Engineering for
Sustainable Growth of
the Global Community

2023 Integrated Report
Year ended March 31, 2023

Ammonia has been used as a fertilizer for around the last hundred years,
and it has therefore contributed to food production and supported theincreasing global population.
Ammonia is expected to continue serving as a clean fuelthat does not result in the emission of CO2.

FertilizerNew
possibilities
for ammonia

Fertilizer

H

N
H

Carbon-free fuelH

Ammonia

Fuel

TOYO ENGINEERING CORPORATION

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01

New possibilities for ammonia

A diverse range of applications that go beyond
thermal-power co-firing are expected of ammonia

TOYO pursues initiatives related not only toammonia production but also to demand generation

In Japan, people tend to focus on coal-fired co-firing when it comes to ammonia, but, globally speaking, there is aAmmonia is also promising as a fuel for naphtha crackers, and its introduction is expected in regions such as Japan

greater focus on ammonia’s use as ship fuel. Ammonia is highly valued due to its high energy efficiency as a hydrogenand Asia in particular, where renewable energy prices are high and it is difficult to switch to electric arc furnaces. In

carrier, its usability for existing infrastructure at a low cost, and other characteristics, and—in Europe—there are active

addition, to encourage the use of ammonia as a hydrogen carrier, we are considering annexing cracking plants to ourefforts underway both to discuss safety measures and develop ammonia receiving-facility infrastructure.

domestic receiving terminals. We believe initiatives such as the above will help to stimulate the market for ammonia

Demand outlook by ammonia application (global)(Millions of tons)(Millions of tons (assuming hydrogen conversion))

400

80

Approximately ¥29 trillion
assuming EPC conversion

300

200

100

0

2021

2030

2035

2030

STEPS

2035

2030

APS

2035

(%)

Approximately ¥25 trillion
assuming EPC conversion

Practical application of ammonia fuel for a naphtha cracker

60

For ships

40

80

60

G7 share(right scale)
Ammonia

Approximately¥8 trillion
assuming EPC
20
conversion

Hydrogen
gas

20

40

20

Switching from conventional fuel, which used methane as its
main ingredient, to ammonia in order to reduce CO2 emissions
practically to zero during combustion0• Demonstration period: fiscal 2021 to fiscal 2030
• Cooperating companies: Mitsui Chemicals, Inc., Maruzen
Petrochemical Co., Ltd., and Sojitz Machinery Corporation

Liquefiedhydrogen
0

NZE

2030

2050
APS

2030

2050

Potential demand for fuel ammonia for naphtha crackers
Japan: around 8 million tons
Asia: around 100 million tons
We will target countries where renewable energy prices are high andwhere it is difficult to achieve electrification (build electric arc furnaces).

NZENote) The meaning of each scenario is as follows:
STEPS : The Stated Policies Scenario
APS : The Announced Pledges Scenario
NZE : The Net Zero Emissions by 2050 Scenario
Source: Towards hydrogen definitions based on their emissions intensity, IEA

Source: Ministry of Economy, Trade and Industry (METI)TOYO is uniquely qualified toachieve clean fuel ammonia
TOYO’s project track record includes 87 ammonia plants and over 48 storage tanks around the world. We have also
been involved in CCS* projects since the 1980s, and we handle renewable energy EPC business that includes biomass-fired power plants and solar power plants at the 1.4-GW scale or higher. Therefore, we believe that TOYO can help
to derive optimal solutions that fuse the elements necessary for clean fuel (chemicals, CCS, and renewable energy).
*CCS: Carbon Capture and Storage

Ammonia plant EPC share

TKIS

Ammonia
production plants

TKIS
technology

87

Ammoniastorage tanks

48+

TOYO
Company E

Technical capabilities in the decarbonization field

KBR
technology
CompanyA

Topsoetechnology

Company
C

1.4GW

KBR
Company
B

Renewableenergy plants

Starting in the

CO2-EOR
/ CCS

1980s

TOYO initiatives

CompanyD

Number of
projects(starting in 2001)• Technology Readiness Level (TRL): 7 to 9
▶ Technology used to generate desulfurization hydrogen when starting up
an existing ammonia production plant▶ Although there is room to further increase efficiency, the technology itself is at the commercial level.
• Energy efficiency (HHV): 80 to 85% = the heat of the acquired hydrogen÷ (the energy of the input NH3 + the input power)
Further improvements are expected due to future catalyst improvements and ammonia-burner development.
• Hydrogen purity: maximum of 99.97% (Can be used for FCVs, which
require the highest purity.)
Source: KBR* Cracking ammonia to extract hydrogen

Government support is extremely important at the dawn of an industry. In particular—given that there is currently an
extremely large difference between the costs of decarbonized fuels and fossil fuels—government support is essential
for FIDs related to production and receiving infrastructure. Based on its ammonia-related knowledge and track record,
TOYO will contribute to making various government systems while taking advantage of opportunities related to EPC
and participating in business.
FY2023Extensive ammonia project experience

Imported ammonia can be cracked at a receiving terminal andthen utilized as hydrogen

TOYO takes advantage of business opportunities
while keeps pace with the trends ofJapanese government system

Japanese government systems* The gray portion is the share held by Chinese, South Korean, andunknown (local, etc.) players. Each company is estimated to havearound one or two projects.

Utilizing hydrogen via ammonia cracking*

Other

For power
generation

For chemicals

production plants.

Demand outlook by hydrogen carrier(for G7 member countries)

Decarbonized Power Supply Auction(power plant renovations/new plants)

Preparationfor openrecruitment

Support related to pricedifferences compared to existing fuels

System design
Preparation foropen recruitment

Site development support

System design
Preparation foropen recruitment

Fuel ammonia production plants

FS/Pre-FEED/FEED

Ammonia-receiving terminals +cracking plants

FS/Pre-FEED/FEED

Naphtha-cracker fuel conversion

FY2024FY2025…

FY2029FY2030…

Open recruitment ➡ Renovations/construction ➡ Start of 20% co-firing (fixed-cost support: 20-year period)* Open recruitment will be implemented every year.

Open recruitment ➡ (Ammonia plant construction) ➡ Price difference support: 15-year period* Open recruitment will be divided into several times for implementation.

Open recruitment ➡ Site construction* Three large-scale locations and five medium-scale locations in the next ten years

FID* ➡ EPC (gradually shift multiple projects to EPC starting in FY2024)

FID ➡ EPC (gradually shift multiple projects to EPC starting in FY2024)

Burner development + basic engineering of test reactor

Test reactor development +demonstration at the scale of tens of
thousands of tons per year

Commercialization* Final Investment Decision

02

TOYO ENGINEERING CORPORATION

Integrated Report 2023

TOYO ENGINEERING CORPORATION

Integrated Report 2023

03

Contents

KGI(Key Goal Indicator)

FY2022 Results• FY2023–2025 average: ¥5 billion or higher• FY2030: ¥10 billion

Consolidated net sales• Emphasis on profit over net sales• Net sales target: ¥300 billion

ROE• FY2025: 10% or higher• Thereafter: Stably 10% or higher

3.5%• Aim to resume dividend payments during
period of plan—

Dividends

1.6 billion¥

192.9 billion¥

Green strategy

GrowthStrategy

Blue strategy

New Knowledge and Business Opportunities
returned to EPC

Strategy “Sustainable
Technology and Business
Development”

Strategy “Advanced EPC
Operation”

Priority Areas: Environment and Energy
Co-creation with clients/partners fromthe concept

DXoT (Digitalization without sanctuary)▼
Ensuring Excellent Quality and ProfitabilityGroup operations

Invest knowledge, experience and benefits
gained through EPC

Management Vision
06 Corporate Philosophy
07 President’s Message
10 The Chronicle of TOYO
12 TOYO Digest
14 Creating Social Value Through Engineering

16 Value Creation Process
18 Mission and Materiality
20 TOYO’s Strengths
24 Discussion between Analysts and President Hosoi
28 Message from the CFO

Medium-term Management Plan
30 Outline of Medium-term Management Plan
(FY2021–FY2025)
34 Strategy “Sustainable Technology and Business
Development”
34 Initiatives Aimed at the Social Implementation of
Synthetic Fuel
36 Strategy “Advanced EPC Operation”

Medium-term Management Plan

Making progress through double spiral strategies of “Sustainable
Technology and Business Development” and “Advanced EPC Operation”

Management Vision

TargetConsolidated net income
attributable to owners of
the parent

44 Market Environment and Business Strategy
44 India
46 Indonesia
48 FPSO
50 Japan
52 China

36 Advanced Engineering Operation Initiatives

53 Korea

38 Advanced Procurement Operation Initiatives

54 Malaysia

40 Advanced Construction Operation Initiatives

55 Brazil

42 Using DXoT to Change Our Business Model Through
AWP

ImportantManagement
Issue

56 Sustainability Initiatives(Materiality）

Environment

SocialGovernanceAim to realize anenvironmentallyfriendly society

Enrich people’s lives

Establish anorganization withintegrity anddiscipline

People of diverse
backgrounds engage
in active, meaningfulwork

58 E: Environment

66 G: Governance
66 Directors and Audit & Supervisory Board Members

58 Addressing Climate Change (Disclosure Based on
TCFD Recommendations)

68 Discussion between Outside Directors andChairman Nagamatsu

61 Environment

72 Corporate Governance

63 S: Social

77 Compliance

63 Human Rights

78 Risk Management

64 Human Capital

80 Quality, and Health and Safety Initiatives

Data Section

Tool System Diagram
WebsiteDigestOverview
Integrated
ReportCorporate
Brochure

Newsletter“TOYO TIMES”• Securities Report• Financial Information• Financial Statements• Corporate Governance Report

Specific data

See here for details.
https://www.toyo-eng.com/jp/en/

Data Section
82 ESG Data
84 Ten-Year Financial Highlights
86 Corporate Information• Report for Shareholders

04

TOYO ENGINEERING CORPORATION

Integrated Report 2023

Foundation for Sustainable GrowthFoundation for Sustainable Growth

TOYO ENGINEERING CORPORATION

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05

President’s Message

TOYO’s MVV

My name is Eiji Hosoi and I took office as President in June 2023. I have

Mission, Vision, Values

two missions as President this year, which is the third year of the five-year
Medium-term Management Plan that began in fiscal 2021. The first is toachieve our KGI in the form of profitability in the final three years of theEngineering for
Sustainable Growth of
the Global Community

Medium-term Management Plan by delivering the results of the measures

Management Vision

From plant builder to value chain organizer

implemented so far based on the strategy set forth in the plan. The second
is to firmly set a direction for TOYO after 2026, which is after the current
Medium-term Management Plan, to make TOYO a company capable of sustainable growth.
One of the most important issues in the world today is the realization of

VisionValuesGlobal Leading
Engineering Partner

We will contribute to solving
customer and social issues asa group of professionals instep with the times
a carbon-neutral (CN) society. For more than 200 years since the Industrial
Revolution in the late 18th century, humans have been using fossil fuels such

Eiji Hosoi
Engineering for
Sustainable Growth of
the Global Community
elemental technologies and optimizes the overalllem of global warming has arisen. The sense of urgency varies from country
to country, but if you look at it broadly, the global goal is to halve greenhousegas (GHG) emissions by around 2030, and then by 2050 to achieve net zeroby offsetting GHG emissions with absorption. Solutions to achieve this include promoting significant energy conservation, the use of renewable energy sources such as solar and wind power, the use of hydrogen as an energy
source, and a shift to a circular economy through the recycling of waste plastics. However, it takes time to develop technology, build infrastructure andsupply chains to enable the use of new fuels, and reduce costs, all of which
are extremely difficult and challenging tasks.
Under such circumstances, the role of TOYO, an engineering company,

system, we will comprehensively solve various

is to evolve from a traditional plant builder, which constructs plants accord-

issues and contribute to creating a sustainable

ing to customer specifications and requirements, into a value chain orga-

global community.

nizer that brings together various companies to establish supply chains for
production, transportation and use and to create new markets. TOYO has
accumulated a wide range of technical knowledge and regional know-how
through the construction of numerous plants around the world, and by exercising judgment cultivated through this experience, we have developed
the comprehensive capability to identify promising technologies and thenimplement them practically by adding TOYO’s technology, experience, andknow-how to them. By sincerely meeting the customer’s expectations,

06

TOYO ENGINEERING CORPORATION

Integrated Report 2023

TOYO ENGINEERING CORPORATION

Integrated Report 2023

07

Data Section

By undertaking engineering that melds various

Representative Director,
President/Chief Executive Officer

as coal, oil, and gas in pursuit of economic rationality. As a result, the prob-

Foundation for Sustainable GrowthIntegrity, Creativity,
Diversity, Learning, Team

Medium-term Management Plan

MissionPresident’s Message

early stages of the project, we are able to incorporate various cost reduction ideas and realize co-creation of technology. Furthermore, I believe that
it is precisely because of our past track record and relationships of trust that

A group of professionals inan organization that continues to learn

our existing customers and partner companies are approaching us for new

When I became President, I sent out a message to our employees: “Let’s

initiatives in the CN field. We will continue to aim to become a value chain

become an organization that continues to learn and a group of profession-organizer that creates a framework for a win-win relationship for all parties

als that our customers can rely on.” The world is moving toward CN at tre-

involved in order to realize solutions to social issues.

mendous speed, and new technologies, products, alliances, and business

Management Visionbuilding a relationship of trust, and starting discussions together from themodels are being created one after another. We cannot contribute to soci-Path to stabilizing management andimproving profitability

ety and grow as a company unless we acquire new knowledge and technologies and proactively propose compelling solutions to our customers.
Over the years, TOYO has built a wide variety of plants for local com-

In the past, TOYO has experienced major losses on a number of occasions.

Sustainable Growth of the Global Community. To help today’s young em-

Eiji Hosoi joined the Company in April 1982.
As a Project Manager, he worked in Saudi
Arabia, Thailand, Indonesia, and India and completed numerous plant construction projects.
Starting in 2015, he served as President of theIndonesian subsidiary (IKPT) for three years,
which he grew into a company capable of constructing a wide range of plants, including oil
and gas, chemical, fertilizer, power generation,and infrastructure. In 2019, he was appointed Unit Director of the Plant Business Unit,
where he developed new business fields,such as a carbon neutral team, to supplement
the existing ones. In June 2023, he was appointed Representative Director, President/
Chief Executive Officer.

I think the biggest reason for this was our acceptance of unreasonable or-ployees realize the appeal of such challenging and responsible work, weders. When market conditions were poor, or when business expansion wasmust actively provide opportunities for such experiences. We will learn

the goal, we accepted orders that had strict contract conditions, an unrea-

many things from our seniors, colleagues, juniors, and customers, foster-

sonable project execution structure, or optimistic expectations that led us

ing the joy of learning, the joy of growth, and an exciting culture, and raising

to underestimate the risks. As a result, during the project execution stage,

the level of the entire company. I consider a professional to be someone

strains began to appear, leading to a negative spiral and a major loss. In or-

who loves his or her work, is willing to put in the effort, and is able to lead

der not to repeat such mistakes, we improved the project review processpeople to their final destination with enthusiasm and never give up, noat the proposal stage and built a system that reliably utilizes feedback frommatter what the situation. We will therefore establish a new committee

past lessons learned. We are also strengthening management by utilizing

to consider and implement various measures related to human resources

the latest DX in project execution. As a result, we have become a com-so that TOYO can become a group of true professionals. With our slogan

pany with a stable financial base and steady profits. The backlog of con-“Your Success, Our Pride.” in our hearts, we will strive to be a company

tracts is steadily increasing, and we are proceeding proposal activities forthat satisfies its customers.

future projects while carefully monitoring market conditions and risks. We
will continue to increase the profitability of existing business fields and develop the profitability of new business fields.

To our stakeholders

The new business fields we are focusing on include new energy-related
businesses such as ammonia and hydrogen; the e-fuel (synthetic fuel utiliz-

We have now passed the two-year mark on the Medium-term Management
Plan, and we have been implementing a wide range of initiatives and preparations for new projects, but I am aware of the criticisms of our stakeholders

advanced pharmaceutical and fine chemical fields. In terms of existing busi-

that we are not moving fast enough and that we are not yet demonstrating

ness areas, we will also focus on the FPSO*2 field, in which we entered into

results in the form of business performance. We have set KGIs of an aver-an alliance last year. We will also aim to expand sales of our proprietary urea,

age net profit of ¥5 billion or higher in the final three years of the Medium-®*3 and HERO*4).

term Management Plan and resumption of dividends during the plan period,

TOYO’s strength lies in the fact that its group companies around the world

and as the person responsible for achieving this KGI, I will do everything

are highly capable and autonomously managed with strong local roots, andpossible to achieve it. We will avoid repeating the mistakes of the past, sta-each has its own product field. These include oil and LNG regasification

bilize management, increase profitability, and achieve sustainable increas-

facilities and petrochemicals in India, foreign customer projects in China,

es in corporate value. I sincerely appreciate the continued support of ourgeothermal power generation in Indonesia, and oil and gas and power gen-stakeholders.

methanol, and energy-saving technologies (*1 Sustainable Aviation Fuel
*2 Floating Production Storage and Offloading System*3 Delivers energy savings of more than 50% in various industrial applications in the petrochemical andoil refinery industries by applying existing distillation
technology without the use of special equipment.
*4 Service that contributes to profit improvements forcustomers through the provision of solutions thatconserve energy consumption and reduce GHG
emissions across all processing and utility systems.

08

TOYO ENGINEERING CORPORATION

Integrated Report 2023

eration in Brazil. Out of these focus areas, alliances, and group company operations, we intend to forge at least three business pillars as the backboneof the company’s stability over the next three years of the Medium-termManagement Plan.

Eiji Hosoi
Representative Director,
President/Chief Executive Officer
TOYO ENGINEERING CORPORATION

Integrated Report 2023

09

Data Section

ing CO2) and SAF business; specialty chemicals necessary for automobiles,
semiconductors, ICT, healthcare, and life care products; and the domestic*1

Foundation for Sustainable GrowthProfileMedium-term Management Plan

munities around the world. This is exactly TOYO’s mission: Engineering for

The Chronicle of TOYOManagement Vision

Photo courtesy of JAL

the1960s

the1970s to the1980s
Enhancing Our Technical
Capabilities and Expanding
Our Business• Received an order for a fertilizer plant inIndia as our first overseas project since
we were founded in 1961.

• Learned about various cutting-edge
technologies to enhance our technicalcapabilities.

• Cooperated with licensors to establish atechnological foundation.

• Expanded our overseas group companies tobuild a foundation for our global operation.

(¥ Billion)

400

Net sales (left scale)
Net income (right scale)the2000s

Diversifying Our Portfolio• Diversified our portfolio to include pharmaceuticals and power plant fields due
to more intense competition.
• Expanded our information technology
to encompass our plant enhancementbusiness and the industrial system field.

2003 to 2005

2006 to 2008

Medium-term management plan

Medium-term management plan2009 to 2011

Medium-term management plan
Global TOYO
Collapse of Lehman Brothers

the2010s

Establishing a Global TOYO
Structure

Switching from Our
Expansion Course• Promoted the utilization of overseas
group companies and established allgroup companies as autonomous profit centers.

• Enhanced risk management andCHANGE!

the2020s
Sustainable Technology andBusiness Development andAdvanced EPC Operation• Promoted management reforms andchanges to our corporate culture.

• Specified the Group’s MVV and unified
the logo to enhance solidarity.

• Taking on the challenge of contributing
to the achievement of a carbon-neutral
society.
• Promoting DX to increase productivity
by six times.

2012 to 2015

2021 to 2025

Medium-term management planNEXT TOYO

Medium-term
management plan
Toward Your Success, Our Pride.

300(¥ Billion)

20

COVID-19 pandemic

Foundation for Sustainable Growth

15

200

10

100

5

0

0
2000

2005

2010

2015

2020

Medium-term Management Plan

Expanding Overseas andEstablishing a TechnicalFoundation

the1990s

2022

-5

10

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Integrated Report 2023

-20

Data Section

The key to TOYO’s business—which is to respond to various risks and handle plant construction engineering through the integration ofvarious kinds of advanced expertise—is to increase business stability as much as possible. When we look back on our business startingin the 2000s, we can see that we recorded losses in the first half of the 2000s as well as in fiscal 2014, 2017, and 2018.
For us, the early 2000s were a period of management reorganization due to extraordinary losses stemming from the liquidation losses suffered by our financial subsidiary in fiscal 1997, and—although we took action that included reviewing our management systems,
pursuing human capital measures, and reducing fixed costs—we ended up recording major losses in fiscal 2003 due to project losses in
Saudi Arabia. After that, we were able to stably make revenue due to both the promotion of organizational/operational system reforms
and improvements in the oil & gas market environment.
From fiscal 2009 to 2011, we had three basic policies under our medium-term management plan: (1) responding to changing businessconditions, (2) evolving to achieve our Global TOYO vision, and (3) enhancing our human capital. Based on these policies, we strived to
expand our portfolio and build a global network system with our overseas group companies.
In addition, in fiscal 2012, we strived to maximize our corporate value and expand the scale of our business through global operations,and we announced a medium-term management plan aimed at increasing our number of employees and expanding both our orders received and net sales. After that—partially due to the receipt of orders for large projects—we achieved record high annual new orders of¥470.3 billion in fiscal 2014 and also received US ethylene and other orders in fiscal 2015. However, our backlog of contracts also suddenly piled up in a short period of time, which imposed various kinds of strain on our EPC execution system, ultimately leading to cost
increases for multiple projects that necessitated the recording of significant losses in fiscal 2014.

In fiscal 2015, we implemented management structure reforms and strived to rebuild our management under our Revival Plan,
which called for enhanced risk management before receiving orders, reduced SG&A expenses, enhanced project risk management,
and improved communication. Although these measures successfully achieved a temporary recovery in terms of our fiscal 2015 results, we ended up once again recording losses in fiscal 2017 and 2018 due to a significant increase in the cost of US ethylene. To restore our heavily damaged financial base, we increased our capital by ¥15 billion through the third-party allocation of preferred sharesin March of 2019—for which Integral Corporation was the underwriter—and we utilized the acquired funds to enhance our competitiveness, mainly in terms of DX and R&D.
As a result of more comprehensively managing risks related to projects ordered from us starting in fiscal 2015, we improved our balance of income and expenditure, and, in fiscal 2019, we completed and delivered the US ethylene plant to the client—which we were worried about—subsequently achieving profitability for the first time in four years, and we have remained profitable ever since. In fiscal 2021,
we announced our medium-term management plan for the period up through fiscal 2025, and—as global efforts to achieve a carbon-neutral society accelerate—we will change our business portfolio through the expansion of new business fields while also focusing on existing business fields to promote initiatives aimed at the stabilization of our management and the achievement of sustainable growth.
TOYO ENGINEERING CORPORATION

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11

TOYO Digest

and society, ranging from the business planning stage to engineering, procurement, and construction, the maintenance and operations of completed plants, and actions necessary to achieve a low
environmental impact.

Construction

Commissioning

Businesses consisting of engineering
services we have provided in response
to customer needs ever since we were
founded, covering plant planningand engineering (E) to equipment
procurement (P) and construction andcommissioning (C).

edge of EPC businesses, including
business planning, business investment, and intellectual property business. Non-EPC businesses also include

Business planning
Through FSs, we assess the feasibility of each project, including
the plant capacity, the applicabletechnology, building the supply
chain—covering raw-material procurement to the final products—
and economic evaluations. In
terms of FEED,*2 as the next stage,
we work on the basic engineering,
including estimating the preliminary EPC costs and identificationof relevant technical issues.
*1

TOYO licenses out its urea,
methanol, and other technologies to customers and provides
technical support as a licensor
after facilities are completed.

projects with a business structure that
does not involve undertaking all theengineering, procurement, and construction work (EPsCm, etc.). We also

Business investment andoperations

PMC*3 and owner’s
engineering

In new business fields, we
engage in co-creation withstakeholders to organize projects aimed at a carbon-neutral
society and work on business
investment and operations.

As a member of our client’s
team, we utilize the EPC expertise we have cultivated up until
now to provide services that
include plant feasibility study,
business plans development,
projects management, andconsulting.
*3 Project Management Consultant

In addition to handling engineering, we help projects tosucceed by providing support
that includes the customer’s
selection of equipment suppliers and construction contractors, material-and-equipment
quality and delivery datemanagement, and construction quality and schedulemanagement.
*4 Engineering, Procurement support,
Construction management*1 Feasibility Studies*2 Front End Engineering Designoffer technical and business consulting

EPsCm*4

Performance fee-based
and subscription-typebusiness
We contribute to customer’s
profitability improvement
by providing solutions thatsave energy and reduce GHG
emissions and by supporting
remote plant management
and increased operational
efficiency through IoT and data
analysis technologies.

aimed at a carbon-neutral society.

(fiscal year ended
March 31, 2023)

1961

192.9

¥

Number of employees*

6,686*Including equity method affiliates

EPC group companies

11

countries around the world

TOYO ENGINEERING CORPORATION

Integrated Report 2023

Net sales composition (¥ billion)
billion

Net income

1.6¥

billionGross profit composition(non-EPC businesses)

44%

Others 5
China 15.5

Others 7.1
Japan 88.2

RegionChemicals/
Fertilizers

35.2Southwest
Asia,Middle East
and Africa

38.5

38.7

13.0

Russia andCentral Asia

12.4

Petrochemicals

Pharmaceuticals
etc.,Southeast Asia,
Korea

33.3

Product

Oil & Gas

29.6

Power/
Railways etc.,

69.3

TOYO ENGINEERING CORPORATION

Integrated Report 2023

13

Data Section

Main data

Net sales

Foundation for Sustainable Growth

Non-EPC businessNew businesses based on our knowl-

Intellectual property/
licensing business

Established in

12

Procurement

Medium-term Management Plan

EPC businessEngineering

Management Vision

In terms of plant construction, we cooperate with various partners around the world to provide high-quality EPC and non-EPC services in a wide range of business fields in line with the needs of our customers

BusinessmodelCreating Social Value Through Engineering

Contributing to the carbon
neutrality and an affluent societyManagement Vision

TOYO is involved in a wide variety of plants and ultimately contributes to safer and more secured society in the form offuel, raw materials, daily necessities, pharmaceuticals, and other things that are essential for the daily lives of people. We
utilize our expertise we have cultivated over the years to contribute to the sustainability of the earth and society throughefforts that include developing environmentally friendly technology, constructing plants, planning commercialization, investing in and running businesses, and building value chains.

Geothermal
power plants

Oil refinery plants
CCS*2 facilities

Marine mineral
resources

Hydrogen/fuel ammonia
receiving terminals(methane hydrate,
rare-earth elements,
cobalt-richferromanganese crusts)

FPSO*1Synthetic fuel(e-fuel) plants

Toyo is engaged in the social implementation of environmentally friendly plants
and CO2 free fuels.

Business examples

GHG reduction consulting
Sustainable aviation fuel (SAF)
Fuel ammonia

Medium-term Management PlanPetrochemicalplantsBiomass-derived
chemical plants

SAF*3 plants

Methanol plants(g-Methanol®)Gas processing
plantsThrough plant construction, we pursue
initiatives ranging from the production ofdaily necessities and other raw materials
to recycling products.

Hydrogen/fuel ammonia plants

Foundation for Sustainable Growth

Fertilizer(ammonia and urea)
plantsBusiness examples

Waste-plastic recycling plants
Biomass-based chemical plants, andPetrochemical plants

Waste-plastic
recycling plants

GHG*4 reduction consulting
PharmaceuticalplantsBiomass power
plantsWe use our urea and ammonia technology—our original business—to contribute tofood production.

Gas-fired power
plantsBusiness examples

Fertilizer (ammonia and urea) plants

On-site PPAs*5
Data Section

Photovoltaic
power plants

Power grids

Nuclear power
plants(decommissioning)

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*1 Floating Production, Storage and Offloading*2 Carbon dioxide Capture and Storage*3 Sustainable Aviation Fuel
*4 Greenhouse Gas*5 Power Purchase Agreement

We construct various power plants, thereby supporting social infrastructure.

Business examples

Renewable energy power plants
Co-generation power plants

TOYO ENGINEERING CORPORATION

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15

Value Creation Process

improving TOYO’s corporate value.

Mission/Materiality

MissionMateriality P18
E Environment

S Social

Enrich people’s
lives

G Governance

16

TOYO ENGINEERING CORPORATION

Integrated Report 2023

Engineering business

Non-EPC businesses

Combining our global network, information,and the power of our partners to increase thecollective strength of the TOYO Group andefficiently execute projects

Intellectual capital
DX investment: ¥3.3 billion
R&D expenses: ¥1.4 billion
Number of registered patents: 224

Process licensors, alliance partners, design companies, material
and equipment manufacturers, transportation companies, andconstruction companies

Human capital

Strategy “Sustainable
Technology and Business
Development”

Strategy Advanced
EPC Operation

Priority Areas:
Environment and Energy

DXoT (Digitalization without
exceptions)Co-creation with clients/partners
from the conceptual stage

Ensuring Excellent Quality andProfitability

Providing high-quality services as an association of professionals that possesses various
kinds of expertise as a result of hiring andtraining outstanding human capital around theworld

Feedback new knowledge andbusiness opportunities to EPC

Minimizing our effect on natural capital throughpromoting energy conservation, introducing
own green power generation, purchasing
renewable power, and the reduction of Scope 3
GHG emissions by providing services for decarbonization• Contributing to theresolution of social issues
through carbon neutral
technology and resource
recycling technology

Highly efficient plantsthat combine our technology and knowledge

Improving corporate
valueGroup operations

Invest knowledge, experience andbenefits gained through EPC*Professional Engineer of USA and Canada

Power consumption: 10,316 MWh
Water utilization: 21,700 m3
GHG emissions (Scope1&2): 13,656 tons

Achieving asustainable society

Co-creation

Medium-term Management Plan P30

Number of employees: 6,686
Number of employees with major certification:engineers: 49
US/Canada PE:* 94

P14• Resolving food andenergy problems

EPC businesses

Combining our proprietary technology—startingwith our urea technology development when wewere founded—with partnership-based technology to provide optimum solutions for social andcustomer issues

Natural capital
Establish anorganization withintegrity anddiscipline

Co-creation

Our financial base for receiving orders and executing projects in countries around the world
based on our medium-term management strat-egy to achieve sustainable growth

EPC group companies: located in 11 countries
Registered procurement suppliers: 2,170
Countries with project implementation results: 63

Environmentallyfriendly industrial
plants and infrastructure facilities

Management Base
Technical Capabilities

Global Operations

Human Capital

P20

P22

P64

Corporate Governance

Safety and Quality

DXoT*

P72

P80

P42

Consulting to help
resolving customer andsocial issues• Improving our profitability
by reforming our businessstructure

Data Section

People of diverse
backgrounds
engage in active,
meaningful work

Equity: ¥48.9 billion
Interest bearing debt: ¥36.5 billion

OutcomeCreating social value

Customers

Financial capitalSocial and relationsip capital
Manufactured capital

OutputFoundation for Sustainable Growth

Aim to realize anenvironmentallyfriendly society

Business Models P12

Medium-term Management PlanEngineering
for Sustainable
Growth of
the Global
Community

Input

Management Vision

We will leverage the technological capabilities and expertise we have cultivated to provide optimum solutions, aiming to realize a society that enriches people’s lives and is environmentally friendly while• Stabilizing corporate
management and achieving sustable growthain• Establishing a soundfinancial base

* Digital Transformation of TOYOTOYO ENGINEERING CORPORATION

Integrated Report 2023

17

Mission and Materiality

Priority Areas

Aim to realize anenvironmentally friendly
societyn Pursuing plants of
low-environmental-impact
n Contributing to theachievement of circular
economyn Pursuing next-generationenergy resources● Loss of business opportunities and decreased corporate
value due to delays in technological development
aimed at carbon neutrality, low environmental impact,
and future circular economy● Hindered implementation of plant construction as aresult of increasingly frequent and severe natural
disasters due to abnormal weather conditions○ Innovations in environmentally friendly technology
related to decarbonization and waste recycle as well as
new business opportunities using such technologies○ Increased business opportunities related to carbon
neutrality and circular economy due to increased needsfor decarbonization and circular economy

TOYO ENGINEERING CORPORATION

Integrated Report 2023

Remarks

12 cases (21 cases)

Examples of Projects:• Green ammonia• Geothermal power
plants• Bio ethanol• Synthetic fuel(e-fuel/SAF)

SocialEnrich people’s lives

n Contributing to food problems,
energy security, and fundamental human life issuesn Transferring technology andstrengthening the industrial
infrastructure throughbusiness execution

SocialPeople of diverse
backgrounds engage inactive, meaningful workn Training and developing
human resources
n Promoting inclusionn Improving the work-lifebalancen Promoting health management
and improving occupationalsafety and health● More limited market access, supply shortages, andsupply chain problems due to increased regionalism andother factors. Low-price competition due to technological innovation delays, etc.
● Stagnant demand for new plant construction as a resultof insufficient funds and political instability due to theweak industrial infrastructure of emerging countries○ Increased business opportunities related to securing
food, energy, etc., which are essential for daily life
○ Expanded local business and smoother execution
through the utilization and training of outstanding local
human capital due to harmony with the community○ Creation of new business opportunities due to technology
transfer and job creation through plant construction● Decreased technical capabilities and competitiveness,
outflow of qualified human capital, and poor laborproductivity and motivation due to the failure to
take suitable action● Business continuity risks and the loss of trust from
customers and communities due to the occupational
accidents○ Continued development through the in-house penetrationof our medium-term management strategy due toemployee retention○ Increased business creation opportunities through themaintenance and improvement of our competitivenessas well as technological innovation as a result of taking
suitable action to secure qualified human capital andimprove both labor productivity and motivation

Governance
Establish an organization
with integrity anddiscipline

Analyze UN SDGs, global trends,
etc., and evaluate TOYO’s uniquecompetency and contribution

Cumulative number oforders and business
investments from FY
2021

n Corporate Governance● Business continuity risks owing to negligence of compliance as well as information security incidents● Risks of major losses and business continuity owing to
failure of corporate governance○ Building a stable, resilient business-execution foundation based on prompt, highly transparent decision-making as a result of the solid governance system

STEP 1

Identify materialities related tosustainability○: opportunities/actions

STEP 2

Conduct an assessment in terms of
the importance, priority, and timeline from the perspective of our
stakeholders

Results of FY 2022

Remarks(accumulated starting in FY 2021)

Examples of Projects:• Energy supply

3 cases (8 cases)
15 cases (29 cases)• Foundation of life

34 cases (58 cases)• Food supply• Fertilizer plant• Geothermal power
generation and oil
refinery plants• Ethylene and pharmaceutical plants

KPI

Results of FY 2022*1

Remarks

Rating of Employees’
engagement survey

3.63

Result of the fiscal year
ended in March 31,
2022
The next assessment
will be implemented
during the fiscal year
ending in March 31, 2024

Lost Time Incident
Rate

0.07

KPI

n Compliance

STEP 0KPI

KPI of 0.1 or less isachieved

Results of FY 2022*1

Remarks

Number of serious
violations ofcompliance

0 cases—Number of Major
Information Security
Accidents

0 cases—

Data Section

18

Cumulative number oforders and business
investments since FY
2021

Results of FY 2022

(accumulated starting in FY 2021)*1 Regarding the FY 2022 results, also see the ESG data on pp. 82 and 83

STEP 3

Conduct an assessment in terms of
the importance, priority, and timelinefrom TOYO’s perspective

STEP 4

Conduct a comprehensive assessment to identify materialities

TOYO ENGINEERING CORPORATION

Integrated Report 2023

Foundation for Sustainable Growth

TOYO used the process on the right to identify fourmaterialities that require high-priority initiatives, andwe take action based on deliberations and decisions
made at management meetings and by our Boardof Directors.

