
Division and President of theTokyo Head Office, Nikko Co., Ltd.
Senior Managing Director, Nikko
Co., Ltd.
General Manager, Business
Division, Nikko Co., Ltd.
Representative Director andPresident, Nikko Co., Ltd. (current)Internal control in-charge andGeneral Manager of Technology
Division, Nikko Co., Ltd. (current)

Shareholding in the Company: 16,900 shares

Hiroyuki Sakurai

Born on September 27, 1961
April 1985
June 2007
June 2008
June 2013
June 2015
June 2015

April 2016

April 2018
June 2018

Joined Nikko Co., Ltd.
Executive Officer, Nikko Co., Ltd.
Director, Nikko Co., Ltd.
Manager, Corporate Planning Department
and General Affairs Department, Nikko Co.,Ltd.
Managing Director, Nikko Co., Ltd. (current)
Deputy General Manager, Business Division(in charge of overseas), Manager,
International Business Department andGeneral Manager, Operations Division,
Nikko Co., Ltd.
Deputy General Manager, Business
Division, Manager, International Business
Department and corporate planning andgeneral affairs in-charge, Nikko Co., Ltd.
Corporate planning and general affairs
in-charge, Nikko Co., Ltd.
General Manager, Corporate Planning
Division, Nikko Co., Ltd. (current)<Important concurrent position>
Chairman, Nikko (Shanghai) Construction
Machinery Co., Ltd.
Shareholding in the Company: 14,700 shares

Toshifumi Kinugasa
Born on October 26, 1960
April 1984
June 2007
October 2008
April 2010
June 2012
June 2012
April 2013
April 2019

Joined Nikko Co., Ltd.
Executive Officer, Nikko Co., Ltd.
Manager, Engineering Department,
Nikko Co., Ltd.
Manager, Design Department,
Technology Division, Nikko Co.,Ltd.
Director, Nikko (current)
General Manager, Manufacturing
Division and Head Office Plant
Manager, Nikko Co., Ltd.
General Manager, Manufacturing
Division, Nikko Co., Ltd.
Director, Techno Center, Nikko
Co., Ltd. (current)

Leadershipand Governance

Noriaki Nagahara

Hiroshi Fujii

Born on January 16, 1959
April 1982

June 2003
April 2009
June 2011
June 2011
June 2013
June 2015
June 2018
June 2018

Joined Taiyo Kobe Bank, Limited(currently, Sumitomo Mitsui
Banking Corporation)
Manager, Corporate Business
Office, Tsukiji Branch, SMBCManager, Kansai Corporate
Solution Sales Department, SMBC
Consulting Co., Ltd.
Director, Nikko Co., Ltd.
Manager, Financial Department,
Nikko Co., Ltd.
Manager, Financial Department
and Information Center in-charge,
Nikko Co. Ltd.
Manager, Financial Department
and legal affairs and Information
Center in-charge, Nikko Co., Ltd.
Managing Director, Nikko Co., Ltd.
(current)
General Manager, Financial
Division, Nikko Co., Ltd. (current)(Outside/Independent Director)(Outside/ Independent Director)

Tomomi Nakayama

Born on July 18, 1951

Born on June 27, 1946

April 1982
January 2011
April 2013

April 1984

October 1988
January 2007
June 2007
June 2015

Certified as attorney
Joined Harada Law OfficeSucceeded Harada Law Office
Established Kobe Jugobankan Law
Firm and became Director(current).
Outside Corporate Auditor, Nikko
Co., Ltd.
Outside Director, Nikko Co., Ltd.
(current)<Important concurrent position>
Director, Kobe Jugobankan Law Firm
Shareholding in the Company: None

<Important concurrent position>
Representative Director and President, Tombo
Industry Co., Ltd.
Shareholding in the Company: 11,800 shares

Joined Matsushita ElectricIndustrial Co., Ltd. (currently
Panasonic Corporation).
April 2002 Joined Rock Field Co., Ltd.
July 2002 Director, Rock Field Co., Ltd.
July 2005 Managing Director, Rock Field Co.,Ltd.
July 2008 Senior Representative Managing
Director, Rock Field Co., Ltd.
July 2014 Vice-Chairman of the Board of
Directors, Rock Field Co., Ltd.
June 2016 Outside Director, Nikko Co., Ltd.
(current)
Shareholding in the Company: 1,000 shares
April 1970

Overview of the Governance Framework
Nikko is a company with the Board of Corporate Auditors. To smoothly execute business, we have a committee of internal
executives and other various committees as consultative organs for the President. Full-time Corporate Auditors andrelevant staff members in the Internal Control Office and Internal Audit Office attend the meetings of these committees.
Ordinary General Shareholders Meeting

Shareholding in the Company: 9,800 shares

Tsutomu Yuasa

Appoint/Dismiss

Appoint/Dismiss
ReportBoard of Directors

8 Directors (including 2 Outside Directors)

Audit

Born on January 10, 1963

July 2013
June 2015
June 2015

April 2016

April 2018

April 2019

Corporate Auditors, we endeavor to clarify management
accountability, speed up business execution, increase thetransparency of management decision-making, and strengthen
compliance in order to ensure sound business management.

