Year ending December 31, 2023

Non-consolidated Financial Results for First Half of FY2023 (YearEnding December 31, 2023)
August 9, 2023

(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, Standard
Market(URL https://www.oec-solution.co.jp)

Representative:
Contact person:(Title) President & Representative Director(Name) Nobuhiko Suga
(Title) Director & General Manager of(Name) Kaoru Kira
Financial Affairs Division
Planned submission date of quarterly earnings report:
August 10, 2023
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 FY2023 (January 1, 2023 toJune 30, 2023)(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, 2023

3,740

9.5

785

32.7

798

34.5

521

36.3

Six-month period
ended June 30, 2022

3,416

-1.9

591

-4.8

594

-10.8

382

-12.0

Yen

Profit per sharediluted for thequarter
Yen

88.71

–

65.29

–

Profit per share forthe quarter
Six-month period
ended June 30, 2023
Six-month period
ended June 30, 2022(2)

Non-consolidated Financial Position
Total assets
Million yen
8,240

Net assets

Shareholders’equity ratio

Million yen
6,506

%
79.0

As of June 30, 2023
As of December 31,
7,598
6,153
81.0
2022
(Reference) Shareholders’ equity: As of June 30, 2023: ¥6,506 million As of December 31, 2022: ¥6,153 million
2.

DIVIDENDS

Dividends per share
End of
End of first
End of third Fiscal year(Record date)secondquarterquarterendquarter
Yen
Yen
Yen
Yen
–
0.00
–
32.00
FY2022–0.00
FY2023–32.00
FY2023 (forecast)(Note) Revision to the recently announced forecast of dividends: None

Full year
Yen
32.00
32.00

3.

FORECAST OF NON-CONSOLIDATED RESULTS FOR FY2023 (January 1, 2023, to December 31, 2023)(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
6,500 0.2
650 -12.1
660 -11.8
400 -3.8
68.08(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 issued shares (common stock)(i) Number of issued shares at end of period, including treasury stock
As of June 30, 2023: 7,796,800
As of December 31, 2022: 7,796,800(ii) Number of shares of treasury stock at end of period
As of June 30, 2023: 1,920,633
As of December 31, 2022: 1,921,033(iii) Average number of shares outstanding for each period (first half)
As of June 30, 2023: 5,875,917
As of June 30, 2022: 5,858,227* 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 2023, which it announced on February 7, 2023. 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 to results forecasts, please refer to “(3) Explanation Regarding Future Forecasts Such as Forecastsof Results” on page 4.

○ 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 .............................................................6(1) Quarterly Balance Sheets ....................................................................................................................................6(2) Quarterly Statements of Operations ....................................................................................................................8First Half .............................................................................................................................................................8(3) Quarterly Statements of Cash Flows...................................................................................................................9(4) Notes Regarding the Quarterly Financial Statements ....................................................................................... 11(Matters Affecting the Assumption of a Going Concern) ................................................................................. 11(Notes Regarding Significant Changes in Shareholders’ Equity) ..................................................................... 11(Changes in Accounting Policies) ..................................................................................................................... 11(Segment Information) ...................................................................................................................................... 111

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 secondlargest 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 730,000 kilometers acrossJapan. However, the national average annual rate of renewing water pipes is as low as 0.67%, 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 their aging rateis expected to keep increasing 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, 92.6% of the population of Japan has access to sewage treatment facilities (as of the end of
FY2021), but only 80.6% has access to sewers, which means nearly 9,300,000 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 FY2023, passed and enacted in March 2023, the total amount to be allocatedto “General Social Infrastructure Development,” including the water and sewage budget, which is closely connectedwith the business of the Company, is a national expenditure of ¥1,361.0 billion. This amount is broken down to ¥818.6
billion for disaster prevention and safety subsidies and ¥542.4 billion for general social infrastructure development
subsidies. Among them, the national budget for the sewerage system is unofficially announced as about ¥477.2 billion
in total. On the other hand, the total of sewage operational costs in ordinance-designated cities with a large budget
across the country and the Tokyo metropolitan area is ¥624.6 billion, an increase of 2.3% from the beginning of theprevious fiscal 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
Ministry of Health, Labour and Welfare’s (MHLW) 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 withthe seven major themes set by the Sewerage and Wastewater Management Department of Ministry of Land,
Infrastructure, Transport and Tourism (MLIT): Strengthening earthquake recovery and reconstruction support andimplementing 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 seweragemanagement; 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 to obtain 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 long track record,
while capturing project orders that have high order-repeat rates through offering fine-tuned technological proposals andflexible customer service. We do this on the back of our superiority resulting from an accumulated knowledge of thestatus of facility development and operational issues in local public entities who are our existing customers. In overseas
markets, the Company has been working to win orders by tapping into projects in emerging nations through publicprivate partnerships.
On the other hand, with regard to its internal work environment, the Company has provided 90% of its
2

