2021 Integrated Report
Year ended March 31, 2021

Contents
Management
Vision02 60 Years of TOYO
04 TOYO’s Strengths
06 President’s Message
08 Dialogue: Challenges and Expectations for the Energy Transition Needed to Realizea Carbon-Neutral Society by 2050

Engineering for Sustainable Growth of
the Global Community

14 Message from the CFO
16 Financial and Non-Financial Highlights
Medium-termManagementPlan

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

Sustainability
Initiatives

42 Mission and Materiality

20 Double spiral growth strategy —Sustainable Technology and Business Development
27 Double spiral growth strategy —Advanced EPC Operation

44 Environment: Aim to Realize an Environmentally Friendly Society
46 Social: “ Enrich people’s lives” and “People of diverse backgrounds
engage in active, meaningful work”
50 Governance: Establish an Organization with Integrity and Discipline
50 Project Risk Management

As the economic development of humankind progresses, energy and environmental issues
are becoming more and more highlighted on the planet on which we live.
Ever since TOYO ENGINEERING was founded, our business has been the development of
the global economy through industrial infrastructure.
The role we are expected to play by society is also at a major turning point.
In an effort to contribute to the sustainability of the world and society, we have set“Engineering for Sustainable Growth of the Global Community” as our mission.
The business fields which we can serve are infinitely expanding.
Based on our corporate slogan of “Your Success, Our Pride.,”52 Corporate Governancewe will continue to evolve for the sake of our future as

55 Risk Management Initiatives

an engineering company.

56 Three-way conversation: Sustainability and Governance
58 Directors and Audit & Supervisory Board Members
Data Section

60 Ten-Year Financial and Non-Financial Highlights
62 Financial Section
Consolidated Financial Statements
96 Stock Information
97 Editor’s Note

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01

60 Years of TOYOTOYO welcomed its 60th anniversary this year. In addition to extending our heartfelt gratitude to all the stakeholders
who have supported us so far, we ask for your continued support.

the 1960s

the 1970s to the 1980s

the 1990s

the 2000s

the 2010s

the 2020s

Expanding Overseas in Searchof Markets

Enhancing Our Technical
Capabilities and Expanding
Our Business

Diversifying Our Portfolio

Establishing a Global
TOYO Structure

Switching from
Our Expansion Course

TOYO’s Mission:• Promoted the utilization of overseas
group companies.
• Started growing again due in part to thehigh price of crude oil.
• Unified the Group’s MVV and logo toenhance our solidarity and aim to establish
all group companies as profit centers.

Enhanced risk management
and CHANGE!

• Received our first overseas order, anIndian fertilizer plant, two years after ourestablishment in 1961.
• Cooperated with licensors to establish afoundation for our technical capabilities.

• L earned about various cutting-edge technologies
to enhance our technical capabilities.
• Expanded our business through a string oforders for fertilizer plants and ethylene plants
both in Japan and overseas.
• Listed our stock in 1980.
• Expanded our overseas group companies tobuild a foundation for our global operation.

• Diversified our portfolio to include
pharmaceuticals and power plant fields due tomore intense competition.
• Applied information technology to the plantenhancement business and industrial system fields.

• Enhancing our risk management and taking on
the challenge to our CHANGE! Initiative to copewith the shale revolution, energy transformation,
larger and more complicated plants, and the riseof emerging-country contractors.

Engineering for Sustainable Growth of
the Global Community• Unveiled the Medium-term Management Plan
(FY2021-2025)• Gathering the best of TOYO’s technology andexperience toward the realization of carbon-neutrality• Accelerating introduction of IT and the Digital
Transformation (DX)

Medium-term Management Plan

Ammonia/
Urea

Management Vision

In order to enrich people’s lives, TOYO has been engaged in a variety of plant construction and infrastructure development projects. Preservation of the Earth’s environment has been highlighted as a common global issue. By
mobilizing all of the engineering capabilities that we have cultivated thus far, we will contribute to the realizationof a sustainable planet and society.

Fuel ammonia
India: Fertilizer

Indonesia: Fertilizer

Nigeria: Fertilizer

Petrochemicals

BiofuelSingapore: Ethylene

China: Ethylene

CO2 value chain

Oil & Gas

Turkmenistan: Gas Chemistry

Germany: Residue Upgrading

Turkey: EOR

CCS, CO2-EOR
Methane hydrate/
Rare earth

Saudi Arabia: Well site GESA**GESA: General Engineering Service Agreement

Circumstances in 1963 and 2021
Pharmaceuticals

In 1963, TOYO made its first step as a global contractor

Sustainability Initiatives

Waste plastic recycling

Resource
development

when it received its first international order in the formof a fertilizer production facility (daily ammonia out-

Japan: Drug Substances

put: 350 tons; daily urea output: 550 tons) in Gorakhpur,

Japan: Radiopharmaceuticals Factory

Advanced pharmaceuticals
manufacturing technology

Uttar Pradesh state, India. The success of this plant construction project not only laid the foundations for TOYO’s

Power
generation

subsequent track record of over 200 projects in India, but

Renewable energy

it has also led to a trajectory of overseas projects throughout the world. On the occasion of our 60th anniversary inIndonesia: Power Generation Plant

Thailand: Gas-fired Power Plant

Japan: Photovoltaic Power Plant

2021, the construction of a large-scale fertilizer proUrban transportation
systems

Transportation
systems

urea output 3,500 tons) in the same area of Gorakhpur is

Data Section

duction facility (daily ammonia output: 2,200 tons; daily
entering its final stages.

Indonesia: Urban high speed railway

EstablishedGroup
Companies

02

1961
Toyo-Japan

TOYO ENGINEERING CORPORATION

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1972
Toyo-Europe
1976
Toyo-India

1986
Toyo-Malaysia, Toyo-USA
1987
Toyo-Korea, TPS

1998
Toyo-Brazil

2004
Toyo-China

2010
Toyo-Canada
2011
IKPT (Indonesia)

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03

TOYO’s Strengths
TOYO’s competitiveness is supported by high-tech application capabilities to solve challenges and global opManagement Visionerations that bring together the strengths of our group companies. With these two elements at our core, TOYO
provides high quality engineering services.

Engineering Technology

Global Operations

The History of Our Research & Development

Best formation

TOYO’s history has been accompanied by changes in technological development, especially regarding proprietary

Customer needs vary widely by country and region. We use the unique perspective and mobility of TOYO group

technologies and technologies offered in partnership with licensors. We have always strived to expand our productcompanies rooted in local societies to identify needs and support our customers using our best formation acrossfields and business areas by improving our energy-saving and environmental technologies. Now, in an effort toour whole group.

contribute to the societal need to realize carbon neutrality, we will leverage the high-tech application capabilities,

Cooperation between
group companies

expertise, experience, and partnerships that we have cultivated thus far to make a circular society a reality.
Evolution to the Future – Phylogenetic Tree of TOYO’s Technology
Oil/gasCoal

Oil/nuclear power

Industrial systems Power/Infrastructure
LNG

Expanding technologies to meet the energy transition

Renewable energy

Decarbonization
Waste Plastic liquefaction / Gasification

Plastics Recycling

SAF (sustainable aviation fuel)Decarbonization

e-fuel / SAF

Electrolysis, Hydrogen Carrier

Circular
EconomyGreen Hydrogen

CO2 Capture, CO2 Utilization, CO2 EOR

HERO /CCS / CO2 Utilization®

Digitalization

DX-PLANT®

Decentralization

Energy Management System (EMS)

Energy consulting
Digital Plant
VPP / Storage Battery

Offshore Wind Power Generation
Woody Biomass, PKF, MSW Power GenerationPowergeneration

Mega-solar Power Generation
Coal-fired Power GTCC Power

Bio Ethanol to Ethylene, CO2 to Olefin

Ammonia (partnering with KBR)

Green Ammonia, Blue Ammonia

TEC/MTC Urea Process

Existing Area 1961

ACES®

1980

2000

2025

2021

LNG regasification facilities (India)
Toyo-India single-handedly executed everything from engineering to procurement, construction, and commissioning of the GSPC
project, completing it ahead of the contracted due date in 2017. Toyo-India is a major
player that has worked on four regasification
facilities in India.

Group
company

Areas of expertise of TOYO group companies

MethanolBy bringing together engineering technology specialisms in each group company, Toyo-Japan has refined TOYO’s

Ethylene

global operations. It has set the TOYO standard supporting our quality since the 1990s, and ensured compliance

Ammoniaamong all group companies. Currently, the engineering functions of the group company is our biggest source of

Co-Creation Engineeringg-Urea®

Next Generation ACES®

ACES21®

Single group company

Groupcompany

competitive power.

Co-Creation Engineering

R&D Engineering

ToyoJapan

Sustainability Initiatives

Core Process
Technology

FPSO

g-Methanol®

Ethylene (partnering with Lummus)

Petrochemicals
Gas chemicals

Group
company

Biomass Power

Methane Hydrate /Rare Metal

Deep sea Resource Development

MRF-Z® Methanol Reactor

Group
company

Transportation

Methane hydrate / rare metal
Increased oil production IOR EOR

Ethylene complex (Malaysia)
This project, the largest in TOYO’s history was conducted with a truly “All TOYO” team—with ToyoJapan taking the lead, detailed engineering weremade by Toyo-India, IKPT, and Toyo-Malaysia, andgroup companies such as Toyo-India, Toyo-Korea,
Toyo-China, Toyo-Europe, and Toyo-USA supported
the procurement of equipment and materials fromsuppliers in their areas of jurisdiction.

Thermal Power

Mass Rapid Transit System

Resource
development

Cooperation between
multiple group companies

Solar PowerHigh Efficiency Power Generation

Transportation
systems

Wind Power

Medium-term Management Plan

Founding
New Area

Butadiene facility (Indonesia)
Toyo-Korea and IKPT worked together to execute the
EPC for a butadiene capacity expansion project.

Urea
2030

Toyo-India

Toyo-Korea

IKPT (Indonesia)

Urea, ammonia, ethylene, FPSO*,
LNG regasification facilities, refineries

Polymers (polyethylene, polypropylene, etc.)

Renewable energy power generation,
Transportation

Toyo-China

Tech project services

TSPI (Brazil)

Chinese investment projects from Japan,
Europe and the USA

Pharmaceuticals, fine chemicals, environment, petrochemicals

FPSO

EPC* by license global share (from 2001 onwards)
Company E
Company B

KBR

52 %

36 %

9%

Lummus42 %Company D

12 %
Urea
license

Other

53 %

Ammonia
licenseEthylenelicenseData Section

34 %Company A

Company C
TOYO (TOYO technology)

14 %TOYO (KBR technology)

11%

28 %

TOYO (Lummus technology)

9%*Engineering, Procurement, Construction

04

TOYO ENGINEERING CORPORATION

Integrated Report 2021

*FPSO: Floating Production, Storage and Offloading
TOYO ENGINEERING CORPORATION

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05

President’s Message
Management Vision

To pioneer the future for a sustainable global community
50 and 100 years from now through Engineering—Engineering for Sustainable Growth of the Global Community—
Bringing together technology and knowledge to solve social issues
Welcoming its 60th anniversary this year, TOYO was founded in 1961 as a spin-off of Toyo Koatsu Industries Inc.’s Engineering
Department (now Mitsui Chemicals, Inc.), incorporating the word “engineering” into its company name, which was rare at thetime. Considering the true mission of an engineering company to work on solving social issues by bringing together technology
and knowledge, we started in the EPC business of fertilizer production facilities including ammonia and urea. I am very proud

Medium-term Management Planof how we have contributed to the economic growth of various countries while expanding our business fields. Going forward, I
would like us not only to offer EPC businesses to solve our customers needs, but also to continue to provide engineering services
based on the high-tech application capabilities and expertise we have accumulated throughout the years, such as identifying
problem areas, early-stage commercialization, and post-EPC maintenance.

Now is the time for engineering companies to fulfill our mission
Social issues continually change with the times. Currently, fires are occurring that are thought to be caused by abnormal weather
due to greenhouse gas emissions. Against this backdrop, the world has set the achievement of a carbon-neutral society an urgent
goal, and the Japanese government has declared its intent to realize a carbon-neutral society by fiscal 2050. Leaving this planet ina sustainable form for future generations is an extremely important challenge that all humans should bring together their wisdom
to tackle.
We have been long in the age of fossil fuel usage, ever since the Industrial Revolution beginning in the mid 18th century.
Engineering companies have played a major role in the construction of large-scale industrial plants. And as we now in 2021
once again rapidly undergo a massive shift into a new age, this time toward a decarbonized society, many companies aroundthe world are rushing to address this change. But this challenge is not simple enough that it can be solved by individual initia-

Sustainability Initiatives

tives by individual companies. In addition to technological innovation, the establishment of a new value chain is necessary. It
is crucial for public and private bodies to come together and bring a variety of players on board; also, the task is a challenging
one that involves reshaping global energy structures. This is precisely why it is essential to have a function to combine andintegrate the strengths of companies with technological expertise and know-how to appropriately manage large-scale projects.
Presenting solutions to these difficult challenges is the mission of an engineering company, and I strongly feel that now is thetime for us to fulfill this mission.

Using the power of engineering to contribute to a sustainable global community
In order to achieve common global goals, TOYO launched “Medium-term Management Plan (FY2021-2025) - Realization of Your
Success, Our Pride.” By implementing this medium-term management plan with a double spiral strategy of “Advanced EPC
Operation” and “Sustainable Technology and Business Development,” we hope to balance the goals of “aim to realize an environmentally friendly society” and “enrich people’s lives,” which we have identified as materiality.
When formulating this medium-term management plan, I did everything I could to unify the thoughts and feelings of employeesof the TOYO Group. To that end, I received the support of a wide variety of team members—not only top executives, but also older and younger employees. Of course, it goes without saying that the trust of our stakeholders is vital to TOYO’s growth. I believethat when employees feel dynamic and motivated at work and show their family how proud they are to work at the company, that

Data Sectionis what enables us to demonstrate our full potential and continue to provide high value to our customers.
I believe that after passing down our strategy to the next generation and continuing to provide solutions to new challenges,
there awaits a carbon-neutral world and a bright future for TOYO.
TOYO will contribute to the sustainability of the planet and society 50 and 100 years from now through engineering. I extend
my heartfelt gratitude to all of our stakeholders for your continued support of TOYO.

Haruo Nagamatsu, President & CEO

06

TOYO ENGINEERING CORPORATION

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07

Dialogue: C hallenges and Expectations for the Energy Transition
Needed to Realize a Carbon-Neutral Society by 2050
Management Vision

Bunro Shiozawa

Haruo Nagamatsu

Former Deputy Program Director of Japan’s SIP “Energy Carriers” initiative
Chief Researcher, International Environment and Economy Institute (NPO)President & CEO

initiative. I spent the five years from FY2014 to FY2018 work-

facilities such as urea for which we have licensed technol-

Ahead of this milestone year, we announced “Medium-ing on CO2-free ammonia manufacturing technology devel-

ogies and one of its raw ingredients, ammonia. In 1963, weterm Management Plan (FY2021-2025) - Realization of Your

opment, then surveying the technological and economic fea-

received our first overseas order for fertilizer production facil-

Success, Our Pride.” In particular, we have defined the key

sibility of establishing a supply chain for it, and exploring its

ities from the Fertilizer Corporation of India. We have sinceareas that contribute to our materiality of “aim to realize an

potential as a hydrogen energy carrier. In particular, I was able

been building up a track record in fertilizer production facili-

environmentally friendly society” as: 1) sustainable aviationto achieve major results concerning the possibility of directly

ties around the world, primarily in Russia and eastern Europe.

fuel (SAF*); 2) the carbon dioxide (CO2) value chain; and 3)

using ammonia as a CO2-free fuel.

In addition to the chemical fertilizer field, we have expanded

for each of these areas.