Nikko positions corporate governance as the management
governance function for maximizing corporate value for ourshareholders and other stakeholders. Under the Executive Officer
system built upon the Board of Directors and the Board of

Joined Nikko Co., Ltd.
Branch Manager, Chubu Branch, Nikko Co., Ltd.
Manager, AP Sales Department, Tokyo Head
Office, Nikko Co., Ltd.
Manager, Asphalt Plant Sales Management
Department, Tokyo Head Office, Nikko Co., Ltd.
Executive Officer, Nikko Co., Ltd. (current)Manager, Business Planning Department,
Business Division and Manager, Asphalt Plant
Sales Management Department, Tokyo Head
Office, Nikko Co., Ltd.
Manager, Business Planning Department,
Business Division, Manager, Asphalt Plant SalesManagement Department, and Director,
AP Technology Center, Nikko Co., Ltd.
Manager, Business Planning Department,
Business Division, Manager, Asphalt Plant SalesManagement Department, Director, AP
Technology Center, and Manager, Mobile Plant
Business Department, Nikko Co., Ltd.
General Manager, Business Division, Manager,
Business Planning Department, and Manager,
Asphalt Plant Sales Management Department,
Nikko Co., Ltd. (current)

Appoint/dismiss
Audit

Executive Committee(internal committee of executives)
Subsidiary Management
Strategy Liaison Committee(Bamboo Group)

Exchange information

Compliance Committee

ReportPresent
opinions

Give
instructions

Give instructions
ReportRisk Management
Committee

Internal Control OfficeInternal Audit Office

Audit

Cooperate

Audit

Audit

Executive Officer
General Manager,
Technology Division

Propose policies

Accounting Auditor

Cooperate

Determine the agenda for appointment/dismissal
Judge the appropriateness of accounting audits
Cooperate

Board of Corporate Auditors(Office of the Board of Corporate Auditors)

Representative Director
and President

Present
opinions
ReportGroup companies

Board of Corporate Auditors

4 Corporate Auditors(including 3 Outside Corporate Auditors)

Audit

Appoint/Dismiss

ReportReportFinance Committee

General Manager,
Business Division

General Manager,
Manufacturing Division

Quality Improvement Committee(Product Guarantee)

General Manager,
Operations Division

ISO Secretariat(Quality management/environment)

Shareholding in the Company: 5,752 shares

Corporate Auditors
Shigeru Sadakari(Outside Corporate Auditor)(Outside Corporate Auditor)(Outside Corporate Auditor)

Tsuyoshi Fukui

Nobutaka Yasuda

Born on September 22, 1957

Born on March 1, 1955

Born on July 24, 1965

Born on September 27, 1959

March 2011
March 2013

August 1995

April 1980
April 2010

May 2011
April 2013
June 2015
June 2016

Joined Taiyo Kobe Bank, Limited (currently,
Sumitomo Mitsui Banking Corporation)
Executive Officer and Manager, Internal
Audit Department, Sumitomo Mitsui
Banking Corporation
Managing Executive Officer, The Minato
Bank, Ltd.
Senior Representative Managing Director
and Senior Managing Executive Officer, The
Minato Bank, Ltd.
Representative Director and Vice President,
Kobe Tochi Tatemono Co., Ltd.
Representative Director and President, Kobe
Maintenance of Building Co., Ltd. (current)

Naoki Ota
April 1979
February 2009

March 2016

Joined NITTOSEIKO CO., LTD.
Representative Director andPresident, Wacoh Corporation
Director, NITTOSEIKO CO., LTD.
Director and Manager of Fasteners
Business Department, NITTOSEIKO
CO., LTD.
Full-time Auditor, NITTOSEIKO CO.
LTD. (current)

October 1991

April 2018

Joined the Kobe Office of Century
Audit Corporation (currently Ernst& Young ShinNihon LLC).
Certified as Certified Public
Accountant of Japan.
Joined the Kobe Office of RSM
Seiwa (current).

(full-time)

April 1982
June 2011
January 2012
June 2013
April 2014

Shareholding in the Company: None
April 2016
June 2016<Important concurrent position>
Full-time Auditor, NITTOSEIKO CO., LTD.
Shareholding in the Company: None

Joined Nikko Co., Ltd.
Executive Officer, Nikko Co., Ltd.
Manager, Batching Plant (BP)Business Department, Nikko Co., Ltd.
Manager, Business Department,
Nikko Co., Ltd.
Manager, Tokyo Head Office andManager, Business Planning
Department
Internal control in-charge
Corporate Auditor (current)

Organization Status of Internal Control System
Our basic approach to internal control system is to flexibly
plan for and implement the organization of rules andemployee education and first ensure its effectivenessMay 2006
June 2006

Shareholding in the Company: 6,800 shares

Adopted the Basic Policy on Internal Controls .
Restructured the Audit Office into the Internal Audit Office toenhance the audit structure. In addition, establishedcompliance rules and basic risk management rules andcreated the Compliance Committee and Risk Management
Committee.

in order to achieve appropriate and efficient businessexecution and to maintain a structure that enables oversightand audits.
March 2008

October 2008

Added internal controls concerning financial reporting andguidelines on preventing damage from antisocial forces to the
Basic Policy on Internal Controls .
Separated the Internal Audit Office to the Internal Control
Office and Internal Audit Office to facilitate internal controls
and clearly separate the evaluation function.