employees with smartphones and notebook PCs and created an office environment with free address (no assigned
seating). So, employees can work at home and outside the office using a teleworking environment. Specifically, theCompany is providing the following internal systems: 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 the revised Labor Standards Act; promoting well-being management; utilizing
internal systems, such as a staggered working hours system; and promoting the use of paid leave, by which each
employee can work flexibly according to his/her own circumstances. In this fiscal year, we further improved theprogram of our internal business management system to digitize the approval function of each business workflow fromreceiving an order for design work, starting the project, preparing and changing the working budget, and thencompleting the project, thereby accelerating the budget management. Through these efforts, we are striving to improve
productivity and reduce costs, and to increase employee returns and earnings.
During the fiscal quarter under review, the government downgraded COVID-19’s legal status under the
Infectious Diseases Act to Category 5, the same group as seasonal influenza. Since the working environment in the
Company is not one where people are encouraged to wear masks all the time, most of our employees work in a state
similar to that before the spread of COVID-19, which is conducive to communication. In customer service, face-to-faceconsultations and on-site surveys are now conducted without a hitch, and remote consultations are increasingly used
depending on the situation to improve efficiency. In addition, industry associations, which have functions such as
exchanging opinions with ordering organizations to support improvements in the working environment and treatmentof employees, have normalized activities for the first time in four years. Opportunities are also increasing for interactive
communication with MHLW and MLIT, which are in charge of the water and sewerage business, as well as industry
associations that are involved in the construction and maintenance of water and sewage facilities and are associatedwith the industry group to which the Company belongs. With regard to overseas projects, restrictions on entry/exit toand from Japan and in the target countries have been lifted, and it is now possible to travel to those countries.
As a result, orders received during the first six months of the fiscal year under review amounted to ¥2,793
million, an increase of 17.2% compared with the same period of the previous fiscal year. Contracts completed posted¥3,740 million (up 9.5% year on year). Operating income amounted to ¥785 million (up 32.7% year on year), andordinary income was ¥798 million (up 34.5% year on year). Profit stood at ¥521 million (up 36.3% year on year).
Results by operating division were as follows.
[Engineering Consultant Department]
The Engineering Consultant Department received orders totaling ¥2,519 million during the first six months of
the fiscal year under review, an increase of 18.9% compared with the same period of the previous fiscal year.
Contracts completed by the department were ¥3,475 million (up 12.1% year on year).
[Information Processing Department]
In the Information Processing Department, orders received increased 3.7%, compared with the same period of
the previous fiscal year, to ¥274 million. Contracts completed by the department were ¥264 million (down 16.3% year
on year).

(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 ¥6,892 million (up 12.4% 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 ¥1,347 million (down 8.1% from the end of theprevious fiscal year). The main factors contributing to this change included a decrease in investments and other assets3

as a result of redemption of investment securities.
(Current liabilities)
Current liabilities for the second quarter under review stood at ¥1,623 million (up 23.4% 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 ¥110 million (down 14.5% 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 ¥6,506 million (up 5.7% from the end of the previous
fiscal year). The main factors contributing to this change included an increase in retained earnings due to the posting ofa profit.
2)

Status of Cash Flows
Cash and cash equivalents (hereinafter referred to as “cash”) stood at ¥5,269 million at the end of the first six
months under review, an increase of 74.1% 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 ¥2,368 million (down 4.8% 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 and a decrease in accounts receivable–trade.
(Cash flows from investing activities)
Net cash provided in investing activities amounted to ¥81 million (¥148 million used in the same period of theprevious fiscal year). The main factor contributing to this change was the redemption of investment securities.
(Cash flows from financing activities)
Net cash used in financing activities amounted to ¥207 million (down 0.3% compared with the same period of
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