Over the past two to three years, ammonia has garnered

our business into a wide range of business fields such as oil

attention as a fuel that does not emit CO2. As I’m sure you

and gas chemistry, resource development, power generation,

Mr. Shiozawa was Deputy Program Director of Cross-are aware, over a century ago, German scientists Fritz Habertransportation, and other infrastructure.

ministerial Strategic Innovation Promotion Program (SIP)and Carl Bosch discovered a process for synthesizing ammo-“Energy Carriers” initiative, which is a project to carry out

nia (NH3) from nitrogen (N2) in the air as a nitrogen source

research related to hydrogen energy in order to carve out aand hydrogen (H2). These results led to the creation of nitro-*SAF: Sustainable aviation fuel (aviation fuel that is produced from sustainable supply sources with low CO2 emissions in the process from producing and collecting raw materials to burning)

path for Japan to realize a decarbonized society. In this role,

gen fertilizers that contributed to increased food production.

you were able to make huge progress in the practical use of

Additionally, when there was a shortage of fossil fuels in war-ammonia as a fuel. I have been looking forward to our discus-time, busses in Belgium ran on ammonia fuel. What’s more,

sion. Thank you for joining us today.

apparently research on using ammonia as fuel for tanks was

Nagamatsu First of all, would you be able to give us yourThe 2050 Carbon Neutrality Declaration
Changed the Tide

1977

:G
 raduated with an M.Eng in Chemical Engineering from theFaculty of Engineering, Yokohama National University
1984:G raduated with an M.A. from the Department ofCommunication, Stanford University
1977:E ntered the Ministry of International Trade and Industry
1993-1996: Seconded to the Technical Secretariat of the Organisation
for the Prohibition of Chemical Weapons (in The Hague, theNetherlands)
2003: Deputy Director General to the Minister of International
Trade and Industry (in charge of industrial technology)
2004: Deputy Director General to the Cabinet Office Minister (incharge of science and technology policy)
2006: Left his position
2006-2008: Director of Japanese Standards Association, Head ofInternational Standardization Center2008: Joined Sumitomo Chemical Co., Ltd.
2009
: Became Sumitomo Chemical Director (in charge of climatechange issues)2015: Became Senior Associate of Sumitomo Chemical
2021: Left Sumitomo Chemical
2014-2018: Became Deputy Program Director of Cross-ministerial
Strategic Innovation Promotion Program (SIP) “Energy
Carriers” initiative
2018-present : Innovation Strategy Coordinator for SIP “Energy Systems ofan IoE Society” (energy management)

thoughts on the direction Japan should take toward a decar-

nia was less likely to catch fire and could be carried safely as

bonized society from your position as someone with many

Paris Agreement was adopted in 2015, the global attitude

sity as you, where I majored in chemical engineering. I thena supply line. This means that ammonia was also used andyears of experience working on Japanese energy policy?

has changed from “there’s no way we can shift to a decar-

joined the Ministry of Economy, Trade and Industry, which

studied as a fuel in the past.

was known as the Ministry of International Trade and Industry

bonized society” to “let’s give it a try.” Against this backdrop,
Shiozawa During Prime Minister Suga’s October 2020

the fact that the Japanese government has started on its pathat the time. In the course of my work on industrial technolo-

Nagamatsu We are an engineering company that was

general policy speech, he made the strong declaration thattowards virtually zero emissions with a clear deadline has

gy policy and science technology policy, I became deeply in-formed as the spin-off of the Engineering Department at Toyo

“Japan will aim to realize a decarbonized society with virtu-

been received as an appropriate signal from the government

volved in the energy issues facing Japan. I was later blessed

Koatsu Industries Inc. (now Mitsui Chemicals, Inc.). We haveally zero greenhouse gas emissions by 2050.” It is the so-to Japanese citizens and industry for Japanese companies towith the opportunity of working on the SIP “Energy Carriers”

our beginnings in the construction of fertilizer production

called “2050 carbon neutrality declaration.” Ever since thecome together and shift gears towards making that a reality.

TOYO ENGINEERING CORPORATION

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Data Section

carried out in the United States in the 1950s, because ammoShiozawa It just so happens that I went to the same univer-

Sustainability Initiatives

Nagamatsu TOYO welcomed its 60th anniversary in 2021.

the fuel ammonia value chain. We have drawn up a road map

08

Medium-term Management Plan

Striving to Be a Conductor that
Pioneers a New Energy Society
with Carbon- Free Ammonia

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09

Dialogue: C hallenges and Expectations for the Energy Transition
Needed to Realize a Carbon-Neutral Society by 2050

Nagamatsu At the same time, it’s simply a fact that it’s stillis building an international supply chain for this fuel ammonia.

Shiozawa Exactly. Even when considering the use of hy-

TOYO is aiming to commercialize blue ammonia plant facili-

drogen, in order for a country like Japan to mass import hy-

ties, which combine CCS/CO2-EOR, and is currently conduct-drogen energy from far away regions that are blessed withing a feasibility study in east Siberia, Russia.

an abundance of relevant resources, we think that the mosteffective method at our disposal right now is to import andvery difficult from a technological perspective.
Shiozawa That is certainly the case. Japan currently relies

The Superiority of Ammonia as
an Energy Carrier

use ammonia, which is easy to transport and store. Ammonia
is designated as a deleterious substance, and needs to behandled by specialists who have the appropriate knowledge.

on fossil fuels for over 80% of its primary energy supply. And
Shiozawa A key point in the hydrogen energy value chain

At the same time, fire is slow to spread when it burns and itmeans bringing that close to zero. In Japan’s case in particu-

is where to produce hydrogen and how to transport it. Take

has a narrower explosion limit, so it is not classified as a flam-lar, we are not in a situation where we can rely on nuclear en-

Europe for example, where the situation differs to Japan. In

mable or explosive substance in the United States. Measuresergy, so we need to introduce a substantial supply of renew-

Europe, there is abundant wind energy and hydropower in theare needed to address the strong smell, but it would be easy

example, if you look at the effect of introducing CO2-free am-able energy. However, unfortunately it is extremely hard in

vicinity of areas of demand, and excess renewable energy is

to detect a leak.

monia in coal-fired power generation boilers, which emit a lot

Japan to build a renewable energy power generation systemused to make hydrogen, which can then be transported forthat can stably supply the necessary energy while ensuring

use as a gas in pipelines and tank trucks. Japan, however,

Nagamatsu Hopes are currently high for use of ammonia

million tons of CO2 a year. Mixed-fuel combustion with 20%

a certain level of profitability, even when taking into accountneeds to bring in hydrogen from production areas in otheras a CO2-free fuel in a variety of applications such as ther-CO2-free ammonia (on a heat quantity basis) would reduce

the expectations for offshore wind power. It is therefore con-countries via long-distance sea transport.

of CO2, 600MW coal-fired power plants emit just less than 4around 800,000 tons of CO2 emissions at a power generation

Hydrogen itself, in its usual state, is a gas with an extreme-

If ammonia replaces coal, city gas, and heavy oil as a power

plant of this scale. The government is aiming for a target ofrenewable energy from overseas regions that are abundant

ly low energy density. The amount of hydrogen that has an

generation fuel, the amount used will multiply by an order of

20% mixed-fuel combustion by 2030. However, 20% is not

in renewable energy.

equivalent amount of energy to one liter of gasoline is approx-

magnitude compared to previous levels. From the perspec-a technological limit and technology to raise the mixed-fuelThis is where hydrogen comes into the spotlight. Hydrogen

imately 3,000 liters at 0°C and 1 atm. Furthermore, it requires

tive of its use both as a fuel and a hydrogen energy carrier,ratio continues to be developed, so it is likely that the effectcan be made from hydrides which exist in abundance on

the extremely low temperature of -253°C to form a liquid,ammonia has the potential to become the “next LNG” thatwill get even larger. Additionally, coal-fired thermal power ac-

our planet, especially water. What’s more, when you burnwhich makes it very difficult to transport and store in large

will support carbon neutrality and energy security in Japan.

counts for approximately 40% of overall global power gen-it, it creates only water and doesn’t emit CO2. This makes

quantities. The solution to this issue is transporting and stor-

Against this backdrop, in the government’s Green Growtheration (approximately 70% in India and China), making thehydrogen the “fuel of dreams” for a decarbonized society.

ing it as ammonia and cracking it into hydrogen at the location

Strategy, a roadmap was presented to swiftly establish an

potential of coal/ammonia mixed-fuel technology to reduce

The main substance of hydrogen energy is hydrogen (H2), butwhere it will be used. Furthermore, the results of SIP “Energy

international supply chain for fuel ammonia and take initiative

CO2 emissions even greater.

the Agency for Natural Resources and Energy defines hydro-

Carriers” research demonstrated that ammonia itself can bein the global ammonia supply and use industry. In 2030, do-gen energy as “energy that does not emit CO2 when used.”

used as a fuel without converting it to hydrogen. What thismestic demand for fuel ammonia is predicted to be 3 million

This means that the hydride ammonia (NH3) is also a form ofmeans is that ammonia is both an outstanding carrier for hy-

tons a year, and 30 million tons a year is predicted by 2050.

hydrogen energy. On the other hand, natural gas, which isdrogen and a form of CO2-free fuel. This is a huge advantage.

The overall global demand is also predicted to grow to the

Nagamatsu In these circumstances, what is expected ofprimarily comprised of the fossil fuel methane (CH4), is a hy-

This is because it eliminates the need to produce hydrogenscale of 100 million tons a year.

the private sector now?

dride but contains carbon (C) molecules, meaning that CO2 isfrom ammonia, and leads to huge cost reductions.

The Star of the Show for Now Is Blue Ammonia

Compared to hydrogen, ammonia forms a liquid at mild

Shiozawa In Japan, hydrogen energy is expected to play

Shiozawa It has to be the establishment of a CO2-free am-conditions, -33°C under normal pressure or 8.5 atm at normal

a big role mainly in the power generation field and also themonia value chain. In terms of current hydrogen production

temperature. If ammonia is liquified by cooling, a volume ofindustrial field. These fields currently account for 45% andmethods, the cheapest generally tends to be producing it by

Nagamatsu Hydrogen can be made with water and elec-

the substance is 1/1,350 of the same weight of hydrogen gas

25% respectively of consumption of fossil fuels in Japan, so

reforming natural gas. However, in future, the cost of pro-tricity, which exist in abundance on this planet. However, it isand its volumetric hydrogen density is 121 (kg-H2/m3), with athe effect of introducing CO2-free fuels would be large. For

ducing hydrogen via electricity generated from renewable

now mainstream to produce “gray hydrogen” from fossil fu-

higher energy density per volume than liquified hydrogen atels such as natural gas and coal, which causes CO2 emissions

70.8 (kg-H2/m3).

Achieving CO2-free production is also essential. “Blue” ammonia, which is cost-competitive, will play a leading role for the time being

during the production process. This means that it is necessary
Nagamatsu What’s more, the amount of ammonia in cir-cess of capturing and using that CO2 or storing and stabilizing

culation is one of the highest of any chemical. One benefit is

it underground, or CO2-EOR (Enhanced Oil Recovery), inject-that there is already an international commercial supply chain,ing CO2 into the ground to collect more oil. This processing

and it is supplied for practical use. In addition, ammonia’s liq-

is the same as when producing ammonia from natural gas.

uefaction conditions are almost the same as liquified petro-

Using these methods to eliminate CO2 emissions is called

leum gas (LPG), so we can use its infrastructure. Ammonia“blue ammonia.” And ammonia made from “green hydro-

has a high energy density and over 20 million tons of thegen,” which is made by electrolyzing water with renewableproduct are imported and exported globally per year, so weenergy, is known as “green ammonia.”

think that it is more feasible to use blue ammonia rather thanIn the Green Growth Strategy announced by the Ministry of
Economy, Trade and Industry in December 2020, one target

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liquified hydrogen.

Manufacturing process

Fossil fuels

CO2

Atmosphere

Product

H2

CO2 emissions during production

Estimated cost(Indexed with gray = 100)

(Indexed with gray = 100)

Gray
NH3

100

Blue
NH3

0 ~ 40100

Data Section

to combine with CCS (Carbon Capture and Storage), the pro-

Sustainability Initiatives

mal power generation, shipbuilding, and industrial furnaces.

sidered necessary to have a way of mass importing cheap

to be a form of hydrogen energy.

Medium-term Management Plan

all of those fossil fuels generate CO2. So carbon neutrality

produced when it is used. For this reason, it is not considered

10Management Vision

Ammonia Is a Form of
CO2-Free Hydrogen Energy

Reforming + CO2
CO2

Renewableenergy
H2O

CCUS*

Water
electrolysis

H2

H2

NH3
Synthesis

Green
NH3

0

120 ~ 130300 ~ 400

*CCUS: Carbon Capture, Utilization and Storage

TOYO ENGINEERING CORPORATION

Integrated Report 202111

Dialogue: C hallenges and Expectations for the Energy Transition
Needed to Realize a Carbon-Neutral Society by 2050

to proceed to the next stage. Specifically, we will be starting

remains a challenge. When we analyzed what we should do,a study of the feasibility of the value chain of producing hy-

we came up with the answer of shifting to this B2B2X busi-

Green Growth Strategy. What’s important here is the pricedrogen from gas made by the Russian Irkutsk Oil Company

ness model. The concept is based on the idea of co-creatingof unloading ammonia in Japan. The roadmap sets a target(IOC), converting it to ammonia, and transporting it from east

with our customer’s customers, or perhaps the governmentof reducing the cost, which is currently in the lower 20 yen

Siberia to Japan. If this can be achieved, there will be a stableor foreign nationally-owned resource companies to lead therange per Nm3 (hydrogen conversion in calorific equivalent)

supply of mass-produced blue ammonia to Japan, which canprocess up to creating innovative business mechanisms. At ato the higher 10 yen range by 2030 (premised on the current

be used primarily as fuel for thermal power generation plants.

time when a huge paradigm shift is expected, we do not wantto enter the business ecosystem after the fact, but rather cre-price of natural gas, etc.). We are aiming to reach this level byleveraging the manufacturing technology and expertise that

Shiozawa Russia is close to Japan and has ports, so this is

ate a win-win framework with all stakeholders right from thewe have accumulated.

a very exciting project. At the same time, one company can’t

get-go. We will use our high-tech application capabilities tojust build a new value chain even if it wants to, so it is key toattract partner companies. We want to then make sure mar-projects combining the U.S. KBR ammonia process and ourbring together the collective strength of the private sector. In

ket share and profit will follow later. To this end, we havetrolysis and renewable electricity. This means a transition tooriginal technology for synthesizing urea, ACES21®, aroundthat sense, I think it will be even more important for TOYO tobrought together a variety of employees—from seasoned

producing green ammonia from renewable-energy hydrogenthe world. We also have a track record of building 85 ammo-

refine its project management skills.

veterans to those with experience working at trading houses,

is likely.

nia plants. Based on the design technologies, etc., that we

The International Energy Agency (IEA) recently released ato those who have worked on developer projects—to create ahave accumulated through this track record, we will strive tosensational report entitled “Net Zero by 2050: A Roadmap for

department dedicated to promoting the B2B2X model. In thisNagamatsu From a long term perspective, TOYO plans tofurther scale up past conventional ammonia plants for fertil-the Global Energy Sector.” According to the report’s analysis,

day and age, we can’t survive unless we keep our eyes open

work on the development of manufacturing technology forizer, and reduce costs through increased productivity. This isinvestment in energy to achieve net zero CO2 emissions by

for new ideas and take up challenges. We are planning togreen ammonia derived from renewable energy. If the CO2

the first point where we will leverage our strengths.