Shareholding in the Company: None

Executive Oﬃcer
Minoru Tanaka

Masao Natori

Morie Okaaki

Takeshi Sone

Born on December 18, 1960

Born on May 22, 1961

Born on November 2, 1963

Born on February 25, 1970

Senior Executive Officer
April 1981
October 2007
April 2010
January 2011
June 2012
October 2012

April 2013

April 2018
June 2019

Joined Nikko Co., Ltd.
Branch Manager, Tohoku Branch,
Nikko Co., Ltd.
Director, Tokyo Service Center, Nikko
Co., Ltd.
Director, Tokyo Service Center,
Leader, Planning Group, and Leader,Parts Group, Nikko Co., Ltd.
Executive Officer and Manager, Service
Planning Department, Nikko Co., Ltd.
Executive Officer, Manager, Service
Planning Department, Director,
Customer Support Center, and Leader,
Solution Team, Nikko Co., Ltd.
Executive Officer, Manager, Service
Planning Department, and Director,
Customer Support Center, Nikko Co.,
Ltd.
Executive Officer and Manager, Service
Planning Department, Nikko Co., Ltd.
Senior Executive Officer & Manager,
Service Planning Department, Nikko
Co., Ltd. (current)

41 N i k ko C o r p orate R ep or t 2019

Executive Officer

April 1984
November 2007
June 2008
April 2010
April 2012
June 2012

April 2016

June 2019

Joined Nikko Co., Ltd.
Director, R&D Center, Nikko Co., Ltd.
Executive Officer and Director, R&D
Center, Nikko Co., Ltd.
Executive Officer and Manager,
Engineering Department, Nikko Co.,Ltd.
Manager, Engineering Department andManager, Cost Management
Department, Nikko Co., Ltd.
Executive Officer, Deputy General
Manager, Technology Division, andManager, Technology Department,
Nikko Co., Ltd.
Executive Officer, Manager, Corporate
Planning Department, Manager,
General Affairs Department, andManager, Cost Management
Department, Nikko Co., Ltd.
Executive Officer, Manager, General
Affairs Department, and Manager,
Cost Management Department(current)

Executive Officer

April 1986
April 2004
January 2007
April 2009
April 2010

July 2013
April 2016

June 2016

April 2017
April 2019

Joined Nikko Co., Ltd.
Manager, Kitakanto Sales Office, Nikko Co., Ltd.
Manager, BP Business Department, Nikko Co., Ltd.
Manager, BP Business Department and Business
Expansion Promotion Team, Nikko Co., Ltd.
Manager, BP Business Department, andConveyance & Environmental Business
Department, Special Environment Sales Section,
Conveyance Sales Department
Manager, BP Sales Management Department,
Nikko Co., Ltd.
Manager, BP Sales Management Department,
Manager, Industrial Machinery Sales Management
Department, and Director, Industrial Machinery
Technology Center, Nikko Co., Ltd.
Executive Officer, Manager, BP Sales Management
Department, Manager, Industrial Machinery SalesManagement Department, and Director, Industrial
Machinery Technology Center, Nikko Co., Ltd.
Executive Officer, Manager, BP Sales Management
Department and Director, Industrial Machinery
Technology Center, Nikko Co., Ltd.
Executive Officer and Manager, Industrial
Machinery Sales Management Department(current)

Executive Officer

April 1990
June 2012
October 2013
April 2015
April 2016
April 2018
April 2019
June 2019

Joined Nikko Co., Ltd.
Director, Tokyo Service Center,
Nikko Co., Ltd.
Director, Tokyo Service Center andDirector, Wangan Service Station,
Nikko Co., Ltd.
Deputy Manager, Service Planning
Department and Director, TSC
Center, Nikko Co., Ltd.
Branch Manager, Chubu Branch,
Nikko Co., Ltd.
Kanto Branch Manager, Nikko Co.,Ltd.
Kanto Branch Manager and Mobile
Plant Business Department
Manager, Nikko Co., Ltd.
Executive Officer, Kanto BranchManager, and Mobile Plant
Business Department Manager,
Nikko Co., Ltd. (current)■ Status of reducing strategically-held shares■ Dialogues with Shareholders and Investors

The Board of Directors annually examines whether or not to continue
holding strategically-held shares and facilitates the gradual sales of theshares if it determines that there is no rationale to keep holding them. To
make this decision, the Board looks into the purpose of holding the shares,
their risks, Nikko s relationship with the issuers, and the balance vis-a-vis
their capital cost. In the last three years, we sold a cumulative total of 18
issues at the total value of 792 million yen. We aim to further sell sharesworth approximately 2.0 billion yen in the next three years.

