Year ending December 31, 2022

Year ending December 31, 2022 Second Quarter of FY2022 Nonconsolidated Financial Results

August 3, 2022
(All financial information herein has been prepared in accordance with accounting principles generally accepted inJapan. This document is an English translation from the original Japanese-language document. This translation is
not subject to auditing standards in the U.S.)
Listed company name:
Code number:

Original Engineering
Consultants Co., Ltd.
4642

Stock listing:Tokyo Stock Exchange, Second
Section(URL https://www.oec-solution.co.jp)

Representative:
Contact person:

Title President & Representative Director
Name: Nobuhiko Suga
Title Director & General Manager ofName: Kaoru Kira
Financial Affairs Division
Planned submission date of quarterly earnings report:
August 4, 2022
Date of scheduled payment of dividends: ―Quarterly earnings supplementary explanatory documents: None
Quarterly earnings presentation: None

Tel: (03) 6757-8800(Amounts less than ¥1 million are truncated)
NON-CONSOLIDATED FINANCIAL RESULTS FOR THE FIRST HALF OF FY2022 (January 1, 2022 toJune 30, 2022)(1)
Non-Consolidated Operating Results (year to date)(Percentages represent year-on-year changes)
Net sales
Operating income
Ordinary income
ProfitMillion yen% Million yen%
Million yen% Million yen%

1.

Six-month period
ended June 30, 2022

3,416

-1.9

591

-4.8

594

-10.8

382

-12.0

Six-month period
ended June 30, 2021

3,481

-4.2

621

-10.5

665

0.4

434

0.7

Profit per share forthe quarter
Yen
Six-month period
ended June 30, 2022
Six-month period
ended June 30, 2021
(2)

Profit per sharediluted for thequarter
Yen

65.29

–

74.39

–

Non-consolidated Financial Position
Total assets

Net assets

Million yen

Million yen

As of June 30, 2022
7,727
6,089
As of December 31,
7,099
5,914
2021
(Reference) Shareholders’ equity: As of June 30, 2022: ¥6,089 million
2.

Shareholders’equity ratio
%
78.8
83.3
As of December 31, 2021: ¥5,914 million

DIVIDENDS

Dividends per share
End of third Fiscal year(Record date)
Interimquarter
end
Yen
Yen
Yen
0.00
–
32.00
FY2021
0.00
FY 2022–32.00
FY2022 (forecast)(Note) Revision to the recently announced forecast of dividends: None
End of firstquarter
Yen––

Full year
Yen
32.00
32.00

3.

FORECAST OF NON-CONSOLIDATED RESULTS FOR FY2022 (January 1, 2022 to December 31, 2022)(Percentages represent changes from the same period of the previous fiscal year)
Net sales
Operating income Ordinary income
ProfitProfit per share
Million yen % Million yen % Million yen % Million yen%
Yen
Full year
6,400 3.1
630 9.4
630
0.7
380
1.0
64.87
(Note) Revision to the recently announced forecast of results: None

* NOTES(1) Application of accounting treatment unique to the preparation of quarterly non-consolidated financial statements:
None(2) Changes in accounting policies, changes in accounting estimates and retrospective restatements:(i) Changes in accounting policies in accordance with revision of accounting standards: Yes(ii) Changes in accounting policies other than (i) above: None(iii) Changes in accounting estimates: None(iv) Retrospective restatements: None
(3) Number of outstanding shares (common stock)(i) Number of shares outstanding at end of period, including treasury stock
As of June 30, 2022: 7,796,800 shares
As of December 31, 2021: 7,796,800 shares(ii) Number of shares of treasury stock at end of period
As of June 30, 2022: 1,938,573 shares
As of December 31, 2021: 1,938,573 shares(iii) Average number of shares outstanding for each period (first half)
As of June 30, 2022: 5,858,227 shares
As of December 31, 2021: 5,840,816 shares* The summary of quarterly financial results is not subject to quarterly reviews by certified public accountants or audit
corporations.
* Note regarding forecasts and forward-looking statements
The Company has not modified its forecast of results for fiscal 2022, which it announced on February 4, 2022. The
forecasts presented above are based on information available to the Company at the present time, and, accordingly,
actual results may differ from any future performance expressed herein due to various factors. For matters relating toresults forecasts, please refer to “(3) Explanation Regarding Future Forecasts Such as Forecasts of Results” on page 3.