2030 will skyrocket to $5 trillion a year, boosting global GDP

appoint people with this kind of mindset, even younger staff,

emitted from the process of producing ammonia (gray am-

Concerning the second point, capturing and storing CO2,

growth by 0.4 points, and increased spending from the public

to important positions. I believe that engineering companies

monia) from hydrogen derived from natural gas is taken to be

we have been working on CO2-EOR since the 1980s andand private sectors will lead to an extremely large number ofhave even more potential than in the past as we launch new100, the cost of blue ammonia, which lowers CO2 emissions

possess abundant experience and expertise in the area. In

employment opportunities created in the clean energy indus-

markets and businesses, such as fuel ammonia.

to 0-40 by capturing and storing CO2, is estimated to be 20

partnership with U.S. Baker Hughes, we can integrate above

try, including engineering companies. So the report sees theto 30% higher than gray ammonia. On the other hand, zeroground and subsurface to formulate development plans,role of engineering companies in carbon neutrality becoming

Shiozawa The B2B2X concept by TOYO can be understood

CO2 is emitted in the production process of green ammonia,

which require high-tech application capabilities, in a shortvery large.

as bringing together a variety of companies to create a blue

which is made from hydrogen derived from renewable en-timeframe. Currently, we receive a variety of inquiries outside

ergy and nitrogen in the air, with absolutely no natural gasof Russia, from the Middle East, North America, and South

used. However, given current technology levels, the produc-

America. By mobilizing all of these strengths, we hope to cre-tion cost is calculated to be 300 to 400%, or perhaps evenate a blue ammonia value chain by around 2026.

possess natural gas interests and the technology to reduce
the CO2 emitted when using it, such as EOR technology. The
ammonia produced will also need to be brought to Japan, re-production facilities for urea and ammonia. We then expand-company to be provided to end users. Even if the govern-

ed our market to petrochemicals and infrastructure. Now,

ment gives out a command, it will not be realized unless it isNagamatsu In December 2020, we announced that we

sixty years later when we consider TOYO’s future as wea win-win for a variety of companies. For the future of Japan,

would be partnering with ITOCHU Corporation to work on amove toward carbon neutrality by 2050, you could say that

there are high hopes for the construction of a new value chain

Shiozawa I definitely agree that it is a priority for businessjoint feasibility study entrusted by Japan Oil, Gas and Metals

it is only natural that we work with ammonia as a fuel again.

through even more co-creation by the private sector.

firms to first create a solid value chain for blue ammonia.

National Corporation (JOGMEC). In July 2021, it was decided

The fact that the potential of the ammonia market, where we

Shiozawa Your initiatives in Russia are very interesting.

green ammonia with the next technological innovation.

Example of B2B2X Model: East Siberia fuel ammonia projectB (usiness)

Nagamatsu As a key pillar of our business vision for thegrown to an unprecedented level is a blessing that we didn’t

next five to ten years, TOYO wants to also shift to the B2B2X

even wish for.

model in the value chain for sustainable aviation fuel (SAF),
which has a high market potential alongside fuel ammonia.

a blue ammonia value chain as an extension of the conven-X
B: Company
C: Consumer
G: Government/Municipality

tional business model of EPC. To TOYO, this project is also an

Shiozawa To be honest, Japanese companies are tiny when

initiative to shift to the new business model of B2B2X, which

compared to their European and American counterparts. In

creates a market by involving all players in the new market. Uporder for Japan to regain its strength as a leading country in

until now, we have built a value chain between our custom-

carbon neutrality, I hope that TOYO pioneers a new energy

ers and TOYO, which you could call B2B. In particular, one ofsociety—like the conductor of an orchestra, leading the rele-

the themes of our previous medium-term management planvant parties on a spirit of “we” not “I.”

Solutions utilizing TOYO’s traditional strengths

Creating value chain by utilizing TOYO’s technologies

was “More Toward Upstream,” which saw us strengthen our• Feasibility study with technical verification• Creation of Master Plan
• Completion of EPC

To Electric Power Company: Sales of Fuel Ammonia
To Others: Ammonia –> Conversion to Hydrogen –> SalesTo Consumer: Sales of generated power

involvement right from the customer’s planning stage. We

Nagamatsu I thank you from the bottom of my heart for yourachieved a certain amount of results in this regard. However,encouraging words. I will do everything in my power to transformthe fact that we are accumulating one-off EPC-centric jobs

TOYO into the kind of company that meets your expectations.

TOYO ENGINEERING CORPORATION

Integrated Report 2021

TOYO ENGINEERING CORPORATION

Integrated Report 2021

Data Section

B (usiness)

can leverage our accumulated technology and expertise, has

However, the current Russian project does not aim to build

Feasibility study with Irkutsk Oil, JOGMEC, and ITOCHU to create a value chain

Sustainability Initiatives

Expectations as a Conductor,
Shifting Business Model to B2B2X

ceived at bases, and successfully transported to the power

first with blue ammonia, and then make a full-fledged shift to12ammonia value chain. In fact, it is not only necessary to first

Nagamatsu As I said before, TOYO started off in fertilizer

to reduce costs, we are aiming to realize carbon neutrality

Medium-term Management Plan

For over 50 years, TOYO has rolled out plant construction
sources will become cheaper due to lower costs of elec-

higher. While technology is being developed around the world

Management Vision

Nagamatsu TOYO is conducting a project in line with thefuel ammonia policy roadmap outlined in the government’s

13

Message from the CFO

FY2021–22
Evolution phase

Penetration phase

Use profits generated from the EPC
businesses to make proactive
future-oriented investments

Resume dividends during medium-term management planby stabilizing business performance through improved profitability

Steady earnings
from EPC

Kensuke Waki
Director, Senior Executive Officer
Chief Financial Officer (CFO)

EPC businessrevenue

Medium-term Management Plan (FY2021–FY2025):
Double Spiral Growth Strategy

In fiscal 2019, we completed the US ethylene project which(1) Invest to create a cycle of growth

had been our biggest concern in recent years. We are therefore

Our medium-term management plan (FY2021–FY2025) is based

no longer engaged in unprofitable projects. Despite the gradualon two strategies: “Advanced EPC Operation” and “Sustainablespread of COVID-19 from the fourth quarter of fiscal 2019, weTechnology and Business Development.”

DXoT
proposal
activities

Source of funds

DXoT benefits• Enhance EPC performance
to improve gross margin• Strengthen competitivenessof proposals by reducing costs
EPC business revenue• Improve profitability ofgroup companies bydeepening Group operations

Investment

New domain
revenueThree-year
average net
profit of ¥ 5billion or higher

DXoT benefit
R&D
EPC businessrevenue

Source of funds

DXoT
Improved
remuneration
Proposal
activities
Investment

Shareholder
returnInternal
reserves¥5 billion per year on average in fiscal 2023–2025, the penetra-

nancial soundness. To this end, we are taking measures to

The key to implementing “Advanced EPC Operation” willtion phase of the plan, increasing to ¥10 billion by fiscal 2030.

attract a steady volume of orders while removing contractual

billion in fiscal 2020, thanks to groupwide efforts to improve

be concentrated investments in DXoT (Digital Transformation

We also aim to achieve an ROE of 10% or more in fiscal 2025.

conditions that may cause negative cash flows. For ongoingproject outcomes and rigorously control expenses.

of TOYO), while the key to advancing “Sustainable Technology(See page 19 for an overall view of our KGIs and KPIs.)

projects, we will prevent construction losses, avoid upfront

posted net profit attributable to owners of the parent of ¥0.8

Through various measures taken under our Revival Plan, we

and Business Development” will be sustained investments inhave built a solid infrastructure business and improved our busi-

R&D. We have positioned fiscal 2021–2022 as the “evolution

ness portfolio, which previously was heavily weighted toward thecost outlays and emphasize the collection of delinquent receivables. In principle, we will maintain financial discipline byphase,” during which we will use cash flows generated by the

Financial Policies: Underlying Assumptions for
Medium-term Management Plan

plant EPC business. In addition, we made good progress in op-

EPC businesses to make proactive future-oriented investments.

(1) Capital adequacy and capital efficiency

velopment for future growth will be made within the scope oftimizing our overseas EPC group companies, which have grown

The subsequent period, fiscal 2023–2025, will be the “penetra-

Our pressing financial task is to restore our equity capital tooperating revenue and free cash flow.

to account for around half of our consolidated gross profit in fiscaltion phase.” During this time, we plan to improve the profitabil-

an appropriate level. Comprehensive engineering companies

Through the above-mentioned cash management policies,

2020. With respect to further strengthening risk management,

ity of existing EPC businesses while exploiting the benefits ofneed to have a financial base that can withstand the risks oftogether with annual revenue growth, we aim to keep our

we have seen visible results in the form of higher gross profit

R&D to make some new businesses profitable. Our policy is to

the EPC business, and the average equity ratio of EPC com-

debt-equity ratio below 1.0 times and secure stable credit lines.

margin in the plant EPC business, for which we have received

reinvest the profits earned here in DXoT, R&D, and businesspanies around the world is 25–30%. TOYO intends to raise its

orders since fiscal 2015.

development to accelerate expansion in new areas and the evo-

consolidated equity ratio, which was 18.3% in fiscal 2020, to(4) Normalization of tax expenses

lution of our business model, with the aim of establishing new

at least the 25% level. Although the size of our assets will vary

Until fiscal 2020, the effective tax rate for consolidated ac-

business pillars.

depending on the volume of projects in progress, our immedi-

counting purposes has been extremely high, and we rec-Through these processes, we hope to accumulate resources

ate goal is to increase equity capital to the ¥60–75 billion range

ognize this as a problem. On a non-consolidated basis, theWe believe that the economic situation will be gradually nor-for future dividends, while at the same time returning part ofor higher. We will first recover to this level by earning steadyCompany has accumulated a considerable amount of tax loss

malized in the second half of fiscal 2021 due to ongoing vac-

the improvement in labor productivity, gained through DXoT, toprofits through meticulous risk management activities.

carried forward due to construction losses from previous

cinations against COVID-19 and economic support measures

employees in the form of an increase in labor’s share of earnings.

to attract new orders and accelerate business structural reforms
to strengthen our financial base.

mandating that investments in DXoT, R&D, and business de-We estimate the current cost of shareholders’ equity topending projects. However, we have been unable to record

be around 8%. Considering the expected equity spreadtax effect from these carry-forwards due to uncertainty about(2) Set KGIs in Medium-term Management Plan

(ROE minus cost of shareholders’ equity) over the medium

profitability in subsequent fiscal years. As the Company’s fu-

especially related to renewable energy, are also increasing, andAs quantitative key goal indicators (KGIs), we aim to achieve a

to long term, we have set a target in our medium-term man-ture non-consolidated profitability recovers, the effective tax

we have set a target of ¥280 billion in orders for such projects.

stable net profit attributable to owners of the parent of at least

agement plan to increase ROE to 10% or higher for fiscal

rate should be normalized over the medium and long terms,

2025 and thereafter.

allowing us to record tax effect from the loss carried forward.

by governments, and we are already receiving many inquiries
for petrochemical projects. Inquiries for infrastructure projects,

Net income

New orders(¥ Billion)(¥ Billion)(2) Shareholder return policy

Responsibilities of CFO

6.0

350.0

The Company has not paid dividends for four consecutive fis-

We are in a drastically changing business environment characterized by increasing sophistication and localization of existing

inconvenience this has caused to shareholders. We will aim to

3.0

EPC businesses and a movement toward carbon neutrality.

200.0

increase the consolidated earnings of the entire TOYO group

1.5

As CFO in this context, I will work to create an environment

in a stable manner and resume dividend payments at an early

that allows us to embrace the challenge toward Sustainablestage within the period of the medium-term management plan.

Technology and Business Development strategy. At the same

280.0

150.0
0

100.0

time, I will rigorously manage risk and work relentlessly to

50.0
-27.0

0
(FY)

2016

External targets

2017

2018

2019

Actual results (Achieved)

TOYO ENGINEERING CORPORATION

Integrated Report 2021

2020

2021

Actual results (not achieved)(FY)

Data Section

cal years since fiscal 2017, and we sincerely apologize for the

250.0

300.0

Sustainability Initiatives

Under these circumstances, the most important task at hand is

14

R&D

Outcomes in new domains• New business domains frommonetization to full-scalecommercialization

Source of funds forshareholder dividends

Medium-term Management Plan

Current Status andFiscal 2021 Outlook of TOYO

Aggressive
investment in
R&D, DXoT, andproposal
activities

Management Vision

To achieve sustainable growth of TOYO,
we will work relentlessly to ensure sound andappropriate decision-making andtransparency from a financial perspective.

FY2023–25

2016

External targets

2017

2018

2019

Actual results (Achieved)

2020

2021

Actual results (not achieved)(3) Ensuring a sound financial position

ensure sound and appropriate decision-making and transpar-

In fiscal 2020, we generated positive net cash flows for theency from a financial perspective, with the aim of maximizing

first time in four years. However, we believe we need tolong-term profits while optimizing short-term profits.

further increase liquidity on hand in order to improve our fiTOYO ENGINEERING CORPORATION

Integrated Report 2021

15

Financial and Non-Financial Highlights
Management Vision

Please go to the Ten-Year Financial and Non-Financial Highlights on P.60-61 for more information.

Financial Highlights
Net Sales, Gross Profit Margin,
and Operating Income Margin

New Orders, Backlog of Contracts

Total Assets, Total net Assets, and Equity Ratio

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

(%)

600.0

12

500.0

400.0

20

60.0

15

400.0

8

300.0

15

40.0

10

200.0

4

0

0

200.0

10

20.0

5

100.0

5

0

-4

-400.0-8-12-600.0
(FY)

2016

2017

2018

2019

300.0
200.0
100.0
0

2020

0
(FY)

2016

2017

2018

2019

2020

2016

2017

2018

2019

(FY)

New orders

Operating Income, Ordinary Income,and Profit Attributable to Owners of Parent

Cash Flows

Interest Bearing Debt, Debt Equity Ratio(¥ Billion)(¥ Billion)(¥ Billion)

10.0

20.0

40.0

2.0

0

10.0

30.0

1.5

-10.0

0
20.0

1.0

-30.0

-20.0

-40.0

2016

2017

2018

2019

2020

2016

2017

2018

2019

(times)0.5

Operating activities CF
Investing activities CF
Net increase/decrease in cash
Free cash flows

Financing activities CF

(FY)

2016

2017

2018

-5

2018

2019

2020

Return On Equity (ROE) (right scale)(¥ Billion)

(%)

500.0

50

400.0

40

300.0

30

200.0

20

100.0

10

0

0

2020

2017

Backlog of Contracts, Renewable-Energy Contract
Backlog Ratio

0(FY)

Operating income
Ordinary income
Profit attributable to owners of parent

Equity (left scale)

Total net assets (left scale)

10.0

-30.0
(FY)

2016

2019

2020

0
(FY)

Interest bearing debt balance (left scale)
Debt equity ratio (right scale)Sustainability Initiatives-10.0

Total assets (left scale)
Equity ratio (right scale)

-20.0

2020

Gross profit margin (right scale)Net sales (left scale)Operating income margin (right scale)-20.0

Backlog of contracts

0
(FY)

0
ROE
-70.3

Medium-term Management Plan

-200.0

400.0

2016

2017

2018

2019

2020

Backlog of contracts (left scale)
Renewable-energy contract backlog ratio (right scale)

Non-Financial Highlights
No. of employees (consolidated)(MWh)(tons)(People)(%)(People)(%)(People)(%)

12,00012,000

7,000

21

4,000

12

1,200

6

6,000

18
9

5

15

3,000

1,000

5,000

800

4

4,000

12

3,000

9

2,000

6

600

3

2,000

6

1,000

3

400

2

1,000

3

200

1

10,00010,000
8,000

8,000

6,000

6,000

4,000

4,000

2,000

2,000

2016

2017

2018

2019

mestic and overseas construction offices emitted
4,413 tons of CO2 a year.
• CO2 emissions are calculated based on theamount of electricity, gas, light oil, kerosene, andheavy oil used.

2020

Electricity usage of Head Office and overseas group companies (left axis)*1
Electricity usage of domestic and overseas construction offices (left axis)*2
CO2 emissions of Head Office and overseas group companies (right axis)*1
CO2 emissions of domestic and overseas construction offices (right axis)*2

16

panies emitted 4,619 tons of CO2 a year, while do-

0

0
(FY)

• In FY2020, Head Office and overseas group com-

TOYO ENGINEERING CORPORATION

Integrated Report 2021

0
(FY)

0
2016

2017

2018

2019

2020

Male (left scale)
Female (left scale)
Percentage of female (right axis)*1 Includes overseas group companies FY2018*2 Measurement began in FY2019

No. of engineers (consolidated)

0(FY)

No. in managerial roles (consolidated)

0
2016

2017

2018

2019

2020

Male (left scale)
Female (left scale)
Percentage of female (right axis)

0

0
(FY)

Data Section

Electricity usage and CO2 emissions of Head office and construction offices

2016

2017

2018

2019

2020

Male (left scale)
Female (left scale)
Percentage of female (right axis)

Note: Total of major EPC companies including equity method companies. Excludes temporary employees.

TOYO ENGINEERING CORPORATION

Integrated Report 202117

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

Strategy “Sustainable Technology
and Business Development”
Priority Areas: Environment and Energy
Co-creation with clients/partners from the concept

FY2021-2022

Strategy “Advanced EPC Operation”
New Knowledge andBusiness Opportunities returned to EPC

FY2023-2025

We will make new business areas and business models more profitable,
further invest to them and improve employees’ treatment.