We position the building of long-term, trusting relationships with ourshareholders and investors as an important management issue. We
proactively work on improving constructive dialogues through theappropriate information disclosure in both Japanese and English andregular information dissemination by our management staff. The opinions of
our Japanese and overseas shareholders and investors we have learned
through meetings with them are reported to the Board of Directors andshared with relevant sections to reflect them in our management decisions
and IR activities.

● Status of reducing strategically-held shares (In million yen)
FY2016FY2017FY20185

7

6

Amount sold

193

405

194

Book value

132

221

106

Sales gain

61

184

88

Number of issues● Shareholder/investor dialogues (FY2018)
EventsFinancial Results Briefing Session
Individual meetings
Nikko Messe (exhibition)
Small-cap conference organized by securities companies
Ordinary General Shareholders Meeting

Number of times

4
12
1
1
1

Number of participants

58
15
93
6

48 (attendance in person)/713 (attendance in writing)

N ikko Co r po rate Re po r t 201942

Financial and
Nonﬁnancial Highlights

FY2018 Business Summary
and FY2019 Outlook

FY2018 Proﬁt and Loss Situation
In FY2018, the global economy slowed down in some partsdue to concerns on the overseas business conditions
including the US-China trade war. The Japanese economy
remained on a gradual recovery track as corporate earnings
and the employment and income environment improved,
supported by the government and the Bank of Japan s
ongoing reﬂationary policies.
Under such circumstances, the construction-related industry,
which has strong bearing on our group business, remainedon a solid ground, with construction investment in theprivate sector increasing signiﬁcantly. We note, however, theconstruction-related industry remains in uncertainty as it
faces a prolonged labor shortage and higher material prices.
Asphalt Plant-Related Business, our mainstay, suﬀered a net
sales fall of 4.3% compared with the previous year. This was
attributed to a decrease in asphalt mixture shipment
volume, aﬀected by a fall in orders for road-related public
works across Japan and a major road paving company
being suspended from operating for a period after it was
found to have violated the Anti-Monopoly Act. On the other
hand, new orders and order backlog for the Asphalt
Plant-Related Business increased sharply compared with theprevious year. This was attributed to a more active spending
on upgrades of large asphalt mixture plants in urban areas
and a strong popularity of the VP series, our strategic
products designed to improve productivity of recycled
mixtures.
Net sales of the Concrete Plant-Related Businessdecreased by 17.1% year on year. This was due to a loworder backlog at the beginning of the ﬁscal year. The● Net sales by segment

AP-Related Business
Environment- and Conveyor-Related Business(mil. yen)
40,000BP-Related Business
Other Businessbusiness order backlog, however, increased at the end of
the ﬁscal year. We expect user appetite for capital
expenditure will remain strong, driven by higher
ready-mixed concrete prices and a wave of large projects
related to the World Expo in Osaka and redevelopment in
the Tokyo metropolitan area, which are expected tocontinue beyond the Tokyo Olympics and Paralympics.
Overseas, net sales for the Asphalt Plant-Related Business in
China was supported by active infrastructure investment
from the Chinese government and tighter environmental
regulations to exceed the ﬁgure in the previous year, which
had increased signiﬁcantly. In contrast to what we achievedin China, our business in Thailand and Indonesia fell short of
expectations despite our focused eﬀort in the ASEAN countries,
which we positioned as a key market in our strategy.
The net result was a 4.4% increase in new orders received
to 35.103 billion yen, a 9.5% decrease in net sales to 31.78
billion yen, a 32.1% decrease in operating income to 1.427
billion yen, a 9.7% fall in net proﬁt attributable to the parent
to 1.345 billion yen, all compared with the previous year.
We note, however, that net sales and operating income
grew by 3.6% and 24.2% year on year respectively in the
fourth quarter of the ﬁscal year.

In terms of current assets on the balance sheet at the end of
FY 2018, a notable change in current assets was a 0.9
billion yen increase in inventories year on year. Property andequipment increased by 1.226 billion yen due to capital
investment totaling 1.889 billion yen for construction of a

● Operating income and operating margin● Equity and equity ratio

Financial Situation and Free Cash Flow

Operating income(mil. yen)
4,000
3,500

4,301
30,000

4,292
1,944

25,00020,00015,0004,058

4,495 2,289

4,840

5,889

2,647

3,931

2,853
10,2673,301 4,008 2,085 8,577
1,911 2,521

4,133

8,287

9,356 9,521

6.0%

4,900

4,480

4,677 2,900
2,775
9,200
7,893

4,719

FY 2019 Estimated Proﬁt and LossIn FY 2019, uncertainties linger in the global economy, but
for the construction-related industry, a key business area forour group, is expected to be driven by solid construction
investment from the government and businesses as various
projects will continue be carried out beyond the Tokyo
Olympics and Paralympics. Overseas, there is a risk that
infrastructure investment may slow in China, our key market.
But still, we see the country as a market where we can takeadvantage of the technologies we have developed over theyears in Japan, as environmental regulations have beentightened and recycled mixtures are starting to be used
more widely in China.
In the growing market of the ASEAN region, we aim to starta new round of in-depth market research and develop