Index of the Attachment
1.

QUALITATIVE INFORMATION REGARDING FIRST HALF FINANCIAL RESULTS ..............................2(1) Explanation Regarding Business Results............................................................................................................2(2) Explanation Regarding Financial Position..........................................................................................................3(3) Explanation Regarding Future Forecasts Such as Forecasts of Results ..............................................................42.

QUARTERLY FINANCIAL STATEMENTS AND PRIMARY NOTES .............................................................5(1) Quarterly Balance Sheets ....................................................................................................................................5(2) Quarterly Statements of Operations ....................................................................................................................7
First Half .............................................................................................................................................................7(3) Quarterly Statements of Cash Flows...................................................................................................................8(4) Notes Regarding the Quarterly Financial Statements .......................................................................................10(Matters Affecting the Assumption of a Going Concern) .................................................................................10(Notes Regarding Significant Changes in Shareholders’ Equity) .....................................................................10(Changes in Accounting Policies) .....................................................................................................................10(Segment Information) ......................................................................................................................................10

1

1.

QUALITATIVE INFORMATION REGARDING FIRST HALF FINANCIAL
RESULTS(1)

Explanation Regarding Business Results

According to a provisional calculation of the Cabinet Office, Japan’s water and sewerage infrastructure assets
amount to approximately ¥130 trillion, which indicates that the water and sewerage infrastructure stock is the second
largest infrastructure stock in the country by sector after the road infrastructure stock. Among these, most of the
population has access to water supplies, with the total length of water pipes reaching around 720,000 kilometers acrossJapan. However, the national average annual rate of renewing water pipes is as low as 0.68%, which means that it willtake almost 130 years to renew all of these pipes. The statutory useful life of water pipes is 40 years, but they are
expected to deteriorate further due to the slow progress in renewing the water pipe infrastructure, much of which wasbuilt during the high-growth period. Therefore, renewing aged water pipes has become an important issue for the stablesupply of safe water.
In the sewage field, 92.1% of the population of Japan has access to sewage treatment facilities (as of the end of
FY2020), but only 80.1% has access to sewers, which means nearly 9,900,000 people still live without access to
sewage treatment facilities; promoting sewage services needs to be accelerated. While the need to construct new
facilities is on the decrease, a great number of water and sewage facilities that were rapidly built during the highgrowth period are reaching the end of their useful lives every year. Maintenance and renewal of these infrastructure
assets, which are indispensable for ensuring a safe, secure, and culturally strong living environment, are thus indemand. In addition, needs are growing for flood control measures to protect human lives and assets from localized
torrential rainfall and large typhoons, which have occurred frequently in recent years, anti-seismic measures such as
quake-resistant toilet facilities, measures for reinforcing water and sewerage systems to make them tsunami resistant,and initiatives to create “green innovation sewerage systems” in line with a shift to a decarbonized and recyclingoriented society.
Out of Japan’s national budget for FY2022, passed and enacted in March 2022, the total amount to be allocatedto “General Social Infrastructure Development,” including the water and sewage budget, which is closely connected withthe business of the Company, is a national expenditure of ¥1,381.3 billion. This amount is broken down to ¥800.9 billion
for disaster prevention and safety subsidies and ¥580.3 billion for general social infrastructure development subsidies.
Since where subsidies will be spent is left to the discretion of local government, the allocated amount dedicated to waterand sewage operations is not known. On the other hand, the total of sewage operational costs in ordinance-designatedcities with a large budget across the country and the Tokyo metropolitan area is ¥620.2 billion, an increase of 1.4% fromthe beginning of the previous year.
The Company, in this operating environment, has been working aggressively to win orders mainly in the watersupply field, particularly for services related to asset management in line with the Water Supply Division of the Ministryof Health, Labour and Welfare’s new water supply vision that focuses on the key words of “safety, strength, sustainability,
collaboration and challenge.” In the sewerage field, the Company pursues orders in line with the seven major themes set