KPI(For details on climate change risks and opportunities, see p.58)●: risks

Materiality (important management issue)
identification process

KPI and Results of FY 2022

Medium-term Management Plan

Mission: Engineering for Sustainable Growth of the Global Community

Environment

Risks and Opportunities

Management Vision

Materiality

19

TOYO’s Strengths

The source of TOYO’s strengths lies in our ability to help resolving customer issues utilizing our technical capabilities. Ever since TOYO was founded, we have developed our technology—including urea, methanol, and other proprietary technology as well as ammonia, ethylene, and other technology offered in partnership with licensors—inline with the needs of our customers and the time trend, and we have designed and constructed various plants
essential for people’s daily life. We will continue to utilize the knowledge and experience we have cultivated until
now as we refine our technical capabilities on a daily basis to not only contribute to the resolution of international customers but also to respond to technically challenging social needs related to the decarbonized society andcircular economy in a timely manner.

EPC business

Power/Infrastructure

Oil/nuclear power

Renewable energy

Decarbonization

CO2 Capture, CO2 Utilization, CO2 EOR®

HERO /

Digitalization

High Efficiency Power Generation

GTCC Power Generation

Ammonia

Co-Creation Engineering
ACES®

ACES21-LP®

ACES21®
2000

g-Urea®

Solving social issues throughtechnologies based on chemicalengineering• Creation of patented
technology

Co-creation engineering
Opening up value chains withpartners based on technologicaldevelopment know-how
cultivated in EPC and R&D• Uncovering issues• Supporting
technologicaldevelopment• Industry-academiagovernment
collaboration

ent situation in each country (even if they are of similar capacity), and we decline such business
opportunities or obtain licenses from the patent holders in cases where there is a risk of violating
existing patents, thereby protecting our intellectual property.

TOYO is a leading licensor of urea, with a 14% global share
License grant to use process-technology with intellectual property are essential for

TOYO
technology

Urea license

14%

constructing and operating plants. Since our founding, at TOYO, we have developed
and owned proprietary licenses such as urea technology and collaborated with other licensors for various plants over the course of more than half a century. Regarding technology for which we have proprietary licenses, we maintain constant improvements
to increase the performance and reduce the environmental impacts.

• Development ofbasic engineering
specifications• Economic valuations
and feasibility
studies

EPC share since 2001

Developing our next-generation urea process ACES21-LP® to save energy and reduce costs
By improving our energy-saving urea synthesis technology ACES21®, we have developed the advanced ACES21-LP® process, which
simultaneously achieves the lowest synthesis pressure and highest CO2 conversion rate among all competing processes. Currently,
we are conducting proposals of this new process to our customers.

Data Section

Leading the social implementation of new technology is one of TOYO’s important missions as an engineering company.
To help resolving social issues, TOYO identifies issues and sets goals with a view to social implementation based on the knowledge,
experience, and know-how we have cultivated over the years and then pursues in-house technological development accordingly.
In addition, through co-creation engineering, we provide technical support services aimed at prompt achievement of commercial scale operations for new manufacturing technology at the lab or pilot scale. By providing engineering services suitable for the
relevant stage of each customer covering searching for technological seeds to R&D, scaling up production equipment, and establishing societal value chains, we serve as our customer’s partner, helping them to achieve the commercialization, mass production, and social implementation of new technology. At the same time, we develop our own proprietary technology to serve for the
resolution of social issues.
• Demonstration ofpatented technology

property as proprietary technology—we change the designs of urea plants according to the pat-

2030

2023

Achieving social implementation through proprietary technology andco-creation engineering• Identifying issues
with a view to social
implementation

General Manager of Licensing
and Patent Administration
Department
Legal Department, Corporate
Administration Division

For example, in the urea field—in addition to simply obtaining patents to protect our intellectual

Co-Creation Engineering
Urea

Yukari Miyamoto

Features
Achievement through low-pressure synthesis technology:• Commercialization
demonstration• Establishment ofsocietal value chains• Reduced plant construction costs (synthesis
equipment steel: 5 to 10%)
• Increased energy savings and reduced operating costs (steam and electricity: 3 to 5%)• Examining
commercial scale
designs

Applicable to both new and existing plants• Planning pilot testing

Existing ACES21® urea plant

20

TOYO ENGINEERING CORPORATION

Integrated Report 2023

Foundation for Sustainable GrowthEthylene

Green Ammonia, Blue Ammonia

R&D Engineering

Renewable energy power plant

Methanol

Bio Ethanol to Ethylene, CO2 to Olefin

Ammonia (partnering with KBR)

obtaining a patent, and/or change our own design to avoid violating the existing patent of them.

FPSO

g-Methanol®

Ethylene (partnering with Lummus)

tors, provide a third-party observation to a national patent office as necessary to stop them from

CCS / CO2 Utilization

Methane Hydrate / Rare Metal

Deep sea Resource Development
MRF-Z® Methanol Reactor

curing our freedom to use various technologies. We also investigate the trends of our competi-

Green Hydrogen

Thermal power plant

Methane hydrate / rare metal

Resource
developmenta result of the above activities, thereby differentiating ourselves from other companies and se-

Synthetic Fuel (e-fuel/SAF)

Digital Plant

Mega-solar / Biomass / Geothermal Power Generation

SocialInfrastructure

Proprietary development
technology

tablishing and implementing a reasonable, highly transparent employee invention system in re-

Waste plastic recycling

Energy consulting

DX-PLANT®

Decentralization

1980

design and operations. TOYO has also tried to flesh out its intellectual property by promptly es-

Medium-term Management Plan

Electrolysis, Hydrogen Carrier

1961

sues that arise during long-term continuous plant operation, and the promotion of DX in terms of

dustrial property rights in the form of patents and trademarks for intellectual property created as

FT synthesis

Circular Economy

Existing Business Area

plants, including the actual plant construction, creative ideas for resolving various technical is-tions as we strive to realize them and expand our business. TOYO is also working on acquiring in-

Decarbonization

TEC/MTC Urea Process

over the years, but we actually constantly create new intellectual property in relation to such

issues in the renewable energy and plastic recycle fields, and we are considering possible solu-

Waste Plastic liquefaction / Gasification

Core Process
Technology

an example, chemical plants—one of TOYO’s core businesses—involve technology established

Under the medium-term management plan we are currently working on, we have predicted

Expanding technologies to meet the energy transition

New Business Area

Oil, Gas, andChemicals

TOYO’s business involves many intangible assets, including licenses, patents, and know-how. As

sponse to the revised Patent Act.

Phylogenetic Tree of TOYO’s Technology
Founding

Intellectual property strategy: protecting intangible assets and linking them tovalue creation

Management Vision1

Technical Capabilities

TOYO ENGINEERING CORPORATION

Integrated Report 2023

21

TOYO’s Strengths

One feature of TOYO’s global operations is that our system enables group companies to either construct plants independently or cooperate with each other. As group companies conduct business rooted in their countries or regions, they utilize their strengths to organize formations in line with customer needs and flexibly form teams ofexperts to provide optimal engineering services around the world.

History of how we have strengthened our global EPC execution capability

3

Professional Human Capital
TOYO’s employees include engineers, project managers, and experts in a wide range of fields. Because there are
professionals with a wealth of both knowledge and experience at not only our Head Office but also our group companies, we can effectively conduct business around the world. We will continue striving to acquire new knowledge
and technologies as we actively propose comprehensive solutions to our customers.

Professional human capital that plays an active role at TOYOManagement Vision

2

Global Operations

Half a century has passed since we established our first overseas group company, and we currently have EPC group companies
in eleven countries around the world. Since the 1990s, we have developed the TOYO standard, which underpins our high quality,
and our group companies have accumulated experience by executing projects in compliance with this standard. One of TOYO’s
strengths is the fact that we have group companies in various countries, each of which serves as a profit center with its ability to
independently receive EPC orders and execute in response.

1987
Toyo-Korea
Seoul
1961
Toyo-Japan1976
Toyo-India
Mumbai

2022
OFS
Singapore

Close
Up!

1986
Toyo-USA
Houston2012
TSPISão Paulo

2012
IKPT
Jakarta

Example of a project involving cooperation of multiple group companies

Our ethylene complex project in Malaysia was large-scale and complicated that was conducted with a truly “All TOYO”
team, including the handling of the engineering by Toyo-Japan, Toyo-India, IKPT, and Toyo-Malaysia as well as efforts by
Toyo-Europe, Toyo-Korea, Toyo-China, Toyo-USA, and other companies to cooperate with suppliers in each region for theorganized procurement of equipment and materials.

Toyo-Japan

Toyo-Europe

IKPT

22

Toyo-Malaysia

TOYO ENGINEERING CORPORATION

Integrated Report 2023

ProfileMr. Yanagawa has been involved in process engineering ever since he started working for TOYO in 1990. His work has included awide range of projects both within and outside of Japan, including a fine chemical plant, urea process ACES21 plant, and SAF pilot
plant. He currently utilizes his abundant knowledge to supervise urea process development.

A project manager’s (PM’s) mission
As a PM, I have always tried to demonstrate leadership and improve communication. The keys toensuring that a project succeeds are drafting a detailed plan and implementing the PDCA cycle.
It is essential to formulate a strategy in line with the project characteristics, form a project teamconsisting of the best available people, select the right subcontractors, and implement and, if necessary, revise the plan. After I built up experience as an engineer and PM at a Chinese design institute for 18 years, I started working at TOYO, where I have acted as the PM for many projects forcustomers in Europe, America, and Japan. I am proud to say that, as a result of completing theseprojects in line with their contract schedules, I earned the trust from our customers, which ultimately led to repeated orders from same clients. Going forward—as the head of my division anda project director (PD)—I hope to train many promising PMs.
ProfileAfter working at a national Chinese design institute, Ms. Ni started working for Toyo-China in 2007. She is the General Managerof the Project Management Department and a PD for projects currently underway. In 2019, she was appointed Vice President of
Toyo-China.

Ni PingToyo-China
Vice President,
Project Director, General Manager ofProject Management Department

Contributing to international projects as an Attorney and construction
disputes specialist

Toyo-Korea

Toyo-India

Toyo-USAEngineering and Technology Unit
Senior Process Engineer,
Process Engineering Division

Data Section

Toyo-China

Takahiro Yanagawa

Foundation for Sustainable Growth

1986
Toyo-Malaysia
Kuala Lumpur

1987
TEC Project Services
Chiba

2010
Toyo-Canada
Calgary

I am currently in charge of technology development that includes urea-process energy saving,scaling up, and engineering cost reduction. I utilize the experience I have accumulated in relation
to process engineering, operational support, technology consulting, etc. for various plants. TOYO
also owns experts on various technologies. In particular, in the urea plant area, which we havebeen involved in since we were founded, the wealth of technology and knowledge we have accumulated over the years—including design, materials, analysis technology, operations, and maintenance—is the source of our competitiveness, and this enables us to develop and design plantsthat can be easily constructed and smoothly operated. In addition, the fact that TOYO is both a licensor and EPC contractor enables us to provide a wide range of technical services in line withcustomer needs.

Medium-term Management Plan

1972
Toyo-Europe
Milan

2004
Toyo-China
ShanghaiProcess development that takes advantage of corporate technology andknowledge as well as personal experience

I specialize in contract law and dispute resolution related to international EPC projects. Up until
now, I have been based in India, Germany, the USA, and Japan, and my work has included arbitration/dispute resolution and legal risk management for many large-scale international projects. I willcontinue using my skills to contribute to the success of TOYO’s projects around the world by ensuring that problems do not arise while also striving to train the next generation of professionals.
ProfileMs. Dhall is licensed to practice law in both India and California (USA) while also being qualified as a fellow of the UK-based
Chartered Institute of Arbitrators, where international arbitrators are trained. She started working for Toyo-Japan in 2020.

Niharika Dhall
Legal Counsel (admitted in India andCalifornia, US), Legal Department,
Corporate Administration Division

TOYO ENGINEERING CORPORATION

Integrated Report 2023

23

Discussion between Analysts and President Hosoi

Satoshi Taninaka

Eiji Hosoi

Senior Analyst, Equity Research
Department, Mizuho Securities

Analyst, Equity Research Division,
SMBC Nikko Securities

Representative Director, President &Chief Executive Officer, TOYO Engineering

Improving TOYO’s corporate value andensuring sustainable growth
Eiji Hosoi was appointed the new President of TOYO Engineering in the third year—the mid-point—of the current five-yearbines its existing business fields with new business fields such as carbon neutrality, President Hosoi has launched a new
management system. We invited three analysts to join President Hosoi and discuss topics such as TOYO’s role in society
and its possibilities for sustainable growth.

TOYO’s role in society

24

TOYO ENGINEERING CORPORATION

Integrated Report 2023

include risk management fees in our order prices. When negotiating with our customers, we can agree on our approach
to risk; and, I think, by adjusting our risk management fees
accordingly, we can secure appropriate profits that are in linewith the added value we provide. Our customers understandthat prices for materials and equipment are rising around theworld. In our industry, it frequently happens that new engineering firms emerge from developing nations, submit low offer prices, and create extreme cost competition; we must be
patient in such situations, and keep our peace. As you point
out, engineering work delivers high added value, and we must
work out a way to ensure we are properly compensated.
Ito The engineering industry has a problem in that there isa lag between what companies wish to do and how they areassessed by the market. If you receive an order, then yourshare price rises in the near-term; but carbon neutral initiatives require a longer-term perspective.TOYO is currently engaged in carbon neutral initiatives, but this has yet to result
in large orders—there is a gap, here, I think, that needs to be
bridged. When it comes to carbon neutrality, the key is transitioning to low-energy density plants—but seen from a society-wide standpoint, this is an inefficient way of doing things.

Initiatives in new business fields
Taninaka Previously, you waited for ITBs to receive orders,
but now you are working to structure projects yourselves. I
believe that this requires a different type of human capital—
how do you intend to respond?
Hosoi Internally, we have reassigned suitable personnel to
the Carbon Neutral Business Division. We are also in the process of hiring mid-career recruits who have knowledge of andexpertise in the relevant products and technologies, as well as
recruits who have experience in project development. We facevarious issues in our projects in new business fields, including scaling up and streamlining mass production through technological development and engineering improvements, andThe key is striking a balance between what
you want to do, what you ought to do, andwhat you can do.
ensuring profitability through cost reductions. However, if we
can solve these issues and gain experience in achieving social
implementation, we anticipate that our employees will growsignificantly.
Ito One of the difficulties of carbon neutrality is considering projects in a wholistic manner—choosing between hydrogen and ammonia, for example, or accounting for the costs oftransportation when deciding where to locate production—and proposing optimal solutions. However, I believe this is afield in which TOYO can excel.
Hosoi Yes, there are a number of new fuels, including hydrogen, ammonia, and methanol. TOYO has an abundance ofexpertise when it comes to ammonia—having built at least
80 ammonia plants around the world—while we also possessmethanol production technologies. Methanol can be madefrom hydrogen and carbon dioxide, and is expected to havewide-ranging uses both as raw materials in chemical products
and as a clean synthetic fuel. At TOYO, we possess technologies, but we are also able to identify which new technologies
we need. Since our founding, we have carried out numerous
overseas projects, and acquired knowledge of various countries around the world. As such, carbon neutrality is very mucha field in which we can excel.
Ito Discussions regarding sustainable aviation fuel (SAF) havegathered momentum over the last two or three years, but, unfortunately, I feel that Japan has fallen behind the rest of theworld in this field. Overseas companies are already building
commercial plants—whereas Japanese companies possess
the technologies, but are disadvantaged by lacking speed.
Hosoi In the field of SAF, Japanese companies are striving
to accelerate their initiatives. In terms of timelines, we intend
to finalize our basic designs during this fiscal year, then begin working on EPC orders in fiscal 2024. We hope to start on
projects as soon as possible, using methods we have alreadyworked on that take woody biomass and CO2 as raw materials; we also plan to consider the use of other raw materials
such as waste cooking oil and bioethanol.
Tai In anything, the key is to strike a balance between what
you want to do, what you ought to do, and what you can do.
Sometimes it is not clear whether you ought to do somethingor not—in such cases, not doing it might be the best course
TOYO ENGINEERING CORPORATION

Integrated Report 2023

25

Data Section

Hosoi TOYO is an engineering company as an associationof professionals that boasts outstanding technical and management skills and our role, I believe, is to help make society richer and achieve environmental harmony. We can do thisby integrating various elemental technologies and overseeing
complex projects, and building various types of plants as social implementation.
Tai TOYO Engineering is faced with an increasing numberof competitors, and this has resulted in fierce cost competition; as such, I believe TOYO and the rest of the industry
must work together to give serious consideration to how to
become more profitable—otherwise, things could become
extremely difficult. Over the last one or two years, we haveentered a period of inflation. Who is going to shoulder theburden of rising costs? Engineering work is hard. Engineering
companies oversee difficult projects, and yet gross profit margins are low—and this strikes me as a strange state of affairs.
At present, TOYO’s gross profit margin stands at about 10%.
However, I would like to see that rise to 20%.
Hosoi While we want to raise our profit margins, we must
do so within limits that our customers find acceptable. We

Hirosuke Tai joined Daiwa Institute of
Research in 1995. After researching
OTC stocks, tires and automotive
sales sector, since 2000 he has been
assigned to the machinery and shipbuilding plant sector.

Foundation for Sustainable Growth

medium-term management plan. Tasked with accelerating the company’s transition to a new business structure that com-

Chief Analyst, Equity Research
Department, Daiwa Securities

Medium-term Management Plan

Tatsuhiko Ito

Chief Analyst, Equity Research
Department, Daiwa Securities

Hirosuke Tai

Management Vision

Hirosuke Tai

Nevertheless, for engineering companies I believe carbon
neutrality represents a new business opportunity.
Taninaka In contrast to other companies in the engineering
industry who excel in the fields of oil & gas, one of TOYO’s
strengths is fertilizer plants, because its origin is Mitsui
Chemicals. The global population is increasing—in developing nations, in particular—and so there is meaning in building
plants that improve agricultural productivity. And the fact that
this will result in future business opportunities is very much a
positive. On the other hand, rather than TOYO’s importance tosociety and other intangible attractions, the stock market prioritizes concrete results, such as order values, profit, and other performances, and the potential for sustainable growth. As
such, there is an extremely large gap between the share pricethat TOYO anticipates and its actual share price. While it will
be difficult to close this gap immediately, if you can create abusiness model that goes beyond engineering, procurement,
and construction (EPC), then I believe the stock market willbe less inclined to fixate solely on your stock price and profits.
Hosoi Previously, we submitted estimates based on ITB*1.
We would come up against numerous rivals, and so a largepart of our job was to overcome these rivals in price competition. In our new business fields, however, instead of playing
a waiting game, we are actively seeking to structure projects
ourselves. An example of this is our green ammonia projectin Indonesia. Our customer is a state-operated fertilizer company that owns five fertilizer plants; realizing they had excess
production capacity, we proposed that they use this excess
capacity to make green ammonia. Our relationship with thecustomer goes back 40 years or so, and the plants in question are ammonia and urea plants built by TOYO—and so
this was a proposal only we could make. Since this is a newmarket, we are actively helping to build the value chain as awhole. While previously we only undertook EPC for manufacturing plants, now we are looking to jointly invest in special purpose companies that operate within the value chain,in the areas of production, transportation, receiving, and use.
In order to create new distribution channels, we are in direct talks with primary distributors, transportation companies, and consumers—and such opportunities arise during
the process of project structuring.

Discussion between Analysts and President Hosoi

Senior Analyst, Equity Research
Department, Mizuho Securities
Tatsuhiko Ito joined Mizuho Bankin 2013. After working at theMizuho Securities Equity Research
Department’s Auto Parts team, in
2021 he was assigned to oversee
the Shipbuilding and Plant team.
From 2022, he is also responsible
for ESG.

I have high hopes that TOYO will take advantage of new business opportunities, and create
a new business model that combines its existing EPC business with new business fields

Integrated Report 2023

Hopes and expectations for President
Hosoi and for TOYO’s future
Ito Over the last year or two, your business results have become more consistent. Under the system introduced by new
President Hosoi, I would like you to show the markets thatyour revenues are growing, and that you are working on forward-looking projects. I hear that Eiji Hosoi was appointed
the new President partly due both to his leadership and to hisabundant experience in overseas projects. Experience in overseas projects will be critical to TOYO’s future growth—and to
the growth of its existing businesses in particular. To this end,
I would like President Hosoi to draw on his knowledge. I havehigh hopes for TOYO’s future growth.
Tai I believe that Integral’s increased investment in 2019

Analyst, Equity Research Division, SMBC Nikko Securities
Satoshi Taninaka joined SMBC
Nikko Securities in 2015. He wasinitially engaged in retail service,
before starting researching themachinery and shipbuilding plant
sector in 2019.

I would like TOYO to translate the growthpotential of its initiatives in the field of carbon
neutrality into concrete business results

marked a significant turning point for TOYO. Even now, TOYO’s
capital structure remains unchanged, and Integral officers areactive at TOYO as outside directors or at a Unit level. Now thata new President has been appointed, TOYO will be expected
to reap the rewards of Integral’s increased investment, and I
encourage you to show how TOYO has changed.
Taninaka The growth potential of your initiatives in the fieldof carbon neutrality—something you set out in your current
medium-term management plan starting in fiscal 2021—
is compelling, but I would like you to translate this potential into concrete business results. TOYO has invested in DX,
new technologies, and new business development, but all I
have seen are claims that results will likely improve in the future. TOYO’s share price indicates that the market is not fully
convinced by its initiatives thus far—for this reason, I would
like you to show clearly how these investments have helped
change the company, and how they are contributing to improved gross and net profits.
Hosoi I would like to thank you all for participating in this discussion today. I plan to draw on my abundant experience inoverseas projects, to actively engage in discussions with ourcustomers all over the world, to visit our worksites in person, and to lead TOYO’s further growth. We have used theincreased investment from Integral to invest in DX, new technologies, and new fields. We are increasing the number ofprojects in which DX is applicable; in new business fields, wehave progressed from feasibility studies to the engineering
stage and beyond, and I recognize that we are now in a position to generate concrete results in the form of revenues.
TOYO’s mission is to fulfil the expectations of all its stakeholders. I intend to build an organization that is capable ofcontinued learning; of grasping global trends and increasing
its technological capabilities; of swiftly engaging in new business initiatives; of providing services with high added value;of solving social issues; and of realizing sustainable growth.
*1 Invitation to Bid*2 A “cost reimbursement contract”—also known as a “cost-plus fee contract”—is acontract in which the contractor executes and manages the project on behalf of theowner, with the owner taking responsibility for the project, including costs.
*3 Operation & Maintenance*4 “Advanced work packaging” is a process driven by construction planning and method for digitalized project execution managing work packages throughout project.

TOYO ENGINEERING CORPORATION

Integrated Report 2023

27

Data Section

TOYO ENGINEERING CORPORATION

Hosoi For our current medium-term management plan, oneof our key goal indicators is achieving an average net profit of
5 billion yen per year from fiscal 2023 to 2025. We have forecast net income of 3 billion yen for fiscal 2023, which is thefirst of the three years from which the average will be calculated; going forward, we intend to secure orders, advanceour digital transformation (DX), cut unnecessary costs, realize
shorter construction period, improve productivity, and thereby grow our profits.
Ito This is your opportunity to step into a new field of carbon neutrality—and I am interested to see how you growyour new business. For example, you might insist on cost reimbursement contracts*2, or you might agree an EPC+ deal
that includes O & M*3 services to provide support in operating plants. Looking around the world, there are engineering
companies who have discontinued their EPC businesses, andwho now specialize in providing services or licenses.
Hosoi In addition to carbon neutrality, TOYO is engaged
in mineral resource projects such as methane hydrate, rareearths, and cobalt-rich ferromanganese crust, and these are
generating steady profits. We intend to gradually increase thenumber of reliably profitable new fields we engage in. One of
the central goals of our current medium-term management
plan is to increase the ratio of our non-EPC businesses—
this includes issuing licenses, offering consulting services
for GHG-reduction, and providing customer support services.
We are working steadily toward achieving this goal. However,completely withdrawing from EPC and focusing solely on
non-EPC businesses such as project management consultancy (PMC) and front-end engineering and design (FEED) willentail ceasing construction work—our technological skills will
suffer and this, in turn, will impact negatively on the quality of
our FEED. In Europe and America, there are engineering companies that have chosen to specialize in FEED and, as a consequence, their technical level is said to have fallen. For thesereasons, we believe that achieving the right balance between
EPC and non-EPC work is crucial to maintaining and improving our capabilities.
Ito I am also interested in how you leverage your overseas
group companies. Other companies in the industry have commented on the outstanding engineering skills of TOYO’s groupcompanies in India and other countries. Since the Indian population is growing, utilizing your Indian group company effectively will be important for your existing businesses.
Hosoi The prospects for the Indian market are extremely promising. India is home to the largest overseas group

Satoshi Taninaka

Foundation for Sustainable Growth

26

Assessing TOYO’s medium-term
management plancompany in the TOYO Group, with a history dating back almost 50 years. We intend to utilize our assets in the country
to further demonstrate our unique strengths. TOYO-India isalready the focal point of the engineering stages of our global projects; it is therefore a key source of TOYO’s competitiveness. Indeed, TOYO’s overseas group companies in Indiaand elsewhere have the capacity to independently execute
projects worth tens of billions of yen, and they are delivering
world-class quality across the globe.
Taninaka SAF, fuel ammonia, and other carbon neutral projects are the pillars of your medium-term management plan. I
am attracted by the idea that you have completely changed
your future growth narrative. However, it is your income
statements—and the information on gross profit margins,on selling, general, and administrative expenses, and on effective tax rates they contain—that third parties will judge
you on. Until your new businesses become genuinely profitable, you will be judged on the state of the existing businesses that comprise your earnings base. However, it feels as if
your results are becoming less predictable; I would like you
to expand the scope and quality of your briefings, and discuss
whether you are seeing the results of your DX investments,
and whether you can improve your gross profit margins.
Hosoi With regard to DX, we have begun applying advanced
work packaging (AWP)*4 for our Indian projects. We will be sure
to provide more easy-to-understand briefings, by providing information of greater scope and quality on as many topics as possible, including the improvements elicited by our DX investments.
Tai No engineering companies outline goals for gross profit
margins in their medium-term management plans. In your medium-term management plan, I would like you to set out yourforecasts for gross profit, and indicate the gross profit margins
you need to achieve your target income for the year. TOYO has
set the ratio of non-EPC contributions to its gross profit margin
as a KPI. However, I feel it would be easier to understand if you
defined your gross profit margin and gross profit goals.
Hosoi Increasing our gross profit margin is key to achieving
our medium-term management plan goals. However, going
forward we will discuss as an issue how we communicate
our medium-term management plan goals to external parties.

Medium-term Management Planof action. When market conditions are poor, I am concerned
you will be forced to take on projects with low profit margins.
Of course, you cannot avoid undertaking orders with low profit margins altogether; nevertheless, it is important to draw
your limits, and to act with discernment. When Integral invested in TOYO, I hear that it mapped out in which fields yourcompany’s strengths lay. It is widely accepted that TOYO willprofit from its operations in former Communist bloc countries,
and from its technology licenses; however, Integral identified
strengths in other areas, too. It is critical that TOYO identifies
in which areas it can be profitable; for this reason, you must
not change “what you ought to do” based on industry fads andtrends. TOYO possesses technology licenses, and this puts
you in a unique position as an engineering company. I believe
you can take advantage of this situation to develop new formsof competitiveness.
Hosoi There was a time when TOYO’s governance was insufficient when it came to evaluating orders. However, after
our equity capital halved, we changed—and we now carry out
careful controls. With regard to our licenses, we have developed low-pressure synthesis technologies for the urea production process that reduce energy consumption and cut
both operating and construction costs. We therefore intend
to make proposals to our customers that draw on these technologies. I would also like to note that our current carbon neutral projects combine “what we want to do” and “what weought to do.”Tai The field of carbon neutrality is fraught with difficulties—
it is expensive, labor-intensive, and comes with new and significant risks. In fact, it is not easy to assess whether carbon
neutrality can be truly profitable.
Hosoi As you point out, compared to fossil fuels, costs inthe field of carbon neutrality are high. As such, there will no
doubt be cases a final investment decision is not made. Yet
it is also a fact that governments around the world are offering carbon neutral subsidies. We are focusing on projects forJapanese and overseas customers with whom we already enjoy strong relationships, and we intend to improve profitability by offering our customers high added value. Finally, as towhether this is “what we can do,” I think the key is resource

management—specifically, ensuring we secure talented human capital, and accepting an appropriate volume of orders in
relation to our talent pool. On that note, we successfully concluded our organizational reforms this year, and we are now ina position to re-assign human resources to their optimal positions at the earliest opportunity.