Penetration phase

FY2026-2030: Leap forward

Group operations
Evolution phase

BACKGROUND

Ensuring Excellent Quality and Profitability

TOYO’s definitive advantages

Proprietary solutions(CCUS, synthetic gas technology, etc.)• Group companies’ capabilities to accomplish EPC• Fuel ammonia• Abundant records in India, Russia/NIS, Asia andBrazil whose demands are expected to grow• Sustainable aviation fuels (SAF)• Green methanol, etc.

EPC business continues to be the mainstay

Invest knowledge, experience andbenefits gained through EPC• Pursue “Dramatic” productivity increase

Existing business area EPC“Advanced EPC Operation” strategy(blue strategy)With a focus on the environmental and energy fields set as prior-

The EPC execution capability of each Group company, nurtured

ity areas, we aim to create businesses together with customers

since the 1970s, is one of TOYO’s strengths and cannot be built

and business partners from the conceptual stage. In particular,

over night. Moreover, our extensive track record in India, Russia,

we will leverage our Carbon dioxide Capture, Utilization, andAsia, and Brazil, where demand for plants will continue growing, is a

Storage (CCUS) and synthesis gas technologies, which are key

major asset of the TOYO Group. We will aggressively promote Digital

TOYO strengths, to increase our emphasis on technological andTransformation of TOYO (DXoT) and strengthen our EPC execution

business development to provide solutions for carbon neutrality.

capabilities in order to pursue high quality and secure profits.

The two strategies, green and blue, are closely intertwined. We will connect the knowledge, experience, and profits we have obtainedin EPC to the development of new technologies and businesses, and in the process we will seize new EPC business opportunities. With
this double spiral approach, TOYO will continue contributing to the sustainability of the earth and society.

2020

2022

The graph showing changes in our profit structure indicates that

plan. During this post-COVID market recovery period, we will steadi-

in 10 years’ time (fiscal 2030), the gross profits composition of

ly increase profits mainly from conventional businesses through en-

EPC and non-EPC businesses will be 50:50. We will achieve this byhanced risk management, and use these profits to invest in DXoT

advancing “Sustainable Technology and Business Development”

and R&D aimed at increasing the certainty and potential of our busi-

and implementing “Advanced EPC Operation.” We will also main-ness. During the “penetration phase” (fiscal 2023–2025), we willtain a 50:50 gross profit composition between existing business

improve the sustainability of our operations by monetizing new busi-

areas and new business areas generated in the process of imple-

ness models in new business areas, making further investments

menting the two strategies, thus building a robust revenue basewith profits generated, and improving employee remuneration.

that is resilient to the volatile plant market.

The table on the left shows key goal indicators (KGIs) of the medium-term management plan, as well as of fiscal 2030
when we achieve the aforementioned profit structure and gross profit composition.
Our targets are: average consolidated net
income attributable to owners of the parentof ¥5 billion or higher in fiscal 2023–2025,
increasing to ¥10 billion in fiscal 2030,
To achieve and maintain these, we have
set the key performance indicators (KPIs)

18

Among TOYO’s materiality, providing workplaces where“people of diverse backgrounds engage in active, meaningful work” and “establishing an organization with integrity anddiscipline” are cornerstones of our corporate activities. The
excellent human resources and creditworthiness that result
from these efforts are the driving force behind the Mediumterm Management Plan.

TOYO ENGINEERING CORPORATION

Integrated Report 2021

shown in the right table.

KGIs (Key Goal Indicators)

KPIs (Key Performance Indicators)

Consolidated net income attributableto owners of the parent• FY2023–2025 average: ¥ 5 billion or
higher• FY2030: ¥10 billion

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

Gross profit composition(new business areas)• FY2025: 25% or higher• FY2030: 50%

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

Gross profit composition(6 main Group companies)• FY2025: 45% or higher• FY2030: 50%

Employee’s satisfactionlevel• Improved from the previous year

No. of employees• Japan: Double number engaged
in sustainable technology andbusiness development• O ther Group companies: Increase/decrease according to demand

ROE• FY2025: 10% or higher• Thereafter: Stably 10% or higher
Dividends• Aim to resume dividend payments
during period of plan

*Non-EPC: Businesses other than EPC/EP lump-sum projects

The synergistic benefit of these

Medium-term Management Plan
Sustainable Tec. andBusiness Development“People of diverse
backgrounds engage inactive, meaningful work”

Advanced EPC Operation
powered by DXoT
“Establish an organization
with Integrity
and discipline”

2

We will acquire new business opportunities driven policies aimed at achieving carbon neutrality by 2050 through“Sustainable Technology and Business
Development” strategy of the Mediumterm Management Plan. At the sametime, we will leverage our strategy of“Advanced EPC Operation” to secure
excellent quality and high profitability.

3 two strategies mentioned in 2

will create a positive spiral thatbalances the two materialities
of “aiming to realize an environmentally-friendly society” and“enriching people’s lives.”

Data Section

Relationship between Materiality andMedium-term Management Plan

“Enrichpeople’s lives”

Advanced EPC Operation

2030

We will position fiscal 2021–2022 as the “evolution phase” of theand ROE of 10% or higher in fiscal 2025.

“Aim to realize anenvironmentallyfriendly society”

2025

EPC

Sustainability Initiatives“Sustainable Technology and Business
Development” strategy (green strategy)

New businessareas

New business area EPC

works since 1960s

Medium-term Management Plan

• Their coexistence are directly linked to Toyo’s Mission

Sustainable Tech. andBusiness Development

New business area Non-EPC

Gross profit

BACKGROUND• Improving Quality of Life in Emerging Countries“Sustainability” ofthe business

non-EPC

Existing business area non-EPC• Efforts against global warming

1“Certainty” ofthe businessIn the recovery phase of the post-COVID-19 market, we will earn profits from EPC throughenhanced risk management and invest in DXoT and R&D from the profits.

DXoT (Digitalization without sanctuary)

Carbon neutral is the area to contribute…

Targets: Average net income of ¥5 billion or higher (FY2023–2025) and ROE of 10% or higher (FY2025)

Management Vision

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

We will produce outcomes that make our

4 customers feel “TOYO is the best partner” and benefit society. This will lead toincreases in business sustainability andemployee job satisfaction, resulting in a
virtuous cycle that epitomizes our slogan, “Your Success, Our Pride.”

TOYO ENGINEERING CORPORATION

Integrated Report 2021

19

Double spiral growth strategy —Sustainable Technology and Business Development
Management Vision

Development of new business fields through strategic co-creation
TOYO Energy Transition Roadmap

Focusing on Three Priority Areas Centered onCore Technologies
SAF
Implementation● Biojet Fuel Scale-up andCommercialization

CO2 Reduction Route● Study of CO2 Capture / Value Chain■ CO2-Free Methanol (g- Methanol®)Engineering Development● Investigating Value Chain■ Carbon-Free Ammonia● CO2 Value Chain (Capture to CCUS)
Solution Provision◆ Next-generation Technology Development

Social Demonstration

CO2
Value Chain● CO2 Value Chain
Technology Demonstration(Carbonate, DAC*, etc.)● Ammonia Utilization Technologies Expansion■ g- Methanol® Plant■ Fuel Ammonia Commercialization

Social Demonstration

Fuel
Ammonia● Value Chain Demonstration

Taisuke Nonaka

Tetsufumi Fukuta

Toshiyuki Koga

General Manager of Sales and Marketing
Division and Principal of Sustainable Business
Strategy Team
Plant Solution Business Unit

General Manager of Solution Marketing
Department and Principal of Sustainable
Business Strategy Team
Plant Solution Business UnitManaging Director of Sustainable
Business Strategy Team
Plant Solution Business Unit

■ Small-scale Supply Chain
Demonstration

Technology Development

2020*DAC: Direct Air Capture (Technology for directly capturing CO2 from the atmosphere)

2025

2030

Drawing on TOYO’s collective strengths oftechnology, experience, network, and footwork
Koga The rising tide of carbon neutrality continues to break
down the barriers between traditional industries and bringSeeking to swiftly deploy new solutions insociety together with customers and partners

a lot of projects often get started without technical specifica-

forth new business domains. For example, fuel ammonia istions and project guidelines being finalized beforehand, so I

an area that requires the integration of multiple elements: re-have gained a lot of experience in the business of providing

sources, chemicals, electric power, and supply chains.

Geothermal 0.3%

Biomass 3.2%

Wind 0.9%
Photovoltaic

8.5%

Overall mix of
power sources
in JapanHydro 7.9%
Nuclear 4.3%
Other thermal 9.9%(2020 preliminary
report)Coal 27.6%

LNG 35.4%

Fukuta The starting gun in the race to carbon neutrality

customers with solutions that nail down the requirements of

was sounded in 2020. It is much more than a competitiona project. There are similarities in the carbon neutrality move-

Nonaka There is a pressing need for Japan to shift away

between countries or companies—it is a race against timement, which is only just dawning, owing to the uncertain na-

from fossil fuel-based thermal power generation, which cur-through to the year 2050. With such limited time available,ture of roadmaps for deploying carbon-neutral technology inrently accounts for more than 70% of the country’s power

we must consolidate and optimize our existing technologies

society, project feasibility, and the economic potential of busi-

sources. Accordingly, ammonia is quickly attracting attention

is to improve the rate of recovery of CO2 emitted during theto create new value and also spawn technological innovation.

nesses. At TOYO, we believe we must adopt a solutions-ori-

as an alternative fuel. The world is aiming to replace the main

production process. And then there is the power generation

ented business approach if we are to deliver optimum solu-

sources of electricity with renewable energy and hydrogen isfield in which ammonia can be used for co-firing. These are

Koga Our understanding is that with carbon neutrality wetions from a technological point of view. In addition to ourseen as the main fuel source. However, the reality is that inall business fields in which TOYO can harness its technology,

are creating the future. All of us are still at the blueprint draw-

own proprietary technology, engaging in co-creation activities

terms of the timeline, there are many steps that need to be

know-how, knowledge, experience, and network. The sameing stage and the environment is open for joint participation

with customers, technology holders, and business partners istaken before that can be achieved. Ammonia (NH3), on thecan be said of SAF development and the CO2 value chain.

in business projects. Instead of confining ourselves to theprobably the most effective way to gain the upper hand in theother hand, is a fuel source that emits no CO2 during combus-

framework of TOYO’s core competencies, such as technolog-

battle against time and hit on optimum solutions.

tion and is regarded as the closest to practical implementa-

Nonaka We should particularly emphasize involvement intion for co-firing in electric power plants or as a fuel for ships.

the creation of significant business opportunities for Japan.

The social infrastructure and safety management standards

By having a deep involvement in the creation of rules in a

are already in place because ammonia is widely used as agame that continues to change due to the transformation offertilizer and as a chemical raw material. In addition, there isenergy sources leading up to 2050, as well as CO2 recycling,

potential for ammonia to play a role as a hydrogen carrier in

we can secure a business share in any of the new markets

the future.

that emerge.

examining new business domains and projects, the buildingof business models and value chains for individual projects,
investments in technology and businesses, and even the financing they require.

Priority area
SAF
development

ment, the CO2 value chain, and fuel ammonia. In each ofthese areas we possess core technology honed over our history of 60 years, centering on which we hope to propose a

CO2 value
chain

vision for the future.
Fukuta I have thus far been involved in services that support the development of oil and gas resources. In this field,

TOYO ENGINEERING CORPORATION

Integrated Report 2021

Fuelammonia

Core technology• Methane gas synthesis technology• FT synthesis (Velocys FT reactor)• g-Methanol ® /MRF-Z® reactor• CO2 separation, recovery, andtransport technology• Ammonia synthesis (KBR license)• CO2-EOR/CCS know-how and track record

Source: ISEP, from electric power survey statistics and other data

Koga To make carbon-free blue ammonia, injection of CO2

Fukuta Changes in the tide of carbon neutrality are also evi-

emitted during production into the oilfield is required, wheredent in the day-to-day enquiries we receive for new projects,

we can leverage our resources development technology.

new technology, and collaborations. Without being tripped up

Plus, developing the ammonia production technology itself isby the intensity of changes in society, we will continuously

a field of chemical engineering. Improving yields and econom-

update own areas of focus as we work towards dynamically

ic efficiency of ammonia had been a major issue up until now,and energetically creating various business opportunities with

but the latest challenge, from an environmental perspective,

customers and partners.

TOYO ENGINEERING CORPORATION

Integrated Report 2021

Data Section

Nonaka TOYO’s focus areas at present are SAF develop-

TOYO’s priority areas and core technologies

Petroleum 2.0%

Sustainability Initiatives

ical know-how and EPC businesses, we are comprehensively

20

Medium-term Management Plan

■ Technology Development of■ CO2 Reduction Route Commercialization■ g-Methanol® Commercialization■ CO2 Reduction Route● Biojet Fuel Demonstration● Wide Spread Biojet Fuel in Society

21Double spiral growth strategy —Sustainable Technology and Business Development
Management Vision

The frontier of resources development

Yoichi Komatsu

Deep-sea rare-earth muds recovery system

Yoki Kitayama

Project Manager
Solutions Service Department
Solution Business Division
Plant Solution Business Unit

Project Engineer
Solutions Service Department
Solution Business Division
Plant Solution Business Unit

Methane hydrate production trials aim to produce stable gas
from “burning ice”

Targeting domestic production ofclean rare-earth metals

unprecedented project even in the field of deep-sea oil andRare-earth elements are materials essential to small motor

is handling concept design and basic engineering for the ra-magnets used in electric vehicles, as well as solid-state elec-

re-earth muds recovery system ahead of sea-based perfor-

Kawaguchi Methane hydrate, also called “burning ice,” is anprocess reaches the stage of practical application. Countries

trolytes for fuel cells. They are an important resource to prog-

mance testing slated for fiscal 2022.

ice-like clathrate compound in which methane gas is trappedaround the world are currently pursuing R&D activities withgas resources development. As part of this project, TOYO

ress carbon neutrality. They are often contained in pelagic

Putting domestic energy resources to practical use

can be separated from the water. However, there are numerous technological hurdles that must be overcome before thiswithin a crystal structure of water in a low-temperature, high-the aim of establishing the technology to stably producepressure environment. It has potential as a next-generation

methane, understanding the production behavior of meth-energy source.

ane hydrate, developing production systems, assessing re-were discovered in 2010 in the seabed 6,000m deep in theDeveloping new resources by combining
our resources development technology
with plant construction know-how

vicinity of Minami-Torishima Islands, Japan’s easternmost

Many experts are involved in the execution of this project,

Kitayama Its presence throughout Japanese territorial wa-

territory. Japan currently relies on imports for almost all of

ranging from plant and resources development engineers,

ters has been confirmed and given its importance from an

Kitayama To further understand the production behavior

its rare-earths, so domestic development is vital in terms ofengineers with experience in oil drilling, offshore oilfield op-

energy security point of view, establishing the productionof methane hydrate, which is one of the development chal-

Japan’s resource security. Also, rare-earths from the sea floor

erations, and equipment development, and engineers in thetechnology to harness it is one challenge going forward.

lenges we face, we need to collect and analyze a lot of data.

differ from mine-derived sources as they have the benefit

field of metal mining resources development. Numerous dis-of being a cleaner resource containing no radioactive sub-cussions between customers and partners have also taken

Kawaguchi In 2016 TOYO was commissioned by the

tomer and to develop a system with which we can monitor

stances. Under the Cross-ministerial Strategic Innovation

place as part of the planning and engineering process. For

Japan Oil, Gas and Metals National Corporation (JOGMEC)

sites from a remote location. I faced quite a few challenges

Promotion Program (SIP), a Japanese team led by the Japan

TOYO, we will be able to fully demonstrate our technologicalto come up with a concept design for methane hydrate trial

in the early days of this project because I had no knowledge

Agency for Marine-Earth Science and Technology (JAMSTEC)

know-how from multiple angles. Personally, I find it reward-

production in Alaska. I have been involved in this project fromof ICT, including sensing technology and telecommunica-

is currently developing world-first technology to recover ra-

ing to work on the development of new resources to enrich

the outset and now as project manager I am overseeing thetions. However, in order to perform my duties for this next-

re-earth muds from the deep sea at a depth of 6,000m—an

the future of Japan, the country I was born and raised in.

final stages of test facility engineering and equipment pro-generation energy resources development project, whichcurement support, and making preparations for on-site work.

even from a global perspective is a brand-new challenge, I am

sludge (rare-earth muds) accumulated from the remains ofplankton and other sources. A trove of such rare-earth muds

Medium-term Management Plan

SB Development Team Manager
Solution Business Division
Plant Solution Business Unit

Kyojiro Kawaguchi

serves, and confirming environmental impacts.