by the Sewerage and Wastewater Management Department of MLIT: Strengthening earthquake recovery andreconstruction support and implementing national measures for safety and peace of mind; early reduction of areas lacking
sewerage infrastructure; promoting water environmental management; improving facilities management and operations;strengthening sewerage management; promoting measures to achieve a low-carbon, recycling-oriented society; and,promoting international water businesses through globalization and private-public initiatives. We also make efforts toobtain orders for services related to support by the Ministry of Internal Affairs and Communications for introducing local
public enterprise-based accounting into small-scale water supply and sewerage operations, in accordance with the Local
Public Enterprise Act, as well as operations including sewerage operations management strategy formulation operations.
In the domestic market, we are doubling down on sales activities to cultivate new fields and customers, based on our longtrack record, while capturing project orders that have high order-repeat rates through offering fine-tuned technological
proposals and flexible customer service. We do this on the back of our superiority resulting from an accumulated
knowledge of the status of facility development and operational issues in local public entities who are our existingcustomers. In overseas markets, the Company has been working to win orders by tapping into projects in emerging nations
through public-private partnerships.
On the other hand, with regard to its internal work environment, the Company has provided 90% of its
employees with smartphones and notebook PCs and created an office environment with free address (no assigned
2seating). So, employees can work at home and outside the office using a teleworking environment. On top of this, theCompany has worked to distribute profits to employees and increase revenue by boosting productivity and reducing
costs through the following measures: facilitating prompt information-sharing and chatting between different levels, on
which the Company has worked to raise awareness internally; speedily responding to departmental issues by checking
management benchmarks by department when necessary; conducting appropriate budget management, process control,
progress management, and outsourcing management for orders received for projects; upgrading in-house engineers’
skills; securing and fostering young employees who will lead the next generation; reducing overtime to comply with therevised Labor Standards Act; promoting health management; utilizing internal systems, such as a staggered working
hours system; and promoting the use of paid leave. These allow each employee to work flexibly according to his/her
own circumstances.
During the period under review, the number of people infected with COVID-19 has been on a decreasing trend
due to an increase in the vaccination rate and the weakening of the virus, and the number of people with a serious illness
has also decreased, resulting in fewer requests from the government and other organizations to refrain from taking action.
Under such social situation, the flow of people from large cities where many of our engineering staff reside to regions
where many of our customers are situated has become smoother, and this makes their meetings and discussions mucheasier. With regard to overseas projects, travel to countries where the coronavirus screening process has been relaxed has
been resumed. On the other hand, compared with the same quarter of the previous fiscal year, orders placed by local
governments as customers tended to be slightly slower. In addition, net sales and operating income decreased slightly
from the same period of the previous fiscal year as the Company reorganized the Engineering Department and updated
the internal budget management system in order to strengthen its internal production system, coupled with a delay in the
progress of a project to be carried over to the fiscal year-end.
As a result, orders received during the first six months of the fiscal year under review amounted to ¥2,383 million,a decrease of 6.1% compared with the same period of the previous fiscal year. Contracts completed posted ¥3,416 million(2Q of FY2021: ¥3,481 million). Operating income amounted to ¥591 million (2Q of FY2021: ¥621 million), andordinary income was ¥594 million (2Q of FY2021: ¥665 million). Profit stood at ¥382 million (2Q of FY2021: ¥434
million).
As a result of adopting the accounting standard for revenue recognition, for the first six months of the fiscal year
under review, contracts completed and cost of completed work increased ¥45 million and ¥1 million, respectively, andoperating income, ordinary income and profit grew ¥43 million, respectively.
Results by operating division were as follows.
Engineering Consultant Department
The Engineering Consultant Department received orders totaling ¥2,118 million during the first six months of
the fiscal year under review, a decrease of 2.4% compared with the same period of the previous fiscal year. Contracts
completed by the department were ¥3,100 million (2Q of FY2021: ¥3,219 million).
Information Processing Department
In the Information Processing Department, orders received decreased 28.2%, compared with the same period of
the previous fiscal year, to ¥264 million. Contracts completed by the department amounted to ¥315 million (2Q of
FY2021: ¥262 million).