Management Vision

Tatsuhiko ItoMessage from the CFO

By receiving orders for good projects andimplementing comprehensive risk management,
we will improve our profitability, accumulateshareholders’ equity, and pave the way to theresumption of our dividend payments.
Kensuke Waki
Director, Senior Executive Officer
Chief Financial Officer（CFO）

Fiscal 2022 Result Review

Net Sales, Gross Profit Margin, andOperating Income Margincompletely—we have more or less escaped the slump in order receipt due to decreased global plant investment demand
resulting from former COVID-19 and other factors. However,the current international market conditions of the conventional
petrochemical field remain poor, and—due in part to up-front
investment costs related to new business and DXoT—our net
income seems to be still not at a sufficient level.

Operating Income, Ordinary Income, andProfit Attributable to Owners of Parent

New Orders, Backlog of Contracts(¥ Billion)(%)(¥ Billion)(¥ Billion)

300

15

5

500

4
3
200

10

400

2
1

5

-1

200

-2
0

0

Total Assets, Total net Assets, and Equity Ratio-3(¥ Billion)

100

-4
-100
(FY)

-5
2018

2019

Net sales (left scale)

2020

2021

2022

2023

(Forecast)Gross profit margin (right scale)Operating income margin (right scale)

-6
(FY)

2019

Operating Income

2020

2021

Ordinary Income

Profit Attributable to Owners of Parent

2022

2023

(Forecast)

(FY)

2018

New Orders

2019

2020

2021

2022

2023

(Forecast)Integrated Report 2023

100

10

Backlog of contracts0

we therefore predict a year-on-year increase in our net sales
and income, including net sales of ¥240 billion, operating income of ¥3 billion, ordinary income of ¥4.5 billion, and net income of ¥3 billion. Our target order amount is ¥320 billion, andover ¥200 billion of this has been covered by two FPSO projects that have already been started by equity method affiliates.
On a consolidated basis, the Group is securing FS and FEED
projects that will lead to future EPC business in new businessfields in particular, and we are also aiming to selectively receive orders for good medium-scale EPC projects.

Financial Measures for the Second Half of Our Medium-Term Management Plan
(1) Dividend payment resumption policy
In fiscal 2022, we failed to pay out dividends for the sixth

20year in a row, for which we would like to humbly apologize
to all our shareholders. One cause of this is that—due to past

0

(FY)

2018

2019

Total assets (left scale)

2020

2021

2022

Equity ratio (right scale)

Total net assets (left scale)

Equity, Return On Equity (ROE)(¥ Billion)

(%)

60

15

40

10

20

5

0

0

-20

-5
(FY)

2018

Equity (left scale)

2019

2020

Return On Equity (ROE) (right scale)

2021

2022

(¥ Billion)

20
10
0
-10
-20
-30
(FY)

2018

2019

2020

2021

Operating activities CF

Investing activities CF

Financing activities CF

Change in cash and cash equivalents

2022

Free cash flows(4) Aiming to achieve an ROE of 10% or more
Given our capital cost level, it is necessary for us to achieve an
ROE (return on equity) of 7 to 8%, but our ROE is still too low,with a recorded ROE of 3.5% at the end of fiscal 2022 and a
predicted ROE of 6.0% for this fiscal year. In addition, our current PBR (price-to-book ratio) is less than 0.5, which is far below the TSE’s requirement of at least 1.0 and must be given
extremely serious consideration. In terms of our predicted revenue for this fiscal year, if we consider our PER (price earnings ratio) based on our EPS (earnings per share) and actual
stock price, it seems like the low level of our ROE is the maincause of our sluggish PBR, so—rather than our capital efficiency—it seems especially important to improve our ROE, whichmeans stably increasing our profitability. To stably improve our
profitability going forward, we must consider our resource allocation as we secure suitable gross profit from orders and implement comprehensive risk management to eliminate project
revenue volatility. In addition, I hope that we can make steadyprogress towards achieving the monetization of both our existing business and new business fields related to CN as we incorporate growth factors to attain our fiscal 2025 ROE targetof at least 10%. I also believe that, to achieve a PBR of at least
1.0, it is extremely important to promote dialogues with shareholders and the market regarding the above corporate activities. I look forward to the ongoing understanding and supportof all our stakeholders.
TOYO ENGINEERING CORPORATION

Integrated Report 2023

29

Data Section

Due to trends that include increasing energy demand and increasing fertilizer demand due to the increasing population, acertain amount of new investment is expected in existing business fields. In terms of new business fields, the acceleratedsocial implementation of carbon neutrality (CN) fields that include fuel ammonia and SAF is expected, and we believe that
we will sow the seeds for this in fiscal 2023. Due to the recovery of our order volume in fiscal 2021 and 2022, we expect active progress related to our projects—including FPSO
projects being pursued by our equity method affiliates—and200

New orders including the equity method affiliates

Fiscal 2023 Outlook

TOYO ENGINEERING CORPORATION

30

0
2018

Backlog of contracts including the equity method affiliates

28

(%)

300

-5

Cash Flows

Foundation for Sustainable Growth

100

300

0

(2) Accumulation of shareholders’ equity
As we aim to resume dividend payments as soon as possible,
we also realize that striving to accumulate shareholders’ equity
is an important issue in terms of our finances. At our peak in fiscal 2013, TOYO recorded consolidated net assets of ¥74.8 billion
and an equity ratio of 28.5%, but this fell to ¥25.2 billion by theend of fiscal 2017. After that, we increased our capital stock by
issuing class A preferred shares, and, at the end of fiscal 2022,
we recorded net assets of ¥49.3 billion and an equity ratio of
19.1%. In addition, although our current policy is to expand ournon-EPC businesses by changing the structure of our CN-related
businesses, the DNA that makes up the core of TOYO’s businessis still EPC, and the building of large-scale industrial systems bycombining various elemental technologies will remain one of thepillars of our business. Given the large business scale of eachof our projects as well as production technology risks, geopolitical risks, and period-length related risks—to ensure our financial(3) Cash management
At the end of fiscal 2022, our consolidated cash and deposits
amounted to ¥108.5 billion, which is a fairly high level given
the current scale of our business. In general, this is a result of
not accepting orders for negative-cash-flow projects. Startingin fiscal 2023, we expect our balance to decrease due to theprogress of our projects. At the same time—as a result of
training up until now—some of our EPC subsidiaries have expanded their revenue ratio and accumulated retained earnings,
so we will account for the credit conditions offered by local financial institutions and keep our desire to promptly resume
dividend payments in mind as we consider implementing acertain amount of non-consolidated returns.

Medium-term Management Plan

In fiscal 2022, we recorded net sales of ¥192.9 billion, operating income of ¥4.7 billion, and net income of ¥1.6 billion.
Our business was therefore profitable for the fourth year ina row, and we maintained a gross profit margin of over 10%,due in part to the strong profitability of our overseas groupcompanies. We also recorded new orders of ¥254.2 billion,
including equity method affiliates, and—although the market
conditions in the petrochemical field have not yet recovered

stability—we have set the following targets for the time being:an equity ratio of at least 25% and amount of around ¥75 billion.

Management Vision

construction losses—the retained earnings included in our
non-consolidated net assets did not reach the amount requiredfor dividends under the Companies Act. To resume our dividend payments as soon as possible, we will start by increasing our non-consolidated order volume and implement morecomprehensive risk management after orders are received to
expand our non-consolidated profitability. We will also consider reviewing our asset holdings and surplus dividends fromsubsidiaries, maintain our awareness of the resumption of dividend payments as a top-priority management issue, and do
everything in our power to resume our dividend payments assoon as possible by the end of the current medium-term management plan period, which is fiscal 2025.

Outline of Medium-term Management Plan (FY2021–FY2025)

New Knowledge and Business
Opportunities returned to EPC

Strategy “Sustainable
Technology and Business
Development”

Strategy “Advanced EPC
Operation”
Group operations

Priority Areas: Environment andEnergyDXoT(Digitalization without sanctuary)

Co-creation with clients/partners
from the concept

Ensuring Excellent Quality andProfitability

Transform our business portfolio, improve
profitability, and ensure the stability andsustainability of our future business

EPC remains our primary source of profit until our new businesses become profitable; ensure stability and reliability of management.

The current medium-term management plan—which aims to contribute to a better, more sustainable world—began in fiscal 2021, and concluded its second year at the end of fiscal 2022.

Results for the period
ended March 31, 2023

TargetConsolidated net income attributable toowners of the parent• FY2023–2025 average: ¥5 billion or higher• FY2030: ¥10 billion

1.6 billion¥

Consolidated net sales• Emphasis on profit over net sales• Net sales target: ¥300 billion

192.9 billion¥

Gross profit composition • FY2025: 25% or higher(new business areas)• FY2030: 50%
Gross profit composition • FY2025: 45% or higher *2(6 main Group companies) • FY2030: 50%

3.5%

Dividends•Aim to resume dividend payments during
period of plan

No. of employees

—

44%
23%
68%

Gross profit composition • FY2025: 25% or higher(non-EPC*1 businesses) • FY2030: 50%

Employee’s satisfaction

ROE• FY2025: 10% or higher• Thereafter: Stably 10% or higher

Results for the period ended
March 31, 2023

Target• Improved from the previous year
level

Fiscal 2021: 3.63 out of 5
Next survey to be carriedout in fiscal 2023

Toyo-Japan: Sustainable Technology
and Business Development
Double current workforce of 110
employees

About 130 now

Other Group companies: Increase/decrease according to demandGroup-wide workforce:
approx. 6,500 people*1 Non-EPC = non-EPC/EP Lump Sum projects *2 TPSI (Brazil) and OFS (Singapore) are equity method affiliates, and hence not included

Key progress and results over the past two years

KGI Graphs

1. Promotion of carbon neutral business

Consolidated net income• In fiscal 2021, we established a special team with a view to actively participating in the carbon neutral business; from fiscal
2022 onward, we have been expanding and strengthening our carbon neutral organization and workforce.
• Based on our technologies and past achievements in relation to ammonia plants, we have engaged in numerous feasibility
studies (FS) and pre-FEED, and we are spearheading the establishment of multiple value chains.

2. Healthy balance of EPC and non-EPC orders, by improving Group operations and coordination between the group• Following a slump in orders in fiscal 2019 and 2020, in fiscal 2021 and 2022 our order volumes recovered; orders for non-EPC
ical, fertilizer, and gas-fired power generation plants.
• We are strengthening risk management for projects undertaken independently by group companies.

3. Promoting initiatives through partnering
Field

PartnerState of initiatives

SAF

JGC Japan Corporation• On a per project basis, in discussions about execution systems for
FEED and EPC

FPSOMODEC, Inc.

• Made a 35% investment in the OFS*1 joint venture in October 2022
• Executed FEED for a project in Guyana, received EPCI order*2• Executed FEED for a project in Brazil, received EPCI order

Fuel ammonia

JGC Holdings Corporation• Jointly carried out sales activities, FS, and pre-FEED

Comprehensive
collaborations

TAISEI Corporation• Joint orders and execution for biopharmaceutical facilities

10

6

5.0

4
2

1.6

1.6

2021

2022

NIPPON STEELENGINEERING Co., Ltd.

results*1 Offshore Frontier Solutions, Pte. Ltd. *2 Engineering, Procurement, Construction, and Installation• We are working toward our goal to sextuple EPC productivity in 5 years from fiscal 2020 to 2025. As of March 31, 2023, prog-

results

Goal for2023–25

full-year
forecast

average

projects achieve a certain level of progress. However, we already have signs of the benefits of DXoT in our EPC business,where improvements in visualization and efficiency have helped prevent the occurrence of additional costs. Going forward,
we apply DXoT to more projects to improve profitability and to reduce loss costs.

Target

(FY)

3.5

2
0
2021

2022

results2023

results

full-year forecast

Guideline

(FY)

2021

2022

results2023

results

full-year forecast

2025
TargetHigher revenues and profits for fiscal 2023 owing to increase in new orders and progress of existing projects
Due to a stagnation in new orders in fiscal 2019 and 2020, revenues fell significantly under our target of 300 billion yen; as a result, net income
and ROE remained at an unsatisfactory level.
However, from fiscal 2021 onward, both new orders and our order backlog have increased; as such, we forecast net income of 3 billion yen
and ROE of 6.0%, on course to achieve our medium-term management goals.

KPI Graphs
Non-EPC gross profit
composition

Non-EPC

New business areas grossprofit composition

New Business area

Group companies grossprofit composition

Group companies

(%)

EPC

(%)

Existing Business area(%)

Toyo-Japan

100

100
39

25

44

50

60
75

40

0
(FY)

23

18

80

100
25

50

60
61

2021

results

56
2022

results

2025
Target2030
Target

82

75

77

0

45

2021

results2022

results

2025
Target2030
Target

50

68

40
50

20

(FY)

57

80
60

40
50

55

43

20
0
(FY)

2021

results

50

32
2022

results

2025
Target2030
Target*2 TPSI (Brazil) and OFS (Singapore) are equity method affiliates, and hence not included

ress rate is 32%— roughly in line with our expectations for the first two years.
• Periods of our major projects are several years in length; as such, we can realize improved profitability through DXoT after our

2030

3.8

4

50
2023

6

6

0

20

4. Progress with DXoT

8

192.9

100

0
(FY)

202.9

10

10

240.0

150

3.0

80

• Joint orders and execution for biomass power generation facilities• Collaborative projects in Japan and overseas, mutual cooperation inexpertise

200

(%)

300.0

300
250

8

ROE

(¥ Billion)

KPIs trending upward
The composition ratio of our non-EPC business, which have high gross profit margins, has already climbed to 44%—well in excess of our fiscal 2025 goal of 25%; this is due to new orders and progress of existing projects for customer support services such as FEED and PMC*. The
composition ratio of our new businesses has now risen to 23%, thanks in large part to our energy-saving and GHG-reduction consulting services, and to our specialty chemicals business. The composition ratio of our key subsidiaries, which form the heart of our existing businesses,
has risen to 68%, again significantly outperforming our goals for fiscal 2030.
* Project Management Consultant

30

TOYO ENGINEERING CORPORATION

Integrated Report 2023

TOYO ENGINEERING CORPORATION

Integrated Report 2023

31

Data Section

Pharmaceuticals andfine chemicals

10.0Foundation for Sustainable Growth

projects are also trending upward. In our focus regions of India, China, and Brazil, we received orders for refinery, petrochem-

Consolidated net sales(¥ Billion)

Medium-term Management Plan

Invest knowledge, experience andbenefits gained through EPC

KPI (Key Performance Indicator)

KGI (Key Goal Indicator)

Management Vision

KGI and KPIRealize sustainable growth through the double spiral of “Sustainable
Technology and Business Development” and “Advanced EPC Operation”

Outline of Medium-term Management Plan (FY2021–FY2025)

Priority measures for fiscal 2023 onward to achieve the medium-term
management plan

Group-wide strategies“Sustainable Technology and Business Development” strategy

1. Recruit and utilize diverse human resources to improve our value to be provided and to strengthen our functions

1. Secure stable profits from non-EPC (customer
support service) projects

2. Ensure profitability by advancing from the planningstage of carbon neutral projects to EPC

Our customer support services are contributing more to FS

Toyo is in discussions with primary distributors, transportation

and FEED projects. These projects are high in added value

companies, customers, and partner companies to structure

but low in risk, and as such they help prop up our profit base.

new projects, and to establish new value chains and markets.

Going forward, we intend to continue leveraging the technicalAt present, our discussions are primarily focused on FS, pre-capabilities we have cultivated thus far, and provide our cus-

FEED, FEED, and other projects still in the planning stage;

tomers with high-added-value support services.

however, from the second half of 2024 onward, we expect de-

Expanding opportunities for human resources to excel, and creating environments that facilitate co-creation
Effective utilizationof Group-wide
human resources

Mid-career
recruitment• Collaborate and coordinate with other engineering
companies• Form strategic partnerships• Share human resources
flexibly across the groupcompanies• Strengthen recruitment
via referral from existing
employees

Partnering

Alliances• Engage in co-creation withour customers

mand for EPC plant projects to rise.
Chart showing the speed at which new business fields are being implemented in society and market scale
Market scale

Circulating and low environmental
impact (waste plastic liquefaction,
biopolymers, etc.)

FS
Pre-FEEDSAF

FS
Pre-FEED

Improving corporate value by improving job satisfaction
Enhancing management of human capital

Independent career path development

Human resources development• Introduce personnel systems based on job responsibilities, from fiscal 2021 onward• Quickly identify, promote, and give development
opportunities to talented employees• Provide learning opportunities tailored to individualneeds• Enhance opportunities for OJT at construction sites
and overseas group companies

2. A pleasant working environment (health-related elements)
Improve working conditions
Work-life balance

EPC/Social implementation stage
FEEDFS
Pre-FEED

Ammonia combustion
electrification at
ethylene cracking furnaces

EPC/Social implementation stage
FEED

Improve job
satisfaction(engagement)• Promote diverse work styles to maximize results,
including remote work, and consideration for longterm business trip

Construction of pilot plants
2024

Current organization
Optimal and flexible assignment humanresources on a Group-wide basis

Plant Solutions
Business Unit

Environment andInfrastructure Business Unit

2030

2025

tasked with further clarifying our focus on gross profits, andIn fiscal 2022, we established OFS joint venture in Singapore

tance of orders, we have been able to increase remuneration

with MODEC. In the spring of 2023, OFS received orders for
two large-scale FPSO projects and fully commenced EPCI
the projects and secure profits, and in order to ensure we continue to receive further projects, we are prioritizing the allocation of necessary human resources to these projects.

with making decisions related to the assessment and selection of project orders. By being more selective in our accepand appraisal amounts of TOYO’s provided value; we are also
working to improve profitability through careful risk management and the application of DXoT.

3. Ensure EPC group companies receive and executeorders for attractive, medium-size projects
Toyo’s EPC group companies are distinctive for having the capacity to independently receive and complete orders for projects in their own and in neighboring countries. Indeed, this is
one of Toyo’s strengths. At each of these companies, we areworking to ensure that they selectively receive attractive orders for projects with high gross profit margins and low risk,

Board of Directors

Executive Committee

3D model of FPSO off the coastof Guyana

3D model of FPSO off the coastof Brazil

4. Promote implementation of DXoT to projects

In our current medium-term management plan, we are fo-

ect we received at the beginning of fiscal 2023. Going forward,of our organizational reform in April 2023, we established
Business Portfolio Committee

as outlined in “2.” above.

2. Selectively receive orders for projects with highgross profit margins and low risk
cusing more on gross profits than on order values. As part

OFS*1 Unit

*1 Offshore Frontier Solutions (the name of a joint venture with MODEC, establishedto implement FPSO projects)
TOYO ENGINEERING CORPORATION

Establishment of Business Portfolio Committee
We established a Business Portfolio Committee as a sub-committee of the Executive Committee. The Business Portfolio
Committee aims for optimally allocating Group-wide resources and promoting inter-Group coordination.

Sales Unit
Project Unit

EPC/Social implementation stage

the Business Portfolio Committee as a sub-committee of the
Executive Committee; the Business Portfolio Committee is

We have started fully implementing AWP*1 in the Indian projby implementing AWP in more projects, we intend to improve
the profits of the Group as a whole.
*1 “Advanced work packaging” is a process driven by construction planning and methodfor digitalized project execution managing work packages throughout project.

TOYO ENGINEERING CORPORATION

Integrated Report 2023

33

Data Section

Previous organization

FEED

1. Receive orders for and execute several large-scale
FPSO projects (priority allocation of suitable humanresources)

work. In order to maximize Toyo’s expertise to steadily execute

Organizational reform
In April 2023, we transitioned from a former Business Unit
system to a system that prioritizes Group-wide coordination.
Our aim in adopting this new system was to be able to respond flexibly to changes in the business environment in across-organizational manner, and to optimally and swiftly re-allocate Group resources.

EPC/Social implementation stage“Advanced EPC Operation” strategy

2. Identify priority business fields, and establish systems that facilitate the optimal and flexible allocation ofhuman resources

Integrated Report 2023

g-Methanol® synthetic
fuel (e-fuel)2023*1 Average across all union members

32

FEED

Foundation for Sustainable Growth

Investing in and providing opportunities tohigh performers• Increase base wages by approx. 8.3%*1 (regular salary
increases included) in fiscal 2023

Improve
corporatevalue• Establish career path models that account forchanges in the business environment

EPC/Social implementation stageFS
Pre-FEED

Fuel ammonia and hydrogen

1. A rewarding workplace (motivational elements)

FEED

Medium-term Management Plan

Diversity and Inclusion
Toyo is an organization that generates new value, and we encourage diverse human resources to excel. We recognize diverse value
systems regardless of gender, nationality, age, or disabilities, and we strive to foster a corporate culture that enables diverse humanresources to excel. Female participation and advancement in the workplace is already increasing at our overseas group companies.
Going forward, we will continue working to improve both diversity and inclusion.

• Further integrate our management and human resources
strategies, and ensure that the “growth of our humanresources” leads to the “growth of our company”

Management Vision

Priority measures for fiscal 2023 onward to achieve the medium-term
management plan

Strategy “Sustainable Technology and Business Development”
Initiatives Aimed at the Social Implementation of Synthetic Fuelworld transition to a carbon neutral (CN) society. In particular, synthetic fuel is promising as a way to help liquid fuel users—
including aircraft, for which it is difficult to use electricity or hydrogen as an alternative fuel—achieve carbon neutrality. TOYO
promotes initiatives aimed at early social implementation based on the technical knowledge it has cultivated over the years.

Synthetic fuel and TOYO’s technology

Examples of initiatives that take advantage of TOYO’s strengths (g-Methanol®
and FT synthesis)

Because synthetic fuel (e-fuel) is produced from CO2 and hydrogen derived from renewable energy, it can be regarded as a typeof decarbonized fuel. In addition, because synthetic fuel can be stored long-term, it contributes to energy security, and it can also

Regarding g-Methanol®, we receive inquiries from all over the world, and, in 2021, we received an order from the Indian state-owned

be used with existing infrastructure as drop-in fuel*1. TOYO possesses two technologies that serve as the foundation of its syn-company NTPC to license out our technology for a demo plant, and we delivered a reactor in February of 2023. In addition, in Marchthetic fuel production: g-Methanol® technology (proprietary technology) and FT synthesis technology (collaborative technology).

of 2023, we concluded an MOU with CS Energy—a power company owned by the government of Queensland, Australia—and Sojitz*2Management Vision

Because synthetic fuel uses CO2 as a raw material and can be utilized with the existing infrastructure, it is expected to help the

Corporation, and we started considering building a value chain of e-fuel/SAF that uses renewable-energy hydrogen there.

Synthetic fuel

TOYO technology

H2

Methanol synthesis
technology• Proprietary g-Methanol® technologythat uses our MRF-Z® reactor

Methanol• Achievement of optimal engineering
suitable for large-scale operations
that fully bring out catalyst
performance

Constructing a g-Methanol® demo plant

Building an e-fuel/SAF value chain in Queensland, Australia• Customer: National Thermal Power Corporation, India (NTPC)• Construction site: Vindhyachal, Madhya Pradesh• Production capacity: 10 tons per day

Conceptual Scheme

H2+CO2CO2 capture

CO2

MTG

TOYO collaborativetechnology(Velocys)

*3

MTJ

3rd step*4

Contribute to decarbonization in the
Asia-Pacific region by exporting SAF to
Asian counties including Japan.

• Use of a proprietary micro-channel
reactor and highly active catalyst

Naphtha, gasoline,
kerosene, jet fuel,and diesel fuel2nd step
Supplying SAF for
return flights to Asian
countries including
Japan.

• Miniaturization of the reaction volume
to 1/10th compared to conventional
technology

Japanese and Australiancompanies’ collaboration

Medium-term Management Plan

Electrolytichydrogen

TOYO’s strengths and characteristics

FT synthesis technology

1st step
Supplying e-fuel/SAF for local users forstable business start up.

Expanding clean fuel demand
The main applications assumed for synthetic fuel are aviation, ships, and large vehicles. In particular, given the medium tolong-distance routes typical of the aviation field, it would be difficult to select any non-liquid fuel from the perspective of energy
density, and the demand for SAF has been estimated to increase to around 450 billion liters by 2050. Meanwhile, in addition tomethanol’s conventional chemical applications, methanol is also promising for its applications as a synthetic fuel, so the demand
for methanol has been estimated to increase to 500 million tons by 2050, an increase of five times compared to 2020.

(Unit: millions of tons)

449
346

229

ing to aviation-fuel raw material in the future—relatively early social implementation is expected. Although most of the current
work is at the study stage, it is assumed that projects will be advanced towards social implementation based on a schedule thatinvolves handling basic engineering and receiving EPC orders from 2024 to 2025.

500

Total market scale ofapproximately ¥110 trillion
assuming EPC conversion■ Renewable methanol*1

hydrogen. Methanol has already been practically applied as a ship fuel, and—given that there is a possibility of the market shift-

5 times2023

Government’s
outlook*

Basic policy toachieve GX

Synthetic fuelTotal market scale ofapproximately ¥350 trillion
assuming EPC conversion

Predicted methanol production output in 2050

Synthetic fuel assumes both a reduction in the cost of hydrogen derived from renewable energy and the full-scale spread of such

TOYO’soutlookg-Methanol®
synthetic fuelFS
Pre-FEED

2024

2025

2026

2027

2028

2029

Research and development aimed at reducing the cost of synthetic fuel, increasing thescale of production facilities, strategically forming carbon-cycle fuel production bases incoordination with the building of hydrogen and ammonia supply chains, promoting thedevelopment of rules related to CO2 emissions during usage, and promoting the transition
away from fossil fuels, especially in the aircraft, automobile, ship, and other mobility fields

2030

2030s

▲2030
• Practicalapplication ofsynthetic fuel

2040s

▲2040
• Commercializationof synthetic fuel(pursued as far
ahead of schedule
as possible)）■ Conventional methanol

100

90
8

23

2025

2030

2035

Source: Fly Net Zero 2050, IATA

34

TOYO ENGINEERING CORPORATION

Integrated Report 2023

2040

2045

2050

2020

2050

FEED

EPC/social implementation stage* Source: The Basic Policy for the Realization of GX: Reference document (February of 2023 Cabinet decision)*1 Biomass methanol and e-methanol
Source: Compiled by TOYO based on Fig. 47 of IRENA's Renewable Methanol
Report.

TOYO ENGINEERING CORPORATION

Integrated Report 2023

35

Data Section

Predicted demand for SAF up through 2050 toachieve net-zero emissions (Unit: billions of liters)

Roadmap to achieve social implementation

Foundation for Sustainable Growth*1 Fuel that enables the ongoing use of existing infrastructure*2 Fischer-Tropsch synthesis technology: developed in the 1920s in Germany as a technology for producing liquid fuel from synthesis gas*3 Methanol to Gasoline (technology for producing gasoline from methanol)*4 Methanol to Jet (technology for producing jet fuel from methanol)

Strategy “Advanced EPC Operation”
Advanced Engineering Operation Initiatives

and technology in order to take on challenges in collaboration
with various stakeholders.

TOYO’s strengths
1. Expert engineering knowledge, technical capabilities, and ability to apply skills in line with businessIn particular, TOYO is familiar with the required specifications for specific products that include ethylene, ammonia, and urea.
2. Technology, knowledge, and a business foundationthat TOYO has continuously improved
3. Human capital and an organizational culture thatenable operations, decision-making, and problem-solving based on experience and results

Improving engineering quality/productivity and achieving advanced operation

We used a piping Design Rule Checker (DRC) and felt the effects!
In recent years, due to the increasing size and complexity of projects, it has started to take longer tocheck the quality when issuing construction drawings. However, due to the increased digitalizationof recent projects, we can now use DRC to detect serious quality problems, which has enabled us tosignificantly reduce the time necessary to do quality checking work. In addition, these system-based
checks have improved the overall quality of construction drawings. DRC has also been extremely effective in terms of (1) interference checks (automatically reducing the amount of interference caused
by equipment and piping or eliminating interfering parts), (2) adding up construction materials (reducing costs by preventing the ordering of excess materials or the wrong materials), and (3) improving ourhandling capabilities (easily and promptly editing information extracted from 3D models to achieve theEffectively utilizing know-how and developing human capital
Effectively utilizing know-how

by participating in feedback study sessions, new technology/

We are promoting initiatives to prevent the recurrence of prob-

product explanatory meetings, and academic conferences/as-

lems and improve our engineering quality by rebuilding oursociations outside the Company.

To improve our productivity, we are promoting reforms andthe digital shift of our work, and, in fiscal 2022, we set a target of reducing the required man-hours by 20% and ended up
achieving an expected reduction effect of 18%.

We are building an Engineering Digital Twin (EDT) system toswitch from a document centric to a data centric approach, increase productivity related to transferring information, and visualize both work progress and engineering-information reliability inreal time. We have built an Engineering Information Hub (E-Hub)to serve as the foundation of the above system, thereby setting
up an environment that increases effects such as those below.

Feedback Knowledge Management System (FKMS) to imple-

BeforeEngineering work mainly based on passing documentsback and forthnatural-language processing AI with data, thereby greatly con-

Utilization of our engineering data integration platform
Connecting and structuring information by using tags
Process Data Sheet

Visual searches for related data

• It took a lot of time and hard work to process themassive amount of engineering data in a timely fashion while maintaining quality.
• Every time information was passed between the engineering, procurement, construction, and delivery
processes, there was an increased risk of mistakes orcontradictions.
• It was difficult to divide or integrate data, and utilizing
data was inefficient.

ment an accumulation and utilization cycle that enables the efficient accumulation and natural use of valuable knowledge.
By doing this, we have reduced the time necessary to search
for information and achieved a system that utilizes push-styleknowledge that combines solutions that take advantage of thesynergy between making tacit knowledge explicit and utilizing

Metadata attributes

Layoutdrawings
Point cloud data

Isometric
drawings

P&ID

Mechanical
Data Sheet• Because data consistency confirmation and change
management are automated, information can betransferred more smoothly.
• The new system eliminates duplicate work and enables engineering that offers a high level of change
trackability.
• The latest information and confirmation timing areclearly defined.
• Reusing data is easy.
The reliability (status) of data in E-Hub can be visualized in
combination with 3D figures and graphs. Going forward, weplan to use EDT to promote the utilization of our data for bothplant lifecycles, including post EPCC, and other projects.

36

TOYO ENGINEERING CORPORATION

Integrated Report 2023

Practical knowledge
communication,
sharing, and discussion

We create development opportunities that encourage thegrowth of individuals, including our Company-wide educational
programs, various specialized educational programs, OJT, onsite training, and other early education as well as the one-stop
provision of experience related to everything from engineering
to job sites and the provision of opportunities for employees totake on the challenge of highly difficult work with the support

well as the abilities of our individual staff members, such as

Field (1)Field (2)Knowledge
discovery andacquisition

Knowledge
Management

Tacitknowledge

Explicit
knowledge

Field (3)Utilization ofknowledge
for business

Naturalaccumulation ofknowledge

Explicit knowledge
Compiled by TOYO based on the SECI model.

Improving the Group’s collective strength through cooperation with group companies
Toyo-Japan has a long history of involvement with its group

improvement proposals, we collaboratively promote the de-companies—including guiding them, assisting them, andvelopment of tools and engineering criteria, and we take oth-transferring technology to them—and, through these efforts,

er steps to increase the Group’s collective strength based on

we have built relationships of trust and a common founda-

relationships as equals. Nowadays, thanks to the spread of ITtion with our group companies. Our group companies auton-

tools, it has also become easier for group companies to com-omously execute projects in their own countries while also

municate with each other. Our engineering departments reg-leveraging the collective power of the TOYO Group to pursue

ularly hold meetings with group companies to give each otherprojects around the world. In addition, Toyo-Japan does not

feedback while also sharing information on and discussing is-

simply engage in one-way communication with group compa-

sues to improve and enhance the Group as a whole.

nies. Instead, our group companies also provide feedback and
TOYO ENGINEERING CORPORATION

Integrated Report 2023

37

Data Section

PFD

Tacit knowledge

Developing human capitalof senior engineers. In addition, we promote flexible, creative
After E-Hub introduction
Work executed by using a centrally managed database

Field (1) Incorporate the accumulation of knowledge into our businessprocesses.
Field (2) Associate knowledge with the circumstances behind considerations and decisions that support it and share this.
Field (3) Extract and utilize required knowledge when it is necessary, similarly to a veteran.

tributing to improved engineering quality.

initiatives aimed at enhancing our organizational capabilities as
Object attributes

Rebuilding our Knowledge Management system

Foundation for Sustainable GrowthEngineering Digital Twin

1. Automating engineering
2. Automating quality checks
3. Shifting to engineering-information databasemanagement
4. Shifting to an engineering-schedule task management system
5. Digitalizing our cross-department interface
6. Predicting risks by utilizing AI

Toyo-India
DX Engineering
Department
Deputy Manager

shapes specified by our customers).