Operating margin

7.0%
35,000techno center and acquisition of a mobile center, in addition
to spending to update production equipment. In terms ofinvestments and other assets, investment securities
decreased by 1.09 billion yen from the previous year due
partly to aggressive sale of cross-held shares. In liabilities,
notes and accounts payable-trade, a current liabilities item,
decreased by 1.008 billion yen year on year.
The net result of the above was a negative free cash ﬂow(FCF) of 1.239 billion yen.
The cash conversion cycle (CCC) was 178 days, signiﬁcantly
deteriorating from 145 days in FY2017. This was attributed
to an increase in inventories due to a sales decline anddelays in some deals. We aim to improve CCC going
forward.

6.4%

5.9% 6.0%(mil. yen)
50,000

4.4%

4.8%

4.5%

2,500
2.0％
2,000

70.4％
69.2％

35,000

67.1％

66.6％
65.3％

13,750 13,303 15,054 17,258 15,071 17,252 16,580 17,179 16,434 18,700

5,000
0

1,000

2,249 1,832 1,629 1,944 2,103 1,427 2,300
1,186
470

43 N i k ko C o r p orate R ep or t 2019

0

64.7％

541

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019（ﬁscal year）(estimated)

10,000In FY 2019, we expect the Asphalt Plant-Related Businessnet sales and operating income to increase by 13.8% and63.0% respectively year on year. The favorable estimates are
based on an ample order backlog of 8.808 billion yen at the
beginning of the ﬁscal year, which had grown by 2.449
billion yen year on year, and the impact from large,
unproﬁtable deals in FY 2018 running its course. For theConcrete Plant-Related Business, we expect net sales togrow by 16.6% year on year to 9.2 billion yen and operating
income to increase by 12.6% year on year to 750 million
yen. Operating income for the Environment- andConveyor-Related Business is expected to increase by 19.9%
to 500 million yen, and the Other Business is expected tobook an operating income of 510 million yen, up 1.6% year
on year. We thus expect all four business segments to see
an increase in both net sales and operating income.

● Free cash ﬂow(mil. yen)
6,000
5,000
4,000
3,000

1,000
26,167 27,845 28,528 29,089 30,286 30,414
23,236 23,117 23,289 24,353

4,748

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018（ﬁscal year）

1,687
873

0
-1,0005,000
0Outlook for Each Segment

2,000

20,0001,500

5002010 2011 2012 2013 2014 2015 2016 2017 2018 2019 (ﬁscal year)(estimated)

67.2％

25,00015,00010,000

66.4％
66.1％

64.9％

30,0002.2%

Equity ratio

45,00040,0003,000

Equityproducts suited to local user needs and consider options forsetting up local oﬃces.
For the full ﬁscal year, we expect net sales of 35.7 billion
yen, up 12.3% year on year, operating income of 2.3 billion
yen, up 61.2% year on year, and a 48.7% increase in net
income attributable to owners of parent to 2.0 billion yen.
We plan to pay out dividends of 200 yen, including a 100th
anniversary dividend of 100 yen, for a payout ratio of 76.6%,
for the full ﬁscal year. Going forward, we aim to further
enhance shareholder returns and information disclosure.

-2,0001,503 1,705
696

1,102

315

-5
-1,2392009 2010 2011 2012 2013 2014 2015 2016 2017 2018（ﬁscal year）

N ikko Co r po rate Re po r t 201944

Financial and
Nonﬁnancial Highlights

Financial Indicators of the Past 10 Years

Key results

Net sales

Cost of sales
Gross proﬁt

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018 (ﬁscal year)

23,971

23,80324,55327,08732,07330,707

34,11032,71735,114

31,78018,09017,976

18,59020,17523,736

22,68325,825

24,131

26,301

23,485

5,881

5,827

5,962

6,911

8,337

8,024

8,285

8,586

8,812

8,295

5,615

5,356

5,420

5,725

6,087

6,192

6,655

6,641

6,708

6,868

265

470

541

1,186

2,249

1,832

1,629

1,944

2,103

1,427

899

812

621

1,108

1,982

1,582

1,648

1,993

2,239

1,576

363

817

542

1,228

1,987

1,800

2,940

1,878

2,299

1,933

124

461

122

881

888

1,348

1,896

1,340

1,490

1,345

2.96

10.99

2.92

21.01

21.18

32.17

45.24

171.52

193.77175.58

9

9

9

8

8

8

8

8

8

8

1

1

2

2

2

1

ー

ー

ー

ー

1.1

2.0

2.2

4.4

7.0

6.0

4.8

5.9

6.0

4.5

0.4

1.4

0.3

2.4

2.2

3.2

4.4

3.0

3.3

3.1

（％）

0.5

2.0

0.5

3.6

3.4

4.8

6.6

4.6

4.9

4.4

(mil. yen)