For the six months under review, orders received, contracts completed, operating income, ordinary income andprofit increased 17.2%, 9.5%, 32.7%, 34.5% and 36.3%, respectively, compared with the same period of the previous
fiscal year. The driving factors include the higher-than-expected number of orders for design work for large water pipe
infrastructure, for which there is steady demand for renewals; orders for flood control-related work, for which there is a
growing need; and the fact that design and construction projects that span multiple fiscal years progressed smoothly
during the quarter under review and were able to be recorded as completed work.
However, in the third quarter, the number of actual workdays tends to be fewer than that of other quarters due
to a combination of summer vacations, internal training, national qualification testing dates, which affect order-taking
activities, and technical research presentations by industry associations and other organizations, which lead to higher
operational quality. In addition, our fiscal year-end is December, but the contract construction period for most of theorders we receive is concentrated in February to March, which is in the second half of the fiscal year for local
governments. For hundreds of orders that are in the middle of their construction period, month-end financial
information is collected and used to finalize our full-year financial statements. Accordingly, there are currently a lot of
uncertainties regarding the quarterly reporting of each business performance, and therefore the earnings forecast
announced on February 7, 2023, has not been changed at this time.
4

Going forward, we will closely examine various situations over time, and will promptly disclose information
when a clear outlook is confirmed.

5

2.

QUARTERLY FINANCIAL STATEMENTS AND PRIMARY NOTES(1)

Quarterly Balance Sheets

Category

FY2022(as of December 31, 2022)
Amount(thousand yen)

2Q under review(as of June 30, 2023)
Amount(thousand yen)

AssetsCurrent assets
Cash and deposits

3,742,336

5,985,753

Accounts receivable–completed
operation and contract assets

2,301,975

811,669

87,481

94,754

6,131,793

6,892,178

Property, plant and equipment

444,478

413,588

Intangible assets

128,404

125,824

Investments and other assets

893,647

808,557

1,466,530

1,347,970

7,598,324

8,240,148

Other
Total current assets
Noncurrent assets

Total noncurrent assets
Total assets

6CategoryFY2022(as of December 31, 2022)
Amount(thousand yen)

2Q under review(as of June 30, 2023)
Amount(thousand yen)Accounts payable–operating

433,918

148,291

Lease obligations

32,84633,365

Income taxes payable

174,711

296,103

Advances received on uncompleted contracts

195,043

418,583

Provision for bonuses

41,336

72,201

Provision for loss on orders received

17,378

7,923

Provision for share benefit

14,79614,156

Other404,958

632,497

1,314,989

1,623,122

Provision for retirement benefits

2,797

-

Provision for share benefit

18,31018,310

Lease obligations

51,44541,948Asset retirement obligations

50,32550,597

Other

6,720

-

129,598

110,856

1,444,588

1,733,979

Capital stock

1,093,000

1,093,000

Capital surplus

2,874,232

2,874,232

Retained earnings

3,694,204

4,024,743

Treasury stock-1,555,708-1,555,388

Total shareholders’ equity

6,105,728

6,436,587

Valuation difference on available-for-sale securities

48,007

69,581

Total valuation and translation adjustments

48,007

69,581

6,153,735

6,506,168

7,598,324

8,240,148

Liabilities

Current liabilities

Total 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

7

(2)

Quarterly Statements of OperationsFirst Half

Category

Previous first half(from January 1, 2022 toJune 30, 2022)

First half under review(from January 1, 2023 toJune 30, 2023)