Reforms and the digital shift of engineering work

Example measures to shift our work towards
digitalization

Leonid A Lopes

Medium-term Management Plan

Plant engineering is proceeded based on our extensive expertise and unique product-related knowledge, and we handle
such work by coordinating between engineering conditionsand various kinds of engineering information while also resolving issues that include effects on procurement, construction,and commissioning. To ensure smooth progress, it is necessary to organically and efficiently share engineering information that is guaranteed to be of high quality in a timely fashion.
The technology, business foundation, and human capital that
TOYO tirelessly develops represent one of our key strengths
in terms of promoting high-quality engineering. In addition,
through our experience working on diverse services and products that are not limited to specific fields, we foster a culturethat enables us to flexibly absorb and utilize new knowledge

Employee voices

Management Vision

The source of TOYO’s engineering capabilities

Strategy “Advanced EPC Operation”
Advanced Procurement Operation Initiatives
Employee voices

Over the past two years, we have faced huge changes that ex-

our range of choices; 2. Utilize the latest data; 3. Develop flex-

Ensuring quality and on-time delivery through expediting suppliers andimplementing early measuresceeded our expectations. Examples include an explosive rise

ibility of thought and action.

Toyo-Japan had ordered key equipment from an Italian manufacturer for a chemical plant in Japan,

Management Vision

Reinforcing Our Procurement Capabilities

and we were asked to oversee the production process of the Italian manufacturer.

in the price of materials, protracted transportation times, andTo achieve these goals, we have defined the following con-restrictions on movement. In light of these changes, we havecrete measures: 1. Strengthen our procurement risk management

We faced three challenges: 1. This was the first time we had dealt with the manufacturer; 2. The

worked hard to mitigate the impact of cost increases and toskills; 2. Promote the digitization of our procurement operations;crisis in Ukraine had led to a spike in the price of steel materials; 3. The equipment had to comply

avoid delivery delays. Procurement environments are subject

3. Develop our human resources. Achieving the goals 1.–3. out-

with Japanese laws and regulations, specifically the High Pressure Gas Safety Act. We stationed em-

to significant fluctuations, and we have identified three key

lined above will contribute to the success of our projects—andployees at the manufacturer’s plant and observed how production was progressing, we learned thegoals for improving our ability to cope with them: 1. Increase

this, in turn, will enhance the value of our procurement.

essence of the manufacturer’s concerns by speaking in local language, and we increased the fre-

Giuseppe Lama
Toyo-Europe
Managing Director

quency of communication with Toyo-Japan more than usual. Implementing these measures enabled
us to deal with the majority of issues at an early stage. At one point, it appeared as if delivery would
be significantly delayed; in the end, however, the equipment was shipped on schedule.

2 Promoting the digitization of our procurement work
In our procurement, we adopt the approach of CC (commission-and the other is that, through integrated EPC execution, we

ing and construction) Driven Engineering, which gives the high-can keep continual track of the scheduled arrival dates of each

est priority to improving the productivity of commissioning anditem of equipment and each material at our construction sites.

construction operations. We are particularly focused on visual-

Suppliers update data using a shared format on our portal web-izing production process data—which includes the engineer-site; this enables Toyo and its suppliers to identify and share any

ing specifications for various equipment and materials and thedivergences between plans and the latest progress. Utilizing

Flexibility

quantities required—in our supply chain management (SCM).

the latest data, we can accelerate our initial response to SCM

That has two benefits: one is that we can detect signs of de-risks, thereby reducing delays in delivering equipment and ma-lays at an early stage by streamlining supplier progress updates

terials, and preventing increases in construction costs.

Reinforce procurement capabilities

Increasechoices

Utilizelatest data

2

3

Risk
management
skillsDigitization

Human
resourcesdevelopment

Employee voices
Operational reforms and system development aimed at optimizing the whole
We are now carrying out operational reforms and developing systems that harmonize with redefined SCM functions in EPC integrated perspective. This brings three advantages: 1. With regard

Procurement environments subject to significant fluctuations inrisk conditions

to data required to carry out procurement risk assessments, we can respond to risks from a CC
Driven-approach; 2. The latest data which previously retained in the procurement departments or

1 Strengthening our procurement risk management skills

person in charge can now be widely shared; 3. Limited resources can be allocated on a priority basis. With regard to operational reform, the process of switching from the old work style we were

Airi Kimura

new fields; collaborating on projects; and flexibly sharing humanand materials from optimal countries. This is made possible

resources. The equipment and materials market is beginning toby Toyo’s network of overseas subsidiaries, which are locatedstabilize following the tumult of the last two years; neverthe-around the world. Rooted in their local communities, our pro-less, geopolitical risks remain, and procurement risks are liablecurement subsidiaries go about their work independently; at theto skyrocket again in the future. By utilizing Toyo’s global activi-

same time, all Group companies share close relationships, andty bases, and by increasing our range of procurement choices—

3 Developing our human resources

coordinate with each other in line with various requests. Group

based on ensuring readiness in our main suppliers’ production

As far as human resources development is concerned, ourdifferent Group organizations, and posting them to overseas jointcompanies coordinate on wide-ranging topics, including: ex-region, and on sharing knowledge between our procurement

goal is to nurture human resources capable of the “4As,” of be-

ventures. With regard to employees engaged in procurement,changing latest information on suppliers; providing support for

subsidiaries—we can respond to everchanging risk conditions.

ing able to “achieve,” while “abroad,” even when “alone,” andwe intend to provide them with more opportunities to broad-“away” at other companies. Our overseas procurement ratio

en their horizons, and to react to events with greater speed andstands at more than 65%, and we do not always use the same

resilience, in situations where unexpected things can happen.

Employee voices
Familiarity with regional information leads to the discovery of new suppliersThis February, we received a request for assistance from Toyo-Japan, which would be built a fertilizer plant in Africa and wanted to procure equipment from India. Toyo-Japan had initially intended
to purchase this equipment from South Korea; but, following the end of the coronavirus pandemic,plant construction within South Korea had increased rapidly, causing South Korean manufacturers
to raise their prices significantly. The Toyo-India Procurement Division has vast experience dealing
with excellent manufacturers that Toyo-Japan is unfamiliar with. As such, after jointly investigating
the details of potential suppliers on our recommendation, we were able to consider several manufacturers of pressure vessels and heat exchangers who were capable of required specificationsat an acceptable price.

38

TOYO ENGINEERING CORPORATION

Integrated Report 2023

Rajdatta B Patil
Toyo-India
Purchasing Department,
Procurement Division,
Deputy Manager

used to, to a new work style is an extremely difficult task, and can result in various issues; however, we are making steady progress toward our goal of executing work in a manner that is optimalfor the entire EPC process.

Toyo-Korea
BPO Department,
Procurement Division,
Buyer & AWP SCM Leader

suppliers. As such, we frequently encounter problems, and ne-

The Procurement Division comprises four departments—

gotiations can be extremely challenging. If we wish to success-

Purchasing, Supply Chain Management, Quality Control, andfully manage procurement risks, which are constantly changing,

Strategic Procurement Promotion—and so our organization

then the flexible ideas and actions of “4A” human resources

has a roughly 50-50 split between arts and sciences. Since

who have mastered the concept of “individual diversity” will be

our employees have opportunities to engage in cross-func-

a huge asset. At the same time, this ability to respond flexibly

tional discussions with experts in different fields, they develop

will also be of use for joint ventures and other collaborative orga-

diverse perspectives. In addition, our employees experiencenizations, which have increased in recent years. Now that restric-

different responsibilities on a rotational basis, working togeth-

tions on movement have been lifted for the first time in three

er with colleagues from different countries. In this way, we

years, we are once again moving human resources between

promote the development of “4A” human resources.
TOYO ENGINEERING CORPORATION

Integrated Report 2023

39

Data Section

One of Toyo’s strengths is that it always procures equipment

Foundation for Sustainable Growth1

Medium-term Management Plan

Enhanceprocurementvalue

Strategy “Advanced EPC Operation”
Advanced Construction Operation Initiatives
Increasing the efficiency of site management by promoting construction DX

Reducing construction-period delay risks and cost overrun risks inregions that have high labor costs and various serious risks

Introducing our construction management system (iCON)

Nowadays, construction work involves great risks due to theincreasing size, complexity, and diversity of plants, and suchrisks are becoming more difficult to predict. To reduce construction risks, our Construction Division is taking various measures that include Constructability Study*1 enhancement andoperating it in the cloud in 2019. (Track record of 15 projects plus seven projects for which the system will be introduced in fis-

TOYO developed and started operating its construction management system (iCON) in 2004 and then started developing andearly project construction planning through the introduction of
AWP*2. Of these measures, we believe that applying the modular construction method could be a major solution and are
therefore focusing on it.

Characteristics of the modular construction method• This construction method involves producing parts of plants (modules) at factories, transporting them to the construction site, andthen assembling them there.
• Compared to normal construction methods, interfaces of EPC are more complex, which makes the modular approach difficult.

Production

Transportation

On-site assembly

Advantages of introducing iCON
• Because entry is possible using mobile devices, accurate site data can be centrally collected and managed in a timely fashion.
• Linkage with the Project Twin enables the visualization and sharing of the site situation. The dashboard can be used to gain a quick
understanding of issues and then promptly respond.
• This system also greatly contributes to saving labor on repetitive work—including everything from data collection to reporting—enabling the use of more time for important work.

TOYO has also started utilizing many other DX systems and is promoting the increased efficiency of construction management. The time that is freed up by increasing efficiency can be used to take effective action related to safety, quality, andmeeting deadlines.

Early development and training of FCMs

Advantages of the modular construction method• Transportation costs: Because it costs money totransport modules, there is little or no advantage except construction sites that have high labor costs.
• Detailed planning and management: More detailed
planning and management are necessary in terms ofproject management compared to the conventional
approach, including process management related tomodule production and on-site construction as well as
the management of drawings and materials.
• Additional work: It is necessary to do construction-plan and management-related work that was
not necessary for the normal construction method, including transporting large modules by land andsea, installing heavy goods at the construction site,
and fitting up.

early at Japanese sites. (Track record: 12 results) By not only

ities, one important issue is to develop and secure FCMs

obtaining construction management know-how and techni-(Field Control Managers), who are key people for construction

cal knowledge but also accumulating experience that enables

management. As one step for overseas sites—which differ

us to demonstrate leadership and negotiating power, we arein terms of their culture, environment, and other characteris-

promoting early growth and striving to improve TOYO’s overall

tics—Toyo-Japan is taking on the challenge of training FCMs

construction management capabilities.

FCM’s voices
Pursuing win-win relationships with customers and contributing toregional development
The Gobo biomass-fired power plant project I am in charge of is a recent project that TOYO
received in 2022, and we are incorporating feedback from past projects to achieve thoroughconstruction planning and management. In addition, we are contributing to the regional economy and considering the opinions of locals as we handle the construction, including various
kinds of cooperation with Gobo city as well as the appointment of local companies as the construction companies for the project. We also pursue win-win results from the perspective of
our clients, put safety first, and constantly remain mindful of the need for both quality control
and meeting construction deadlines. Through this project, we hope to focus all our energy on

AWP as a way toachieve the modular construction method

the sustainable development of the region to achieve personal growth as well.

TOYO has been building up experience related to the modular
construction method since around 2005, especially in relation
to FPSO construction work. We have a lot of module manufacturing plant experience in China, Southeast Asia, and Brazil,
and we are capable of managing construction in line with thecharacteristics of each region. Going forward, we will consider
using the modular construction method for larger FPSO units
as well as fuel ammonia and other projects, and we will pursue
initiatives to further enhance our related systems and improve
our construction productivity.

As described above, the modular construction method requires
a detailed construction plan and management. To handle this,TOYO has introduced AWP to promote the linkage and adjustment of various kinds of necessary information, the achievement of detailed initial construction plans and Constructability
Studies, the creation of schedules, and drawing, material, andconstruction-management work based on the above.

FCM’s opinion

TOYO ENGINEERING CORPORATION

Integrated Report 2023

Construction Planning
Department
Construction Division

Utilizing our understanding of the contract and DX tools to suitably
manage the budget and processes
I first took on the challenge of being an FCM at our Gamagori biomass-fired power plantsite. The FCM’s main job is to stick to the budget and execute the project in line with theconstruction period. During the recent project, I mainly gained experience related to managing additional costs and processes. Thanks to my deep understanding of the contract
details, I was able to minimize unnecessary costs when additional construction work became necessary. In addition, to more efficiently manage processes, I actively learned about
Power BI and other DX tools, visualized the construction progress by using graphs, etc., andreported such details to our customers in an easy-to-understand way. I hope to utilize this40

Geoffery Mutyaba

Data Section

Extensive modular construction
method experience*1 An assessment to determine whether the building construction process can be handled efficiently and smoothly*2 Advanced Work Packaging (a process driven by construction planning and method for digitalized project execution managing work packages throughout project)Foundation for Sustainable Growth

Because a factory equipped with the necessary facilities can be used to
produce major parts of buildings, the modular construction method has
the advantages below and can significantly reduce construction-period
delay risks, quality risks, and cost overrun risks.
• Reduced construction period: The amount of work and time necessary to complete on-site assembly work can be reduced.
•
Improved quality control and production efficiency: Decreased
quality resulting from climate conditions and construction-precisionvariance can be minimized, and production efficiency can be increased.
• Optimal factory selection: Optimal manufacturing factories can beselected based on perspectives that include costs, technical capabilities, and experiences with TOYO, so there is no need to limit operations to the country where the construction is taking place.
• Minimized construction site risks: Various risks can be minimized, including construction-site weather risks, the risk of being unable to secure outstanding workers, and the risk of soaring labor costs.

Issues related to the modular
construction method

In terms of enhancing our construction execution capabil-experience to actively participate in future domestic and foreign projects.

Medium-term Management Plan

Modular construction method flow (FPSO example)

cal 2023)

Management Vision

Optimizing construction through our modular construction method

Qiaoyi Li
Construction Planning
Department
Construction Division

TOYO ENGINEERING CORPORATION

Integrated Report 2023

41

Strategy “Advanced EPC Operation”

Using DXoT to Change Our Business Model Through AWP
communicate by using the same data but also enables dashboard viewing based on analysis perspectives specific to each man-

which involves digitalizing individual projects, (2) insightful project execution, which involves optimizing overall projects by inte-

agement level/degree of precision while also supporting predictions and decision-making by each level.

grating EPC data and achieving more flexible project execution through efforts that include agile replanning in response to irregu-

We first applied an AWP approach that uses the above system to a lubricant project in India received in fiscal 2022. Applying

larities, and (3) resilient project execution, which involves achieving future predictions via digital twins for EPC.

this system contributes to improved quality and helps to reduce unnecessary costs.

We have already built our EPC-Hub—a database that integrates EPC data that makes up the project foundation—to finish

As we strive to shift to the next step, resilient project execution, we will also aim to achieve more flexible EPC operation to at-digital project execution, and we are currently shifting to the insightful project execution stage. We used the EPC-Hub data as

tain six times the productivity by 2025.

a foundation to develop our irregularity detection and replanning systems. This not only enables all the concerned parties to

EILB Project Hazard

CWA Lv.1

WP Type

Milestone

xxx

All

All

All

All

100%

from the perspective of overall project optimization

Layout Stage

30% Model Review

Remaining Process Rate

100%

ENG

SCM

Const

SPI 0.8
CP 1.4I

SPI 0.8
CP 1.4I

SPI 0.8
CP 1.4I

MHFoundation for Sustainable GrowthRemaining Process Rate

specific to each management level/granularity

SPI-CPI Trend

WP Lv.1 Schedule
Difference

Milestone Buffer Risk
Map

100%

Agile replanning

Milestone wise Remaining
BufferMilestone Schedule and Status

Milestone
Remaining Buffer Rate

Detecting irregularities

Medium-term Management Plan

Monitoring the consumptionof our buffer for
responding to cost andprocess fluctuation risks

WP BOQ

Consumption

Trend
0

X

Days

WP Lv.1 Schedule Difference

Achieving results

UI/UX(visualization, analysis, data utilization)

Our EPC-Hub is used to collect all the EPC dataso that the latest data can be centrally managed.
This improves the quality of reporting that includes everything from planning to construction while also achieving effective progress
management

Project Hub
Engineering Hub
Supply Chain HubConstruction Hub
Knowledge Hub• Dashboard

Azure based TOYO Integrated Cloud Platform

TOYO ENGINEERING CORPORATION

Integrated Report 2023

Data linkage• Simulation• Mobile IoT

User access
Data linkage

Customers

Engineering SC

Suppliers

Data Section

to use as a foundation for overall
project optimization

Project data
integration hub• Digital twin

Setting of application-specific roles

Integrating EPC data

42

Management Vision

We are using DXoT to work on achieving Advanced Work Packaging (AWP) through three stages: (1) digital project execution,

User accessCustomers

JV partners

JV partners

Partners
Construction SC

Method of integration withusers outside the Company (1)Services that enable data linkage by using
TOYO systems under suitable security andaccess management

Method of integration with users outside theCompany (2)Data-only linkage with a UI/UXTOYO ENGINEERING CORPORATION

Integrated Report 2023

43

Market Environment and Business Strategy
India

The United Nations Population Fund (UNFPA) has announced
in its “State of World Population Report 2023” that India is ex-

10

try by mid-2023. In addition, according to the International

8

Monetary Fund (IMF), India ranks as the world’s 5th highest6

est economy by surpassing Japan and Germany by 2027. As

three domestic oil refineries, scheduled for completion in thement-intensive petrochemical projects within India.

An oil plant for HRRLAn LNG regasification facility for HPLNG

420a result of its immense market size and strong economic-2

growth, many overseas companies are actively promoting-4

expansion into India.

-6

In spite of the slowdown of global demand and the tighten-

fiscal 2024, and will continue to actively participate in invest-

Real GDP growth rate (annual) (%)

pected to surpass China as the world’s most populous coun-

GDP in 2021 and is expected to grow the world’s 3rd larg-

industry. Toyo-India is currently executing expansion projects in

(FY)

2019

ing of monetary policy to curb inflationary pressure, India re-

2020

2021

2022

2023 (plan)

Source: Compiled by TOYO based on an IMF announcement

LNG regasification facility market

in March 2023, and the IMF has also announced that the coun-by 63.4% and is driving India’s economic growth. In particular,

try is expected to maintain a high growth rate of 6.1% for thethere has been strong export growth for the services sector,

India has set a target of increasing the percentage of its do-regasification facilities for the total processing capabilities offiscal year ending in March 2024. In addition, the capital ex-

which has been improving the outlook, along with comprehen-mestic energy consumption covered by natural gas from the

LNG receiving terminals in India. Leveraging our experiences

penditure by the central government of India has increased

sive trade agreements with major trade partners.

current 6.2% to 15%, and the natural gas consumption is ex-

and track records, we are committed to pursuing further op-

pected to increase from 174 million m3/day in 2021 to 555 mil-portunities in this field.

lion m3/day by 2030 at a CAGR of 12.2%.

Toyo-India’s growth strategy
ly to become one of leading India-based comprehensive engineering companies, with over 2,000 employees, throughout
executing various projects, including fertilizer (ammonia andAs of December of 2022, there were a total of 22,335 kiMajor project results in India (number of projects)

plans to connect all the states by 2027 through major pipelines has been established. The development of gas-infra-

71

lars: detailed engineering design for large-scale projects un-

7

structure-network is expected to lead to an increase in the

Other
companies

47%

Annualproduction
output:

42.7

TOYO

53%

million tons

demand of India’s LNG import.

2

14

two years ago has gotten on track and is now focusing on the1Group’s overall digital transformation promotion, contributing

3

9

3

9

Toyo-India has successfully constructed about half of the

Potential of the carbon neutrality field
The Indian government has implementing various policies to

Indian Rupees (approximately 2.4 billion US dollars) to pro-and competitiveness.

achieve energy independence. As part of these efforts, a tar-mote the hydrogen industry. Additionally, various state gov-

get has been set to increase the blend ratio of biofuel includ-

ernments have introduced their own independent investment

ed in gasoline and diesel fuel to 20% by the fiscal year ending

incentives, both of which are expected to further boost in-cusing on core business opportunities within domestic oil andMarch 2026. Regarding which they declared to achieve a ratio

vestments in green business in India.

petrochemical industries where new investment is expected.

of 10% in June 2022. However, due to the raw material sup-In particular, India’s renewable energy, such as solar andply shortages, India still relies on imports for about 40% of its

wind power, is known for its remarkable price competitive-

as chemical / specialty chemical industries, as well as green

fuel, and there are many plans to boost the country’s produc-

ness, which is an important element in terms of promoting

business fields toward decarbonization goal.

tion capacity, including second-generation (2G) biofuel

projects aimed at transitioning from fossil fuel to alternative

Given that Indian economic development is expected to remain robust, Toyo-India is strategically positioning itself by fo-

Additionally, we aim to expand its business into sectors such

1

12

8

5
1

*1

and

compressed biogas*2 (CBG).

Oil and petrochemical market

energy sources.

In addition, at COP26 (a conference held in 2021), Prime

Given the above boost provided by governmental measures

Minister Narendra Modi announced India’s commitments toas well as the strong potential inherent in India’s location, pub-achieve net-zero emissions by 2070, including the supply of

lic sector companies as well as leading private renewable en-

The demand for downstream petrochemicals is also ris-

500 GW of power from non-fossil power sources by 2030,

ergy companies are gradually coming up with ways to invest

ing, as an important element in supporting the development

thereby reducing the country’s overall greenhouse-gas emis-

in various green related businesses, including green hydrogen

The projected annual average growth rate (CAGR) for crudeof other industries, including infrastructure and pharmaceuti-sion intensity by 45%. Under India’s latest National Greenand ammonia, green methanol, 2G bioethanol, and CBG. Toyo-oil consumption is 5.14%, expected to increase from 4 million

cals. The scale of India’s market for chemicals and petrochem-

Hydrogen Mission, announced by Indian government inIndia, while supporting its clients’ investment plans, will con-barrels per day in 2021 to 7.4 million barrels per day in 2030.

icals is expected to reach approximately 1 trillion US dollars,

January 2023, which offered renewable energy incentives

tribute to the economic development of India.

so state-owned oil companies and major private companies

for green hydrogen and ammonia, the government present-

are promoting plans to actively invest in the petrochemical

ed a plan to allocate a budget of approximately 197.4 billion

India, as the world’s 3rd largest consumer of oil, is experiencing rapid growth in its crude oil consumption due to the country’s rapid economic expansion driven by population growth.

Indian government plans to double the oil refinery capabilitiesof 23 refineries in India (approximately 251 million tons per

44

TOYO ENGINEERING CORPORATION

Integrated Report 2023

year as of October of 2022) by 2030.

*1 Biofuel that uses non-food biomass as a raw material.
*2 Flammable gas that is produced through the fermentation and anaerobic digestionof waste and biomass resources.

TOYO ENGINEERING CORPORATION

Integrated Report 2023

45

Data Section

to the enhancement of TOYO’s project execution capabilities

Foundation for Sustainable Growth

generation, and FPSO. Our core business is based on two pil-projects. In addition, DXoT support team set up at Toyo-India

It is projected that the network will expand by approximately
54% to reach 34,500 kilometers by fiscal 2024. Furthermore,

28urea), oil refinery, LNG regasification, petrochemicals, power

dertaken by the TOYO Group and domestic EPC / consulting

Share of LNG regasification facility construction results

lometers of natural gas pipelines in operation in this country.

Medium-term Management Plancorded an annual growth rate of 6.8% for the fiscal year ended

Toyo-India, which was founded in 1976, has grown significant-Management Vision

The market of India, home of the world’s largest population

Market Environment and Business Strategy
Indonesia
Initiatives in the carbon neutrality field

Indonesia is the largest ASEAN country in terms of its geo-transition through a long-term energy plan that prioritizes in-

To help achieve carbon neutrality, the state-owned fertil-graphical area, population, and GDP. In the next 30 years, thevestment in clean energy. In order for the country to achieveizer company Pupuk Indonesia—which produces 80% ofcountry’s population is expected to increase to around 335

its decarbonization scenario, it will have to invest a total of 2.3

Indonesia’s ammonia—has formulated a long-term roadmap

million people, its economic scale will be extended to more

to 2.4 trillion dollars by 2050. Around half of this investment

aimed at reducing CO2 emissions and has announced the in-than triple, and its primary energy demand is expected to in-will be allocated to renewable energy, power grids, electrici-

tention to develop blue ammonia and green ammonia.

crease. In addition, by the end of 2023, the country is aiming

ty storage, and other related infrastructure to achieve power

to reduce its GHG emissions by 29% through its own efforts

field reforms. It will also be necessary to invest a lot of mon-and by 41% with international support, and the country has

ey in industries that include bioenergy, hydrogen, blue/green

also announced its intention to achieve net zero emissions

ammonia, and batteries for EVs (electric vehicles).

by 2060. Indonesia also has a plan to accelerate its energy

IKPT was founded in 1982 and is a leading EPC company that has been involved in oil

Indonesia has abundant natural resources and therefore has

Loop System which can serve as a breakthrough technolo-

a lot of potential in terms of renewable energy, especially hy-

gy to expand client’s geothermal capability by reactivating de-droelectric, geothermal, and solar power generation. Under

pleted/suspended well due to lack of downhole steam. In theIndonesia’s plan, in order for the country to achieve net zerogeothermal power generation field, IKPT will implement aemissions (NZE) by 2060, the country has set the following

blue ocean strategy to generate new demand while simulta-

target for the ratio of its power covered by renewable ener-

neously pursuing differentiation and low costs.

the state-owned power company PLN, the country intends

the 1990s, and, in 2012, IKPT became a consolidated subsidiary of TOYO. Since then,IKPT has done business in a wide range of fields, including oil, gas, petrochemicals,
chemicals, fertilizer, infrastructure, power, and consumer goods.
The company is currently aiming to enter new markets via new client development

1995

Gunung Salak unit 4, 5, and 6 project (3 × 55 MW)

generation, geothermal power generation, biomass-fired pow-

2010

Lahendong unit 4 project (1 × 20 MW)

2011

Ulubelu unit 1 and 2 project (2 × 55 MW)

the company has maintained collaborative relationships with2017

Lumut Balai unit 1 project (1 × 55 MW)

strategic partners and stakeholders, including companies,

2019

Dieng small-scale project (1 × 10 MW)

2023

Blawan Ijen unit 1 project (1 × 34MW)

Through the projects IKPT has implemented up until now,

dium-term management plan consisting of two main strategies: networking and digital transformation. The company plans to build a network with business stakeholders tofund providers, and OEMs. In addition, Currently, IKPT is alsoenhance its existing services and expand its portfolio into new fields, including carbon

supporting TOYO for the promotion of technology of Closed
Lori Octavia

with licensors and OEMs.*

IKPTCorporate Planning Department
ManagerFoundation for Sustainable Growth

rently. The company is also enhancing its cooperation not only with customers but also

IKPT’s geothermal power generation results

to achieve the above target through new hydroelectric powerer generation, and biomass co-firing at coal-fired power plants.

while also promoting the enhancement and expansion of its services based on a me-

Due to global trends associated with new business fields related to the energy tran-

IKPT’s strategy in the geothermal power generation market

Under the Electricity Supply Business Plan (2021 to 2030) ofstarted with collaboration on fertilizer plant construction projects and other business insition and carbon neutrality, IKPT will aim to further enhance its EPC business in renew-

TOYO will continue focusing on helping to achieve carbon
neutrality in Indonesia.

gy: to increase the ratio from 14% in 2021 to 23% by 2025.

and gas processing plants for many years. TOYO and IKPT have a good relationship thatneutrality. IKPT’s client base increased from 19 companies in 2012 to 37 companies cur-bility study for Pupuk Iskandar Muda’s fertilizer plant.

Medium-term Management PlanIKPT’s history and future growth strategy

TOYO has conducted a green-ammonia-production feasi-

Management Vision

Indonesia’s market environment, which is aimed at achieving carbon neutrality

able energy fields, including geothermal power generation, while also pursuing morebusiness opportunities.
* Original Equipment Manufacturer (a company that produces outsourcer-brand products)

Network with new clients
Dieng small-scale geothermal power plant

37

New Clients• Collaborative projects withTOYO
4 companies• Independent IKPT projects
33 companies

19• Railways, power plants,
geothermal power
generation, and other new
business

Clients

1982

Potential demand for geothermal power plant development in Indonesia up through 2030

2012

Data Section

Participation in the TOYO Group

Signing ceremony for the Blawan Ijen unit 1 geothermal power plant
project

Aceh, Sumatra
2,725 MW

Java, Bali
1,800 MW

Sulawesi
455 MW

Other
regions inEast Indonesia
480 MW

2023

Source: 2021 to 2030 Electricity Supply Business Plan, PLN

46

TOYO ENGINEERING CORPORATION

Integrated Report 2023

TOYO ENGINEERING CORPORATION

Integrated Report 2023

47

Market Environment and Business Strategy
FPSO

In 2022, we established the strategic affiliate Offshore

Initiatives to reduce the environmental impact

to maintain their superiority for the time being.

For the orders we received at the end of April of 2023 and at

FPSO as our main business product, the reason we called the

The FPSO market had its first boom from 2003 to 2012,

the beginning of May—the Uaru project (Guyana) for Exxon

new company Offshore Frontier Solutions is that our plan isand—given the cyclical nature of this market—it will have an-

Mobil and the BM-C-33 project (Brazil) for Equinor—given thefor the company to be a provider of all kinds of offshore solu-

Currently, major oil companies and state-owned oil compa-

other boom in the next ten years, and a lot of large projects areneed to consider the environment, we have decided to intro-

tions, so we intend to actively and horizontally expand into off-nies have a lot of investment appetite for the FPSO market.

being planned. Our policy is to devise a reliable strategy for tak-duce combined-cycle power generation, which reduces theshore ammonia, offshore hydrogen, and other green and blue

As the SDG tide rises, most major oil companies are setting

ing advantage of these trends, foster an environment that en-

CO2 emissions compared to conventional gas-turbine power

projects. In essence, we will utilize the knowledge possessed

CO2 emission reduction targets. As such companies con-ables us to help create this market, assign an order of priority

generation. In addition, although we are currently focusing onby MODEC and TOYO to build a new business model.

sider how to reduce their CO2 emissions and maintain theirfor selecting projects, and reliably receive orders as a result.

Frontier Solutions (OFS)—which handles FPSO EPCI* work—with MODEC, Inc. in Singapore.

cost competitiveness, they are planning to continue invest-

We will take full advantage of both MODEC’s market build-ing heavily in the deep sea field (a growth field) until arounding capabilities and knowledge as well as TOYO’s FPSO top-

2030. When major oil companies select FPSO EPCI contrac-side project results and know-how to increase the orders wetors, they prioritize contractors that are capable of executing

receive and reliably execute projects.

as a spin-off company to handle business related to ocean projects for a shipbuilding* Engineering, Procurement, Construction, Installation

EPC work to charter operations while also providing services related to oil produc-en track records, and the market’s two leading companies—

Partner’s opinion
This year marks MODEC’s 55th year in business. Our company was originally started
company, and we currently pursue initiatives related to everything from pure FPSO
tion activities.