(2)

Explanation Regarding Financial Position

1)
Status of Assets, Liabilities and Net Assets(Current assets)
Current assets for the second quarter under review amounted to ¥6,356 million (up 9.1% from the end of theprevious fiscal year). The main factors contributing to this change included an increase in cash and deposits due to thereceipt of payment for operations and a decrease in accounts receivable-completed operation.
(Noncurrent assets)
Noncurrent assets for the second quarter under review stood at ¥1,371 million (up 7.7% from the end of theprevious fiscal year). The main factors contributing to this change included an increase in investments and other assets
as a result of acquisition of investment securities.
3

(Current liabilities)
Current liabilities for the second quarter under review stood at ¥1,477 million (up 48.6% from the end of theprevious fiscal year). The main factors contributing to this change included increases in income taxes payable,
advances received on uncompleted contracts due to the receipt of payment for operations, and others due to the postingof accrued expenses for summer bonuses.
(Noncurrent liabilities)
Noncurrent liabilities for the second quarter under review stood at ¥160 million (down 15.8% from the end of
the previous fiscal year). The main factors contributing to this change included decreases in provision for retirement
benefits and lease obligation.
(Net assets)
Net assets for the second quarter under review amounted to ¥6,089 million (up 3.0% from the end of the previous
fiscal year). The main factors contributing to this change included an increase in retained earnings by the posting of a
profit.
2)

Status of Cash Flows
Cash and cash equivalents (hereinafter referred to as “cash”) stood at ¥4,967 million at the end of the first six
months under review, an increase of 75.1% from the end of the previous fiscal year.
The main factors contributing to changes in cash flows during the first six months under review were as follows:(Cash flows from operating activities)
Net cash provided in operating activities amounted to ¥2,487 million (increased 12.3% compared with the same
period of the previous fiscal year). The main factor contributing to this change was the posting of profit before income
taxes for the quarter and a decrease in accounts receivable–trade.
(Cash flows from investing activities)
Net cash used in investing activities amounted to ¥148 million (increased 63.1% compared with the same
period of the previous fiscal year). The main factor contributing to this change was the acquisition of investment
securities.
(Cash flows from financing activities)
Net cash used in financing activities amounted to ¥208 million (decreased 0.5% compared with the same periodof the previous fiscal year). The main factor contributing to this change was the payment of cash dividends.

(3)

Explanation Regarding Future Forecasts Such as Forecasts of Results

The Company has not changed its financial results forecast, which was announced on February 4, 2022, but willpromptly release a revised forecast when any correction is needed after examining various factors.

4

2.

QUARTERLY FINANCIAL STATEMENTS AND PRIMARY NOTES(1)

Quarterly Balance Sheets

Category

FY2021(as of December 31, 2021)
Amount(thousand yen)

2Q under review(as of June 30, 2022)
Amount(thousand yen)

AssetsCurrent assets
Cash and deposits

3,552,478

5,683,915

2,202,044--

590,271

71,70782,517

5,826,230

6,356,704

Property, plant and equipment

492,423

468,476

Intangible assets

130,567

129,330

Investments and other assets

650,508

773,233

1,273,498

1,371,040

7,099,729

7,727,745

Accounts receivable–completed
operation
Accounts receivable–completed
operation and contract assets
Other
Total current assets
Noncurrent assets

Total noncurrent assets
Total assets

5CategoryFY2021(as of December 31, 2021)
Amount(thousand yen)

2Q under review(as of June 30, 2022)
Amount(thousand yen)Accounts payable–operating