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

3,416,257

3,740,141

Cost of completed work

2,157,266

2,266,890

Gross profit

1,258,990

1,473,251

Selling, general and administrative expenses

667,143

687,864

Operating income

591,847

785,38653

43

Interest on securities

1,750

2,500

Dividend income

3,376

3,786

Commission fee

1,215

1,215

Gain on investments in silent partnerships-

280

Gain on valuation of investment securities

-

8,179

Foreign exchange gains

2,644

1,905

Other

5,282

4,162

Total non-operating income

14,322

22,071

Interest expenses

1,431

1,096

Expenses for securities transactions

6,091

7,263

Loss on valuation of investment securities

4,191

-

352

288

12,0668,648

594,103

798,810

-

635

-

635

Loss on retirement of noncurrent assets

0-Loss on valuation of golf club membership-

800

Total extraordinary loss

0800

Profit before income taxes

594,103798,645

Income taxes–current

207,016

266,797

Income taxes-deferred

4,599

10,573

Total income taxes

211,615

277,371

Profit382,487

521,274

Non-operating income
Interest income

Non-operating expenses

Other
Total non-operating expenses
Ordinary income
Extraordinary income
Reversal of provision for warranties for completed
construction
Total extraordinary income
Extraordinary loss

8

(3)

Quarterly Statements of Cash Flows
Previous first half(from January 1, 2022 toJune 30, 2022)
Amount(thousand yen)First half under review(from January 1, 2023 toJune 30, 2023)
Amount(thousand yen)

Profit before income taxes

594,103798,645

Depreciation and amortization

54,324

71,334

Increase (decrease) in provision for bonuses

30,42530,865

Increase (decrease) in provision for loss on orders
received

2,638-9,455

Increase (decrease) in provision for share benefit

-239

-639

-17,636-2,797--6,593

Interest and dividends income-5,179-6,330Interest expenses

1,431

1,096

Decrease (increase) in notes and accounts receivable–
trade

1,566,638

1,490,306

Decrease (increase) in costs on uncompleted services-887-7,868-169,103-285,626

357,230

223,539

Other

185,382

274,791

Subtotal

2,599,126

2,571,266

Interest and dividends income received

5,180

6,330

Interest expenses paid

-1,431-1,096

Payment of warranties for completed construction-59,364

Income taxes paid

-115,416-148,494

Cash flows from operating activities

2,487,458

2,368,642

Category
Cash flows from operating activities

Increase (decrease) in provision for retirement benefits
Decrease (increase) in prepaid pension costs

Increase (decrease) in notes and accounts payable–
trade
Increase (decrease) in advances received on
uncompleted contracts9Previous first half(from January 1, 2022 toJune 30, 2022)
Amount(thousand yen)First half under review(from January 1, 2023 toJune 30, 2023)
Amount(thousand yen)

Purchase of property, plant and equipment-19,486-6,586

Purchase of intangible assets-22,663-20,594

Payments for lease and guarantee deposits-4,210

-804

337

219

-100,000-100,000

Proceeds from redemption of investment securities-

210,000

Proceeds from withdrawal of investments in silent
partnerships

-

1,116

Other payments-3,777-3,880

Other proceeds

1,267

2,350

-148,533

81,820

Repayments of lease obligations-17,404-16,765

Cash dividends paid

-190,736-190,734

Cash flows from financing activities-208,141-207,500

642

449

2,131,426

2,243,410

2,836,362

3,026,208

4,967,789

5,269,619

Category
Cash flows from investing activities

Proceeds from collection of lease and guarantee
deposits
Purchase of investment securities

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 thequarter10(4)Notes Regarding the Quarterly Financial Statements(Matters Affecting the Assumption of a Going Concern)
Not applicable.
(Notes Regarding Significant Changes in Shareholders’ Equity)
Not applicable.
(Changes in Accounting Policies)(Application of Implementation Guidance on Accounting Standard for Fair Value Measurement)
The Company has applied the “Implementation Guidance on Accounting Standard for Fair Value
Measurement” (ASBJ Guidance No. 31, June 17, 2021) from the beginning of the fiscal year under review, anddecided to apply the new accounting policies provided for by the Implementation Guidance on AccountingStandard for Fair Value Measurement prospectively in accordance with the transitional treatments provided forin paragraph 27-2 of the Implementation Guidance on Accounting Standard for Fair Value Measurement. The
application of this implementation guidance has no impact on the quarterly financial statements.
(Segment Information)
Previous first half (from January 1, 2022 to June 30, 2022) and first half under review (from January 1,
2023 to June 30, 2023)
Since the Company’s business operations comprising engineering consulting and related services are
conducted within a single business segment, segment information is omitted.

11