SBM (based in the Netherlands) and MODEC—are expected

MODEC has grown rapidly in the last 20 years, and we now hold the number 1 shareof the FPSO industry. Both our organization and the scale of our business grew before

TOYO’s FPSO results

we knew it, and—during the last ten years—we learned a lot of hard lessons about how
difficult FPSO operations are as well as differences compared to EPCI work. At first,

and constantly reminding subcontractors what needed to bework as a subcontractor for MODEC to expand our offshore

done. By fusing the strengths of our two companies—specif-

knowledge, and then, in 2010, we established the joint ven-

ically MODEC’s ability to handle projects based on its knowl-

ture MTOPS with MODEC for the purpose of executing proj-

edge of FPSO-specific requirements and TOYO’s experienced

ects and started jointly handling EPCI work. All the projects

systematic plant-engineering management and construction

we handled through MTOPS were for Brazil, which means

management methods—we were able to achieve synergis-

the projects had local content requirements.* We were aid-

tic effects that we believe led to successful project execution.

ed by the exchange rate difference with the Brazilian real,

Through the new establishment of OFS, we will not only

and—in spite of the difficult environment, including regu-

provide engineering technology but also contribute to con-lations, the culture, and the national character of the peo-

struction, foster a culture that provides our customers with

ple—we were able to successfully complete the projects byboth cost competitiveness and high value, and endeavor tosetting up an organization capable of project execution, imple-

ensure the success of projects.

that we ultimately judged TOYO to be our best possible partner.

*Regulations that require a certain level of procurement from local companies basedin the country, etc.

hope that we can continue to contribute to the stable production of fossil fuel, which

menting detailed reporting and cost schedule management,
Completed
in

2005

2008

BHPBP/MODEC

Australia

80,000Toyo-Japan

EPCm

2007

2008

BHPBP/MODEC

Australia

96,000Toyo-Japan

FEED

2008

2011

BP/MODEC

Angola157,000

Toyo-Japan

FEED+E

2010

2012

Petrobras/MODEC

Brazil120,000

MTOPS

EPCI

2011

2013

OSX 3 Leasing B.V./MODEC

Brazil100,000

MTOPS

EPC

2011

2014

Petrobras/MODEC

Brazil

150,000

MTOPS

EPCI

2012

2015

Petrobras/MODEC

Brazil

150,000

MTOPS

EPCI

2013

2016

Petrobras

Brazil100,000

MTOPS

EPCI

2013

2018

Petrobras/MODEC

Brazil

150,000

EBR*

EPCI

2019

2020

MODEC

Brazil

180,000

EBR

C

2019

2021

MODEC

Brazil

180,000

Toyo-Japan, Toyo-India EBR

EC

CustomerCountry

Production
capacity (BOPD)

Contractor

Service details

it for twenty years before earning a return, and—as a result of getting involved in too
many projects—I feel like we lost sight of our basic value, which is to make things thatare good, as well as the culture and abilities necessary to support this. At the same

Soichi Idetime, because we established a position in the market, it was necessary to respond to

Executive Managing Officer andGroup CDO (Chief Digital Officer)of MODEC, Inc.
President & CEO (Chief Executive
Officer) of MODEC Offshore
Production Systems (Singapore)
Pte. Ltd. and Offshore Frontier
Solutions Pte. Ltd. (Singapore)its needs and to find a partner we could trust.
Our history with TOYO goes way back, and we have worked on many projects together. TOYO is home to many professionals who are experienced with FPSO projects,
and TOYO is also appealing in terms of its diligence as a company and its many otheroutstanding executives and employees. Given the above strengths, it was only natural
The energy industry is currently at a major turning point. To support this transition, I
supports the daily lives of people, for the time being as we take steps to ensure thatthe partnership between our two companies adds up not just to two but to ten or evena hundred times the effectiveness, including innovating, finding the courage to get outof our comfort zone, and steadily making revenue as we work together to formulate andexecute strategies for handling the energy transition.

Data Section

Order
received in

we did not fully understand the concept of building a huge plant and then having to use

photo courtesy of MODEC

MV32 FPSO completed in 2021

* A Brazilian 50% equity-method affiliate

48

TOYO ENGINEERING CORPORATION

Integrated Report 2023

Foundation for Sustainable Growth

In 2005, we started out by mainly handling engineering

Medium-term Management Planprojects within the desired time period and that have prov-

Management Vision

FPSO market environment and establishment of OFS

TOYO ENGINEERING CORPORATION

Integrated Report 2023

49

Market Environment and Business Strategy
Japan

Functional chemicals

Semiconductors

Growth is anticipated in this field, and we expect the global mar-

The global market for semiconductors for use in mobile

ket for functional chemicals (electronic materials, dyes and pig-

phones, data centers, and automotive IoT is expected to bements, food additives, fragrances, and agricultural chemicals) toworth approximately 100 trillion yen by 2030—roughly dou-

double in size between and 2030 to approximately 10 trillion yen.

ble its value in 2020. In Japan, too, companies are investing

All of Japan’s leading chemical companies are overhaul-vast sums in semiconductor production facilities; for this rea-

ing their portfolios, shifting from traditional all-purpose pet-son, demand both for semiconductor auxiliary materials androchemicals to functional chemicals. In particular, companies

for semiconductor production equipment is expected to rise.

are positioning optical resins (materials for mega-lenses, andSpecifically, the semiconductor industry uses a variety of ma-

for smartphone and in-vehicle camera lenses), agricultural

terials, including etching gases, photoresists, silica glass, andchemicals, and exhaust gas-purification catalysts as points ofprotective tapes, and we believe that investment in produc-

difference and growth drivers; as such, they are proactively in-tion facilities for these materials is set to grow.

tinue in the near future.
Global market for functional chemicals(synthetic organic chemicals) (trillions of yen)

Market for semiconductors for IoT use
Industrial equipment(smart cities,
smart factories, etc.)

Electronic materials (for EVs, electric appliances,and electronics)

PCs

1.3

Dyes and pigments (for paints and inks)
Food additives (for flavorings)

Automobiles

2030

Fragrances (for cosmetics and perfumes)
Smart home appliances

Agricultural chemicals
Other (surfactants and adhesives)

MobilephonesHome appliances

3.5

Data centers and SSDs

Industrial equipment
PCs
Automobiles

Industrial equipment

PCs

Automobiles

1.7

1.2

0.9

1.0

0.5
0.4
0.5

1.2

2015

2030 forecast

Smart home
appliancesHome
appliances

Mobilephones

100 trillion yen

Approx.

Data centers andSSDs

Total market value

75 trillion yen

2020

Approx.
Mobile phones

Data centers and SSDs

Source: NEDO Technology Strategy Center, compiled in 2018 from various sources

Total market value
Approx.

50 trillion yen

Source: “Strategy for the semiconductor and digital industries,” issued in June 2021 by
the Ministry of Economy, Trade and Industry

Plant Business Strategy
time, we plan to increase our capacity to propose both ener-

tors produce products with high added value; compared togy and labor-saving improvements for our customers’ plants.

conventional large-scale petrochemical plants, they are therefore distinctive for their compact size. We see leading chemical companies for whom we have already completed projects
as our primary customers; we actively approach them withmodalities.
*1 Dual-use facilities refers to facilities that usually produce biopharmaceuticals, butthat are capable of switching to the production of vaccines to combat infectious disease pandemics.
*2 Biopharmaceuticals refers to pharmaceuticals that make effective use of proteins
and are produced using recombinant DNA, cell culture, and other bio technologies.

Global market size by modality
Modality

Market size*1(2020)

Growth rate*2(20-30)Market size*1(2030)

Celltransplantation

220 billion yen

High (27%)

2.5 trillion yen

ex vivo genetherapy

140 billion yen

High (31%)

2.0 trillion yen

in vivo genetherapy

170 billion yen
210 billion yen*3

High (32%)
30%*3

2.6 trillion yen
2.9 trillion yen*3

Nucleic acid drugs

450 billion yen

High (17%)

2.1 trillion yen

Peptide drugs

3.2 trillion yen

Medium (8%)*2

4.7 trillion yen(2025)

Antibody drugs

16 trillion yen

Medium (8%)*2

23 trillion yen(2025)

Protein drugs

6.4 trillion yen

Low (4%)10 trillion yen

Low-molecularpharmaceuticals

48 trillion yen(2016)

Low (slightincrease)approx. 55 trillion yen

Regenerative medicine
Celltherapy
Gene therapy
Middle molecule
pharmaceuticals
Polymer drug
conjugates
Low-molecularpharmaceuticals*1 Predicted market values *2 Growth rates for 2020–25 *3 Including virus treatments
Source: Based on “Final report on issues and essential initiatives to resolve these issues,
aimed at industrialization of pharmaceutical-related fields,” issued on March 29, 2021, by
Arthur D. Little (Japan), Inc.

Strategy for Pharmaceuticals and Related Businesses
Biopharmaceutical and vaccine production facilities
Many leading companies have already successfully applied forthe Dual-Use Subsidy Program. TPS*1 is seeking entry into the
production facility EPC market, where it intends to leverage
its advanced single-use technologies*2. Biopharmaceutical andvaccine production facilities tend to entail large-scale investment projects, and we are working together with our partner,
TAISEI Corporation, to expand our share of this market.
Middle molecule pharmaceuticals production facilities
Based on our past history in constructing nucleic acid production facilities, we aim to continue attracting orders for EPC
projects; at the same time, we are actively soliciting orders for
related facilities that are indispensable to nucleic acid production, including nucleic acid bead production facilities, and separation and refining agent production facilities.
Low-molecular synthetic API production facilities
Traditionally, batch-production systems have been the norm in
the field of synthetic APIs. However, iFactory® Note), which wehave participated in from the development stage, has completed development of a continuous API production system.
iFactory® features easy recombination of unit operations andis highly energy efficient; as such, we believe there is a strong
likelihood it can be used in the continuous production of finechemicals as well.
Going forward, we intend to grow sales of low-molecularsynthetic API production facilities, while TPS intends to participate as an EPC contractor as well.
By expanding into various pharmaceutical fields, we intend
to increase sales in our pharmaceuticals and related businesses approximately three-fold by 2025, and four-fold by 2030. We
intend for pharmaceuticals and related businesses to becomea key pillar of TPS operations.
*1 TEC Project Services Corporation (TPS) is a Toyo subsidiary that specializes in plant
EPC in Japan.
*2 Instead of conventional stainless-steel production facilities, TPS utilizes single-use
resin facilities for production. The fact that they are single-use means that new facilities are used for each new project, so eliminating the need for cleaning, disinfecting,and checking processes; this enables production facilities to be established quickly,
and saves on energy and labor.
Note) iFactory®
1. In 2022, at the Fourth Japan Open Innovation Prize, “The development andwidespread sales of the iFactory® innovative continuous production system”
project received the Minister of Economy, Trade and Industry Prize
2. 
In 2023, at the 15th ENAA Engineering Commendation and Special
Encouragement Awards, “The iFactory® innovative continuous production system development team” received the Special Encouragement Award

proposals for FS, FEED, and other upstream projects, andseek to expand these to EPC, which is one of our strengths.

TPS sales in pharmaceuticals and related businesses (¥ Billion)
18.0

We are also seeking to acquire repeat orders for facilities
we have a track record of constructing—including plants for

14.0

smartphone lens materials, silica glass, agricultural chemicals, and exhaust gas purification catalysts—and we have set
a target of increasing sales in these fields by approximately

4.7

150% by 2030. When it comes to executing projects, we intend to use DX to streamline our work processes; at the same
50

TOYO ENGINEERING CORPORATION

Integrated Report 2023

Exhaust gas purification catalyst plantiFactory® demonstration facilities

FY2022 results

FY2025 forecast

FY2030 forecast

TOYO ENGINEERING CORPORATION

Integrated Report 2023

51

Data Section

Plants in the fields of functional chemicals and semiconduc-these markets. In the future, we believe we can also expect
capital investment in facilities for gene therapy and regenerative medicine, which are post-middle molecule pharmaceutical

Foundation for Sustainable Growth

1.9

0.7

Total market value
2025

Smart home appliancesHome appliances

By 2030, the pharmaceutical industry is expected to have grown
to its largest-ever size, with a value of 55 trillion yen. Although
the market for conventional low-molecular synthetic active pharmaceutical ingredients (APIs) is predicted to see only a slightincrease, we expect this slack to be taken up by growth in polymer drug conjugates; in particular, the antibody drugs market
is predicted to be worth approximately 23 trillion yen in 2025.
We anticipate that new-modality pharmaceuticals—including
middle molecule pharmaceuticals (nucleic acids and peptides),gene therapy, and regenerative medicine—will see high growth
rates, with each of these markets growing in value to several
trillions of yen. In Japan, the government has put in place subsidy programs to strengthen domestic supply chains for low-molecular synthetic APIs, and the Dual Use Subsidy Program*1,
which seeks to strengthen vaccine production systems for postCOVID Japan. As such, we are seeing a boom in large-scale investments for production plants for both pharmaceuticals andpharmaceutical materials (separation and refining agents, refining films, and nucleic acid beads) in Japan. Going forward,
we are confident that capital investment in Japan will continue
to grow for antibody drugs and other biopharmaceuticals*2, as
well as for middle molecule pharmaceuticals—indeed, we haveseen both leading Japanese pharmaceutical companies andcontract development and manufacturing organizations enter

Medium-term Management Plan

vesting in facilities—and we expect this state of affairs to con-

Pharmaceuticals and Related Businesses: Market Conditions

Management Vision

Plant Business (Functional Chemicals and Semiconductors): Market Conditions

Market Environment and Business Strategy

Market Environment and Business Strategy

China

Korea
South Korea’s semiconductor market, which will remain promising

Following the end of the COVID-19 pandemic, the ensuingeconomic recovery has led to further opportunities for growthin the fields of carbon neutral, new infrastructure, electronic materials, and lithium-ion battery materials. As a result,

In 2020, South Korea had an 18.4% share of the world’s semiPredicted annual growth rate of the Chinese petrochemicals
and chemical products markets (%)(%)
50

to as much as five times or more (6 to 10%). In addition, tosupport capital investment, the country has used 1 trillion won

Average annual growth rate,compared to 2022 baseline

30(approximately 800 million US dollars) to set up a special cap-6%

petrochemicals and chemical products industries has beenslightly slower than expected, but investment has continued,

est share of this market since 2013. The country’s government
2030, and it plans to increase the investment tax reduction rate

40

Chinese petrochemicals and chemical products industries ispredicted to average 6%. Foreign investment in the Chinese

conductor market and has maintained the world’s second largis aiming to build a world-class semiconductor supply chain by

China’s markets are showing signs of increased domestic investment. From 2022 to 2027, the annual growth rate of theManagement Vision

Continued Domestic Investment Expected in Chinese Markets

20

ital investment fund and plans to expand its support for the
streamlining of semiconductor production facilities as well as

particularly in coastal regions.

the development of water, electricity, and other infrastructure.
South Korea is also developing a specialized semiconductor

10

Medium-term Management Plan

A dry gas plant completed in 2023

complex to attract semiconductor-related equipment, materi0(Year) 2022

2023

2024

2025

Toyo-China’s Growth Strategy

2026

2027

al, and part manufacturers from countries around the world.

The increasing presence of South Korea’s secondary EV battery market
The world’s secondary EV (electric vehicle) battery market has

Japanese, European, and U.S. customers who invest in China

been expanding since 2017. EV battery consumption reachedin various fields, including petrochemicals, specialty chemi-

around 749 GWh in 2023, and it is expected to increase atcals, fine chemicals, catalysts, electron gas, and lithium-ion

an average annual growth rate of 10% through 2030. The

battery materials. If we can successfully fulfill our existing

market shares of major South Korean companies have been

project orders and provide outstanding services, this will en-

steadily expanding, and South Korea is now the world’s sec-courage our customers to place new orders for new projects;

ond largest producer of secondary batteries. South Korea’s

in this way, we are aiming to achieve harmonious co-pros-

manufacturers—which produce battery materials that include

perity with them. We are focused on helping our customers

cathodes, anodes, electrolytes, separators, and precursors—achieve carbon neutrality through our engineering, as well.

are planning investments to respond to increasing demand,

We also plan to leverage our past experience and success-and they are actively expanding their production capacity in

es to actively enter new fields such as electronics and lithi-South Korea, the USA, and Europe. In addition, to reduce po-

um-ion batteries.

tential risks stemming from trade friction between the US

Taking the DXoT tools that the Toyo Group is currently developing and applying them to medium and large-scale proj-

Chemical plant for DPE in Nantong

ects, we aim to further improve efficiency and boost quality,

and China, some Chinese manufacturers are devising plans toExpected global EV battery consumption
749

(GWh)

518

301

100

118

2018

2019

147

59
(FY)

2017

2020

2021

build plants in South Korea through collaborative investment

2022

2023

(Predicted)

Source: SNE Researchwith South Korean companies.

through the achievement of high performance, superior quality, more rigorously adhering to our schedules, and reducing

Building a new business portfolio that takes advantage of past experience andknowledge

costs. Going forward, Toyo-China will seek to provide better
value and services in line with customer needs.

future—including not only battery separators but also EV

rochemicals, in South Korea and other countries around thebattery materials, as a new revenue source for the compa-

world. Based on the technologies and regional know-how

ny. Toyo-Korea will continue providing overseas clients who

accumulated through such experiences, the company has

are considering investment in South Korea with one-stop ser-recently gotten involved in the construction of semiconduc-vices that include everything from the basic engineering andtor-related material plants. Toyo-Korea also plans to focus

government approval stages to plant construction, therebyon constructing plants in the secondary EV battery field—

acting as a partner to customers to help them reliably launch

for which demand is expected to greatly increase in thetheir operations in a short period of time.

Chemical plant for Wacker Chemicals in Nanjing

52

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Integrated Report 2023

53

Data Section

Toyo-Korea has implemented many projects, including pet-Foundation for Sustainable Growth

Toyo-China provides specialized engineering services toMarket Environment and Business Strategy
Malaysia

Market Environment and Business Strategy
BrazilBrazil is aiming to reduce its greenhouse gas emissions

power parity is expected to grow, so there are demands

by 50% by 2030 and to achieve carbon neutrality by 2050.

for the country to accomplish its energy transition no mat-

In 2021, Malaysia’s government announced the country’s

In addition—based on Malaysia’s policy of achieving car-President Lula, who was inaugurated in January of 2023, has

ter what. TSPI—our Brazilian affiliate—will fully utilize its EPC

Twelfth Malaysia Plan, a medium-term five-year plan for nationalbon neutrality by 2050—the government announced National

identified environmental protection as an important politicalexpertise, management capabilities, and relationships with

development. Under this plan, the country is emphasizing recov-

Energy Policy 2022-2040 in 2022. This policy consists of 12

measure, and the efforts of Brazil’s society to achieve carbon

customers developed until now to employ a multifaceted ap-

ery from COVID-19, economic growth, and the pursuit of sus-

strategies and 31 action plans for achieving the energy tran-

neutrality are therefore expected to accelerate. In addition,

proach to the social issues facing Brazil, thereby contributing

tainability, and—during the final stage of the plan—Malaysia’ssition, and it includes important efforts that take advantage ofthe population of Brazil is expected to continue increasing

to the achievement of a sustainable society.

aim is to become a high-income country, and the country is ex-

the TOYO Group’s knowledge and strengths—including im-

up through around 2050, and the country’s GDP purchasing

pected to maintain a stable GDP growth rate of 4 to 5%. To sup-proving the added value of existing petrochemical complex-

port this growth, the country is maintaining a certain scale ofes, expanding the high-value-added downstream oil and gas

domestic and foreign investment in the manufacturing indus-

product industry, promoting the local production of bioenergy,

try as well as new and replacement investment, and stable de-and enhancing competitiveness aimed at our upcoming car-One example of our projects to reduce the environmental

mand is expected in the oil, gas, petrochemical, and chemical

bon-neutral society—all of which are expected to result in di-

impact is an order we received from Petrobras in 2022 toindustries, which are TOYO’s main business fields.

verse and abundant business opportunities.

increase/build diesel fuel hydro-refining equipment and hydro-

Oil refinery: reducing the environmental impact

Medium-term Management Plan

gen recovery equipment planned for the Replan refinery. The
purpose of this project is to reduce the sulfur content of all

Toyo-Malaysia’s growth strategy

the diesel fuel produced by the Replan refinery, the largest

Toyo-Malaysia will take advantage of the strengths below in exist-

In addition, as a member of the TOYO Group, Toyo-Malaysia

in Brazil. Because the sulfur in diesel is emitted as exhausting fields to serve its customers as the best possible engineering

boasts a diverse range of experiences collaborating with thegas and causes air pollution, sulfur reduction is one initiative

partner and to contribute to the success of their projects, includ-group companies and is capable of utilizing the Group’s lat-that greatly contributes to reducing the environmental im-

ing investment in the modernization and improvement of existing

est knowledge and playing a role as a Group collaboration

pact. The plan is to complete the Replan project in 2025, andfacilities in Malaysia for which ongoing demand is expected as

hub when it comes to large projects and opportunities in new

it is expected to result in the production of 63,000 barrels perwell as investment in capacity expansion.

domains.

day (bpd) of low-sulfur diesel. Petrobras is planning a num-Thanks to these strengths, Toyo-Malaysia can provide opti-

ber of sulfur-reducing projects other than Replan as well, andmal one-stop EPC services in Malaysia to contribute to the suc-

TSE—a TSPI subsidiary that possesses regional know-how,cess of customers in situations involving both domestic andtechnologies, and results—will contribute to the achievement

foreign clients as well as new and replacement investment.

of an environmentally friendly society through these plans.

Diesel desulfurization and hydro recovery facilities at the Replan refinery (under construction)

Gas-fired power generation: improving the QOL
In 2021 and 2022, we received consecutive orders for gasfired power generation projects. In Brazil—where renewableenergy accounts for over 80% of the electricity matrix—securing a stable supply of power is a major issue, and the de-of hazard risk.

velopment of base-load power sources that are not affectedby nature is essential for achieving social development.

Major project experience in Malaysia (number of projects)

In 2021, we received an order from Eneva for the Parnaiba

42

VI gas fired power plant—which was using only gas turbines
to generate power—and we improved the power generation

42

Data Section

output and efficiency by adding steam turbine and a heat re-1

covery steam generator. Increasing the power generation
efficiency also reduced the CO2 emissions from this plant, resulting in a reduced environmental impact.

17

The Barcarena project, which was ordered from us in17
1 3

2022, involves the construction of a 600 MW combined cycle

3

power plant in Para state. Para has one of the highest ratios

6of people unable to use power of any state in Brazil, so com-

Parnaiba VI gas-fired power plant (under construction)

pleting this project is expected to help mitigating the power

3
Malay Peninsula

54

TOYO ENGINEERING CORPORATION

Integrated Report 2023

Foundation for Sustainable Growth

Toyo-Malaysia’s strengths•Toyo-Malaysia possesses comprehensive engineering
departments in the country and can therefore provide
high-quality engineering services.
• Toyo-Malaysia possesses deep knowledge of the existing
facilities of customers as well as Malaysia’s laws and regulations and can therefore optimize customer plans.
• Toyo-Malaysia has an extensive project track record thatenables the company to select the best available local
vendors and subcontractors for customers.
• Toyo-Malaysia’s reliable safety management system has
the highest level safety record of any such system in the
country for renewal projects, which involve a high degree

Management Vision

Malaysia’s market environment

shortage problem and improve residents’ quality of life.

2

3

Borneo Island

TOYO ENGINEERING CORPORATION

Integrated Report 2023

55

Sustainability Initiatives

Message from the Chair of the
Sustainability Committee

Sustainability Basic Policy

The Positioning of the Sustainability Basic Policy

TOYO will contribute to the sustainable development ofcorporate value and the sustainability of the global soci-Management Vision

Sustainability Basic Policy

Corporate Philosophy (MVV)

ety based on our mission of “Engineering for Sustainable
Growth of the Global Community.”
In response to various issues, TOYO will fulfill our unique

Noriyoshi Torigoe

role as an engineering company by providing solutions

Director, Executive Vice President

Materialitythat realize the harmony between the supply of energy
and materials and global environmental conservation,
which are indispensable for the sustainable growth ofIntegrated Report 2023

*1 Sustainable Development Goals*2 Task Force on Climate-related Financial Disclosures*3 UNGC (United Nations Global Compact)

TOYO is committed to addressing environmental (E),social (S), and governance (G) issues and sustainabil-Management Strategy

ity based on the materiality of “Aim to realize an environmentally friendly society,” “Enrich people’s lives,”

Medium-termManagement Plan“People of diverse backgrounds engage in active, meaningful work” and “Establish an organization with integri-

Business Plans

ty and discipline.”

Sustainability Promotion System
Head Office

Board of Directors
President and CEO

Deliberation
and reporting

Group companies(Chairman: CCO)

Executive Committee(Chairman: President and CEO)EPC group companies(consolidated/50%
equity-method
subsidiaries)(Members: CTO, General Manager of the SQE Management Division, General
Manager of the Corporate Administration Division, General Manager of the
Finance and Accounting Division, General Manager of the Corporate Strategy
Division, and General Manager of the Corporate Communications Department)(Secretariat: Corporate Strategy Department)

Environment Subcommittee
Operation Units

Sharing andcooperation

Sustainability Committee

Human Rights Subcommittee(Subcommittee Chairman: General
Manager of the Corporate
Administration Division)(Subcommittee Chairman: CTO)

Collaboration

Data Section

TOYO ENGINEERING CORPORATION

economic community.

the global community.

Sustainability Initiatives
2023
2022
2021
~2020

• Formulated our mission,
vision, and values (MVV)• Specified materialities• Established the Sustainability
Committee• Expressed our endorsement of
the TCFD• Expressed our endorsement of
the UNGC• Formulated our Sustainability
Basic Policy• Expressed our intention to contribute to carbon neutrality• Disclosed information related to
the TCFD recommendations/climate change• Formulated our Basic Policy on
Human Rights• Established subcommittees

TOYO ENGINEERING CORPORATION

Integrated Report 2023

Foundation for Sustainable Growth56

is essential not only to utilize the knowledge and experience
we have cultivated up until now but also to secure and train human capital in possession of diverse backgrounds and knowhow, we have positioned human capital as our most importantbusiness resource as we aim to become an (3) an organizationof ” people of diverse backgrounds engage in active, meaningful work” through the pursuit of diversity, environmental development, suitable hiring activities, human capital training, andother initiatives.
At TOYO, our Code of Conduct forms the cornerstone of ourbusiness management as we endeavor to maintain and improve our (4) “integrity”. Having signed the UN Global Compact(UNGC)*3 in December of 2021, we now also engage in management that conforms to the Ten Principles of the Global
Compact, which are related to human rights, labor, the environment, and anti-corruption.
In terms of business and human rights, we recognize respect for the human rights of all people affected by our global
business activities as the foundation of our operations, and, in
this spirit, we established our Basic Policy on Human Rights inJune of 2023, and we strive to implement human rights due
diligence as we strengthen our related initiatives.
To oversee our Group-wide sustainability initiatives,in November of 2021, we established the Sustainability
Committee as an advisory body to the Executive Committee.
The Sustainability Committee plans, promotes, and monitors
Group-wide sustainability initiatives and is properly supervisedby the Board of Directors. In addition, based on this committee,
we have established various subcommittees in environmental
and human rights fields, and we promote initiatives in collaboration with operation units and each Group company.
TOYO, as an organization that possesses integrity and that
employs a diverse and motivated workforce with retaining thetrust we have earned from society and from our stakeholders,intends to fulfill our unique duties as an engineering company
and to sustainably improve our corporate value while also contributing to the sustainable development of the international

Medium-term Management Plan

In recent years, the international economic community has
faced universal issues, including responding to climatechange and realizing a balanced form of sustainable growth.
Companies, too, are being called on to contribute to the resolution of various issues outlined in the UN’s SDGs*1. To realize
our mission of engineering for sustainable growth of the global community, we have defined four materialities (importantmanagement issues). Based on our Sustainability Basic Policy,
we also intend to fulfill our role as an engineering company inorder to grow sustainably, too.
Based on our belief that business operations and sustainability are inseparably linked, we are promoting a medium-term management plan (2021-2025) focused on our green
and blue strategies (sustainable technology and business development and advanced EPC operation).
We are implementing initiatives to enhance the technicalcapabilities, knowledge, and experience we have cultivateduntil now as we aim to (1) help “achieve an environmentallyfriendly society” by pursuing the development of fuel ammonia, hydrogen, synthetic fuel, and other next-generation energy as well as energy-saving plants, waste plastic, and other
low-environmental-impact/cyclical technology and (2) “enrichpeople’s lives” by contributing to the resolution of food problems in the fertilizer and other fields, securing stable energy
for transition purposes, and enhancing the foundation of life
via high-performance materials, etc.
When it comes to sustainability, we recognize responding
to climate change to be of particular importance. Therefore,
in addition to executing the above initiatives, in November of2021, we expressed our support for the recommendations of
the TCFD*2, and, in June of 2022, we disclosed and announced
information in line with these recommendations. As part of ourefforts to contribute to the international realization of the Paris
Agreement, we have established targets of reducing our own
greenhouse gas (GHG) emissions by 30% by 2030 (compared
to 2021) and of achieving net zero emissions by 2050. We also
intend to contribute to reductions of emissions generated bythird parties by cooperating with our stakeholders and by providing the necessary technologies, products, and solutions.
Based on our belief that, to achieve the above strategies, it

Sustainability Basic
PolicyOther related Policies

TOYO’s Code of
Conduct

57

Addressing Climate Change(Disclosure Based on TCFD Recommendations)
global warming are common issues for all humankind. We conduct businessactivities as our mission “Engineering for Sustainable Growth of the Global
Community” and under the slogan “environmentally-friendly society” which is one of our materialities. In November 2021,
TOYO expressed its agreement for the recommendations of the Financial Stability Board (FSB)’sTask Force on Climate-related
Financial Disclosures (TCFD), and based on these proposals, TOYO has established the strategies and promoted initiatives.

Major Risks and Opportunities
Item

Risks

Opportunities

Carbon pricing• Introduction of carbon pricing schemes may lead both to decreased demand for conventional plants due to falling demand
for fossil fuels and to increased plant costs due to rising costs of
raw materials and equipment• The appropriate introduction of carbon pricing schemes might lead to increased orders and business opportunities for renewable power generation and non-conventional plants and to improved competitiveness due todecarbonized procurement of raw materials and equipment

Licenses and support systems• Insufficient responses to more stringent environmental permit requirements may result in reduced orders, missed business opportunities, and increased costs• The use of government assistance might facilitate the development, verification, and social implementation of new technologies

Technologies New technologies• Delays in developing new technologies may result in lost orders
and missed business opportunities• The use of decarbonized technology/CCUS or circular economy/circular technology application might lead to increased orders and business
opportunities

Energy savings and • Delays in responding to energy savings may result in decreased
optimization
opportunities for new construction projects and modification
projects• The application of energy-saving/efficiency-boosting technology mightlead to an increase in new projects or increased opportunities to renovate existing facilities

Transition risks Policies,(primarily forlaws and1.5˚C temperature regulations
rise scenario)

GovernanceWe recognize responding to sustainability-related issues as an important management issue in terms of not only avoiding risks
but also gaining business opportunities, and—to improve our corporate value in the medium to long term—we have formulated a
Sustainability Basic Policy to describe our initiatives aimed at sustainability, and we are building sustainability-related systems su-

Markets

pervised by our Board of Directors.

• Decreased demand for conventional plants due to decreased fos- • The development of renewable power generation and new technologies
sil fuel demand and the spread of non-conventional energy
might lead to increased orders and business opportunities centered on• The realization of geo-economic risks may increase pressure on
non-conventional plants
energy supplies, while energy transitions may result in volatile• Increased use of renewable energy in numerous countries and regions
fossil fuel prices
overseas may facilitate risk diversification, lead to lower medium- andlong-term costs for fossil fuels, and lower prices and increased uptake ofrenewable power generation facilities

Supply chains• Supply chain issues may result in adverse impacts on stable procurement of raw materials and equipment, as well as on suppliers, local freight transporters, and subcontractors

Initiatives for andcontributions tofighting climatechange• Insufficient responses to climate change may result in adverse• The improvement/establishment of stakeholder assessments might lead
impacts on orders, business opportunities, partnerships, securing
to increased differentiation and opportunities
human resources, and financing due to poorer reputation amongcustomers, partners, and markets

mittee to the Executive Committee, and our basic policies and important matters are discussed and formulated by the Board of
Directors after deliberation and reporting by the Executive Committee.
(>For more information about “Corporate Governance,” see p72)
Reputation

Risk Management
Based on our Basic Policy of the Internal Control System, TOYO identifies the events of potential risks, including changes in thebusiness environment, clarifies the processes for classifying, analyzing, assessing, and responding to risks, and the divisions incharge and related regulations, develops and implements risks management system. In order to identify and mitigate potential
risks as quickly as possible, we periodically review and identify key risk items and implement risk management. Regarding iden-

Physical risks
Acute(primarily for
Chronic
2.6˚C temperaturerise scenario)

Natural disasters• Increasingly severe natural disasters (acute: typhoons and flooddue to abnormal
ing; chronic: long-term heat waves and rising sea levels) might
weather conditions
cause problems that include the stagnation of project execution,
decreased productivity, and a worsened working environment• Focused procurement on the back of proper assessments and selective
choice of suppliers, differentiation based on partnerships and alliances,supply chain management, and more efficient construction work

• More advanced business operations and expanded maintenance (due totarget-site risk handling, insurance coverage, and safety measure costs aswell as supplier decentralization, the minimization of on-site construction
through the use of modules, etc., business continuity planning (BCP), etc.)