21,933

21,16922,464

24,82329,403

27,881

31,13029,761

31,14827,941

2,038

2,633

2,088

2,263

2,669

2,825

2,980

2,956

3,965

3,838

ー

1,892

1,812

1,752

1,684

2,072

2,220

2,026

3,389

3,357

ー

740

276

510

984

753

760

930

576

481

（％）

8.5

11.1

8.5

8.4

8.3

9.2

8.7

9.0

11.3

12.1

(mil. yen)

11,787

13,75013,303

15,054

17,25815,071

17,252

16,58017,17916,434

6,086

4,840

4,719

5,889

8,577

8,287

10,267

9,356

9,521

7,893

2,267

1,911

2,521

2,085

1,944

2,853

2,289

2,647

3,931

2,775

(mil. yen)(mil. yen)(mil. yen)

Selling, general and administrative expenses (mil. yen)
Operating income
Ordinary income

Net income before income taxes(mil. yen)(mil. yen)(mil. yen)

Net income attributable to owners of parent (mil. yen)
Net income per share*

Number of consolidated subsidiaries(yen)

Number of aﬃliates accounted for using equity method

Proﬁtability

Operating margin
ROA
ROE

Segment results

Japan

Overseas
China

Other

Ratio of net sales outside JapanNet salesby segment

Asphalt Plant-Related Business

Concrete Plant-Related Business

（％）
（％）

(mil. yen)(mil. yen)(mil. yen)(mil. yen)

Environment- and Conveyor-Related Business (mil. yen)
Operatingincome (loss)

Other Business(mil. yen)

3,830

3,301

4,008

4,058

4,292

4,495

4,301

4,133

4,480

4,677

Asphalt Plant-Related Business(mil. yen)

888

1,354

896

1,492

2,125

1,214

1,234

1,253

1,348

963

3

(156)

(39)

317

678

712

878

1,006

1,015

666

385

203

530

250

166

527

337

369

308

417

(58)

(2)

(7)

59

388

451

277

417

462

502

(217)

(193)

ー

ー

ー

ー

ー

ー

ー

ー

Concrete Plant-Related Business

Environment- and Conveyor-Related Business
Other Business(mil. yen)(mil. yen)(mil. yen)Amount after elimination of transactions between segments (mil. yen)OrdersFinancial position

Corporate expenses(mil. yen)

(736)

(734)

(838)

（933）

（1,109）（1,074）（1,097）（1,102）（1,031）（1,122）

Total new orders received(mil. yen)

Total order backlog
Total assets
EquityInterest-bearing debts
Equity ratio

Net assets per share*

Dividends

Dividend per share
Total dividend

Dividend payout ratio
Dividend on equity

Capital investment,
etc.

Capital investment

Depreciation and amortization
R&D expenses

R&D expenses to net sales

Cash ﬂows

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

25,541

22,743

26,16926,56433,91534,50033,284

34,13433,61635,103(mil. yen)

5,376

4,316

5,933

5,410

7,246

11,03910,212

11,62910,132

13,454(mil. yen)

34,61332,85834,98937,27840,34841,964

43,18944,97644,87643,96923,23623,11723,28924,353

26,167

27,84528,52829,08930,28630,414

3,096

2,948

2,840

2,849

2,212

2,206

2,362

1,987

1,799

1,718

67.1

70.4

66.6

65.3

64.9

66.4

66.1

64.7

67.2

69.2

553.61550.87555.16580.88624.23664.35680.713746.35

3955.783968.79(mil. yen)(mil. yen)

（％）

（yen）
(yen)

(mil. yen)

（％）

30

30

30

35

35

45

50

55

60

60

251

251

251

293

293

376

418

426

458

459

202.6

54.6

205.4

33.3

33.1

27.9

22.0

31.9

30.8

34.2

（％）

1.1

1.1

1.1

1.2

1.1

1.4

1.5

1.5

1.5

1.5

(mil. yen)

569

492

292

335

844

815

877

1,261

550

1,889

590

486

432

389

392

419

483

478

468

508

251

211

239

256

295

276

227

271

291

211

（％）

1.05

0.89

0.97

0.95

0.92

0.90

0.67

0.83

0.83

0.66

(mil. yen)

1,452

890

574

2,457

2,641

1,001

（1,040）

5,064

274

（218）

235

(895）

299

（954）

（936）

（305）

2,142

（316）

41

（1,021）(mil. yen)(mil. yen)(mil. yen)(mil. yen)

Term-end balance of cash and cash equivalents (mil. yen)

1,687

(5）

873

1,503

1,705

696

1,102

4,748

315

（1,239）

6,550

6,078

6,618

7,839

8,506

8,796

9,630

12,622

12,11010,300*The Company conducted a one-for-ﬁve reverse stock split of common shares eﬀective October 1, 2016. Net assets per shareand net income per share are calculated based on the assumption that the reverse stock split was executed at the beginning of FY 2016.