Sustainability Initiatives

My job is to safely deliver data acquired on-site to the cus-

endeavoring to expand my knowledge through self-study efKitayama I was assigned to the Alaska project immediately

forts mainly by acquiring accreditation for ICT and digital tools.

after I joined TOYO in 2018. Since then I have been tasked
with managing the design and development of a production

Kawaguchi As a Japanese engineering company, TOYO

site data acquisition system and a cloud services-based re-has a long history of deep involvement in oil and gas field

mote data delivery system.

developments. At the same time, as a urea licensor, we
Data Section

also have a history of outpacing our rivals to provide remote

Amassing technical expertise to overcome
numerous technological hurdles

location-based plant information management support, operational support, maintenance support, and business support services with our DX-PLANT® system, for example.

Rare-earth muds at the bottom of the deep sea; the black clumps aremanganese nodules

22

TOYO ENGINEERING CORPORATION

Integrated Report 2021

Chikyu, JAMSTEC’s deep-sea exploration vessel

Kawaguchi One characteristic of methane hydrate is that

By combining our wide array of technological knowledge,

stable supplies of it are located underground in crystalline

we will do our utmost to ensure that gas can be stably pro-form. To recover methane hydrate in the form of methane

duced from the new energy resource of methane hydrate

gas above ground, a decompression method must be used

and that we can fulfill our duty as an engineering company

to instigate a phase change below ground so that the gas

to realize new commercial processes.

TOYO ENGINEERING CORPORATION

Integrated Report 2021

23

Double spiral growth strategy —Sustainable Technology and Business Development

Masashi Higo
Research Engineer
Next-G Technology &Application Division
Engineering andTechnology Unit

FT synthesis technology

We are pushing ahead with initiatives targeting the commercialization of plants that produce SAF*1 and other fuels fromsustainable feedstock such as woody biomass, municipal
solid waste, and the CO2 emitted from industrial facilities.
SAF that we produced on a demonstration basis together
with partners for a contracted project for the New Energy
and Industrial Technology Development Organization (NEDO)
fueled a commercial flight (Japan Airlines flight JL515 fromHaneda to New Chitose Airport) on June 17, 2021. It was thefirst time to establish an integrated production system fromgasification of woody biomass and FT synthesis technology*2
to SAF in world history.
Leveraging our knowledge of synthesis gas technology, an
area in which we have ample experience, TOYO has concluded a comprehensive business collaboration agreement on
Gasification

Urban waste

Gasification

CO2

CO2 reduction

Synthesis gas

Research Engineer
Next-G Technology &Application Division
Engineering andTechnology Unit

TarT™ sour gas sweetening
technology

In February 2021 we signed a comprehensive collaborationagreement to promote commercialization project with 8 Rivers,
which has licensed TarT™ process for sour gas sweetening
as a natural gas processing technology. This technology uses
an innovative distillation technology that can reduce equipment cost and operating cost by approximately 20% and 50%,

Integrated Report 2021

Environmentally-friendly recycled methanolusing proprietary technology
g-Methanol® is an environmentally-friendly recycling technology for methanol synthesis using CO2 captured from various
emission sources and hydrogen derived from renewable energy as feedstocks. TOYO has its own process for synthesizing methanol from fossil resources such as natural gas, andwith our proprietary developed MRF-Z® reactor, we offer anenergy-efficient reactor that performs methanol synthesis
whilst simultaneously recovering energy from reaction heat.
Renewable energy

Electrolysis of water

A sentimental process that we hope will
benefit society
It is really satisfying to be able to propose this methanol
process—something I have been emotionally involved in asprocess engineer—as one unique technological solution for
utilizing CO2. Our aim is social implementation so that it cancontribute to a sustainable global environment.

H2
Synthesis gas

CO2 emitting facilities

CO2 capture

CO2

g-Methanol ® producedby the MRF-Z® reactor

Methanolof catalysts.

FT synthesis

Diesel fuelNaphtha works

respectively, compared with conventional chemical absorption
process. Furthermore, CO2 can be recovered as liquid that contributes to CO2-EOR and CCS/CCU. The technology can be applied to natural gas fields containing a lot of hydrogen sulfide
that have not been fully developed because of high technicaldifficulties of gas production.

Desire to see new technologies implemented
in society
I find it very rewarding to contribute to the Company’s missionof helping to solve global environmental issues by combining
TOYO’s technical know-how with the superior technology ofstartup firms. TOYO’s experiences in the EPC of natural gas
processing plants and track record of projects for storing captured CO2 underground or injecting it into oil and gas reservoirs
to boost production are solutions that hold the key to carbon
neutrality by 2050. I certainly would like to see the new technologies that I have personally been involved in from the development stage be successfully deployed in society.

Takato Nakao
Manager
Advanced Technology
Business Department
Plant Solution Business Unit

Technological development ofredox flow batteries
Targeting stable supply of renewableenergy-based power with large-scale stored
energy technology
I learned about flow batteries roughly four years ago when
I was conducting research into mainly energy storage technologies. A flow battery is a type of industrial storage battery(secondary cell) that can be charged and used repeatedly.
This technology is mainly being developed for application in
relatively large stationary storage batteries. The principle itself of turning electricity into chemical energy for storage isthe same as that for other storage batteries, but in addition to
the cells that charge and discharge electricity, a flow battery
system configuration also has tanks, pumps, and pipes thatare similar to the equipment used in plant engineering. Owing

to these characteristics, flow batteries are expected to be adopted as large-scale stored energy systems with the capacity
to generate anywhere between 30 MWh and a few hundred
MWh. They have the potential to play a key role in moderating power supply and demand in large-capacity renewableenergy installations. By improving the value provided withflow battery systems through technological development anddelivering optimal solutions to meet various requirements bycombining them with other forms of stored energy technology, we hope to boost the presence of TOYO as we go aboutbuilding a renewable energy-powered society.

Towards development of redox flow batteries
The development of flow batteries is more than 30 years
old. They are already being used to moderate fluctuations inphotovoltaic and wind power generation systems and theirbasic structure is more or less established. But significant
cost reductions are needed to be used widely in the market. I
believe an effective way to go about this is to review and rebuild the system, starting with the fundamentals. I personallyintend to address this leading technology with humility, butalso continue to develop it through a process of trial and error
by going back to its rules and principles and always being
prepared to think outside the box.

TOYO ENGINEERING CORPORATION

Integrated Report 2021

Data Section

Technology for both gas field development andCO2 storage/utilization

TOYO ENGINEERING CORPORATION*1 SAF is an acronym for sustainable aviation fuel. It refers to aviation fuelmanufactured from sustainable feedstocks characterized by low CO2
emissions, from production and procurement through to combustion.
*2 Fischer-Tropsch synthesis is a technology that synthesizes liquid hydrocarbon from synthesis gas (gas mixture of CO and H2) with the use

g-Methanol®

SAF

Hao Zuo24

After starting out as a process engineer and then being seconded to a general trading company, my current role is tocontribute to the energy transition field from a technical perspective. The adoption of SAF for the purpose of reducing
CO2 emissions from aviation fuel is absolutely essential, so as
an assigned member to this development project I will devote
myself entirely to the construction of a commercial plant at
the earliest possible time.

Research Engineer
Next-G Technology &Application Division
Engineering andTechnology Unit

We apply the engineering knowledge which we have honed
from fossil resource-derived methanol synthesis to the configuration of operating conditions and reactor design so that itsuits methanol synthesis with CO2 as a feedstock. Methanol
has many uses, including as a raw material for chemicals andin gasoline blending, and we expect demand for methanol
recycled from the environment to only grow stronger in theyears ahead. TOYO is currently undertaking initiatives withthe aim of taking part in, or considering the commercializationof, projects planned in other countries.

Sustainability Initiatives

Woodchips

Focusing my efforts on realizing a commercial
plant as soon as possible

Azusa Okazaki

Medium-term Management Plan

Stepping up adoption of SAF bylowering production costs

FT synthesis technology in the field of renewable fuel with
US-based Velocys, a company possessing technological expertise in the area of microchannel reactors for FT synthesis.
Going forward, to drive the uptake of SAF, which can drastically reduce CO2 emissions in the aviation sector, we willtake steps to reduce production costs mainly by diversifying
feedstocks and scaling up production plants. We will also aim
to keep initial investments to a minimum by making use ofexisting refinery plants and contribute to its adoption in society by implementing technological improvement measures.

Management Vision

Recycling-oriented society supported by technological development

25

Double spiral growth strategy —Advanced EPC Operation

Building sustainable infrastructure

Building sustainable infrastructureManagement Vision

Double spiral growth strategy —Sustainable Technology and Business Development

After taking its first order for a biomass power plant in June 2018, TOYO has continued to receive totally eightorders in the roughly three-year period. Currently, all of these projects are in progress. Here is more information

I.E. Bimo Harikristanto
Wahonofrom a couple of our project managers.

General Manager
Business Development Unit
IKPT

Enabling the future green
energy with geothermal power

Dieng Small-Scale Geothermal
Power Plant (1×10MW) wascompletedcompleted the project in March 2020.
Then in August 2019 we awarded an order from the Dieng
Small-Scale Geothermal Power Plant (10MW). A steam blow
ceremony was held in April 2021 and Taking Over Certificate(TOC) has been received on July 23rd, 2021.
Geothermal business has been growing rapidly inIndonesia. We would try to take more chances to enter into
several geothermal power projects coming up next. With ourlong relationship in the local market and project experience& know-how, IKPT shall continue to contribute to the project
execution of geothermal plants which is expected not only
as a renewable energy power plant but also as stable power
supply generators.

MyungJong Eom

Deputy General Manager
Environment Division
Toyo-Korea

General Manager
Environment Division
Toyo-Korea

Development of high-performance organic sludge drying system
Eom Toyo-Korea’s sludge drying facility has the following
characteristics: (1) no wastewater is produced because direct
drying with superheated steam is used to completely evaporate the sludge moisture content; (2) foul odors are extinguished with a built-in 850-degree deodorizing furnace; and(3) the system is 20%–30% more fuel efficient than conventional models. We are currently fielding many enquiries forthis system and we are aiming to launch commercial plant
operations within the next year or two.
We currently work on development to produce pellet products made of dried sludge and sawdust for power plants aswell as to develop some systems that can treat food waste
and livestock waste. In 2020, we established a dedicated task
team handling Waste Plastic Recycling. In order to explore
more business opportunities, we would like to enter into theEastern Asian market in addition to Korea.

Obayashi Kamisu biomass power
plant project

Omaezakikou biomass power
plant project

Even though TOYO was a late entrant in the field of biomass
power plant construction, since the time I took charge of theKamisu project, we have successively taken on eight projects
in total. The key to success owes to our capacity to provide
power plants with the highest level of efficiency thanks tothe close partnerships with Andritz, one of the world’s leading biomass boiler makers, and Siemens, a manufacturer ofsteam turbine generators. Since the 1980s TOYO has undertaken thermal power plant projects. And ever since feedin tariff legislation was enacted in Japan in 2012, we haveworked on 10 large-scale photovoltaic power plant projects.
Our standing today is the direct result of this track record, andevery time I recall this I feel deeply moved by the fact that it
owes to the trust our customers have placed in us, as well as
the fruits of our partnerships.
The Kamisu project was the first of TOYO’s biomass power
plant projects and it proved to be a significant challenge forme as project manager because of the many “firsts” it happened to spawn. For example, the experience of dealing withdomestic laws and regulations, our first collaboration with
Andritz, and countermeasures against the COVID-19 pandemic. Still, we were able to finally complete construction in
May 2021 by solving all of these issues one by one together
with the customer and our partners. We are steadily executing the plant’s commissioning and I am confident of being
able to complete the project.

Construction of the Omaezakikou biomass power plant is a
joint venture project implemented through collaboration with
Nippon Steel Engineering Co., Ltd. (NSE). Two of professionals from NSE have joined our team as project engineers at
TOYO’s office and NSE’s chief engineer will also be assigned
to the construction site. TOYO and NSE have set up a JV
works committee and JV steering committee and both companies regularly monitor the project’s progress and cooperate
on identifying and rectifying issues. The project commenced
with piling work in April 2021.
Due to pandemic of COVID-19, it was appeared inconvenient situation that no direct meetings were allowed withequipment fabricators in Japan and overseas from March
2020. Usually we would pay visits to fabricators’ shop tocheck on production and conduct tests and also ask the supervisors to come to the construction site, but at present almost
all of these dealings have to be carried out online. Sometimes
communicating with foreign supplier is challenging becauseof time differences, but we make up for those minor mishaps
by consciously sharing in-depth information. We are employing unprecedented methods by exchanging knowledge withequipment fabricators, mainly by meeting online to monitor
production progress. As project manager, I am glad to embrace the challenge of adopting a new project management
style with the aim of improving the cohesiveness between
the customer, partner companies, and JV partners.

Data Section

Park Sludge generated from sewage treatment contains perishable and harmful substances, where the treatment technology is very important to environment conservation. Major disposal
methods were landfill and ocean dumping, however, it is nolonger acceptable. The government of Korea had adopted sludge
drying facilities by enormous spending out of tax. But it requiresa large consumption of fossil fuel and these facilities were unwelcomed by the communities due to foul odor. Toyo-Korea set
up Environment Division to start developing our own sludge
drying facility by taking this opportunity to solve social problems.
Based on the Multi-stage Sludge Drying System, which waspatented on April 14, 2014, Toyo-Korea improved some partsof the dryer such as the driving system, paddle & screws andfurthermore to enable an application to the pilot plant 5t per day
in 2018. As a result, the Improvement Patent for Organic Sludge
Drying System was registered in April 2020.

Project Manager
Environment and Infrastructure
Project Division
Environment and Infrastructure
Business Unit

Sustainability Initiatives

JinSu Park

Masanori Komatsu

Project Manager
Environment and Infrastructure
Project Division
Environment and Infrastructure
Business Unit

Medium-term Management Plan

The Government of Indonesia (GOI) continues to maximize
the use of clean energy through geothermal development tomeet national energy supply needs which is in accordancewith the National Energy General Plan. IKPT has taken up
the opportunities towards the program by being involved
in several Geothermal Projects. According to the National
Geological Agency, the geothermal potential in Indonesia is
23.9GW but it has installed only 8.9% out of the target atpresent. The GOI strive to increase the new developmentof geothermal power plant to become 7,200MW with 46
geothermal areas that spread across the islands.
In May 2017, IKPT was involved in the Steam Field Above
Ground System in Lumut Balai Unit 1 Geothermal Power
Plant 55MW. As an EPC Contractor, IKPT has successfully

Unit 1 of the Lumut Balai
Geothermal Power Plant (55MW)FCRS was completed

Makoto Koga

Photos of the Obayashi Kamisu biomass power plant

26

TOYO ENGINEERING CORPORATION

Integrated Report 2021

TOYO ENGINEERING CORPORATION

Integrated Report 2021

27

Double spiral growth strategy —Advanced EPC Operation

be seen in early engagements with Clients, taking up conceptualization assignments, such as Cost Estimation and Detailed
Feasibility Reports. The keyword is “more toward upstream”
for the clients in private sectors. This strategy is to avoid an
exhaustive price in tenders of public sector clients. Our special
competitiveness and high- end project management skills, canallow us to expand our geographical reach to outside of India,
like Middle East, USA and Africa, for soft jobs and neighboring
countries for EPC projects.