Medium-term Management Plan

Our climate change measures are also planned, promoted, and monitored by the Sustainability Committee, an advisory com-

Energy mix, power
configuration, andproduct changes

Management Vision

TOYO recognizes that protection of the global environment and prevention of

ENVIRONMENT Aim to Realize an Environmentally Friendly Societytification and assessment of climate change-related issues, we comply with the framework recommended by the TCFD, and analyzes important factors affecting our business through scenario analysis and reflects in the medium-term management plans andother strategies.

Business field

Major transition risks (▲) and opportunities/response (●)

Medium-term (to 2030)

Long-term (to 2050)▲ Decreased opportunities to receive orders for conventional plants in the oil and gas field due to the transition to clean fuel. However, due to the ongoing economic development of emerging countries in the short to medium term, there will still be conventional business opportunities during the transitional period.

Strategy
In line with the TCFD recommendations, the report is based mainly on (1) the 2.6°C scenario* (Stated Policies Scenario (STEPS)

Energyand (2) the 1.5°C scenario* (Net Zero Emissions by 2050 Scenario (NZE)). “Transition risks” refers mainly to the risks that may occur in course towards the decarbonization society (1.5°C scenario), and “physical risks” refers to the risks that would take placein the emissions reduction failure (2.6°C scenario).

▲ Decreased opportunities to receive orders due to decreased demand for conventional petrochemical plants that use fossil raw materials and fuels resulting in high CO2 emissions.

Chemical* Refer to World Energy Outlook 2021 of the International Energy Agency (IEA)

Scenario Analyses: the World in 2050

Rise in average temperature of 1.5˚CStated Policies Scenario (STEPS)Net Zero Emissions by 2050 Scenario (NZE)•
Increased energy consumption, increased demand forfossil fuels(Continued reliance on fossil fuels, rise in fossil fuel prices, improvements in energy efficiency)• Reduced energy consumption, reduced demand for fossil
fuels and decarbonization(Significant shift to electrification and non-fossil fuel use, fall in
fossil fuel prices, significant improvements in energy efficiency, widespread implementation of carbon pricing, and decarbonization/recycling-society development)• Increasingly severe natural disasters• GHG emissions remain flat until 2050

• Gradual increase in major natural disasters• Net-zero GHG emissions by 2050

Power
generation● Increased opportunities to receive orders for new decarbonized (blue or green) petrochemical plants as well as the gradual conversion to alternative fuels at existing facilities. Increased opportunities to receive orders in high-performance material fields and circular economy fields,
including increasing the efficiency of plants by introducing energy-saving technology, waste plastic recycling, and biodegradable plastic.
▲ Decreased opportunities to receive orders for gas-fired or coal-fired power generation due to the transition to clean power. However, there
will also be increased opportunities to receive orders due to the transition to the use of LNG, which has relatively low CO2 emissions, aswell as orders in the short to medium term.
● Increased orders for and business opportunities related to overseas projects and large projects in Japan—regarding which we can takeadvantage of our renewable power generation technology and extensive track record. Increased orders for and business opportunities
related to the transition from existing thermal power generation to ammonia co-firing as well as future single-fuel firing.

Data Section

Rise in average temperature of 2.6˚C● Increased business opportunities and orders for decarbonized plants aimed at achieving a carbon-neutral society by utilizing both ourexisting know-how of ammonia, hydrogen, synthesis gas technology, CO2 recycling, etc. and the new technology of us and our partners.

Specific Initiatives
Promotion—including co-creation partnerships—of EPC, non-EPC (pre/post-EPC, technological development, and business development), andvalue chain construction, especially in the fields listed below:■ Carbon-free fuels (ammonia and hydrogen fuels, decarbonized power-generation fuels, and synthetic fuels (e-fuels, SAF, and synthetic
methane))■ Green petrochemicals and CCU (g-Methanol®, green/blue ammonia, CO2-derived petrochemical raw materials/fuel, and heating furnace fuelconversion/electrification)■ Renewable power generation and geothermal power generation■ CO2 capture (DAC, EOR-CCS, and BECCS)® and biorefineries)■ Energy savings and more efficient resource use (HERO/■ Renewable/recycling (waste plastic recycling and urban mines/biomining)>We have incorporated the above scenario analyses in our Medium-term Management Plan (2021–2025) strategies.

58

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Integrated Report 2023

Foundation for Sustainable Growth(>For more information about “Risk Management,” see p78)

Risks, Opportunities, and Strategies in Major Business Fields

59Addressing Climate Change(Disclosure Based on TCFD Recommendations)

Environment

Metrics and Targets

Basic Policy and Principles on the Environment

TOYO has set the following targets to reduce GHG emissions.

Regarding the environment (E), TOYO has stipulated “minimize environmental impact by saving resources and energy,
detoxifying, reducing and recycling waste, and by preventing environmental pollution during the course of our business activities” within its Basic Policies on HSE, Quality, andInformation Security.
Recognizing the preservation of the global environment andprevention of global warming as issues facing all of humankind,
TOYO has also established “aim to realize an environmentally

Scope 1 & 2 (targets)
New technology research center• Achievement net zero emissions by 2050
pared to 2021 (based on GHG emissions
per employee)** Our Scope 1 & 2 emissions in 2021 amounted to approximately 11,800 tons (1.87 tons of CO2 per person), andwe are using this as a reference as we strive to achieve
our targets.

Scope 3 (targets)

Environmental Management
In line with ISO14001 certification standards, TOYO takes theenvironmental management actions stated on the right when
executing projects in Japan and within related divisions. We
also confirm that these actions are effectively implemented
through internal audits.

• TOYO will cooperate with its stakeholders to provide new technology, products, and solutions, thereby contributing to the reduced GHG emissions of the plants the Group delivers.

Energy-saving/
renewable energy field(Currently operating) We delivered our ener®
gy-saving distillation system
in response to an order received from Maruzen
Petrochemical Co., Ltd., achieving over 50%
more energy savings compared to conventional distillation towers.

TOYO's Environmental Initiatives
Next-generation energy field

Chemical plant field

Green ammonia production inIndonesia

Practical application of ammonia
fuel for a naphtha cracker(Feasibility study) We are verifying the feasibility and economic rationality of a project thatinvolves introducing hydrogen produced using
renewable energy to an existing fertilizer plantin order to produce clean fuel ammonia.

(Under development) Our target is to switch
the fuel from the conventionally used methane to ammonia in order to reduce the CO2
emissions during combustion to zero. We areworking on demonstrating ammonia-only commercial furnaces with the aim of achieving social implementation by fiscal 2030.

To contribute to the protection of the global environment as a
global engineering company, TOYO will reduce the GHG emissions caused by its engineering activities and provide plants thatutilize the latest technology to achieve a low environmental impact collaborating with stakeholders to reduce the GHG emissions of various plants. In addition, we also pursue initiatives
related to the maintenance and preservation of biodiversity, andwe have developed nature reserve areas for endangered wild
plants and animals during past projects as well.

Reducing the environmental impact
In addition to thoroughly sorting waste at not only in domestic and overseas construction sites but also the Head Officein Japan, TOYO safely disposes of hazardous substances andmanages contaminants. Since obtaining ISO 14001 certification

Electricity Consumption from2012 to 2022 (11 Years)

Tap Water and Rainwater
Consumption from 2012 to 2022
(11 Years)(Tons)(Tons)（×106kWh）（×1,000m3）

40,000160

30,000120

20,00080

10,00040

SAF

g-Methanol®

(Result) We have received orders for a total of
12 biomass-fired power generation plants inJapan since 2017 (total power generated: approximately 650 MW), which we have completed or are currently building (as of June of2023).

(Demonstrated) On June 17, 2021, we became
the world’s first company to, for a commercial
flight between Haneda and New Chitose, supply SAF produced in Japan by using wood chips,
etc. as raw materials. Our aim is to achieve social implementation by the late 2020s.

(Business underway) We are promoting initiatives aimed at achieving the social implementation of environmentally friendly methanol
synthesis technology that uses CO2 captured
from various emission sources as well as hydrogen derived from renewable energy as raw
materials. There is a possibility of diversifying
carbon recycling options.

Integrated Report 2023

5

0
(FY)

0
2015

’16

’17

’18

Overseas sites (left scale, Year)

’19

’20

’21

’22

Domestic sites (left scale, FY)

The Japan Head Office (right scale, FY)

40

30

4

Biomass-fired power generation

TOYO ENGINEERING CORPORATION

200

Data Section

Photo courtesy of JAL

in 2004, we have maintained zero environmental accidents. At
construction sites in Japan, we also work to limit the volume ofwaste and have maintained a recycling rate of more than 88%.
We also raise the environmental awareness of employees
through activities that include using rainwater captured on theroof of our Head Office to flush toilets, turning off lights during
break times, and opening and closing sunshades. Changes inthe electricity consumption as well as the tap water and rainwater consumption at our Head Office in Japan are shown in
the graphs below. Compared to fiscal 2021, in fiscal 2022, the
COVID-19 pandemic calmed down, and our number of projects both in Japan and abroad increased, resulting in increased
waste volume. In addition, the number of people working at
the work increased, resulting in higher tap water consumption
at our Head Office.

Waste Generation Amount at Domestic andOverseas Construction Sites and the Japan
Head Office from 2015 to 2022 (Eight Years)
50,00060

1. Evaluate compliance with environment-related laws
2. 
Formulate and implement the set of three environment-related actions (evaluate environmental
impact, set environmental target, and implement environmental program)
3. Take and monitor environmental measurements atconstruction sites

20

10

3
(FY)

0
2012 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20 ’21 ’22
Electricity consumption(FY)2012 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20 ’21 ’22
Tap water consumption

Rainwater consumption

TOYO ENGINEERING CORPORATION

Integrated Report 2023

Foundation for Sustainable Growth®

• We will contribute to the achievement of a sustainablecommunity and society enabling both development of
humanity and environmental protection.
• As an international company, we will strive to provide engineering services in harmony with the global environment.

Medium-term Management Plan

TOYO is building a new technology research center in Chiba and plans to startrunning it in April of 2024. The center will
use solar energy generated by the solar
panels installed on its roof. The new center
will research and develop technology that
includes fuel ammonia, which is expected
to help achieve carbon neutrality, as wellas green methanol that can be producedwith almost no GHG emissions.

•
Reduce emissions 30% by 2030 com-friendly society” as its materiality, and carries out the businessbased on the basic philosophies stated on the right.

Management Vision

Examples of specific initiatives

ENVIRONMENT Aim to Realize an Environmentally Friendly Society

61

Environment

ENVIRONMENT Aim to Realize an Environmentally Friendly Society

Human Rights

SOCIAL People of diverse backgrounds engage in active, meaningful work

Solar power generation at our new technology research center

To contribute to the achievement of a society that enriches people’s lives and enables people of diverse backgrounds to engage in active, meaningful work (two of TOYO’s materialities)
we recognize respect for the human rights of all people affectedby our global business activities—including the activities of ourgroup companies—as the foundation of our operations. Basedon this belief, we will promote further initiatives aimed at respecting human rights, and—to fulfill our responsibilities in thisregard—we have established Human Rights Basic Policy basedon TOYO’s Code of Conduct and our Sustainability Basic Policy.
Based on our Human Rights Basic Policy, TOYO respects
human rights as they are defined in the International Bill of
Human Rights1) and the International Labour Organization’s

To contribute to the achievement of a carbon-neutral society by promoting energy-related technological development, TOYO is relocating its technology research center inNarashino City to Chiba City, with plans to start up operationsin April of 2024. The solar panels installed on the roof of a newbuilding will be used to supply approximately 40% of its required power by utilizing solar energy.

Reducing the environmental impact through on-site PPA* business
TOYO is working on contributing to the invigoration and decarbonization of regional economies by developing regional pow-

To steadily promote initiatives aimed at respecting human rights, TOYO has established a Human Rights Subcommittee under
the Sustainability Committee—which is an advisory board to the Executive Committee and is chaired by the Chief Compliance
Officer—and we cooperate with our group companies to promote initiatives aimed at respecting human rights based on our global system. (For details, see Sustainability Promotion System on P57.)

of renewable power for local consumption. As part of these
efforts, we launched our on-site PPA business in fiscal 2023
by supplying solar power to Chosei Aoba Noen Co., Ltd., an
agricultural company in Chiba Prefecture. In addition, we delivered a solar carport (a parking lot with a solar power genLTD. store involved in a demonstration experiment related to

Implementing Human Rights Due Diligence
TOYO Chosei solar power plant

TOYO implements human rights due diligence to identify and assess the negative effects of our business activities on humanrights and then prevent or reduce such effects. In particular, we have identified the five items below as high-priority human rights
issues and are taking action accordingly.

reducing the environmental impact. In the future, we hope toprovide solar-carport-based on-site PPA services to not only

High-priority human rights issues

side stores with attached parking lots.
* On-site Power Purchase Agreement (PPA). A system under which a power company (TOYO) sets up a solar power generation facility on a customer’s site at the powercompany’s expense, owns, maintains, and manages the facility, and supplies the electricity generated by the facility to the customer.

Solar carport (photo courtesy of SEVEN-ELEVEN JAPAN CO., LTD.)

Contributing to the Achievement of a Carbon-Neutral Society
carbonization of society by fusing the engineering knowledge
cultivated by the Group through its work on various plants withJapan

CanadaBiomass-fired power
generation

Blue ammonia /Methanolits low-carbon plant technology. With many countries aroundthe world declaring their target to achieve zero emissions bymaterials and fuels used for our energy-intensive petrochem-

g-Methanol® /Green ammonia

Blue and green
ammonia / hydrogenical plants and power plants as well as mitigating to emitted
CO2 by CCUS. In the petrochemical field, our proposals include
switching to fossil raw materials to recycled petrochemical
products, using green hydrogen produced via renewable ener-

The United ArabEmirates
Blue ammonia

Green ammonia

gy, or using captured CO2 for CCUS. In the power generation
Indonesia

Australia

cular economy by not only pursuing fuel conversion throughGeothermal power
generation / green ammonia

Blue and green
ammonia / hydrogencilitating the widespread use of clean power through the utilization of renewable energy, biomass, geothermal, and otherenvironmentally friendly energy sources.

62

TOYO ENGINEERING CORPORATION

Integrated Report 2023

1. Occupational safety andhealthContinuing and strengthening initiatives

2. Harassment anddiscrimination• Regularly implementing harassment training• Establishing an in-house consultation service• Ensuring the diversity of human capital (women, disabled
persons, foreigners, mid-career hires)

Continuing and strengthening initiatives, developing a
consultation service outside the company

3. Working environment(working hours and wages)• Suitably managing working hours• Improving work-life balance (remote work system, promoting the taking of childcare and nursing care leave, etc.)

Continuing and strengthening initiatives

4. Forced and child labor• Requiring that TOYO’s Code of Conduct be followedin terms of individual procurement and construction
contracts

Clearly stating our requirements in our Transaction
Basic Policy, requesting the cooperation of our suppliers, and conducting questionnaires as necessary

5. Supplier management• Stipulating that TOYO’s Code of Conduct be followed interms of individual procurement and construction contracts as well as the prevention of bribery

Requesting the cooperation of our suppliers in following our Transaction Basic Policy and conducting questionnaires in sequence

Note) The above five items are established based on international standards, such as the principles of the UN Global Compact (UNGC) and the five areas covered by the International
Labour Organization’s (ILO’s) core labor standards, and we also referred to industry-specific human rights risks (including UNEP FI and other international indicators and tools as well
as examples of other companies in the industry) to identify human rights issues that TOYO should prioritize based on their level of severity and likelihood of occurrence.

Relief and Dialogues Related to Human Rights Risks
Chile

field, we are aiming to achieve a decarbonized society and cirthe use of fuel ammonia, synthetic fuel, etc., but also by fa-

Future initiatives

To handle all the human rights risks related to TOYO’s global business activities, we have established complaint handling services
at each TOYO Group company, we strive to suitably and sincerely respond to reports, and—if it becomes clear that we have somehow caused, promoted, or been directly related to a negative effect on human rights—we endeavor to rectify the situation andprovide relief through suitable procedures.
In addition, we utilize outside experts specialized in human rights risks, and we engage in sincere dialogues and discussions
with anyone who is negatively affected as well as other relevant stakeholders.

Initiatives to Achieve Respect for Human Rights in the Supply Chain
At TOYO, we apply our Human Rights Basic Policy to all Group executives and employees, we approach all of the suppliers, affiliates, and other business partners in our supply chain to ensure that they support this policy, and we cooperate with them as we
strive to ensure respect for human rights.
TOYO ENGINEERING CORPORATION

Integrated Report 2023

63

Data Section

2050, we face urgent issues in terms of decarbonizing the raw

America
India

Current initiatives• Fostering a safe culture• Developing and following safety standards• Maintaining and promoting employee healthFoundation for Sustainable Growth

convenience stores but also other companies that own road-

TOYO will collaborate with customers to contribute to the de-and Human Rights.
1) International Bill of Human Rights is the collective name of documents adopted by the UN,
including the Universal Declaration of Human Rights, International Covenant on Economic,
Social and Cultural Rights, and International Covenant on Civil and Political Rights.
2) This declaration establishes ten conventions as core labor standards in five areas:
freedom of association and the effective recognition of the right to collective bargaining, the elimination of all forms of forced or compulsory labor, the effective abolition ofchild labor, the elimination of discrimination in respect of employment and occupation,
and a safe and healthy working environment.
3) The UN Global Compact is a global framework for achieving sustainable growth thatwas established by the UN in cooperation with private companies and organizations,and it establishes ten principles to be followed by companies in four areas: humanrights, labor, environment, and anti-corruption.

System for Promoting Respect for Human Rights

er network infrastructure that facilitates the local production

eration system on the roof) to a SEVEN-ELEVEN JAPAN CO.,(ILO’s) Declaration on Fundamental Principles and Rights
at Work2), we endorse the Ten Principles of the UN Global
Compact3), and we promote initiatives aimed at respecting human rights in line with the UN Guiding Principles on BusinessMedium-term Management Plan

Basic Approach

Management Vision

Reducing the Environmental Impact Through In-House Power Generation and PPA BusinessHuman Capital

SOCIAL People of diverse backgrounds engage in active, meaningful work

To implement our sustainable technology and business development and advanced EPC operation strategies under our medium-term management plan, it is essential not only to utilize
the EPC-related knowledge and experience we have cultivatedup until now but also to secure and train human capital with diverse backgrounds and know-how. TOYO will therefore position
human capital as our most important business resource as we
Human capital investment and environmental
development (input)

Environmental
development• Health management• Work-style reforms

Japan and abroad. The first time I worked as a project manager (PM) was for a fertilizer project in Nigeria, which received an order in fiscal 2022. I had participated in previous projects in Nigeria as a member as well, so I had established a good relationshipwith our customers there. My boss warned me that I should not knock something
until I try it, which gave me the push I needed to decide to take on the challenge ofbeing a PM. Being a PM is sometimes hard because I have more responsibilities andHuman capital measures (output)

Value creation (outcome)have to make important decisions more often than before, but—now that I have actually experienced this new role—I find that I am constantly discovering and learning
new things, which is making my work interesting. As a PM, my aim is to constantly• Enhancing organizational strength• Improving employee engagement• Promoting independent growth

Achieving materiality targets

look at each project as a whole and complete each project as I consider the best possible answer for both our customers and TOYO.

Achieving the mission of our
medium-term management plan

Our Vision for Our Organization and Human Capital
MeasureCareer support

Training humancapital(OJT/Off-JT)

Improving
remunerationand fairassessment

Diversity &inclusion

Partnership
Independently growing and providing unique value

Diversity & Inclusion
Initiatives

TOYO’s human capital includes diverse individuals of different

our business while also increasing the competitiveness of our• Utilizing career review interviews• Respecifying the career path model and ideal
human capital required for each business field• Utilizing onboarding plans for mid-career hires
and employees

nationalities, genders, values, and backgrounds who play anorganization. We will continue to implement training that cov-

active role in our operations around the world. By enabling di-ers all our overseas group companies while also actively pro-verse people to stimulate each other as they fully demonstrate

moting the hiring of mid-career professionals and appointment

their capabilities, we are aiming to further promote diversityof suitable staff to managerial roles regardless of their nation-and inclusion to achieve creativity and innovation in terms ofality or gender to maintain or improve TOYO’s diversity.

• Providing work opportunities in line with individual capabilities and aptitudes• Providing experience through practical construction site training, overseas group company
training, overseas accompaniment training, etc.
• Providing on-demand training by utilizing online
technology• Implementing a base-pay increase of approximately 8.3%*1 in fiscal 2022, including the annual wage increase*1 Union member average• Fair assessment system based on results andjob responsibilities• Redesigning our system for awarding outstanding business performance• Selecting and promoting outstanding employees early• D eveloping a workplace environment thatconsiders diverse cultures, religions, etc.
• D eveloping a workplace environment withno gender gap• Reducing working hours• Remote work

Improving work• Limiting long-term business trips
life balance• Promoting the taking of childcare leave (especially paternity leave)

Company

Project Division
Nigeria fertilizer project
Project manager

TOYO Global Leaders Seminar
We have been holding the TOYO Global Leaders Seminarsince 2010, and—up through last year—a total of around 300
mid-career professionals and young employees from various
group companies participated in the seminar. We have held theseminar every year except when there were travel restrictions
due to COVID-19. This seminar offers the opportunity for a teamconsisting of people from Japan, India, China, South Korea,
Indonesia, Malaysia, and other countries to experience collaborating with people from other cultures through group-based
discussions and group work. Our aim is to not only strengthen the Group’s human capital networking but also to develop a
new generation of leaders who are capable of recognizing cultural and individual differences as they achieve results.

Data Section

Utilizing diverse kinds of expertise and experience to contribute

Satomi Ishii

Foundation for Sustainable Growth

TOYO aims to be an organization that provides employees witha sense of job satisfaction when they achieve their work, suchas by providing employees with opportunities to take on challenging work, promoting the expansion of their experience via
job transfers based on their career plans, and rewarding themfor their achievements with bonuses, selection-based promotions, awards, etc. In addition, we are making TOYO easier towork at by developing a working environment that responds
to diverse work styles, including our remote work system andchildcare/nursing care leave system. As a result, by running
an organization that offers job satisfaction, we are promoting
increased employee engagement as well as the developmentof an environment that enables employees to continuously
demonstrate their capabilities.
At the same time, we know that companies and employees are not in a master-slave relationship but rather in a partnership. We expect employees to assume responsibility for
their independent growth, take steps to actively acquire newskills, fulfill their duties based on their job responsibilities as
they expand their fields of expertise, independently demonstrate their abilities, and successfully contribute to the growthof the company in both the short and long term.

Employees

Since I started working for TOYO, I have experienced 17 proposals and projects in

Shifting Human Capital to the Sustainable Technology andBusiness Development Field
As we shift mid-career employees from EPC fields to the

EPC fields, thereby optimizing the utilization of personnel re-sustainable technology and business development and DX

sources throughout the Group. Various business opportuni-

Healthmanagement• Holding health promotion events• Diagnosing health before long-term businesstrips and setting criteria for determining thepossibility of business trips• Measures to prevent long working hours

fields, we have also focused on mid-career hires in an ef-

ties are expected in the sustainable technology and businessfort to acquire experience and new know-how from outsidedevelopment field, so we will enhance our efforts to promote

TOYO. We are also focusing on Toyo-Japan as we expand ourthe hiring of mid-career professionals and establish them as

Improvingengagement• Conducting employee satisfaction surveys every two years

business in green business fields while also strengthening

a pillar of our business as soon as possible, with the aim ofour cooperation with overseas group company engineers inachieving our medium-term management plan.

Developing an environment that is easy to work in
Providing opportunities to take on challenges

64

TOYO ENGINEERING CORPORATION

Integrated Report 2023

Medium-term Management Plan

Human capital
investment• Hiring and retention measures• Training•	Remuneration, grading, and assessment systems• Creating growth opportunities

aim to be an organization where people of diverse backgrounds
engage in active, meaningful work—one of our materialities—
and we will strive to achieve our medium-term management
plan by enhancing the ability of our employees to succeed in themedium to long term from a multifaceted perspective that includes hiring, training, remuneration, and health management.

Management Vision

Taking on the challenge of being a project manager

Our Basic Approach to Human Capital

TOYO ENGINEERING CORPORATION

Integrated Report 2023

65

Directors and Audit & Supervisory Board Members

GOVERNANCE Establish an Organization with Integrity and Discipline(As of July 1,2023)

Management Vision

Directors

ChairmanHaruo Nagamatsu

Masami Tashiro• Term of office for Directors 8 years• Attendance at Board of
Directors meeting
18/18 (100%)

Director, Executive Vice President
Chief Compliance Officer

Director, Senior Executive Officer,
Chief Financial Officer

Eiji Hosoi

Masayuki Yoshizawa

Noriyoshi Torigoe

Kensuke Waki

• Newly Appointed• Term of office for Directors 8 years• Attendance at Board of
Directors meeting
18/18 (100%)• Term of office for Directors 2 years and 11 months• Attendance at Board of
Directors meeting
18/18 (100%)• Term of office for Directors 5 years• Attendance at Board of
Directors meeting
17/18 (94.4%)

1976 Joined the Hibiya Branch, Mitsui Bank (currently Sumitomo Mitsui Banking Corporation)
2001 General Manager, International Banking Unit,
Credit Department Sumitomo Mitsui Banking
Corporation
2002 General Manager, Singapore Branch,
Sumitomo Mitsui Banking Corporation
2003 Executive Officer, Singapore Branch,
Sumitomo Mitsui Banking Corporation
2006 Director, Taiyo Oil Co., Ltd2010 Vice President, SMBC International BusinessCo., Ltd.
2012 President, SMBC International Business Co.,Ltd
2013 Auditor (part-time) ACKG Ltd. (currently
Oriental Consultants Holdings)
2015 Outside Director, Toyo Engineering
Corporation (Present)2016 Outside Director, Oriental Consultants
Holdings (Present)

Outside Director

Reijiro Yamamoto• Term of office for Directors
4 years and 4 months• Attendance at Board of
Directors meeting
18/18 (100%)

1984 Joined Mitsui Bank (current Sumitomo
Mitsui Banking Corporation)2000 Participated in Unison Capital, Inc.
2004 A Founding Partner, GCA Corporation2005 Representative Director, Mezzanine
Corporation
2006 Representative Director & Partner, Integral
Corporation (Present)2013 Auditing Officer, Yohji Yamamoto Inc.
(Present)
2016 Outside Director, Itokin Co., Ltd. (Present)2017 Outside Director, Aderans Company
Limited (Present)
2019 Outside Director, Toyo Engineering
Corporation (Present)
Outside Director, Sanden Retail Systems
Corporation (Present)
2020 Director, K2TOP Holdings Corporation(current Mamezo Digital Holdings Co.,
Ltd.) (Present)
2021 Chairman & Director, Skymark Airlines Inc.
(Present)

Outside Director
Independent Officer

Tatsuya Terazawa• Term of office for Directors
2 years and 11 months• Attendance at Board of
Directors meeting
17/18 (94.4%)

1984 Entered the Ministry of International Trade andIndustry
2001 Industrial Researcher, JETRO New York
2004 Director, Northeast Asia Division, Trade Policy Bureau
2006 Director, Finance Division, Small and Medium
Enterprise Agency
2008 Director, Economic Policy Unit, Minister’s
Secretariat
Director, Economic and Industrial Policy Division,
Economic and Industrial Policy Bureau
2011 Executive Secretary to the Prime Minister2012 Deputy Director-General, Economic and Industrial
Policy Bureau, Ministry of Economy, Trade andIndustry
2013 Councilor, Commerce Distribution and Industrial
Safety Policy Group (Industrial Safety Section),
Ministry of Economy, Trade and Industry
2015 Director-General, Trade and Economic Cooperation
Bureau, Ministry of Economy, Trade and Industry
2017 Director-General, Commerce and Information Policy
Bureau, Ministry of Economy, Trade and Industry
2018 Vice-Minister for International Affairs, Ministry of
Economy, Trade and Industry
2019 Advisor, Ministry of Economy, Trade and Industry
2020 Outside Director, Toyo Engineering Corporation(Present)
2021 Special Advisor to the Cabinet Office
Chairman and CEO, The Institute of Energy
Economics, Japan (Present)

1979 Joined Hitachi, Ltd.
1982 Joined Bank of America, N.A., Asia
Headquarters
1986 Joined Pasona Inc. and seconded andthen transferred to Edu Consult Co., Ltd.
(current Scholar Consult Co.,ltd.)2000 Partner of Scholar Consult Co.,ltd. (Present)
Assistant Professor of Nihonbashi Gakkan
University (current Kaichi International
University)
2005 Partner of Scholar Consult Co.,ltd.
(Present)
2008 Professor, Nihonbashi Gakkan University(current Kaichi International University)(Present)
2019 Outside Director and Nomination andRemuneration Committee Member, KH
Neochem Co., ltd. (Present)
2020 Outside Director, Toyo Engineering
Corporation (Present)
2022 Professor emeritus, visiting professor,
Kaichi International University (present)
Outside Director, NIHON SEIKAN K.K.
(present)

Outside Director
Independent Officer

Sayoko Miyairi• Term of office for Directors
2 years and 11 months• Attendance at Board of
Directors meeting
18/18 (100%)

Audit & Supervisory Board Members

Audit & Supervisory Board
MemberToshihiko Nemura

Chihiro Ubukata• Term of office for Audit &Supervisory Board Member 1 years• Attendance at Board of
Directors meeting 		14/14 (100%)• Attendance at Audit &Supervisory Board meeting 14/14 (100%)• Term of office for Audit &Supervisory Board Member 4 years• Attendance at Board of
Directors meeting
18/18 (100%)• Attendance at Audit &Supervisory Board meeting 20/20 (100%)

66

TOYO ENGINEERING CORPORATION

Integrated Report 2023

Outside Audit & Supervisory Board
MemberIndependent Officer

Hideki Matsuo• Term of office for Audit &Supervisory Board Member 1 years• Attendance at Board of
Directors meeting 		14/14 (100%)• Attendance at Audit &Supervisory Board meeting 14/14 (100%)

Outside Audit & Supervisory Board
MemberIndependent Officer

Takako Miyoshi• Newly Appointed

2001 Registered as Attorney at Law (Dai-Ichi
Tokyo Bar Association)
2003 Member of Consumer Affairs Committee,
Dai-ichi Tokyo Bar Association
2008 Member of the Intellectual Property Law
Research Committee of the General Legal
Research Institute, Dai-ichi Tokyo Bar
Association (Present)2010 Member of Environmental Protection
Committee, Dai-ichi Tokyo Bar Association(Present)
2011 Partner, Okamura Sogo Law Office (Present)2017 Member of the Special Committee on
Civil Litigation Issues, Dai-ichi Tokyo Bar
Association (Present)
Member of the Advisory Council on theManagement of Civil Litigation, Tokyo
District Court and Tokyo Sankai (Present)
2023 Outside Audit & Supervisory Board
Member, Toyo Engineering Corporation(Present)

TOYO ENGINEERING CORPORATION

Integrated Report 2023

67

Data Section

Audit & Supervisory Board
Member1981 Joined Mitsui Toatsu Chemicals, Inc. (current
Mitsui Chemicals, Inc.)
2000 Director, Plant Manager, MITSUI BISPHENOLSINGAPORE PTE LTD
2006 President, SHANGHAI SINOPEC MITSUICHEMICALS, CO.,LTD2009 Senior Director, Mitsui Chemicals, Inc. General
Manager Planning & Coordination and License
Division, Basic Chemicals Business Sector
2010 Senior Director General Manager, Planning &Coordination Division, Petrochemicals Business
Sector2013 Executive Officer General Manager, Production& Technology Center2016 Director/Senior Executive Officer General
Manager, Production & Technology Center2018 Representative Director; Senior Executive
Officer (CTO)
2020 Representative Director; Executive Vice
President (CTO)
2022 Special Advisor
Chairman, Japan Industrial Safety Competency
Center (JSCC) (Present)
2022 Outside Audit & Supervisory Board Member,
Toyo Engineering Corporation(Present)
2023 Outside Director, RYODEN CORPORATION(Present)

Foundation for Sustainable Growth

Outside Director
Independent Officer

Representative Director,
Executive Vice President

Medium-term Management Plan

• Term of office for Directors 6 years• Attendance at Board of
Directors meeting
18/18 (100%)

Representative Director,
President & Chief Executive Officer

Discussion between Outside Directors andChairman Nagamatsu

GOVERNANCE Establish an Organization with Integrity and Discipline

Chairman Haruo Nagamatsu and Toyo’s four Outside Directors have gathered to
discuss various topics, centered on how to strengthen Toyo’s governance andachieve sustainable growth.