45 N i k ko C o r p orate R ep or t 2019

N ikko Co r po rate Re po r t 201946

Nonﬁnancial Performance
Indicators

Financial and
Nonﬁnancial Highlights

Stock Information

Major shareholders (top 10)

Stock overview (as of March 31, 2019)(ﬁscal year)

2011

Number of employees(consolidated)

Average age of employees(non-consolidated)

Average years of service

2014

2015

2016

2017

2018

763

767

796

803

797

807

799

44.2

44.7

43.3

43.1

42.2

42.3

42.2

40.9

21.2

28

(non-consolidated)

Number of new-graduate hires(non-consolidated)

Number of foreign-national employees(consolidated)(non-consolidated) (yen)

2013

775

Number of female employees

Average annual salary

2012

21.5

(non-consolidated)

31

20

18.2

19.3

31

18.5

39

33

18.3

42

45

13

15

21

21

30

17

19

15

92

90

91

95

94

93

101

98

6,371,446 6,443,280 6,928,098 6,770,199 6,692,305 6,853,058 6,722,077 6,704,340

1,072

13.99

The Master Trust Bank of Japan, Ltd. (trust account)

462

6.03

Nikko Employees' Shareholding Association

360

4.71

Total number of shares authorized for issuance:
30,000,000

Sumitomo Mitsui Banking Corporation

240

3.14

Japan Trustee Services Bank, Ltd. (trust account)

235

3.08

Total number of outstanding shares:
8,000,000(including 336,569 treasury shares)

MSCO Customer Securities

216

2.83

Nippon Life Insurance Company

170

2.23

Yasumitsu Shigeta

157

2.06

Sumitomo Life Insurance Company

149

1.94

MSIP Client Securities

140

1.83

Tokyo Stock Exchange (ﬁrst section)

TSE code

6306

State of issuance

16.0

42

Nikko Trading-Partner Shareholding Association

Stock listing

Number of share units 100
Number of shareholders 2,606
Shareholder
registryadministrator

Mitsubishi UFJ Trust and Banking Corporation
4-5, Marunouchi 1-chome, Chiyoda-ku,
Tokyo 100-8212

Fiscal year

From April 1 to March 31

Notes: 1. Numbers of shares are rounded down to the nearest 1,000 shares.

2. Nikko holds treasury shares totaling 336,569, but is excluded
from the above major shareholders.
3. Shareholding ratios are the number of shares held divided by the
total number of outstanding shares less the number of treasury
shares, rounded oﬀ to two decimal places.

● Composition of shareholder types (%)

Annual General Meeting Juneof Shareholders

Registration deadline for year-end dividend payment : March 31● Voluntary turnover rate (non-consolidated)● Employment rate for persons with disabilities (non-consolidated)

（％）
6

（%）
3
4.8

5
4
3.3
3
2

1.5
1.1

3.3

2.5
2

3.0

1.9
1.8

1.7

2.3

2.3

2.3

2.2
1.9

2.2

2.0

(days)
14

Period held

02009 2010 2011 2012 2013 2014 2015 2016 2017 2018(ﬁscal year)● Number of patent/design registrations(number of registration)
40
35

10.3

10.8

7.4

6

10

4

5
2

0

47 N i k ko C o r p orate R ep or t 2019

2017

2018

30.64

29.75

0.97

0.92
16.47

0.42
16.6

9.23
4.3
2017

9.65
4.21
2018 (ﬁscal year)-5(ﬁscal year)

Designs

1 year (4/18-3/19)

3 years (4/16-3/19)

5 years (4/14-3/19)

Nikko

＋5％

＋56％

＋5％

TOPIX

−7％

＋24％

＋31％

Machinery index

−13％

＋33％

＋24％

Nikko
TOPIX (Tokyo Stock Price Index)
Machinery index (TSE ﬁrst section)
Nikko trading volume2,996.00 yen● Share prices and trading volume in the past ﬁve years (weekly ﬁgures) (July 18, 2014 - July 19, 2019)

35

2,500
23

2,000
21

9

8

7
1

4

3

1,761.50
1,588.81

16

15

13

15

2016

29.25

26

20

6.4

2015

37

Patents

30
25

8

39.36

● Stock performance2009 2010 2011 2012 2013 2014 2015 2016 2017 2018(ﬁscal year)

10

36.07

38.43

Individuals and others
Financial institutions
Financial instruments business operators
Other domestic corporations
Foreign corporations, etc.
Treasury stocks

0.5

12

37.27

37.6

1.15
1.02
18.43
17.87 4.71 18.51 4.54 5.75
0.67
0.68 7.99
2014
2015
2016

2.4

2.1

39.18

1

1.8

● Average number of annual paid holidays per employee (non-consolidated)

0

2.3

38.33

Registration deadline for interim dividend payment : September 30

1.5

1
0

Number of shares Shareholding
held (in thousands) ratio (%)

Name● Employee data

10

12
7

2

1,000
133,000 shares
100,000 shares

102009 2010 2011 2012 2013 2014 2015 2016 2017 2018(ﬁscal year)

50,000 shares
2014

2015

2016

2017

2018

2019

0

N ikko Co r po rate Re po r t 201948

Company Overview and Oﬃces and Sites

Summary of subsidiaries

Company Overview（as of March 31, 2019)

Nikko Electronics Co., Ltd.