240,019

70,915

Lease obligations

33,69933,106

Income taxes payable

141,001

234,325

Advances received on uncompleted contracts

116,730

473,961

Provision for bonuses

40,13770,562

Provision for loss on orders received

20,29021,146

Provision for share benefit

14,076

14,076

Other

387,812559,090

Total current liabilities

993,767

1,477,184

Provision for retirement benefits

38,67821,042

Provision for share benefit

18,24518,005

Lease obligations

77,64065,146

Asset retirement obligations

49,78950,057

Other

6,720

6,720

191,074

160,972

1,184,841

1,638,156

Capital stock

1,093,000

1,093,000

Capital surplus

2,874,232

2,874,232

Retained earnings

3,499,411

3,661,084

Treasury stock-1,569,735-1,569,735

Total shareholders’ equity

5,896,907

6,058,581

Valuation difference on available-for-sale securities

17,97931,007

Total valuation and translation adjustments

17,97931,007

5,914,887

6,089,588

7,099,729

7,727,745

Liabilities

Current liabilities

Noncurrent liabilities

Total noncurrent liabilities
Total liabilities
Net assets
Shareholders’ equity

Valuation and translation adjustments

Total net assets
Total liabilities and net assets

6

(2)

Quarterly Statements of OperationsFirst Half

Category

Previous first half(from January 1, 2021 toJune 30, 2021)

First half under review(from January 1, 2022 toJune 30, 2022)

Amount(thousand yen)Amount(thousand yen)Contracts completed

3,481,466

3,416,257

Cost of completed work

2,203,350

2,157,266

Gross profit

1,278,116

1,258,990

Selling, general and administrative expenses

656,687

667,143

Operating income

621,428

591,847

52

53

Interest on securities

1,200

1,750

Dividend income

3,083

3,376

Dividends from silent partnerships

2,226

-

Gain on sales of investment securities

1,240

-

Gain on redemption of investment securities

38,545-

Commission fee

1,215

1,215

Foreign exchange gains

1,111

2,644

Other

3,612

5,282

Total non-operating income

52,287

14,322

Interest expenses

1,689

1,431

Expenses for securities transactions

5,957

6,091

-

4,191

441

352

8,088

12,066665,627594,103

1,067

-

1,067

-

Loss on retirement of noncurrent assets

596

0

Total extraordinary loss

596

0Profit before income taxes for the quarter

666,098

594,103

Income taxes–current

235,364

207,016

Income taxes-deferred-3,757

4,599

Total income taxes

231,606

211,615

Profit434,491

382,487

Non-operating income
Interest income

Non-operating expenses

Loss on valuation of investment securities
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Reversal of provision for warranties for completed
construction
Total extraordinary income
Extraordinary loss

7

(3)

Quarterly Statements of Cash Flows
Previous first half(from January 1, 2021 toJune 30, 2021)
Amount(thousand yen)First half under review(from January 1, 2022 toJune 30, 2022)
Amount(thousand yen)

Profit before income taxes for the quarter

666,098

594,103

Depreciation and amortization

57,16654,324

Increase/decrease in provision for bonuses

30,93530,425

Increase/decrease in provision for loss on orders
received

5,694

2,638

Increase /decrease in provision for share benefit

-709

-239

Increase/decrease in provision for retirement benefits-12,937-17,636

Interest and dividends income-6,562-5,179Interest expenses

1,689

1,431

Increase/decrease in notes and accounts receivable–
trade

1,457,851

1,566,638

Increase/decrease in costs on uncompleted services

313

-887

Increase/decrease in notes and accounts payable–trade-165,799-169,103

Increase/decrease in advances received on
uncompleted contracts

196,330

357,230

Other

109,799

185,382

Subtotal

2,339,869

2,599,126

Interest and dividends income received

6,562

5,180

Interest expenses paid

-1,689-1,431

Payment of warranties for completed construction-35,632-

Income taxes paid

-93,181-115,416

2,215,928

2,487,458

Category
Cash flows from operating activities

Cash flows from operating activities

8

Previous first half(from January 1, 2021 toJune 30, 2021)
Amount(thousand yen)First half under review(from January 1, 2022 toJune 30, 2022)
Amount(thousand yen)