Reijiro Yamamoto

Haruo Nagamatsu

Masami Tashiro

Tatsuya Terazawa

Outside Director

Outside Director

Chairman

Outside Director

Outside Director

Q Chairman Nagamatsu, you have recently been appointed chair of the Board of Directors. Going forward, how do you intend to lead the Board?
Nagamatsu One of the roles of the Board of Directors is tomonitor and keep the executive functions of our company incheck. In carrying out my duties as Chairman of the Board of
Directors, I intend to keep the idea of separation of executive
and supervisory functions in mind at all times, and maintaina proper distance from our executives. I will also work to foster an environment and atmosphere that facilitates more lively discussions that are broader in scope and higher in quality.

TOYO ENGINEERING CORPORATION

Integrated Report 2023

Tashiro Toyo has a history of strengthening its governancedating back to 2003, when it first introduced its executive officer system.
In 2015, it formulated its Corporate Governance Guidelines,
and appointed three Outside Directors. It was at this time that
I myself was appointed. It was an extremely difficult time for
Toyo, with the company right in the middle of its restructuring
plans and its financial condition continuing to deteriorate.
When considering how the company could recover, oneof the Outside Directors proposed deliberating the issue
not only at Board of Directors’ meetings, but also at morecasual discussion meetings. After a number of these discussion meetings, the Directors began to understand eachother better, and I believe that communicating opinions froman outside perspective helped strengthen governance. The
business environment remained bleak for some time afterward—there was a downturn in the market, for example, andthis was followed by the coronavirus pandemic. Yet since fiscal 2019, Toyo has recorded four consecutive years of profit.
There is a tendency in the engineering industry that, whenthings are difficult, companies force themselves to accept orders for projects that perhaps they shouldn’t. But comparedto the past, I have witnessed first-hand that Toyo’s corporate
governance is now more effective at preventing this from happening. Strengthening governance is very much an on-goingprocess at Toyo, and I hope to continue contributing in my roleas an Outside Director.

The appointment of a new President

Medium-term management plan
Q This is the third year of the current medium-term management plan. What is your assessment of the company’s progress so far?

Q Eiji Hosoi, the former Executive Vice President, hasbeen appointed President of Toyo Engineering. Can
you provide an overview of the appointment process?
Terazawa Perhaps the most important role of the Nomination
and Remuneration Advisory Committee is selecting the Chief
Executive Officer and, as a member of the Committee, I felt
the burden of responsibility that had been entrusted to me by
our shareholders. I was not particularly familiar with Hosoi,
and so initially I felt I was not in a position to recommend
him with full confidence. For almost two hours, therefore, I
quizzed him on his ideas and approaches; I also asked him to
set aside time so that I could get to know his character better. Following our interactions, I concluded that here was aperson to whom I could entrust the future of Toyo—in termsof his career, his character, and his ideas. When the next
Nomination and Remuneration Advisory Committee meeting
was held, I declared my support for appointing Hosoi as ournext President. The fact that the Committee was able to discuss the matter fully until all parties were satisfied is, I believe, a sign that Toyo’s governance is working effectively.
Miyairi As head of a company, it is vital that you can inspire your employees to work together with you. From myunique vantage-point as an Outside Director, I considered the

Yamamoto When we first began discussions on formulating
the medium-term management plan, we primarily focused onstrengthening Toyo’s EPC business. After that, we incorporated strategies regarding new technologies and new businessdevelopment—which centered on the field of carbon neutral.
Finally, we decided our goal should be to achieve sustainablegrowth by combining the two. It was a creative process. But
while the aims of the medium-term management plan arecommendable, achieving them will be no easy task. This isparticularly true when it comes to the digital transformationof Toyo (DXoT)—it will take time for the initiatives we havetaken to bear fruit.
I believe that by improving productivity and opening up
new business fields, in the near future DXoT will bear fruit in
the form of improved profitability.
Terazawa I agree that we managed to draw up an excellent
plan—but, as you indicate, it is imperative that our initiatives
soon bear fruit. DXoT will take time. But instead of seeing
what happens after five years, now that we are at the halfway point we must carefully examine whether or not there
are any issues. Carbon neutral is also of great importance.
The U.S. recently passed the Inflation Reduction Act (IRA),
as a result of which carbon neutral initiatives are progressing
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68

Q What is your assessment of Toyo’s governance?

Foundation for Sustainable Growth

Governancecompany’s employees and its shareholders, and I asked various questions regarding Hosoi’s personality and his ideas for
Toyo’s future. Hosoi’s responses satisfied me that he was
the right candidate for the job. I feel that the Nomination andRemuneration Advisory Committee is gradually functioning
more effectively. But when thinking about future succession
plans, I believe we ought to consider not only the next generation, but the generation after that. The spread of COVID-19
meant I had few opportunities to interact with Toyo employees or visit Toyo worksites. However, the company agreed tohold Business Report Debrief meetings—which were distinct
from our Board of Directors’ meetings—and also created opportunities for me to interact with frontline employees. As aconsequence, I now enjoy more opportunities to get to know
managerial-level employees.

Medium-term Management Plan

Sayoko Miyairi

Management Vision

Strengthening Toyo’s governance andachieving sustainable growth

Nagamatsu Before Toyo adopted a system of three Outside
Directors, the majority of decisions were made at the management meetings that took place before the Board of
Directors’ meetings. Expert Outside Directors provide feedback and make various suggestions from entirely different
points of view. This not only creates a desirable tension, butalso helps the Board of Directors function so that Toyo canachieve its goal of sustainable growth.
Yamamoto Toyo has fully learned the lessons of its failures,and its governance has improved as a result of overcoming
difficulties.
Challenging questions and issues are raised at both Boardof Directors’ meetings and at management meetings; I feel thedesire of the executive management to strengthen governancehas played a large role in the progress we have made today.
Terazawa The day before a Board of Directors’ meeting, anadvance briefing is held. There, Directors acquire a full understanding of the agenda items, and pose questions; the executive side then does its homework on these questions, andprepares responses in time for the Board meeting the following day. If you include discussions on the day of the meeting, we spend around five hours on each Board of Directors’
meeting. Thanks to the briefing the day before, everyone participates in the Board of Directors’ meeting having fully understood the topics on the agenda; for this reason, at themeeting itself we can engage in heated yet focused discussions. We all share the same goal. My hope is that, by carrying out thorough discussions with an appropriate level oftension, we can contribute to the company’s results and its
further growth.

Discussion between Outside Directors andChairman Nagamatsu

Miyairi The key is whether the engineering industry—and
Toyo in particular—is an attractive proposition for job-seekers.
Wages are important, but I believe many people join Toyo outof a desire to benefit society. We must learn how to identify people who wish to dedicate their lives to the engineering industry, even in this day and age. I think we have to think
about recruiting personnel from overseas as well. Toyo is a
supporter of the Japanese Business Foundation’s goal of increasing the percentage of female executive to 30% or moreby 2030. Diversifying our human resources can lead to changes in work approach and management, and it is an opportunity to encourage change via a domino effect. Today, companies
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Tashiro Toyo’s biggest strength is that it has so many independent overseas affiliates. However, it is important thecompany conducts careful governance; rather than waiting
passively, Toyo must actively gather critical information, andcontinue to maintain and strengthen its data-based fixedpoint measurements.
Yamamoto Toyo is one of Japan’s leading global companies.
It respects the business methods of its affiliates around theworld, and it has established systems for managing these affiliates. However, precisely because Toyo has a long historyof global management, there are aspects in which the quality

Hopes for Toyo’s future
Q What hopes and expectations do you have for Toyo’s
future?
Tashiro First, I would like Toyo to expedite the achievementof its medium-term management plan goals. I also believe theGroup must unite in anticipation of the future that lies beyond
this plan, which ends in fiscal 2025. Following his appointment,
President Hosoi has introduced a new management system,and this makes me extremely excited for Toyo’s future.
Yamamoto There is no doubt that, through its business, Toyo
will contribute to the realization of a sustainable global community. As an engineering company, I want to see Toyo innovate and make significant contributions both to preserving the
global environment and to carbon neutral—and I would likethese activities to support the sustainable growth of Toyo as
well. Finally, we must resume dividend payments at the earliest opportunity.
Miyairi When developing its carbon neutral business, Toyomust revise its entire engineering business model. In newmarkets, instead of accepting orders only after all the plans
have been ironed out, it is vital we attract potential customers

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71

Data Section

man resources should Toyo recruit and nurture?

filiates now account for an increasing proportion ofyour revenues. What are the keys to effective global
management?

Foundation for Sustainable Growth

Q In the light of your growth strategy, what type of hu-

Q Your consolidated subsidiaries and equity method af-

Medium-term Management Plan

Human resources

Global managementof its management is deteriorating. The officers and employees engaged in global management are not newcomers but
experienced professionals. For this reason, it is vital that instead of leaving things entirely up to our affiliates, and being
confident that the systems we have in place will function as
intended, we ensure that our global management professionals pay careful attention to our affiliates, check whether there
are any points of potential failure, and ensure our governanceremains effective.
Nagamatsu Toyo-Japan management meetings are attended by the heads of our overseas affiliates as well; as such, we
all have a shared understanding of Group-wide management
issues and the measures implemented to resolve them. In
addition, Toyo-Japan deliberates key projects of our affiliates
during the proposal stage. After an order has been confirmed,
Toyo-Japan then regularly monitors the results of the project.
Employees are frequently assigned between Toyo-Japan andits affiliates, while there are also times when we execute projects together. In this way, we are making resourceful use of
the human and financial capital of the entire Toyo Group in executing our projects.

with proposals for project structuring. At present, it feels as
if Toyo is directing its antenna in a predetermined direction,and succeeding in receiving signals from there. However, wemust take a more expansive approach, extending our network to encompass fields that are new for us—and in thisthe management must take the lead. There is a mountain of
information around us. We have to develop the capacity tocollect the appropriate information, no matter which direction it comes from.
Terasawa There are not many companies so clearly capable of contributing to Japan, the earth, and to society as awhole as Toyo. Perhaps for this reason, Toyo’s commitment
to making money has in the past been less than steadfast.
To take a baseball metaphor, Toyo frequently makes one-basehits—but rarely strings them together and turns into runs. We
are a team that earns a small number of runs—but then atsome point we concede a whole heap of runs, and victory
eludes us. Going forward, we must convert these one-basehits into two-base hits, and ensure we put runs on the board.
We must share risks appropriately with our customers, provide services with high added value, and make sure we areproperly compensated—this is how we can win the game. At
the same time, if we wish to avoid conceding large numbersof runs, we must ensure that we do not shoulder excessive
risk at the proposal stage. Instead, it is critical we engage in
careful risk management, and ensure any risks are reflectedin suitable contract conditions.
In the field of carbon neutral, there is a lot of attention
on ammonia—which is one of Toyo’s strengths. Carbon neutral comprises a wide range of other fields and technologies,
such as carbon capture and storage (CCS) and methanol. But
these are all areas in which Toyo is capable of leveraging its
technologies and expertise. We must therefore identify areasin which we can make a difference, and work together with
our partners to create value. Toyo’s future is bright—I have no
doubt it will go on to make even greater contributions to society. We all share the same goals—as an Outside Director, I intend to participate in debates at Board of Directors’ meetings
with the right amount of tension.
Nagamatsu Toyo’s workforce of engineers and specialists
possess the integrity to excel on the global stage. As members of the Board of Directors, it is our responsibility to supervise the execution of business by this workforce. The current
medium-term management plan runs until fiscal 2025—wehave now concluded the two-year period of evolution, and weare entering the penetration phase. Toyo is fully committed
to and fully intends to achieve the KGIs in the medium-term
management plan. We have positioned 2025–2030 as a breakthrough period—and the Board of Directors has a responsibility to ensure Toyo is well-placed to achieve major growth.
I would like to thank our four Outside Directors for theirvaluable insights. Going forward, let us further strengthen ourgovernance, and provide transparent explanations to all our
stakeholders. As Toyo seeks to achieve sustainable growth,
I very much look forward to your insight and advice at future
Board of Directors’ meetings.

Management Vision

there with great pace. In fact, all over the world, countries aremaking the move from demonstrating technologies to commercializing them. In contrast, Toyo is still in the early FS andFEED stages. As a matter of urgency, we must begin to implement projects and make our new business fields profitable. When it comes to carbon neutral, Toyo of course has a
responsibility reduce its own greenhouse gas emissions; but
we should also recognize that our plants are making a positive difference to the global environment. The idea of Avoided
Emissions—which results in reductions in CO2 emissions—isbecoming more widespread in the services we provide. Toyomust promote the fact that it can make a positive impact on
the global environment through its technologies.
Tashiro The first one or two years of the medium-term management plan are a period of evolution, and I believe we havemade a strong start. As we enter the penetration phase andwork toward achieving the numerical goals outlined in our medium-term management plan, we must secure an appropriate
number of orders, complete construction via proper project
management, and ensure we do everything we can to improve profitability—such as eliminate unnecessary costs.
Nagamatsu As you all note, Toyo must achieve the numericalgoals it set out in its medium-term management plan as swiftly
as possible. We must also execute our mission of “Engineering
for Sustainable Growth of the Global Community,” and contribute to the realization of a carbon neutral society. I will carefully
fulfill my responsibilities to ensure this happens.

cannot survive without diverse human resources. I would likeToyo to use this fact as a motivation to change and to achieve
the goals of its medium-term management plan.
Nagamatsu We have identified female advancement in theworkplace as one of our key issues. In recent years, Toyo has
assigned a female employee to the role of project manager
for large-scale projects, while at our overseas subsidiaries, alarge number of women occupy executive positions. In Japan,
women now make up 30% of our graduate recruits and, going forward, I believe this will continue to rise.
For the new business fields we are currently focused on,
we require a new type of human resource—they must have
speed and flexibility of thought, and the ability to act basedon hypotheses and correct their actions where necessary.
As such, we intend to combine various methods of securing the appropriate human resources—including nurturing ourexisting workforce, head-hunting, recruiting specialists, andcollaborating with other companies; we will act with speed,
and make these new business fields profitable as quickly as
possible. If we wish talented job-seekers to view Toyo as an
attractive company, we must engage in work that benefits
people and society—and, through this work, we must generate suitable profits. Indeed, by posting strong results, we
can reassure talented job-seekers. I hope new management
system lead by President Hosoi shows the path to greater
profitability.

GOVERNANCE Establish an Organization with Integrity and Discipline

Corporate Governance

GOVERNANCE Establish an Organization with Integrity and Discipline

tainability as a company and improved corporate and shareholder value in the medium- to long-term. We are also
working on fleshing out our corporate governance, which we consider the foundation for achieving the above. Morespecifically, we are doing everything in our power to establish and run a corporate governance system, implement
suitable risk-taking management, ensure thorough compliance, actively disclose information, and maintain a dialogue
with our stakeholders.

Initiatives to Strengthen GovernanceAppointing Outside Auditors

We appoint Outside Directors who possess superb insight

We appoint Outside Auditors who possess superb insight andand abundant experience in various fields, including manage-abundant experience in various fields. They are able to take anment of global corporations, accounting and finance, human re-overview of our entire management and properly audit the ad-sources management, and legal affairs. They are able to take anequacy of the work and business execution of our Directors.

overview of our entire management and provide practical andOutside Officer Systemobjective opinions and advice from the perspective of diverse

Our Outside Officers provide opinions from the perspective of

stakeholders. In line with the criteria for the independence

external stakeholders, and we believe this both helps ensureof outside directors prescribed by the Tokyo Stock Exchange,

the accountability of our corporate executives and contributes

three of our four Outside Directors are Independent Officers.

to management transparency. Considering the business con-Ensuring the diversity of the Board of Directors/Audit &tent and structure of our company, we are confident that our

Supervisory Board

current Outside Officer system is effective in ensuring our cor-

In fiscal 2020, we appointed a female Director, and, in fis-porate governance functions as intended. In addition, to makecal 2023, we appointed a female Audit & Supervisory Board

sure that our Outside Officers provide effective supervision for

Member. Going forward, we will continue our efforts to ensure

our corporate management, we provide explanations of agen-the diversity of the Board of Directors, including aspects suchda items in advance of Board of Directors meetings, with theas gender, nationality, career history, and age.

goal of elevating the quality of meeting discussions.
Percentage of members of the Board of Directors/
Audit & Supervisory Board who are female

4 Audit & Supervisory

9 Directors
OutsideDirectors

44.4%

Board Members

Supervisory Board Member

Outside Audit& Supervisory
Board Members

FemaleDirectors

Female Audit &Supervisory
Board Members

11.1%

50%

Independent Directors: 33.3%

2003

2008

2006

Appointment of one
Outside Director

2014

Establishment ofCompliance Committee
Adoption of executive officer system

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2015

Appointment of four Outside Directors(increased from three to four)

Establishment of Nomination andRemuneration Advisory Committee

2017

Board of Directors
Appointment/Remova

President and CEO

2018

2019

Audit & Supervisory Board (Members)

LiaisonNomination and Remuneration
Advisory Committee
J-SOX Management Meeting

Sustainability Committee

Crisis Management Office

Accounting Auditor

Audit

Executive Committee

Crisis (Disaster) Headquarters

Appointment/Remova
LiaisonCompliance Committee
Project Risk Management Committee

ReportInternal Auditing Division
Audit

Group Management Division
Supervise

Operation UnitsGroup Companies

Internal Controls
Based on the recognition that internal controls serve as thefoundation of corporate governance, the Directors establish,
maintain, and evaluate an appropriate internal control system.
They conduct ongoing inspections and make improvements tothe system and periodically review their basic policy for internal controls. Given that internal controls ensure the reliabilityof compliance, risk management, and financial reports, we
also pay sufficient attention to the effectiveness and efficiency of operations. The establishment of this system enables theBoard of Directors to make decisions based on appropriate information and subsequently, the execution of business.

Auditing by Internal Auditing Division and Audit & Supervisory Board Members
2021

Revisions to Corporate
Governance Guidelines
Establishment of Compliance Department
Revisions to Corporate Governance Guidelines

Appointment of Chief Compliance Officer
Appointment of three Outside Directors (increased
from one to three)
Formulation of Corporate Governance Guidelines

Appointment/Remova
Audit

TOYO has established an Internal Auditing Division that is directly controlled by the President. Internal Auditing Division assesses the legality and rationality of Company operations, andprovides advice and counsel regarding the operational effectiveness and efficiency of the Company. Additionally, it independently assesses the maintenance and operation of internal controls
related to financial reports, and these results are reported to
the J-SOX Committee, the organization immediately under the
President. Audit & Supervisory Board Members audit Directors’
execution of duties through attending important meetings, including those of the Board of Directors, interviewing Directors,

Executive Officers, and employees on the status of operations
and the execution of duties, and investigating the progress of
the Company’s operations and finances. The Audit & Supervisory
Board, Accounting Auditors, and the Internal Auditing Division
conduct their auditing in cooperation, while giving full consideration to the independence of one another. Auditing is implemented through close communication such as explaining theobservations related to the Company’s operations, and exchanging opinions on various topics including their respective yearly
auditing plans and critical audit items, auditing methods, inspection and quality control systems, and audit results.
TOYO ENGINEERING CORPORATION

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Data Section

Establishment ofCode of Conduct andCompliance Program

25.0%

Independent Officers: 50%

Past Initiatives to Strengthen Corporate Governance

Shareholders Meeting
Appointment/Remova

1 female Audit &1 female Director

President & CEO and consists of Executive Officers with specific roles (Senior Executive Officers or above) and the heads ofkey divisions. The Executive Committee reports on and deliberates important matters related to the execution of operation.
The Nomination and Remuneration Advisory Committee also
serves as an advisory body to the President & CEO—its members comprising the President & CEO and Outside Officers.
The Committee serves to ensure fair and transparent officer
appointments and remuneration by providing opinions to the
President & CEO. The Audit & Supervisory Board consists offour members, two of which are Outside Auditors. They reportand deliberate on the execution of duties by Directors, the establishment and implementation of internal controls, internal audit guidelines for quarterly and year-end results, and the details
and results of audits.

Foundation for Sustainable GrowthComposition of the Board of Directors/
Audit & Supervisory Board

TOYO recognizes the importance of ensuring transparency andfairness in management decision making in gaining the trust of
its stakeholders, including shareholders and customers, and fulfilling our corporate social responsibilities. We have establishedthe following corporate governance system and are working tofurther expand its operation. The Board of Directors comprises
nine Directors, including four Outside Directors, who deliberate and determine all important matters related to management
and execution of operation, and also monitor and supervise one
another with respect to the execution of duties. We also employ an executive officer system for the purpose of guaranteeing a swift and efficient business execution system. Executive
Officers are appointed by the Board of Directors and, under the
CEO’s directions, execute the duties they have been delegated. The Executive Committee serves as an advisory body to theMedium-term Management Plan

Appointing Outside Directors

Corporate Governance System

Management Vision

TOYO’s mission is “Engineering for Sustainable Growth of the Global Community.”, and we aim to achieve both sus-

Corporate Governance

GOVERNANCE Establish an Organization with Integrity and Discipline

Name

Positions

Haruo
Chairman
Nagamatsu

Global corporate
management

Accounting/financeHR/labor

Legal andregulatory

Technology/
R&D

Project
Management

l

l

l

Sales
marketingIndustryknowledge

Knowledgeof otherindustrieslEiji Hosoi

Representative Director,
President & Chief Executive Officerl

Masayuki
Yoshizawa

Representative Director,
Executive Vice PresidentlNoriyoshi
TorigoeDirector, Executive Vice President,
Chief Compliance OfficerlKensuke
Waki

Director, Senior Executive Officer,
Chief Finance OfficerlMasamiTashiroOutside Director

l

l

l

ReijiroYamamoto

Outside Director

l

l

l

TatsuyaTerazawa

Outside Director

SayokoMiyairi

Outside Director

Toshihiko
NemuraAudit & Supervisory Board Member

ChihiroUbukata

Audit & Supervisory Board Member

HidekiMatsuoOutside Audit & Supervisory Board
MemberTakakoMiyoshi

Outside Audit & Supervisory Board
Member

l

l
l

l

l

l

l

l

l

l

l
l

l

l

l
l

l

l

l

l
l

Note: the table above shows the specialized knowledge and experience held by Directors and Audit & Supervisory Board Members. (The maximum is four per person.)

Reasons for selecting each skill matrix item
In order for TOYO—which does business around the world

integrate new technologies and elemental technologies andand for which the percentages of net sales and total employ-then socially implement them as production facilities (plants)

ees outside of Japan are both high—to achieve its mission of

in various business fields.
Therefore, TOYO has set up a skill matrix of not only ba-

Community," global corporate management skills are vital.

sic items required of its corporate management, including

In addition, project management knowledge and experienceaccounting/finance, HR/labor, legal and regulatory, sales mar-are important in order to manage and supervise TOYO’s main

keting, and industry knowledge, but also global corporate

business, which involves implementing various projects at the

management, project management, technology/R&D, andsame time. Finally, it is important to have both technical/R&D

knowledge of other industries.

knowledge and knowledge of other industries to develop andDiscussions by the Board of Directors
The primary topics of discussion by TOYO’s Board of Directors

Agenda items

are: medium- and long-term management plans and financ-

Important matters related to corporate management, includ-ing plans; and basic policies and risk management for priority

ing officer appointment and basic policies for priority issues

neering company into consideration.

Reported items
Mainly the situation of new orders, progress of projects, situation of Group companies, internal control system and compliance implementation situation, etc.

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of. In December 2022, we conducted a survey of all of theJanuary 2023 regular Board of Directors meeting. Below are

Directors and Audit & Supervisory Board Members that makethe main points of those results.

Fiscal 2020
Improvements made in response to issues raised in fiscal 2019:• Appointed female Directors, and worked to ensure diversity of Boardof Directors•Completed shift to paperless (digitalization) for Board of Directors
meeting materials• Achieved swift distribution of electronic materials
Issues requiring improvement:• The impact of COVID-19 has reduced opportunities for face-to-facemeetings, resulting in lower frequency of communication• Board of Directors meetings are excessively long

Fiscal 2021
Improvements made in response to issues raised in fiscal 2020:• Increased opportunities for officers to exchange information and share opinions through the useof video conferencing systems and, as circumstances allow, the gradual incorporation of face-toface discussions• Some improvements made to the length of Board of Directors meetings, through advance explanations of agenda items and careful time management by the Chairman
Issues requiring improvement:• Inspections of overseas construction sites have not been carried out, and opportunities for communicating with these project sites have diminished• Further discussions are required regarding successor development and further utilizing the Nomination and Remuneration Advisory Committee

Fiscal 2022
Improvements made in response to issues raised in fiscal 2021:• Implemented on-site inspections both within Japan and abroad to create opportunities to communicate with sites• Revitalized Nomination and Remuneration Advisory Committee discussions by setting up opportunities for Outside Officers, General Managers, managers in charge, and other top executives to exchange opinions with each other
Issues requiring improvement and future initiatives:
As a result of this fiscal year’s effectiveness evaluation, we concluded that there is room for improvement regarding the items below,
so we will share this view and consider improvement plans for further improving the functions of the Board of Directors and revitalizing its discussions.
1. Fleshing out dialogue with investors and shareholders as well as Board of Directors discussions related to media public
relations
It is necessary for us to promote dialogue with investors and shareholders and to flesh out media public relations. Therefore, wemust create more opportunities than before for the Board of Directors to discuss such matters from the perspective of improving
our corporate value. Based on the recent opinion, we will promote dialogue with stakeholders while also implementing various
initiatives to improve TOYO’s corporate value.
2. Fleshing out opportunities to provide information related to TOYO’s business to Outside Officers as well as communication with executive members
Our Outside Officers continue to express the opinion that we should flesh out opportunities for communication with executive
members as well as opportunities to provide information aimed at deepening the Outside Officers’ understanding of both thedetails of TOYO’s business and how it is conducted, so we will flesh out such opportunities to start revitalizing discussions by the
Board of Directors and Nomination and Remuneration Advisory Committee.

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75

Data Section

providing "Engineering for Sustainable Growth of the Global

issues, which take TOYO’s unique characteristics as an engi-

and evaluation based on these results were conducted in theFoundation for Sustainable Growthling the efficacy of the Board of Directors. Analysis, discussion,and discloses a summary of the procedures and results there-

Medium-term Management Planllreport of the results from the Director in charge of evaluat-

TOYO regularly evaluates and analyses the Board of Directors

up the Board of Directors. The Board of Directors received all

In order to improve the efficacy of the Board of Directors,

Management Vision

Evaluation of Effectiveness of the Board of Directors

Skill Matrix

Corporate GovernanceCompliance

Policies on Remuneration Amounts and Determining Calculation Methods for
Directors and Audit & Supervisory Board Members

Basic Policy on Compliance

Supervisory Board Members and strengthen accountability,

their motivation to maximize the Company’s corporate value

the ratios for both fixed and performance- linked remunera-

while ensuring medium- to long-term profit for shareholders.

tion as well as the calculation formula for performance-linked

More specifically, this remuneration consists of a fixed por-remuneration shall be decided by the Board of Directors

tion—determined according to each Director’s position— and abased on the findings of the Nomination and Remuneration

performance-linked portion. The performance- linked remuner-

Advisory Committee—which consists of the President & CEO

ation is calculated based on the current net profit attributable to

and Outside Officers—after discussing any revisions deemedowners of the parent—which is considered the most suitablenecessary by the President & CEO. Remuneration for Outside

indicator that reflects the Group’s business performance—and

Directors and Audit & Supervisory Board Members is fixed andis determined by the President & CEO according to the lev-

not linked to business performance in light of their roles andel of contribution of each Director. Furthermore, in order toindependence.

Commitment by the Top Management

Codes and Manuals

Based on our recognition that the commitment by the top
management toward the maintenance and strengthening ofcompliance is important, our President and CEO annually issues a message that emphasizes the importance of compliance to Directors and employees of all group companies.

The Group has established TOYO’s Code of Conduct, aCompliance Manual, and other related rules, strives to raise
the awareness of compliance among executives and employees, and ensures that laws and regulations are followed. In addition, we have our executives and employees submit written
oaths once per year to follow the above rules.

Compliance System
Head Office(FY2022)
Total Remuneration by Type (¥ million)
Officer Classification

Total
Remuneration(¥ million)

Fixed
Remuneration

PerformanceLinked
Remuneration

Group companies

Number of
Eligible
Officers

Board of Directors

Board of Directors

Retirement
Benefits

Non-Monetary
Remuneration,etc. Included on
the Left

President & Chief Executive Officer

President & Chief Executive Officer

Directors (excluding Outside Directors)

147

147

—

—

—

5

Executive Committee (Chairman:
President & Chief Executive Officer)

Compliance Committee(Chairman: CCO)

Audit & Supervisory Board Members(excluding Outside Audit & Supervisory
Board Members)

41

41

—

—

—

3

Departments

Compliance Department

Compliance Committee

Sites

Division heads

Compliance managers

Outside Officers

36

36

—

—

—

7

TOYO established the Nomination and Remuneration Advisory

and Executive Officers. The Nomination and Remuneration

Committee as an advisory body to the President & CEO, with

Advisory Committee meets once per year in principle, with ad-

the goal of ensuring transparency in various areas: the nom-

ditional meetings held as required.

ination of Director and Executive Officer candidates; the ap-

The Nomination and Remuneration Advisory Committee

pointment and dismissal of the Representative Director; thecomprises a total of four members: the President & CEO, who

appointment and dismissal of executives; and the systems andis Committee chair, and three Independent Outside Directors.

decision-making processes for the remuneration of Directors

Items discussed by the Nomination and Remuneration Advisory CommitteeI) Items related to NominationsII) Items related to Remuneration

1.	Director appointment and dismissal proposals submitted

1.	The remuneration system for Directors and Executive

2. Appointment and dismissal of the Representative Director

Officers
2.	
Breakdown of compensation, including compensation

3.	Appointment and dismissal of executives: Chairman,

amounts, for individual Directors and Executive Officers

President, Vice President, Senior Executive Officers,

3.	Inquiries from the President & CEO regarding the remu-CEO, CFO, CCO, and CTO
4.	Developing successors to the President & CEO and other Directors and to Executive Officers
5.	Inquiries from the President & CEO regarding the nomination of Directors and Executive Officers: the selection
process for officer candidates, eligibility requirements forofficers, evaluation criteria, etc.

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neration system for Directors and Executive Officers:
remuneration methods, calculation methods, remuneration tables, etc.

Internal Whistleblowing System
We have developed an internal whistleblowing system concerning compliance, including the violation of laws, regulations, etc.,
as a system to ensure appropriate reporting to the Board of Directors and the Audit & Supervisory Board. For this purpose, we establish points of contact for consultation and internal whistleblowing within and outside of the Company for executives and employees of all group companies (including hotlines set up through third-party organizations, etc. and the possibility of anonymous
whistleblowing), and we strictly prohibit any disadvantageous treatment of those who provided such information.