The chinese market outlook andToyo-China’s superiority

DXoT as the most crucial project in TOYO

Executive Director(Commercial & Sales, DXoT)
Toyo Engineering India Private Limited

Beyond the top experienced engineering firm

In 2025 to become a Construction Planning Centerin TOYO group

Incorporation of clean projects demand in India& Expansion of Toyo-India’s geographical reach
Presently, there are many clean projects being thought of inIndia. Toyo-India would like to have a balanced business portfolio by incorporating clean projects such as Carbon capture, Flue
Gas Desulphurization, 1G/2G/3G Bio-Ethanol, Compressed
Biogas, Plastic recycle, etc. together with conventional core
sector Hydrocarbon projects. Additionally, we would also like to

28

TOYO ENGINEERING CORPORATION

Integrated Report 2021

Aiming for collaboration excellence in
TOYO global operation
After successfully achieving medium-term management plan
by FY2025, it is expected that TOYO will be looking for step
jump in terms of the collaboration excellence in global operation. Every group company shall be responsible for their domain market and also unite as cohesive TOYO group globally.
In order to be compatible and achieve self-sufficiency in local
operation & with TOYO group global collaboration, we believe
in all affiliates to do the right things as routine.
To ensure above following practices can be considered:
1. Close interactions to understand each Group Company’sfunctioning and territory of business domain
2. 
Frequent meetings to exchange views on engineering
global best practices, centralized procurement, projectplanning and global construction
3. Use of single platform for communication with required
transparency and hierarchy

A reliable engineering partner in China
Ever since diplomatic ties were restored between Japan and
China in 1972, TOYO has constructed a variety of fertilizer,
ethylene plants, and other plants in China. Toyo-China waslaunched in 2001 for the purpose of supporting Toyo-Japan’s
Chinese plant construction projects. It now implements EPC
projects on a standalone basis and receives high praise fromits customers. As the President of Toyo-China, I would like tofurther enhance our strength in EPC operation and improve
productivity by leveraging decades of TOYO EPC experienceand advanced engineering skills as well as DXoT, and set ourselves apart from Chinese design institutes and other foreign-owned engineering companies.
Restrictions imposed by the COVID-19 pandemic sincelast year have meant that it has become more difficult tosend staff abroad and carry out face-to-face communicationin the projects that we carry out in collaboration with TOYO
group companies. Collaborative projects are large in scaleand complex, making risk management an important point
for success. To address this issue, we have introduced theappropriate systems, such as latest meeting tools like Teams
and Webex as well as Power BI and Project Twin that allow
us to visualize project status. In order to adapt to the resultsof Toyo-Japan’s DXoT development in a timely manner, ToyoChina established a DXoT Promotion Team in 2020. In EPC
projects that are currently underway, Project Twin is used tomonitor the status of projects, enabling the real-time visualization of the latest project status, which makes it easierto produce status reports. By integrating data on engineering, procurement, and construction for large-scale projects,
we would like to further develop data-driven cutting-edge
project management methods. Through these initiatives,
we will aim to strengthen our competitive foundations andboost gross profit by approximately 1.5 times by FY2025 andachieve further growth toward FY2030.

Realizing TOYO’s mission “Engineering for
Sustainable Growth of the Global Community”
in China
In 2021, Chinaese government announced goals to pass
the peak of its CO2 emissions by 2030 and achieve carbon
neutrality by 2060. Alongside these societal changes, ToyoChina is working to achieve carbon neutrality by having ourcustomers use renewable energy, improving processes,
converting raw materials for petrochemical, and conducting
carbon offset trading. We are proud to be able to contributeto the sustainable growth of the global community by leveraging the process technologies and engineering expertise
cultivated by the TOYO Group and realizing these initiatives
alongside our customers.

Data Section

To be in line with the “Advanced EPC Operation” of themedium-term management plan, our aim is, also to develop
Toyo-India into a full-fledged Construction Planning Center,
which will provide management procedures and undertake
support services like FEED for international projects awarded
to TOYO group companies. Owing to experience of multiple
international Engineering and domestic FEED/EPC projects
we think that Toyo-India can be entrusted to become a leading
part for evolving Group Operation, rather than only depend on
Toyo-J’s High Value and cost competitive Engineering Center.
We are now striving for enhancing competitiveness of TOYO
group through Blue strategy which will reinforce TOYO’s
earning power in EPC business.

Ongoing DXoT task status
1. Project Twin: Being implemented in various ongoing projects
2. Construction Site DX: Development in progress
3. Just in Time: Being implemented in some domestic projects
4. Digital Procurement: Initiated with Toyo-India’s own ERP
5. Engineering Digital Twin (EDT): Being implemented on 4 projects
6. Smart Module Engineering Task: Trial on executed proposal ongoing

Director & President
Toyo Engineering Corporation (China)

Sustainability Initiatives

Toyo-India has been developing its competitive skills by playing important role in the scope of Ethylene plant projects &Fertilizer plant projects awarded to TOYO group. We are proud
that, Toyo-India has experienced core engineering scope for 5of ethylene projects and 4 fertilizer (Ammonia & Urea) projects(including 2 EPC projects in India) in last 10 years. With thisand with other domestic projects in Indian market, Toyo-India
is now the top experienced Engineering firm in India. We now
prepare for the next stage to step up our business.

Dong Benli

The Chinese market continues to be robust with a positive
growth outlook. Our focus regions for the next five years are
the Yangtze River Delta area, the Pearl River Delta area, and
the Guangdong-Hong Kong-Macao Greater Bay Area. The
Yangtze River Protection Law was enacted in March 1, 2021
in order to protect and restore the environment and ensuresustainable development in the Yangtze River basin. Plant
upgrading and transfer projects are expected to adapt to thislaw. In addition, China launched a development plan for the
Guangdong-Hong Kong-Macao Greater Bay Area in the firstquarter of FY2019. As region is one of the most open andeconomically vibrant area in China, it will attract high-techcompanies and global giants. We believe that we can play a
key role in these regions where economic development is expected, as an engineering company rooted in the region andstrong in foreign capital who has a full backing of extensive
track record of projects and have a deep understanding ofcustomer needs and expectations.
In terms of product fields, Toyo-China’s targets continue tobe hydrocarbon, specialty chemicals, advanced materials, andfine chemicals.

Medium-term Management Plan

Suresh B. Shelke

Toyo-India has established DXoT team in January 2020, soonafter establishment of DXoT Planning & Promotion Center in
Toyo-Japan. Our objectives are to synchronize various DXoT
related tasks simultaneously to accelerate accomplishing 6
times productivity in EPC operation, by business flow improvement and activation of solution developed to real projects. I am responsible for DXoT in Toyo-India because I believethat it must make good influence on mindset change from theManagement Committee members in line with DXoT.
We understand that the goal of DXoT is not only on EPC project procedure improvement but also to transform Corporate
Management methods and Business models. It is what wecall the biggest challenge like a mega project in TOYO group.
Additionally, Toyo-India DXoT Team is also working on ourInternal tasks for Manhour reduction and Quality Improvement.

Management Vision

Group company top executives message

TOYO ENGINEERING CORPORATION

Integrated Report 2021

29

Double spiral growth strategy —Advanced EPC Operation

Total EPC optimization

Management Vision

Deepening group operations

Naoyuki Sawada
Ir. Azhan Salleh

Daniela Guariglia

Executive Director
Toyo-Malaysia

Chief Operating Officer
EBR*

Toyo-Malaysia’s sustainability challenge
35 years in the community

The production of oil and natural gas in Brazil is in a prominent
position in the world’s reserves, driven mainly by the development of the Pre-Salt fields. The government authority for PreSalt production management has just informed that 28 new
FPSO are forecasted to increase the production to 3.8 million
barrels per day up to 2032. International Oil Companies suchas Shell, Exxon-Mobil, BP, Equinor and others acquired several pre-salt fields in Brazil in the past years that will booster
the demand for new Floating Production Units. There is an
estimation that Brazil leads the new FPSOs investments with
28% of the total demand in the world.

Excellent Rating awarded by the CLIENT

Challenge for DXoT and next-generation business

30

TOYO ENGINEERING CORPORATION

Integrated Report 2021

Advanced EPC Operation byenhancing procurement value

In fiscal 2018 we established the EPC Integration Division
as a command-and-control unit tasked with carrying out
constructability study, overall schedules for projects, andproposal strategies from a total optimization standpoint andthen steadily executing them for engineering, procurement,
and construction stages, as well as across all divisions, afterincorporating them as tactics for each division. For plant construction projects that are intricately entangled with interests
and alliances between companies and organizations, we aim
to always acquire a total optimization solution for the TOYOGroup by binding together the divisions that are prone to running their own optimization programs.

Nearly 70% of our procurement sources for equipment andmaterials is from non-Japanese suppliers on a monetary basis. Even though Japan domestic projects account for close to
50% of sales amount, the outcome of our projects still hinges on overseas procurement capabilities. Furthermore theprocurement sources are still expanding and supply chainsare getting more complex as well. In addition, overseas procurement is becoming more challenging mainly because of
COVID-19 restrictions and volatile commodity market. We
will aim to be even more risk-sensitive going forward andsupport TOYO’s EPC competitive edge from a procurement
standpoint by making preparations so that we can respondflexibly under such circumstances.

Although Brazil has high competition in the topside construction market, EBR had a relevant position fabricating topside
modules for four FPSOs units out of the six units with local
content requirements contracted in the Brazilian market in
the past three years. We believe that being in a key position
because of the proven capacity to deliver the projects on timewith high quality and high safety standards.
EBR recently modernized its pipe shop with semi-automatic equipment for cutting and welding and improved layout. A
new painting and blasting cabin was also installed.
Our track records and capabilities allowed EBR to be recognized and qualified by Petrobras as one of the 13 FPSO EPC’s
contractors in the world.
*EBR: Estaleiros do Brasil Ltda. The group company under TS Participações
e Investimentos S.A. (TSPI) which is TOYO’s equity method affiliate.
Undertakes EPC projects for mainly FPSOs and other offshore facilities.

Prior to contract award, it is crucial that we deliver the mostbeneficial proposal to the customer to differentiate ourselvesfrom the competitors. After winning an order, we consider
it important to share an image of the completed plant withthe customer at the earliest possible time during the project.
On top of this, during the construction process, we enhance
our ability to foresee risks as much as possible by visualizingchanges over time at the construction site, for example, inthe transportation and installation of equipment & materials
and the operation of heavy machinery. Sharing a sense of togetherness with our customers is a major role we are expected to play as a prime contractor. We have hitherto executed
projects in which we coordinate the engineering and procurement based on in-depth construction planning, but going forward, DXoT will likely play a key role in how those functions
go hand-in-hand with construction plans.

Respecting the will of customers toprovide services of value
We believe our social mission as an engineering company is
to create new value by combining different types of technology. In plant construction, there is a tendency for the thinking
of engineers to remain unchanged from a safety and quality
point of view, but at this turning point in history, we are particularly mindful of adopting a flexible mindset and dispellingpreconceived ideas. We aim to raise the value of TOYO’s
services by taking the expectations and concerns of our customers into consideration and fully enjoying the process ofcreating something together.

Improving the Group’s procurement
risk management capabilities
Despite the fact that each TOYO Group company undertakes its own EPC business operations, we aim to mitigate
procurement troubles by having the entire Group utilize thesame supplier information. To that end, we are employing thefollowing three approaches: (1) sharing trouble records; (2)sharing information on competitive manufacturers regarding
quality and prices; and (3) standardizing order qualification
screening and supplier performance assessment methods.
We will raise our level of risk management by making global
use of local information from each group company to ascertain the competence of suppliers under common criteria. We
will also seek to improve the Group’s competitive strengths
in procurement.

Further leverage with DXoT
Digital tools have opened up the possibilities of remote workin the area of procurement. For example, inspections at a
manufacturing shop can be performed remotely via a video
feed. Moreover, precise and swift receipt of data on production progress can help minimize delivery delays. Also, digital
tools can be used to improve the accuracy of financial planning for payments if they are linked to delivery forecasts.
Given the benefits of DXoT, I intend to work with passion toenhance the value of TOYO’s global procurement operations.

TOYO ENGINEERING CORPORATION

Integrated Report 2021

Data Section

Toyo-M is playing a significant role in initiatives of DXoT. The
DXoT evaluation process together with gap analysis is going on. This process is required to well harmonize the newplatform and our existing system & business flows. Morehigh-intensity collaboration among TOYO is expected for accelerating the global implementation of DXoT.
Toyo-M will lead TOYO group’s carbon neutral businesspromotion in Malaysia. For most of our major clients, Toyo-M
will become the decarbonizing project partner.

The EPC Integration Division to deliver
total EPC optimization

Coordinating engineering andprocurement with construction planning

As a selective FPSO contractor

General Manager
Procurement Division

Sustainability Initiatives

Recently Toyo-M received “Excellent Rating” for the year 2020
by PETRONAS vendor evaluation program. To add the icing on
the cake, Toyo-M also has been awarded by PETRONAS thebest Safety and Health Manager and Best Contractor Cabincompliance to COVID-19 requirements award in our ongoingproject in June 2021. Even though under extraordinary circumstances, we are so proud that we can build up good relations
with clients through close communication.

Ryoji Nakamura

Medium-term Management Plan

Toyo Engineering & Construction Sdn Bhd (Toyo-Malaysia)
was set up in 1986. Over the years Toyo-Malaysia (Toyo-M)
has gained a firm foothold in the local market. Today we havemore than 300 direct hired staff and can handle small to medium sized EPCC projects of up to USD 120 million. Our target is to serve Malaysia National Oil Company (PETRONAS),International Oil and Chemical Companies and Japanese companies to invest in Malaysia. In addition, our business activity
is diversifying into several new fields such as ESG related
projects, Bio-Chemical Engineering and Specialty Chemical.

EBR contribution through FPSO business to Brazil

Executive Officer
General Manager,
EPC Integration Division
Deputy Unit Director,
Engineering and Technology Unit

31

Double spiral growth strategy —Advanced EPC Operation

Masatoshi Ikeya

Yoshitaka Yamaguchi

Deputy General Manager,
Pharmaceuticals and Fine
Chemicals Project Division
Project Construction Unit
TEC Project Services

Group Leader, Equipment Group
Plant Systems Engineering Division
Engineering Unit
TEC Project Services

TEC Project Services (TPS), which operates the domestic
plant business in the TOYO Group, has built a solid EPC
track record for pharmaceutical plants based on its plantengineering technology. Read on below to find out what
the future might hold in store for TPS based on its knowledge and proprietary technology concerning pharmaceutical manufacturing plants.

dients (APIs), but we intend to expand our operations mainly
in areas where there is heightened market demand—namely,
plant facilities for middle molecule pharmaceuticals (nucleic
acids and peptides) and biopharmaceuticals. We will look todevelop these businesses into an earnings pillar for TPS by
expanding sales from ¥4 billion at present to more than ¥10billion by around 2025.

History of pharmaceutical and fine chemicals
businesses and outlook

Biopharmaceuticals*1 × single use*2

Molecular
weightMiddle molecule pharmaceuticals

Biopharmaceuticals~1,000~3,000~50,000~100,000

Low-molecularpharmaceuticals

Peptide drugs

Nucleic acid drugs

Protein drugs

Antibody drugs

ADCs*

Main of new drugs up ahead

Low-molecular pharmaceuticals

Middle molecule pharmaceuticals

Biopharmaceuticals• Can be administered orally. Efficacy of mainly anticancer drugs is strong, but the main drawbacks are theimpact on the body and strong side effects.
• Can be manufactured cheaply due to synthetic reaction of chemical compounds.
• Global market was worth $476bn in 2020 and themain players are still low-molecular drugs, but theirshare is declining year on year and it is said that new
drug discovery has been exhausted.

• With a molecular weight somewhere between low-molecular drugs and biopharmaceuticals, middle molecule pharmaceuticals have gained attention in recent years for carrying
the benefits of both the other two groups.
• Some production cost issues remain outstanding because
reaction control is complicated and large volumes of solvent
are used, but they are expected to become cheaper thanbiopharmaceuticals.
• Many middle molecule drugs were approved after 2016,
thus there is potential for market growth up ahead.

•Biopharmaceuticals have few adverse effects because they make use of the body’s intrinsic immunological effect mechanism.
• Manufacturing costs are high because volume production is difficult owing to the biotechnology-based
manufacturing process.
• Global market was worth $284bn in 2020, more or lessdoubling over the last 10 years.