Purchase of property, plant and equipment-5,424-19,486

Purchase of intangible assets-19,670-22,663

Payments for lease and guarantee deposits-1,035-4,210257

337

Purchase of investment securities-310,000-100,000

Proceeds from sales of investment securities

100,862-

Proceeds from redemption of investment securities

146,040-

Other payments-3,717-3,777

Other proceeds

1,621

1,267

-91,066-148,533

Repayments of lease obligations-20,428-17,404

Cash dividends paid

-188,817-190,736

Cash flows from financing activities-209,246-208,141

348

642

1,915,963

2,131,426

2,660,092

2,836,362

4,576,055

4,967,789

Category
Cash flows from investing activities

Proceeds from collection of lease and guarantee
deposits

Cash flows from investing activities
Cash flows from financing activities

Effect of exchange rate change on cash and cash
equivalents
Net increase/decrease in cash and cash equivalents
Balance of cash and cash equivalents at beginning of theyear
Balance of cash and cash equivalents at the end of thequarter9(4)Notes Regarding the Quarterly Financial Statements(Matters Affecting the Assumption of a Going Concern)
No applicable items.
(Notes Regarding Significant Changes in Shareholders’ Equity)
No applicable items.
(Changes in Accounting Policies)(Application of Accounting Standards for Revenue Recognition)
The Company has applied the “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29,
March 31, 2020; hereinafter, referred to as “Accounting Standard for Revenue Recognition” from the beginningof the fiscal year under review, and recognizes revenue in the amount expected to be received in exchange forthe promised goods or services when control of the goods or services is transferred to a customer.
Previously, the Company had applied the percentage-of-completion method to operations for which thecertainty of results was recognized in the progress portion, and the completed-construction method to otheroperations. However, we changed the method to recognize revenue over a certain period of time as theperformance obligation is satisfied. We estimate the progress in the fulfilment of performance obligations using
the input method based on costs incurred.
With respect to the application of the Accounting Standard for Revenue Recognition, in accordance withthe transitional treatment set forth by Paragraph 84, proviso of the Accounting Standard for Revenue
Recognition, the cumulative effect should retrospectively apply the new accounting policy prior to the beginningof the fiscal year under review, and add to or subtract from retained earnings at the beginning of the fiscal year
under review, and then the new accounting policy is applied to such balance at the beginning of the fiscal year
under review.
As a result, for the first six months of the fiscal year under review, contracts completed and cost ofcompleted work increased ¥45,131 thousand and ¥1,782 thousand, respectively, and operating income, ordinary
income and profit increased ¥43,348 thousand, respectively. In addition, the effect of retained earnings on thebalance at the beginning of the fiscal year under review is immaterial.
As a result of adopting the Accounting Standard for Revenue Recognition, “Accounts receivable–
completed operation,” which was presented in “Current assets” in the balance sheet for the previous fiscal year,
was included in “Accounts receivable–completed operation and contract assets” from the first quarter of the
fiscal year under review. We did not restate the previous fiscal year using a new presentation method in
accordance with the transitional treatment set forth in Paragraph 89-2 of the Accounting Standard for Revenue
Recognition. In addition, in accordance with the transitional treatment set forth in Paragraph 28-15 of the
Accounting Standard for Quarterly Financial Statements (ASBJ Statement No. 12, March 31, 2020), we did notpresent detailed information on revenues from contracts with customers for the first three months of the previous
fiscal year.
(Application of Accounting Standards for Calculation of Fair Value)
The Company has applied the “Accounting Standard for Calculation of Fair Value” (ASBJ Statement No.
30, July 4, 2019; hereinafter, referred to as “Fair Value Accounting Standard”) from the beginning of the fiscal
year under review, and will apply the new accounting policies provided by the Fair Value Accounting Standards
prospectively in accordance with the transitional treatment set forth in Paragraph 19 of the Fair Value
Accounting Standard and Paragraph 44-2 of the “Accounting Standard for Financial Instruments” (ASBJ
Statement No. 10, July 4, 2019). This application has no impact on the quarterly financial statements.
(Segment Information)
Previous first half (from January 1, 2021 to June 30, 2021) and first half under review (from January 1,
2022 to June 30, 2022)
Since the Company’s business operations comprising engineering consulting and related services are
conducted within a single business segment, segment information is omitted.

10