Japanese name 日工株式会社
English name

Other
14.7%

Nikko Co., Ltd.

Head oﬃce address 1013-1, Eigashima, Okubo-cho, Akashi, Hyogo Prefecture 674-8585
Tel.

+81-78-947-3131

Representative Masaru Tsuji, President and Representative Director

Environmentand ConveyorRelated
8.7%

August 13, 1919

Capital9,197 mil. yen（as of March 31, 2019）

Number of employees 799（as of March 31, 2019）(consolidated)

Net sales

Net sales breakdown
by business segment

APRelated
51.7%

Nikko Machinery Co., Ltd.

Nikko Sec Co., Ltd.

Tombo Industry Co., Ltd.

Service centers/stations

Factories

Akashi head oﬃce

Tokyo service center

Head oﬃce factory

Hokkaido branch
Tohoku branch

Hoku-shinetsu branch
Kanto branch

Chubu branch
Osaka branchChu-shikoku branch
Kyushu branch

Akashi service centerTokyo mobile center

Morioka service station

Wangan service station

Hokuriku service station
Akashi service station

Okayama service station

Tokyo factory
Satte factory

Kakogawa factory
Fukusaki factory

85

1,669

80.3%

Group companies

Number of employees

58

1,747

1,765

1,765

Percentage
of sales to Nikko in FY2018

43.6%

5

Number of individuals
holding position at parent

2

FY2017FY2018

Number of employees

37

1,566

1,510

1,519

Percentage
of sales to Nikko in FY2018

0.2%

Number of Directors

5

Number of individuals
holding position at parent

3715

FY2016
Net sales

Number of Directors

FY2016FY2017722

FY2018688(mil. yen)

Nikko Sec Co., Ltd.

2

FY2018

Nikko Electronics Co., Ltd.
Maekawa Kogyosho Co., Ltd.

5

Number of individuals
holding position at parent

FY2017

Manufacture and sale of crushing plant/equipment,
grinders, etc.

Nikko Machinery Co., Ltd.

Number of Directors

FY2016FY2016

Maekawa Kogyosho Co., Ltd.

3

Percentage
of sales to Nikko in FY2018

Manufacture and sale of soil farming tools andgardening supplies, including shovels andscoops, and concrete mixers for mixing andkneading.
(mil. yen)

Net sales

5

Number of individuals
holding position at parent
Number of employees

Manufacture and sale of temporary equipment
and machinery for construction work, material
handling machines, and computer-related
equipment(mil. yen)

Net sales

Branches and sales oﬃces

1,795

Number of Directors

FY2018Manufacture and sale of construction equipment
and ﬂooding preventive equipment, including
ﬂoodgates and waterproof boards

Net sales*AP: Asphalt plant
BP: (Concrete) batching plant

1,650

FY2017(mil. yen)

BP-Related
24.8%

Number of factories 7（including 1 overseas）
Business segments Asphalt Plant-Related, Concrete Plant-Related,
Environment- and Conveyor-Related, Other

Manufacture and sale of control systems,
covering processes from circuit designing to
manufacturing of control panels, switchboards
and monitoring panels.
(mil. yen)
FY2016（FY 2018）

EstablishedFinancial and
Nonﬁnancial Highlights

390

FY2017415

FY2018439

Tombo Industry Co., Ltd.

Number of employees

18

Percentage
of sales to Nikko in FY2018

0.3%

Number of Directors

5

Number of individuals
holding position at parent

3

Number of employees

16

Percentage
of sales to Nikko in FY2018

0.5%

Number of Directors

4

Number of individuals
holding position at parent

2

Nikko Kosan Co., Ltd.

Nikko (Shanghai)Construction Machinery Co., Ltd.
Nikko Baumaschinen GmbH

Nikko Kosan Co., Ltd.

Services related to home remodeling, property
damage insurance agency, life insurance agent
and real estate(mil. yen)

Okinawa branch

FY2016

Yokohama sales oﬃce
Shikoku sales oﬃce

Net sales

Minami-kyushu sales oﬃce

324

FY2017323

FY2018471

Number of employees

14

Percentage
of sales to Nikko in FY2018

57.5%

Taipei branch

Nikko (Shanghai)Construction Machinery Co., Ltd.

Manufacture and sale of asphalt/recycling
plants and anti-pollution devices(mil. yen)

Taipei branch

FY2016
Net sales

49 N i k ko C o r p orate R ep or t 2019

2,131

FY2017

3,299

Number of Directors

6

Number of individuals
holding position at parent

3

FY2018

Number of employees

98

3,468

Percentage
of sales to Nikko in FY2018

2.7%

N ikko Co r po rate Re po r t 201950

For inquiries about this report, please contact:

IR Team, Financial Division, Nikko Co., Ltd.
1013-1, Eigashima, Okubo-cho, Akashi, Hyogo Prefecture 674-8585
Tel: +81-78-947-3141
Email：IR-nikko@nikko-net.co.jp
September 2019