*Antibody-drug conjugates

32

TOYO ENGINEERING CORPORATION

Integrated Report 2021

Country

Type

Scope

Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan

Antibody drugs
Vaccines
Biopharmaceuticals
ADCs
Antibody drugs
Antibody drugs
Biopharmaceuticals
Antibody drugs
Biopharmaceuticals
Vaccines
Biopharmaceuticals
Antibody drugs
Antibody drugs

Basic engineering
EPCV*
Basic engineering
EPCV
EPCV
EPC
Basic planning
EPCV
EPC
EPCV
Basic planning
EPCV
EPCV

Characteristic

Single-use equipment installation
Single-use equipment installation
Single-use equipment installation
Single-use equipment automation
Single-use equipment installation
Single-use equipment automation
Single-use equipment installation
All single-use equipment construction
Single-use equipment automation
Single-use equipment automation*Engineering, Procurement, Construction, Validation

Middle molecule pharmaceutical track record
Nucleic acid drugs track record
Year

Facility

Peptide drugs track record
Country2021 API manufacturing commercial plant for nucleic acid drugs

Japan2020 API manufacturing commercial plant for nucleic acid drugs2018 API manufacturing plant for nucleic acid clinical testing2015 API manufacturing plant for nucleic acid clinical testing

Japan
Japan
Japan

Scope

Year

Basic
planning
EPCV
EV
EPCV

2019 Modification of small-batch, high-activity plant facilities
2018 Modification of small-batch, high-activity plant facilities
Modification and basic engineering of small-batch,2017
high-activity plant facilities
2015 Modification of high-activity peptide API manufacturing plant facilities

cepts and single-use tools for biopharmaceutical plants, and
we also delved into research on new technologies and thedevelopment of equipment—areas in which TPS has its own
expertise. Fortunately for us, the industry is seeing a majortransformation in manufacturing equipment, with large culturing vessels being replaced by smaller single-use systems
for biopharmaceuticals. This has become an area of strengthfor TPS in the field of biopharmaceuticals. Starting with anorder for a biopharmaceutical (vaccine) manufacturing plantfacility from a major domestic pharmaceutical company in2017, we have steadily received
more project enquiries and weare seeing more opportunities
for us to propose solutions thatcater to customer needs. Morethan anything, it is key that we
think deeply about what it is that
TPS can do without losing sightof the common needs of our customers. Our virus inactivation device is one such product that we
independently developed as asingle-use system to solve such Virus inactivation automation
system (patented)
common customer needs.
*1 Biopharmaceuticals are drugs produced with the use of biotechnology.
They continue to be developed as therapeutic drugs for various illnesses that pharmaceuticals made with conventional chemical synthesis
have failed to treat. The cells of plants, animals, and microorganisms
are cultured to produce special proteins for use as a drug.
*2 Instead of conventional stainless steel culturing vessels and pipes, single-use, disposal bags and tubes are used as manufacturing equipment.
Conventional hard equipment required a lot of time, manpower, and energy to be cleaned and disinfected, but disposal equipment eliminates
or greatly minimizes these tasks.

Order for middle molecule pharmaceutical API
plant and business alliance with Taisei Corporation
Yamaguchi Along with biopharmaceuticals, another field inwhich we have pioneered industry trends is middle molecule

FacilityCountry

Scope

Japan
Japan

EPCV
EPCV
Basic
engineering
EPCV

Japan
Japan

pharmaceuticals, particularly nucleic acids and peptides. We
started undertaking small projects at a time when there werevery few contractors handling peptides in Japan. We took advantage of that experience to seize on opportunities in the middle molecule pharmaceutical manufacturing industry in recent
years. No matter what size of project we undertook, building a
track record helped deepen our technical knowledge. Becauseof this track record, we secured an order for a middle molecule
pharmaceutical API factory from Ajinomoto Co., inc.
Also, with the objective of bolstering our sales capabilities,
in December 2020 we signed a business alliance agreementin the field of pharmaceuticals and fine chemicals with Taisei
Corporation, which commands the largest share of the pharmaceutical plant construction industry. This tie-up completed
the platform with which we could demonstrate our competitiveness by specializing in manufacturing processes, an areaof expertise for TPS.

Shifting to continuous production to create
new business opportunities
Ikeya Many pharmaceutical factories need to produce multiple products in small batches and manufacturing lots must be
tightly managed because of the rigorous legal requirements
surrounding quality control. And conventional manufacturing
is limited to batch processing, especially if raw materials need
to be left in equipment for a certain period of time to create a chemical reaction. In contrast, demand is growing forless manpower and more automation to deliver high-quality,
high-efficiency production. In responding to these needs, in
April 2019 TPS invested in iFactory with the goal of realizing
continuous manufacturing for items hitherto manufactured atbatch plants. Three years of a five-year plan have now passed
and the engineering work is mostly completed. Over the next
two years we plan to construct a demonstration plant andconduct trials. At TPS we will look to grasp the issues andneeds of customers and undertake R&D to develop and provide new solutions going forward.

TOYO ENGINEERING CORPORATION

Integrated Report 2021

Data Section

Main of new drugs
up until 2000s

100,000+

Facility

Biological API manufacturing plant
Vaccine production facility
Biological API manufacturing plant rebuild
Biopharmaceutical plant
Biopharmaceutical purification process automation
Biopharmaceutical plant
Biological API manufacturing plant rebuild
Biopharmaceutical purification process automation
Biopharmaceutical plant
Vaccine production facility
Biological API manufacturing plant modification
Biopharmaceutical purification process automation
Biopharmaceutical purification process automation

Sustainability Initiatives

Yamaguchi Pharmaceutical plants are broadly classified aseither APIs/intermediate plants or drug formulation factories.
When TOYO made its initial entry into the pharmaceuticalplant business, we employed a strategy of focusing on contract manufacturers for APIs/intermediates that require expertise in production plant facilities because it was hard for us
to break into the drug formulation factory field dominated by
the major general contractors and leading engineering companies. In anticipation of a shift in mainstream from low-molecular pharmaceuticals to biopharmaceuticals, we determined that the market would continue to grow up ahead andwe therefore heavily injected a lot of our business resources
into it. We dispatched engineers to a company with a track record in Europe and North America to learn about design con-

Ikeya In 2016, TPS became the sole entity behind theGroup’s domestic business after the domestic plant andpharmaceutical plant businesses were transferred fromToyo-Japan. TOYO has a history of more than 30 years in thepharmaceutical and fine chemicals businesses after making
its first foray into these fields in around 1990. Although wewere somewhat late to these fields, we have amassed ourown technological expertise mainly by developing production
plant facilities to meet the requests of clients. And as a result,
we have continued to execute difficult projects one after theother. In the last 10 years or so these businesses are stabilized at long last. Going forward, not only we continue tofocus on low-molecular synthetic active pharmaceutical ingre-

Year

2020
2020
2020
2020
2019
2019
2019
2018
2018
2017
2016
2015
2014

Medium-term Management Plan

Spotlight on the cutting-edge pharmaceutical manufacturing
technology of TPS’ pharmaceutical and fine chemical businesses

Biopharmaceutical track record
Management Vision

Technological innovation in cutting-edge pharmaceutical plants

33

Double spiral growth strategy —Advanced EPC Operation
Management Vision

Advancements in EPC work innovation with DXoT: 1
Becoming a company that can continue to innovate through DXoT
As part our DXoT strategy, we have established a unit to execute more than 20 tasks as we work towards overhauling
our work processes company-wide with the aim of realizing a
six-fold improvement in productivity.
We will extend our digital twin concept—a platform thatuses a digital environment to manage real world data fromplant construction sites—and broaden the scope of DX to encompass “Project Twin” and “Corporate Twin”. The former
enables real-time monitoring of the status with detail information for every ongoing project around the world, while thelatter detects signs of risk from a corporate point of view andfacilitates swift decision-making and actioning. We will alsoendeavor to strengthen management by making full use ofhigh value-added data to improve visualization and shore up
our earnings base by minimizing the risk of earnings fluctuation caused by instability in project management.
We will strive to thoroughly utilize and genuinely leveragedata in a bid to become even more data driven in our mainstay
EPCC operations, project and accounts management, quality
control, and even in the indicators used for management decision-making. As part of DXoT, we are making steady progresson the building of the TOYO digital twin in the following threeareas of focus.

As a proactive corporate management measure, we are taking
steps to visualize management with Corporate Twin in order tofacilitate accurate and swift management decisions based onreal-time, accurate data obtained from a CC Driven Engineering
management approach.
For example, for “Talent Management” and “Digital First”,
two tasks in Corporate Twin, we are pushing ahead with initiatives geared towards realizing an aptitude-oriented HR development policy. By visualizing human resources and other resources
information pertaining to our competitiveness as an engineering
company, we will aim to invest in sustainable technologies andbusiness development fields and securely reap the benefits of
those investments to achieve positive spiral management.

Data Leveraging
Our data leveraging measure aims to help generate sustained
growth by implementing the PDCA cycle so that we can makethoroughgoing use of managed data and enhance the accuracyof our plans.
Previously, accumulated past data was difficult to access andnot readily available for use, but we are now building a digitalplatform that can automatically retrieve and analyze data fromworkflow processes. We are structuring our data and creating
a database that enables seamless collaboration between business divisions and group companies. In the near future we aretargeting the roll out of a data analysis function.

CC Driven Engineering
In the conventional work process, the FEED*1/proposal stage
had to be planned despite its many uncertainties, which ultimately led to idle time and reworks during each EPCC phaseof a project. The CC Driven Engineering concept revolutionizes the work process with the application of AWP*2.

*1 FEED: Front-end engineering design*2 AWP: Advanced work packaging

CC Driven Engineering
EPCC Work Process Innovation
Formulation of strategy considering commissioning/construction

Realfront-loading

EWP

PWP

CWP

SWP

Engineering
Work Package

Procurement
Work Package

Construction
Work Package

System Work
PackageDX

Standard modules
used to make 3Dmodels and planseven more detailed

Automation with data-centric
approach and improved accuracyof information and zero rework
thanks to forecasting technology

Comprehensive measuresaccording to capacity
and introduction of EPC
cross-functional SCM*3

Materials delivered
based on JIT*4 system.
Enhanced speed andquality with digitalization.

Procurement

Construction

Maximizing
construction
and operatingproductivity
On-schedule
handover in theorder requested

Adding value
Streamlining

FEED/PROPOSALEngineering

Planning characterized bymany uncertainties

Detailed considerations
from the outset

Commissioning

Conventional approach
Factors inhibiting improvement inproductivity

Low rate of delivery
compliance

Idle time andreworks

Handover order differs from commissioning
requirements due to construction progress

HiroyukiMatsumaru

Construction Engineer
Construction Technology
Department
Construction Division

Task Organizer
DXoT Planning &Promotion Center

Improving productivity by applying AWP
Aiming to shorten EPCC project period by 10%
Nakayama The plant construction plan typically is undertaken in the order of engineering, procurement, construction,and then commissioning in a sequential order, we are now
turning this process around by having engineering design as
per construction plan that prioritizes maximum productivity inthe commissioning and construction stages and employs abackcasting approach from there to build the overall process.
At TOYO we call this approach “CC Driven Engineering” andensure that it functions efficiently we divide all of the EPCC
elements into segments called work packages and employ
a method called AWP to manage engineering, procurement,
and construction along with the delivery of materials.
Matsumaru With AWP, we aim to achieve five objectives:(1) consideration of EPC project period to be shortened at theconstruction planning stage; (2) deeper constructability specialized for critical path methods; (3) progress visualizationof each work package and proactive actions; (4) Just-in-timematerial delivery on an AWP basis; and (5) maximization of
productivity owing to a reduction in idle time at worksites. As
a result, we aim to shorten EPC project period by 10%.

Advancing project implementation together
with overseas group companies
Nakayama Each company executes AWP differently, but
one point worth noting about TOYO’s approach is how we
integrate it with SCM (Supply Chain Management) which iscross organizational function. Realizing overall optimization ofmaterials management without regard to functional divisions
and group companies is key to the success of AWP. The common goal is to break away from the hitherto optimization ineach EPC division and instead command a broader view ofengineering information, production management information from vendors, and site construction circumstances sothat the most suitable actions can be taken.
Matsumaru Having already reflected initial construction plan-ning including schedule optimization based on AWP philosophy
into project master schedule, we are now starting the use of
AWP systems. Furthermore, the RFID materials management
system for steel structures and piping spools that was alreadydeveloped together with IKPT is now fully compatible with
AWP. We are also developing the systems which can materialize work automation that are not susceptible to the volume ofmaterials or the knowledge of certain individuals.

Potential for unlimited scalability by
combining DXoT and AWP
Nakayama Plant constructions sites are often located in extremely harsh environments, such as deserts or bitterly cold
regions. Elaborate planning and preparation are very importantin order to boost productivity without being swayed by external conditions. It is imperative that a construction site haseverything it needs to get the job done, including drawings,
materials, workers, and construction machineries. We mustalso meet safety, quality, and scheduling requirements. A lotof down time and significant costs will be incurred if we discover there are no drawings at a site where a few thousand
workers have gathered. We must take meticulous care inplanning and double checking to always prepare for unexpected contingencies.
Matsumaru TOYO’s CC Driven Engineering approach gives
us a framework with which to reflect work order/flow and construction requirements from the initial planning stage. It also
alleviates the burden of making preparations and checking at
the construction site, thereby avoiding unforeseen situations.
As a result, it enhances the effectiveness and feasibility of
construction planning, raises the quality of advance preparations, facilitates efficient project execution, and shortens project period. By making further use of DXoT in the future, wewill consider expanding this approach to overseas sites andgroup companies in an online environment, as well as for theconstruction of a collaborative framework between customers
and partner firms.

Data Section

Uncertainty
analysis andforecasts factored
into plan

CC Driven
Engineering

Takayuki
Nakayama

Sustainability Initiatives

Proactive Corporate Management

Medium-term Management Plan

Blue strategy and DXoT vision*3 SCM: Supply Chain Management *4 JIT: Just in Time Material Delivery

34

TOYO ENGINEERING CORPORATION

Integrated Report 2021

TOYO ENGINEERING CORPORATION

Integrated Report 2021

35

Double spiral growth strategy —Advanced EPC Operation

Hideki Hashino

Tadashi Miyazawa

Business Leader
Proposal Division
Plant Solution Business Unit

Task Organizer
DXoT Planning &Promotion Center

Project Twin delivers project status updates in real time

Miyazawa An EPC project is basically a service that undertakes the construction of a plant whilst taking receipt of, andmanaging, a huge amount of engineering drawings, materials,
and equipment, controlling a great number of construction site
workers, and guaranteeing safety, quality, cost control, and ontime delivery. It was an epoch-making challenge for the people
in charge to separately collect large volumes of data and takethe reports that had been physically counted and integratethem into a shared platform through which the most up-to-date
data could be accessed at any time and from anywhere.

As a platform appreciated by both customers
and partner firms
Miyazawa Project Twin delivers more than just benefits for
TOYO—it has the potential to be a useful tool for all stakeholders involved in a project. That is because it can clearlyanswer the question of when the project will be completed,a topic of interest for all concerned, including customers andpartner companies.
Hashino By sharing accurate information in a timely manner
about when the plans and materials will be delivered, and inwhat quantities, we can work together with partners to formulate and monitor the execution of efficient working schedules
and mobilization plans. This in turn means that operations canbe carried out with a sense of unity with TOYO. And we continue to improve Project Twin by collecting real feedback fromour subcontractors and overseas group companies.

Overall Status
E

P6

SPMat

AVEVA
Engineering

Polaris36

TOYO ENGINEERING CORPORATION

Integrated Report 2021

Realizing EPC quality improvements with
Data-Centric Engineering

Involving overseas group companies in theactive adoption of the latest digital technology

Takizawa Up until now each engineering division was required to separately prepare drawings and specifications andshare pertinent information with other divisions. If changes arose, the corresponding number of drawings had to beamended. EDT-driven data-centric engineering revolutionizes
this whole process—centrally managed engineering information eliminates the need for copying content, consistency ischecked for automatically, and data is amended in one fell
swoop. Up-to-date information is shared at all times, thereby
enabling the seamless performance of engineering work.

Takizawa A system we developed in fiscal 2020 is already up
and running for an actual project, and a new structure that weare jointly developing with overseas group companies is also being gradually rolled out starting with Toyo-India’s projects. We
aim to complete the realization of the Engineering Digital Twin
concept by utilizing data-centric engineering more often and expanding its scope to all of our engineering work.