Training on Compliance

Fiscal 2022 compliance management report

We implement the following initiatives in an effort toraise awareness of and promote compliance:(1) Compliance-related group training, (2) new-employee training, (3) e-learning, (4) mini compliancetests, (5) compliance newsletter distribution, and (6)in-house lectures

Number of cases of serious compliance violations

0

Number of cases of whistleblowing*1

21

Number of compliance e-learning participants(for new recruits and employees yet to complete the program)*2

76

Total number of mini compliance test participants*2*1 Non-consolidated and consolidated subsidiaries

2,479*2 Non-consolidated

Approach to the Bribery Risk
The Group strictly prohibits bribery as well as unlawfully providing, offering, or promising money or any other benefit to foreign
public officials, etc., and we strive to make all of our executives and employees aware of the need to follow laws that include theUnfair Competition Prevention Act, the US Foreign Corrupt Practices Act (FCPA), and the UK Bribery Act while also educatingthem accordingly.
We will continue to enhance and expand our program for preventing the bribery of foreign public officials, make it mandatory
to apply for and obtain approval before providing gifts, business entertainment, etc. in particular, and strive to prevent corruption.
TOYO ENGINEERING CORPORATION

Integrated Report 2023

77

Data Section

to the General Meeting of Shareholders

We have established a Compliance Committee chaired by our Chief Compliance Officer (CCO), and we endeavor to operate andmonitor the educational and promotional campaigns on compliance and the compliance system.
More specifically, (1) our Compliance Committee devises awareness-raising and promotion activities, (2) our ComplianceDepartment—which serves as the Secretariat of the committee—and division heads lead the way in implementing the above activities, (3) the committee confirms and evaluates the implementation situation, and (4) our CCO regularly reports the results to
the Board of Directors and the Executive Committee. The Board of Directors conducts one management review per year.
In addition, to ensure more unified Group-wide compliance activities, we have built a system under which Compliance Committees
and managers are set up at group companies and regularly exchange opinions and share information with our Compliance Department.

Foundation for Sustainable Growth

Nomination and Remuneration Advisory Committee

Medium-term Management Plan

set appropriate remuneration levels for Directors and Audit &is intended to be suitable, fair, and balanced and to increase

The Group’s Basic Policy on Compliance requires that every member of our workforce not only comply with national and international laws, regulations, and rules, but also abide by the spirit of these rules in the execution of their day-to-day work; it further
requires that employees improve the integrity and ethical values of the Company by acting in conformance with our Corporate
Philosophy and by acting with social decency.

Management Vision

Remuneration for TOYO’s Directors (excluding Outside Directors)

GOVERNANCE Establish an Organization with Integrity and Discipline

Risk Management

GOVERNANCE Establish an Organization with Integrity and Discipline

Project Risk Management

At TOYO, we believe that appropriate risk-taking and effective risk management are essential for improving corporate value. For

Pre-order (proposal selection and estimation stages)

this reason, we identify potential risks—such as changing business environments—in all our business processes. We clearly de-

For each project we undertake, we examine the technologies and work involved, we understand and assess the risks involved,

fine which processes we use to classify, analyze, assess, and respond to these risks, which departments are tasked with over-

we consider the potential impact and probability of occurrence of these risks, and we draw up rational countermeasures. To facil-

seeing these processes, and which relevant regulations we adhere to. To understand and respond to latent risks as quickly as

itate the above risk management initiatives, to ensure they are formulated in a transparent manner, and to verify the efficacy ofpossible, we regularly review our risk management processes, identify priority risks, and manage these risks accordingly. As antheir risk control functions, we have established and operate the system outlined below.

engineering company, we intend to continually build on our past experiences to enhance our risk management capabilities andhandle risks in an appropriate manner.

Strengthening Pre-Order Risk Management

Management Vision

Basic Policy on Risk Management

For projects that are large, important, or novel

Discussing our initiative policy and strategy for each project and analyzing risks at a strategy policy meeting

Risk Classification and Basic System

The Board of Directors determines the advisability of starting proposal activities

In terms of our management, we classify various risks that affect the normal execution of our operations from various perspectives. At the same time, we consider each event from different perspectives, including compliance risks (preventing and dealing
thereby using a multifaceted risk classification approach for our development and operations.

Risk measures

Business
operation risks

The Project Risk Management Committee* considers risks and determines our management policy(Targets: emergencies and serious
situations that could threaten thesurvival of the Company)

The Board of Directors approves the risk management policy
Assessing the suitability at a cost appraisal meeting and schedule appraisal meeting

Company-widerisks
Contractrisks

The heads of business divisions approve the price
Order receiving
capability risks
Countryrisks

The President, Executive Vice President, and CFO approve and submit the final offer
Board of Directors

Discussion

Project
execution risks(More important risk details andmeasures)

Investment
risks

Executive Committee

Internal
management risks

Technology andproduct-derived
risks(Financial information
disclosure)Intellectual property
and information
protection risks
Human capitalderived risks

ESG
risks

Discussion

ReportingIntegrated Report 2023

• Schedule* Committees attached to the Executive Committee

Project Risk
Management
Committee(individual
projects)

Eachdepartment
in charge ofrisks

risk control systems, incorporate risk assessments and preconditions from the pre-order proposal stage; second, the maintenanceing and monitoring throughout the duration of the project. To this end, we have established and operate the system outlined below.

Crisis Response
Division(General Manager:
President)

Strengthening Project Risk Management
After order receipt
Implementing a reliable transfer from proposal activities to the project itself
At the time starting the project(Important risk details andmeasures)

Drafting a clear execution policy and making everyone aware of it

Security Management
Department* Response via the normal
execution of operations andmanagement systems

Information
disclosure-derived
risks

Risks to be considered• Weather and disasters

During project execution• Partner capabilities• Weekly and monthly management as well as reviews by division heads• Ensuring the design and procurement that considering construction and operations• Strengthening construction management• Implementing a Cold Eye Review by in-house experts• Early detection of and response to predictors of trouble• Drafting and executing early measures to respond to trouble• Implementing steering from a high-level perspective• Regularly holding meetings to report to the management• Sharing important risks and countermeasures with other projects in progress• TOYO Group resources• Increases in the quantity of materials and equipment or associatedconstruction work
• Risks of construction period delays or failing to achieve performance guarantees• Country risk (political, economic,
exchange, tax system, public security, infrastructure, unions, etc.)

After the project ends

Various rules, guidelines,
manuals, etc.

TOYO ENGINEERING CORPORATION• Country risk (political, economic, exchange, tax system, public security,
infrastructure, etc.)

and improvement of project profitability through the implementation of appropriate risk control systems, including regular report-

Business
continuity risks78• TOYO Group resources (execution
system)Board of Directors

IT system-derived
risks(Non-financial
information disclosure)• Risk sharing with the client or partner

Data Section

Safety andenvironmentderived risks

Financialreporting risks• Partner capabilities, experience, resources, and reliability

Our project risk management comprises two main components: first, the approval of project execution policies which, as part of theirOverseas
security risks

Operationalrisks(Preventing and dealing
with wrongdoing)• Client credibility

Post-order (project execution stage)

FundingrisksCompliancerisks• Contract conditions

Internal Rules for Crisis
Management

Implementing reliable feedback• Analyzing job data via risk category classification and providing feedback• In-house sharing of project trouble examples at job close-out report meetings

TOYO ENGINEERING CORPORATION

Integrated Report 2023

Foundation for Sustainable Growth

Financial
risks

Risks

Crisis measures• Project novelty and special
characteristics
Medium-term Management Plan

with wrongdoing), financial reporting risks (financial information disclosure), and ESG risks (non-financial information disclosure),

Proposal Activities and Cost Estimating• Execution system consideration	Intra-Group formation, PM/key person/resource
Partner screening and formation• Detailed examination of contract requirements Required deadline
Critical path of schedule

Risks to be considered79Quality, and Health and Safety Initiatives

GOVERNANCE Establish an Organization with Integrity and Discipline

Health and Safety

Toyo has established a basic policy (https://www.toyo-eng.com/jp/en/company/policy/safety/) based on the rec-To ensure occupational health and safety, the foundation of business activities, TOYO has simply and honestly undertaken various
efforts over the years, and these have included strengthening health and safety-related leadership of management, fostering a culture of health and safety, and formulating and adhering to health and safety standards. For example, as we strive to have zero occupational accidents, we continue to work to improve safety activities while using lost time incident rate and total recordable incident
rate as management indicators. As a result, TOYO has maintained some of the lowest lost time incident rates and total recordable
incident rates in the industry. The following is safety record data for the past ten years, which includes overseas group companies.

ognition that compliance with laws and regulations related to HSE and quality as well as meeting the requirements of customers and society, is an indispensable prerequisite for operating business and fulfilling our social
responsibilities as a company and have pursued the realization of the policy under the following management
structure.
Safety, Quality, and Environment (SQE) Management Structure

TOYO’s safety record over the last 10 years

LTIR*1

TRIR*20.5

2.0Management Vision

Basic Policy(ILO basis: Incidence rate per million hours worked)

TOYO Group Companies
SQE Management Committee at Group Companies

Head Office“Advanced EPC Operation”
Strategy Priority Measures

SQE Management Committee at Head OfficeDirection

ReportingContinuously improve theManagement System, the global
common foundation

Direction

Divisions and Departments at
Group Companies

ReportingDirection forimprovement

Safety, Quality and Environment
Management Division• HSE Management Department• Quality Management Department

SQE Division at Group Companies
Monitoring and auditing

SQE Promotion
Committee(Division HeadLevel)
held 4 times/year

Strengthen solidarity among groupcompanies

Monitoring and auditing
Divisions and Departments at
Head OfficeGroup HSE/Quality Meeting

Single Project at Head OfficeSingle Project at Group Companies
Collaborative Project

Global Standards (GS) + ISO 9001 Certification (the TOYO Group)
ISO9001: Quality Management System, ISO14001: Environmental Management System, ISO27001: Information Security Management System, ISO 45001: Occupational Health and
Safety Management System*Global Standards and Local Standards: Standards used by the entire TOYO Group were unified as Global Standards in 2008 so that all group companies would operate using the same
management criteria. TOYO Group obtained ISO9001 group certification for its unified group operation in 2013 and still maintains it. On the other hand, Local Standards are applied aswork standards for individual group companies when they execute domestic projects based on the laws, regulations, etc. of the country the company is located.
*Group HSE/Quality Meeting (strengthening solidary among group companies): A meeting that brings the HSE/quality managers of the various group companies together under one
roof to build a consensus and promote improvements through lively communication. Group companies actively make proposals, which leads to better management.

2013 105,164,018
2014
89,777,237
2015 67,308,769
2016 52,540,748
2017 76,493,784
2018 102,817,669
2019 46,642,608
2020 44,895,756
2021 59,524,567
2022 82,244,375

Total fatalities and losttime incidents (B)Total recordable
incident (B + Medical
treatment) (C)

7
7
5
3
4
11
3
3
3
6

23
20
14
26
35
38
14
23
19
27

*1 Lost time incident rate (LTIR) = (B) x 1,000,000 / (A) (B) = Fatalities +Lost time incidents*2 Total recordable incident rate (TRIR) = (C) x 1,000,000 / (A) (C) = (B) +Medical treatment

Construction industry average

0.4
0.3

1.0
0.2
0.1
0
(Year)

management system that enables us to respond effectively

Knowledge Management System, which automatically col-to risks while projects are in progress. Using DX, we now vi-

lects and stores information on different issues and feedback,sualize the state of risk management on a dashboard, andenabling this information to be easily used; and the AI-based

the new quality management system is coordinated with our

ITB Review System, which helps detect risks and prevent

schedule management software; this helps ensure that risks

oversights in estimate request forms. By applying these twoare continually reduced, and helps prevent oversights in risk

systems to our project proposals, we are able to read large

response. Using these new systems, we can transform indi-

volumes of ITBs in a short time, and improve the efficacy ofvidual experience into organizational knowledge, and hence

our risk detection. This fiscal year, we intend to use DX andlower organizational risks; in this way, we can improve bothto fundamentally change our work flows as a means of low-

the accuracy of our plans and the reproducibility of our exe-

ering high-level risks detected during the proposal stage. To

cution. We have set ourselves a goal of reducing quality-relat-

this end, we have implemented a new AWP-based quality

ed loss costs compared to fiscal 2019 levels by fiscal 2025.

80

TOYO ENGINEERING CORPORATION

Integrated Report 2023

TOYO

0.5

0
13 14 15 16 17 18 19 20 21 22(Year)

13 14 15 16 17 18 19 20 21 22Note) Source of reference for construction industry average: IOGP safety performance indicators2022 data “Contractor”

Preventing Disasters by Raising Levels of Safety AwarenessWe seek to ensure that sayings such as “safety above all else”
and “safety is the foundation of all corporate activities” are• Implementing safety training for all Group employees—in-

put into action. To this end, we carry out risk assessments ofcluding those engaged in design and office work—with aall our construction processes, and we work to ensure thatview to improving awareness and establishing a culture of

the creation of construction guidelines, operational procedure checks at pre-construction toolbox talks, and risk prediction activities are meaningful and not mere formalities. We
strive to foster greater awareness of safety, and we endeavor
to ensure that the entire Group—including its bases—unites

safety that is shared by the entire Group• Sharing lessons learned from serious accidents to all construction sites• Checking and carefully implementing construction-related
safety measures from the project estimation stage

in demonstrating leadership in safety. Compared to 2022, in•Controlling overtime at construction sites, in anticipa-

2023 Toyo construction sites have unfortunately seen an in-tion of the application of the Act to Promote Work Style
Reform to the construction industry

further strengthen the concrete measures listed in the box to• Acquiring ISO45001 certification, an international standard

the right. Through the implementation of these Group-wide

for occupational health and safety management systems

measures, we are striving to prevent further disasters.

Feedback from a safety manager at Toyo’s overseas bases

Data Section

In fiscal 2021, we introduced two systems: the New Feedback

TOYO

KPI

crease in occupational accidents; as such, we are working to

Quality
Initiatives to reduce quality-related loss costs through systems integrated into AWP

1.5“Fostering a resilient culture of safety”
We do not know when an event like COVID-19 will strike next. If we wish to effectively manage occupational health and safety at construction sites in the post-COVID
era, the concept of “resilience engineering” and the adaptive systems it seeks to understand is indispensable. If our project members can understand what they need to
do to recover from setbacks like the coronavirus pandemic, they will be well-placed
to respond swiftly in times of emergency, and to minimize any adverse effects. We
intend to carefully improve occupational health and safety not only by regularly sharing knowledge, but also by implementing training programs and continually revisingand improving our behavior.

Foundation for Sustainable Growth

Local Standards (LS)+ISO14001/ISO27001/ISO45001(planning to achieve certification in March 2024)

Local Standards (LS)+ISO14001/ISO27001/ISO45001

Man-hours (A)Medium-term Management Plan

SQE Committee(Officer andGeneralManager Level)
held 4 times/year

Thoroughly review and continuously improve basic operations
Direction forimprovement

Year

Wildan Ramdan Nurhud
IKPT
SHES Department Manager

TOYO ENGINEERING CORPORATION

Integrated Report 2023

81

ESG Data

SocialIndustrial waste recycling rate
(Domestic construction sites)

Fiscal 2022

Fiscal 2018

Fiscal 2019

Fiscal 2020

Fiscal 2021

(fiscal year ended
March 31, 2019)(fiscal year ended
March 31, 2020)(fiscal year ended
March 31, 2021)(fiscal year ended
March 31, 2022)

91%

91%

90%

(fiscal year ended
March 31, 2023)

88%

No. of employees*6*7

94%

Male

Construction site industrial waste volume(domestic)

10,160t

Construction site industrial waste volume(overseas)*1
Industrial waste volumes (Domestic Head Office)10,262t

9,992t

8,717t17,697t

13,805t

37,963t

6,557t10,318t

129t

95t

58t

63t

70t

0

0

0

0

0

—

9,025t9,430t11,804t

13,656t

No. of toxic material leaks(Domestic/overseas construction sites)
GHG emissions for TOYO Group（Scope1&2）

*2

Male
Female (%)
No. of managers*7*8
Male
Female (%)

Fiscal 2019

Fiscal 2020

Fiscal 2021

(fiscal year ended
March 31, 2020)(fiscal year ended
March 31, 2021)(fiscal year ended
March 31, 2022)(fiscal year ended
March 31, 2023)

3,950

4,204

4,425

4,625

5,730

3,370

3,566

3,749

3,888

4,752

580(15%)638(15%)676(15%)737(16%)

978(17%)

2,811

2,815

2,824

3,087

3,265

2,533

2,529

2,537

2,745

2,873

278(10%)286(10%)287(10%)342(11%)392(12%)

1,081

1,119

1,112

1,150

1,163

1,027

1,065

1,055

1,090

1,099

54(5%)

54(5%)

57(6%)

60(5%)

64(6%)—

1,224t1,244t3,226t

3,910t(Scope2)*2—

7,801t8,186t

8,579t

9,746tEmission intensity (per employee) (Scope 1 & 2)*2—

1.64t/person

1.60t/person

1.87t/person

2.17t/person*1

Fatalities

1

0

0

0

1

Electricity usage at domestic and overseas offices*3

10,571MWh

10,438MWh

9,375MWh

9,757MWh

10,316MWh

Lost time incidents*1

10

3

3

3

5

7,177MWh

Lost time incident rate

0.11

0.06

0.07

0.05

0.07

27

11

20

16

21

Total recordable incident rate

0.37

0.30

0.51

0.32

0.33

No. of employees*6

973

998

968

989

974

804

817

790

809

800

169(17%)181(18%)178(18%)180(18%)174(18%)

735

757

738

754

744

693

709

687

703

694

42(6%)

48(6%)

51(7%)

51(7%)

50(7%)

558

583

569

573

564

539

561

543

548

536

19(3%)

22(4%)

26(5%)

25(4%)

28(5%)

No. of foreigners in managerial roles
(%)

—

—

—

28(5%)

35(6%)

No. of mid-career hires in managerial
roles (%)———

126(22%)138(25%)

Electricity usage at domestic and overseas
construction sites*1—

Renewable energy usage included in the electricity
usage at domestic and overseas construction sites*1

—

—

—

Water use (Domestic Head Office)27.8 thousand m3

27.2 thousand m3

18.5 thousand m3

18.2 thousand m3 21.7 thousand m3

Rainwater use (Domestic Head Office)

2.9 thousand m3

4.4 thousand m3

3.1 thousand m3

4.0 thousand m3

3.9 thousand m3

29.6t

28.8t

18.2t

16.9t

16.1t

Purchase volume of printing paper(wood-free paper) (Domestic Head Office)2,852MWh

6,882MWh

8,649MWh

102,817,669 hours 49,642,608 hours 44,895,756 hours 59,524,567 hours 82,244,375 hours

Man-hours*1*1*9

Medical treatment*1 (no lost time)—

3,960MWh

*1*10

Male
Female (%)
No. of engineers
Male

GovernanceFemale (%)
No. of managers
Male

Fiscal 2022

Fiscal 2018

Fiscal 2019

Fiscal 2020

Fiscal 2021

(fiscal year ended
March 31, 2019)(fiscal year ended
March 31, 2020)(fiscal year ended
March 31, 2021)(fiscal year ended
March 31, 2022)(fiscal year ended
March 31, 2023)

Female (%)

Compliance Risk Management Reports
0

0

0

0

0

Internal reporting*4

16

8

4

9

21

No. of compliance e-Learning participants (fornew recruits and employees yet to complete theprogram)*5

62

33

66

69

76

Total no. of mini compliance test participants*5

961

790

2,298

2,404

2,479

Information security promotion initiatives

No. of male employees taking childcare
leave

4

4

5

10

14

Percentage of male employees taking
childcare leave

—

—

—

31.3%

43.8%

Average length of paternity leave

—

—

—

58.2 days

61.4 days

No. of female employees taking
childcare leave

9

3

7

12

5

5

5

5

5

5

No. of persons taking paternity leave

39

21

25

28

25

No. of persons working shorter hours
for childcare reasons

14

14

15

12

10

No. of persons working shorter hours
for nursing care reasons

2

1

1

1

0

No. of persons taking family care leave

102

96

81

101

144

0

0

0

1

1

62.0%

61.9%

57.6%

54.7%

61.2%

—

—

—

69.3%

71.1%

4

4

4

4

2

2

2

2

Outside Audit & Supervisory Board Members

2

2

2

2

2

95.6%

96.7%

99.6%

98.8%

98.6%

*1 Calendar year (January to December) *2 Group companies, including domestic and overseas construction sites (calendar year) *3 For fiscal 2018, the total for the domestic Head
Office (fiscal year) and overseas group companies (calendar year); for fiscal 2019 and after, calendar year *4 Non-consolidated and consolidated subsidiaries *5 Non-consolidated *6
Excluding temporary employees *7 Main EPC companies, which include equity method companies *8 Number of managers with a position equivalent to team manager or generalmanager *9 Lost time incident rate (LTIR) = total lost time incidents x 1,000,000 / man-hours *10 Total recordable incident rate (TRIR) = number of recordable incidents x 1,000,000/ man-hours *11 As of June 1 of each fiscal year, and percentage of disabled persons hired includes special-purpose subsidiaries *12 Excluding employees on long-term assignments
overseas, employees on temporary assignment, mid-year recruits, employees on long-term sick leave, and employees on extended leave

No. of persons taking nursing care
leave
Percentage of annual leave used

*12

Wage gap between men and women

TOYO ENGINEERING CORPORATION

Integrated Report 2023

83

Data Section

61
28(2.8%)02Integrated Report 2023

60
24(2.5%)

0

4

TOYO ENGINEERING CORPORATION

50
21(2.1%)0

Audit & Supervisory Board Members

82

48
21(1.8%)

No. of disabled persons hired*110Outside Directors

Average attendance ratio of Directors and Audit& Supervisory Board Members at meetings of theBoard of Directors

47
18(2.2%)

No. of foreign employees

0

Governance-related data
Directors

Non-consolidated

Number of serious violations of compliance

Serious information security incidents*8Foundation for Sustainable Growth(Scope1)*2

Medium-term Management Plan

Consolidated

35,698t

Female (%)
No. of engineers*7

Fiscal 2022

Fiscal 2018
(fiscal year ended
March 31, 2019)

Management Vision

EnvironmentTen-Year Financial Highlights
Toyo Engineering Corporation and Consolidated Subsidiaries
Years ended March 31
Millions of yen

2015/3

2016/32017/3

2018/3

2019/32020/32021/32022/32023/3

Net sales

230,124

311,454299,813431,917335,697

294,993

219,094

184,000

202,986

192,908

Gross profit (loss)

25,155

17,21430,513

15,971(12,521)

10,636

18,765

18,557

20,83824,268

10.9

5.5

10.2

3.7

(3.7)

3.6

8.6

10.1

10.3

12.6

24,69924,57019,426

17,98020,42916,25016,875

16,941

17,875

19,504

Operating income (loss)

455(7,356)

11,087(2,009)(32,951)(5,613)

1,890

1,615

2,963

4,764

Ordinary income (loss)

4,942(25,280)

3,873

1,603

(27,821)

3,426

2,467

2,781

3,126

3,888

967

(20,965)

3,038

1,472

(26,846)

(818)

1,664

814

1,620

1,647

4,088

(25,534)

8,492

1,066

(25,758)(3,818)

(376)

4,097

4,485

4,547

New orders

365,137

470,369

443,537

116,790309,325

298,052

187,054

122,895

274,467

211,038

Backlog of contracts

538,023

659,005

823,066

492,682448,629426,373

389,236

310,691

381,954399,192

Total assets

257,480

261,609

321,836

317,089

251,861

239,694

208,719

218,255

240,853

256,311

Total net assets

74,831

44,97951,036

51,331

25,17636,35735,98040,07744,562

49,105Interest bearing debt

44,797

31,91832,64531,84430,841

32,71027,62928,16736,67936,586

Net debt(52,137)(58,543)(91,480)(90,858)(75,694)(65,197)(52,584)(66,316)(53,121)(71,936)

28.5

17.2

15.8

16.2

10.0

15.1

17.2

18.3

18.4

19.1

Operating activities cash flows

21,244(4,192)

46,37618,984(22,824)(25,828)(18,696)

17,753(6,790)15,591

Investing activities cash flows(1,638)

9,587(11,776)(16,650)

6,386

1,354

7,980

(2,712)(7,851)(9,469)Financing activities cash flows

3,167(14,341)

1,099(1,548)(1,174)

16,768(6,159)

(451)

7,608

(1,574)

Dividends per share (annual) (yen)

3.0

4.0

4.0

2.0

0.0

0.0

0.0

0.0

0.0

0.0

Earnings per share (EPS)*1 (yen)25.23(546.72)

79.24

38.42

(700.30)(20.51)

28.40

13.91

27.65

28.11

1,913.07

1,170.99

1,329.60

1,337.40

654.91554.11

544.16650.52766.81885.04

Price earnings ratio (PER)

93.9

—

18.5

36.3

—

—

11.4

56.2

23.0

20.1

Return on equity (ROE) (%)

1.4(35.9)

6.3

2.9(70.3)

(2.7)

4.6

2.2

3.8

3.5

*4

Management Vision

2014/3*3

Financial Highlights

Gross profit margin (%)
SG&A expenses

Profit (loss) attributable to owners ofparentBook value per share (BPS)*1 *2 (yen)Foundation for Sustainable Growth

Equity ratio (%)

Medium-term Management Plan

Comprehensive income

Data Section*1 The company conducted a one-for-five reverse stock split of common shares effective October 1, 2017. “Book value per share” and “Earnings per share (loss)” have been calculatedon the assumption that this reverse stock split had been conducted at the beginning of the fiscal year ended March 31, 2013.
*2 “Book value per share” for the fiscal year ended March 31, 2019 and after is calculated after deducting residual assets attributable to class A preferred stocks issued in March 2019from total net assets.
*3 The company applied “Partial Amendments to Accounting Standard for Tax Effect Accounting” (The Accounting Standards Board of Japan (“ASBJ”) Statement No. 28, February 16,2018), etc. from the beginning of the fiscal year ended March 31, 2019. The figures for the fiscal year ended March 31, 2018 are based on retrospective application.
*4 “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, March 31, 2020) has been applied since the beginning of the fiscal year ended March 31, 2022, and items
such as management indicators for the fiscal year ended March 31, 2022 are those after applying this accounting standard and other items.

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TOYO ENGINEERING CORPORATION

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85

Corporate Information(As of March 31, 2023)

IR Activities

CorporateName

Toyo Engineering Corporation

FoundedMay 1, 1961

Capital Stock¥18,198 million

Number of
Employees

6,686(including consolidated and equity-method companies,
current as of March 31, 2023)

Business
Activities

Communication with Shareholders and Investors

Domestic Affiliates
Tec Air Service Corp.
TEC Business Services Corp.
TEC Project Services Corporation
Chiba Data Center Co., Ltd.
Tec Accounting & Consulting LTD.

TOYO promotes the timely disclosure of suitable information to its shareholders and investors while also aiming to increase its transparency.
In addition, we will strive to engage in more comprehensive dialogues with our stakeholders, actively apply their valuable opinions to ourmanagement, and thereby improve our corporate value.

Main IR Activity Details

WEBSITE

Overseas Affiliates
Korea
Toyo Engineering Korea Limited
China
Toyo Engineering Corporation (China)
Indonesia
PT. Inti Karya Persada Tehnik
Malaysia
Toyo Engineering & Construction Sdn. Bhd.
India
Toyo Engineering India Private Limited
Singapore
Offshore Frontier Solutions Pte. Ltd.
EuropeToyo Engineering Europe, S.r.l
CanadaToyo Engineering Canada Ltd.
Toyo U.S.A., Inc.
America
BrazilTS Participações e Investimentos S.A.

•
Online financial result briefings for analysts and institutional
investors• Online explanatory meetings of the progress of our medium-term
management plan for analysts and institutional investors• Individual meetings with institutional investors• Conferences organized by securities companies• Financial information• Timely disclosed information• Stock information/General Meeting of Shareholders• Performance highlights

1. Common Shares
Common Shares
100,000,000
Class A Preferred Shares 25,000,000

Capital Stock
IssuedCommon SharesClass A Preferred Shares

38,558,507
20,270,300

Number of
Shareholders

Common SharesClass A Preferred Shares

16,0382

Securities code

6330

Types of Shareholder (Common Shares)
Financial
institutions
28.21%

NumberVotingPercentageof shares rights ratioof total(thousands)(%)(%)

Mitsui & Co., Ltd.

8,754

22.89

14.93

Custody Bank of Japan, Ltd.
(Sumitomo Mitsui Trust Bank, Limited
Re-trust Account, Mitsui Chemicals,Inc. Pension Trust Account)

5,140

13.44

8.77

The Master Trust Bank of Japan, Ltd.
Trust Account

3,111

8.13

5.30

Taisei Corporation

1,000

2.61

1.70

JP JPMSE LUX RE NOMURA INT PLC
1 EQ CO

580

1.51

0.98

Custody Bank of Japan, Ltd. Trust
Account

492

1.28

0.83

Sumitomo Mitsui Banking Corporation

470

1.22

0.80

NORTHERN TRUST GLOBALSERVICES SE, LUXEMBOURG RE
CLIENTS NON-TREATY ACCOUNT

427

1.11

0.72

NumberVotingPercentageof shares rights ratioof total(thousands)(%)(%)

Domestic
companies
26.92%

Integral Team Limited Partnership

17,576—

29.99

Innovation Alpha Team L.P.

2,693

—

4.59

Notes) 1.	The shareholding ratio was calculated based on the exclusion of the 227,453
shares of treasury stock.
2. Class A preferred stock do not have any voting rights.

86

TOYO ENGINEERING CORPORATION

Integrated Report 2023

Production Policy planningfor the next fiscal year

Feedback from investors

Interim reporting to
Directors

Final proofreading

Issuance of the Integrated Report

Approved by the Executive Committee and
Board of Directors

Editing Policy

Caution Concerning Forward-Looking Statements

The 2023 Integrated Report was prepared to provide stakeholders with a better understanding of TOYO’s financial information(such as our management policies and financial results) andnon-financial information (such as business environment and its
connections to society). These are based on the Guidance forCollaborative Value Creation by the METI and the International
Integrated Reporting Framework of IIRC (International Integrated
Reporting Council).

This integrated report includes certain “forward-looking statements.” These statements are based on management’s current
expectations and are subject to uncertainty and changes in circumstances. Actual results may differ due to changes in economic, business, competitive, technological, regulatory, and otherfactors.

Editor’s Note

2. Class A Preferred Shares

Foreignshareholders
11.47%

Detailed planning and production based oncollaboration between departments/committees,
the presidents of affiliates, and in-house stakeholders

Thank you for reading the 2023 Integrated Report. As we prepared this report, we did our best to introduce such topics as
the significance of TOYO’s purpose, our value creation process, the description of our business, and the direction ofchanges in our business fields and business model based on
our medium-term management plan as clearly as possible.
We hope that this report will help to deepen everyone’s understanding of TOYO, give everyone reasons to expect future
growth from us, and facilitate more effective dialogues. We
will continue striving to disclose appropriate information ina timely manner as we conduct IR activities that lead to thefurther improvement of our corporate value.

TOYO ENGINEERING CORPORATION

Integrated Report 2023

87

Data Section

Types of
Shareholder(Common Shares)

Integrated Report Production Policy

Approved by the Executive Committee and
Board of Directors

Foundation for Sustainable Growth

Authorized
SharesIndividuals
32.10%• Held in an in-person/online hybrid format

Production Flow

Major Shareholders

Tokyo Stock Exchange

Others1.30%

For details, see the investor relations
information on TOYO’s website.
https://www.toyo-eng.com/jp/en/investors/

General Meetings of Shareholders

Production Policy

Stock Information
Stock Exchange
Listing

IR Information

Medium-term Management PlanEngineering and Construction for Industrial Facilities
R&D support, design, engineering, procurement, construction, commissioning, technical assistancetechnicalassistance for industrial facilities
Business fields: Oil, gas, oil & gas development,
petrochemicals, chemicals, water treatment, transportation systems, power plant, nuclear power, advanced
production systems, pharmaceutical, fine chemical, logistic center, biotechnology, environment conservationand others

Affiliate Information

Management VisionCorporate DataTOYO ENGINEERING CORPORATION
2-8-1 Akanehama,Narashino-shi, Chiba 275-0024, Japan
https://www.toyo-eng.com/jp/en2023