Mori As a result, we can significantly reduce manhours andshorten construction period. Engineering know-how acrossdivisions can be accumulated exhaustively, and by analyzing
accumulated data from multiple angles, it can be utilized in thenext project, thereby enabling us to deliver more competitive
quality, schedules, and costs to our customers.

Atsushi Kotoya
Task Organizer
DXoT Planning &Promotion Center

Mori With the objective of transforming our business processes, we undertook a cautious review by revisiting the basics of
our engineering work process. The evolution of digital technology has released our engineers from irksome duties that werereliant on manpower and has allowed them to focus on more
important work requiring human judgment. The number of manhours reduced can be appropriated to further enhancing technological capabilities and analyzing data, which can feed the cyclethat creates new value.

Toshiro Nemoto
General Manager
Quality Management Department
Safety, Quality and Environment
Management Division

P

C

C

Circulation of knowledge is the key to lowering
quality-related losses

Considering work innovation anddata governance as a whole

Kotoya By digesting the issues of past projects into ourorganizational knowledge and utilizing that knowledge inthe procurement of materials and equipment and construction planning and execution, we can minimize quality-related losses. As part of DXoT, we are pushing ahead withknowledge management reforms in both our operations
and systems so that (1) information from projects currently
being fulfilled can accumulate naturally, (2) we can aggregate knowledge of value, and (3) the entire TOYO Groupcan draw on such knowledge readily and in a timely fashion.

Nemoto At TOYO we have made every effort to preventthe recurrence of loss costs attributable to engineering quality by analyzing with categorized risk factors, but identifying
the root cause has not been easy.

Nemoto At present, I see often the case that action is delayed even if feedback has been compiled, which is why, theQuality Management Department, intend to collaborate forcreating a feedback system that is easy to use without bothering busy project members with additional tasks.

Kotoya We intend to improve the accuracy of our analyses
in order to prevent higher costs by reviewing our classifications and definitions of factors behind quality-related cost
increases and appropriately linking higher costs to factor categories when they arise. We can also expect to further curb
costs by strengthening data governance as our Data-CentricEngineering approach continues to evolve.

Data Section

Project Twin
Dashboard

ICON

Reducing manhours with Engineering Digital Twin (EDT)

Reducing quality-related losses with Knowledge Navigator

Project Twin concept

Team
Binder

EDT Task Leader & Piping Engineer
Layout and Piping Engineering
Division
Engineering and Technology Unit

Sustainability Initiatives

Hashino Understanding a project’s status and circumstances is essential to speedy decision-making by management.
Project Twin was designed so that we could visually perceive
problems as they appeared in the engineering drawings byquantitatively comparing progress, budget use, and otherkey elements of project management from the viewpoint ofvariances with plans, bottlenecks, and the degree of impact
on successors. In developing Project Twin, we conceived,
launched, and steered operations by incorporating programand project management methods. We have thus far led theway as EPC practitioners to familiarize ourselves with digital
tools, thereby putting agile development into practice so as tocontinually drive a series of processes in a short period of time.

Katsunobu MoriEDT Task Leader &Petrochemicals Team Manager
Process Engineering Division
Engineering and Technology Unit

Medium-term Management Plan

Visualizing up-to-date information at
any time and anywhere

Masanori Takizawa

Management Vision

Advancements in EPC work innovation with DXoT: 2

Nemoto We continue to streamline our data governance fromboth a “hard” (organizations and systems) and “soft” (rules)
perspective and while we are endeavoring to speed works up
with the automation of engineering and checking functions, westay careful not to allow its content to turn into a black box.

TOYO ENGINEERING CORPORATION

Integrated Report 2021

37

Double spiral growth strategy —Advanced EPC Operation

Safety, Quality, and Environment (SQE) Management Structure

Evolution to Advanced Global Standards
through collaboration with group companies

1990s
Guided by Head Office on safety andquality standards

Japan Quality
Toyo-Japan

Operations” and plan to establish a structure in whichgroup companies will play a central role in the executionof EPC projects. Together with the fundamental transformation of the workflow through DXoT, we aim to establish an organization that ensures unchanged safety
and quality at all group companies. Safety, Quality andEnvironment Management Division will play a leadingrole in the evolution of the Advanced Global Standards,
which is essential for the realization of operations for
EPC execution.

2008 ~ Present
Establishing and refining
Global Standards

Group
companies

TOYO Group CompaniesGroup
companies

SQE Management Committee
at Group Companies

Direction forimprovement

Direction

ReportingThoroughly review and continuously improvebasic operations
Continuously improve
the Management System,
the global common foundation

SQE Divisionat Group Companies
Monitoring and auditing

2025
Advanced Global Standards

Group
companiesGroup
companiesGroup
companiesGroup
companiesGroup
companies

SQE Committee(Officer andGeneral Manager
Level)

Strengthen solidarity amonggroup companies

SQE Promotion
Committee(Division HeadLevel)

ReportingDirection forimprovement

SQE Management Division• HSE Management Department• Quality Management Department
Monitoring and auditing

Divisions and Departments
at Group Companies

Divisions and Departments
at Head Office

Local Projectat Group Companies

Local Projectat Head Office
Collaborative ProjectAll group companies
TOYO Quality
DXoT empowered
Common HSEMS
Common QMS & ISMS

ISO45001

FKMS

Local Standards (LS)+ISO14001/ISO27001

Sustainability Initiatives

Group
companies

ToyoJapan

SQE Management Committee
at Head OfficeDirection

Local Standards (LS)+ISO14001/ISO27001/

Group
companies

Head Office

Advanced EPC Operation
Strategy Priority Measures

Medium-term Management Plan

While conducting plant construction projects all over
the world, we have accumulated experience and developed our unique Safety and Quality Global Standards
that are common to all TOYO group companies. In the
1990s, we began to promote activities with the goal ofbringing Japan quality to group companies around theworld. Thirty years have passed, and today, in 2021, we
have evolved a system in which TOYO standards are
based on the autonomy of each group company.
In our medium-term management plan (FY2021FY2025), we have set the goal of “Advanced Global

Management Vision

Safety and quality initiatives

Global Standards (GS) + ISO 9001 Certification (the TOYO Group)
ISO 9001: Quality Management System, ISO 14001: Environmental Management System, ISO 27001: Information Security Management System,
ISO 45001: Occupational Health and Safety Management System

HSEMS : Health Safety Environment Management System
QMS : Quality Management System
ISMS : Information Security Management System

Unification of management criteria (TOYO Standards)

TOYO and its group companies have established the ba-

Standards commonly used by the entire TOYO Groupsic policy based on the recognition that compliance with

were unified as Global Standards in 2008, and all grouplaws and regulations related to HSE (Health, Safety,

companies are operating under the same management

Environmental Preservation), quality, and information secu-

criteria. The standards are updated as needed to incor-

rity, as well as meeting the requirements of customers andporate feedback from operations. Since 2013, the ISO

society, is an indispensable prerequisite for operating busi-

certification body has certified the TOYO Group’s unified

ness and fulfilling our social responsibilities as a company.

operations as an ISO 9001 group certification.

https://www.toyo-eng.com/jp/en/company/policy/safety/index.php

38

FKMS (Feedback Knowledge Management System)

Group quality and safety meeting

The TOYO Group has been accumulating feedback case

Quality and safety managers from overseas group compa-

studies of projects for more than 30 years, which are used

nies meet to build a consensus and promote improvements

for reference in the execution of each project and for pre-through active communication. Group companies are also

venting recurrence of problems.

actively making proposals, leading to better management.

TOYO ENGINEERING CORPORATION

Integrated Report 2021

Ayaka Urashima
HSE Management
Department
Safety, Quality
and Environment
Management Division

Our EPC business (Engineering, Procurement, Construction) involves the construction of magnificent
systems that are the culmination of human knowledge, but they are all created by human hands.
Because the construction is complex and large-scale, risk management for prevention of any trouble
must be important for safety and quality control. Therefore, it is essential for each employee to have ahigh level of knowledge, awareness, and even experience.
HSE Management Department conducts regular safety training for all employees. In this way, we
aim to improve the knowledge and awareness of occupational safety and our safety culture by sharing
our safety policy, risk assessment, safety records, and accident cases.
Similar efforts are also carried out at group companies, and we have shared information of eachcompany through regular “Group Quality and Safety Meeting.” There is unanimous agreement that it
is possible to dramatically reduce risk by developing knowledge and changing consciousness to prevent accidents and to ensure quality. We will continue these activities and ensure that each and every
employee of our group companies are able to manage risks appropriately under the slogan “Start with
Safety, Start with Quality.” We believe that this will enable TOYO, who has been successfully instilled
inside group companies, to make further evolution.

TOYO ENGINEERING CORPORATION

Integrated Report 2021

Data Section

Basic policy on HSE, quality, and information security

True Globalization Must Begin with Safety andQuality Management

39

Double spiral growth strategy —Advanced EPC Operation

Updating quality management methods in
response to work process innovation

Safety record
TOYO Group’s safety record over the last 10 years is as follows. In aiming to achieve zero occupational injury, we continue to step up our efforts on improving safety. We have therefore adopted the management indicators of lost-time injury

TOYO is pushing ahead with numerous DX-driven initiatives with the aim of boosting productivity six fold. As

Initiatives with DXoT

these activities go hand and hand with work process inno-(1) Quantifying the cost of quality-related losses

vation, our quality management system will also have to

Visualize the status of projects in order to steadilychange accordingly. We will endeavor to instill new ways

implement improvement measuresof working throughout the entire TOYO Group so that weManagement Vision

Safety and quality initiatives

rate (LTIR) and total recordable injury rate (TRIR). Over this period, our LTIR and TRIR have been among the lowest in our
industry.
TOYO Group’s safety record over the last 10 years
Year(2) Updating project management methods
Update project management methods to address

customers have come to know and trust.

changes in EPC and PM methodologies brought
about by radical workflow reforms

Man-hours (A)Fatalities

Lost-time injuries(LTI)

Medical treatment(no lost time)

Total fatalities andlost-time injuries (B)Total recordable
injuries (B + Medical
treatment) (C)LTIR*1

TRIR*2

2011

80,782,919

1

6

12

7

19

0.09

0.24

2012

120,760,052

3

8

16

11

27

0.09

0.22

2013

105,164,018

0

7

16

7

23

0.07

0.22

2014

89,777,237

1

6

13

7

20

0.08

0.22

2015

67,308,769

1

4

9

5

14

0.07

0.21

2016

52,540,748

0

3

23

3

26

0.06

0.49

Safety is fundamental to our corporate activities

2017

76,493,784

2

2

31

4

35

0.05

0.46

2018

102,817,669

1

10

28

11

39

0.11

0.38

To address the challenges listed below is indispensable2019

46,642,608

0

3

11

3

14

0.06

0.30

2020

44,895,756

0

3

20

3

23

0.07

0.51

to safety management, we diligently implement various*1 Lost-time injury rate (LTIR) = (B) x 1,000,000 / (A)*2 Total recordable injury rate (TRIR) = (C) x 1,000,000 / (A)safety-first initiatives.
• Strengthening of safety management leadership• Fostering a safety culture(B) = Fatalities + Lost-time injuries(C) = (B) + Medical treatment

LTIR

TRIR

(%)

(%)

0.5

2.0

Safety Character, TOYO-kun

Sustainability Initiatives

0.4• Establishing and complying with safety standards

Medium-term Management Plan

can continue to provide the same quality of output that our(ILO basis: Incidence rate per million hours worked)

Number of occupational accidents

1.5

Construction industry average

0.3

1.0
0.2
0.1

TOYO
KPI

0.5

TOYO

0

0

Fostering a culture of active efforts
for addressing HSE (Health, Safety,& Environment) to achieve zero
occupational accidents!
HSE is a key element that we cannot do without when assuming the responsibility ofnumerous plant construction projects. I would call a successful project one that is not(Year)

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

(Year)

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Note) Source of reference for construction industry average:
IOGP safety performance indicators - 2020 data “Contractor”

Activities to achieve zero occupational accidents
We are promoting a variety of activities to foster a safety culture and to ensure that all workers have a high level ofsafety awareness.
Data Section

only completed on time and to a certain level of quality, but also fulfills all of our HSE
standards. TOYO has a plethora of systems and processes in place for maintaining
HSE standards. The development of a positive culture towards HSE in the TOYO

Ajitkumar V. PatilHead of Department
Health, Safety & Environment
Department
Toyo-India

Group is the result of a raft of safety campaigns spearheaded by the management
team. We continue to foster a culture that always addresses HSE with the use ofsuch slogans as “HSE starts with me” and “I am responsible for HSE” so that we
can further improve our performance and raise awareness among employees. In thisway, every individual can be habitually aware of health, safety, and the importance ofprotecting the natural environment in which we live.
New Year’s Greeting with TOYO safety character (Malaysia)

40

TOYO ENGINEERING CORPORATION

Integrated Report 2021

Morning meeting at construction site for COVID-19 measures (India)

TOYO ENGINEERING CORPORATION

Integrated Report 2021

41

Mission and Materiality
Management Vision

Engineering for Sustainable Growth of the Global Community

MissionMateriality and Our Commitment

Enrich people’s lives

Environment

SocialOpportunities

Risks• Any delay in developing
technologies that achieve
low environmental impact
and a recycling-oriented
society could result in missed
business opportunities or adecrease in corporate value.

• Innovations in environmentally friendly technologies
related to the prevention of
global warming and waste
management could lead tonew business opportunities.

• Increased regionalism isresulting in more limited
market access, and the lackof technological innovation
is causing low-price competition.

• Due to increasing needs fora low-carbon/decarbonizedsociety, there are more business opportunities related
to renewable energy andresource recycling.

• There is little demand toconstruct new plants due topolitical instability and insufficient funds resulting fromweak industrial infrastructurein emerging countries.

Governance

Opportunities

Risks

Opportunities• Harmony with the community would enable us to secure
outstanding local humancapital and more smoothly
execute local business.

• If we do not take suitableaction, TOYO’s technical capabilities and competitivenesswill decrease, leading to theoutflow of outstanding humancapital from the company,
lost business opportunities,
decreased labor productivity,and decreased motivation.

• Taking suitable action could
increase technological innovation and business creation
opportunities, help us secure
outstanding human capital,
improve labor productivity,and increase motivation.

• Plant construction could
promote job creation andthe transfer of technology,
thus creating new business
opportunities.

Establish anorganization withintegrity anddiscipline

Risks

Opportunities• Hindering compliance could
result in business continuity
risks.
• Hindering corporate governance could result in major
loss risks and business
continuity risks.

• Through a solid governancesystem, we could build astable, strong business-execution foundation based onhighly transparent, prompt
decision-making.
Sustainability Initiatives

Risks• Climate change is resulting
in natural disasters becoming
more frequent and severe,
which is hindering the execution of plant EPC business.

People of diverse
backgrounds engage
in active, meaningfulwork• Occupational accidents could
result in a loss of trust fromclients and business continuity risks.

Our Commitment

Our Commitment

Our Commitment

Our Commitment

Pursuing low-environmental-impact plants
By promoting energy saving and the use of renewable energy, we arecontributing to reducing the environmental impact of industrial fields.

Contributing to the development of industrial infrastructure
We are utilizing TOYO’s global network to provide plants equippedwith state-of-the-art technology, thereby contributing to the development of industrial infrastructure in countries around the world.

Training and developing human resources
We are striving to train and develop the abilities of diverse human capital who can contribute to the achievement of a sustainable society byproviding engineering at the global level.

Compliance
By fleshing out our education and training, internal reporting system,
etc., we are implementing compliance throughout the TOYO Group.

Contributing to the achievement of a recycling-oriented society
To reduce the environmental impact by reusing waste, we are promoting initiatives aimed at the development and social implementation of
the relevant technologies.

Created Value
Reducing the emission of greenhouse gases
Preventing environmental pollution

Promoting inclusion
We are doing everything in our power to respect diverse people andpersonalities as well as the cultures and customs of various countries
and regions while striving to eliminate discriminatory practices.

Transferring technology through EPC implementation
We are creating jobs and transferring technology in various regions at
each stage of the plant construction process.

Improving the work-life balance
We are striving to build a workplace environment that provides job
satisfaction and aims at a balance between the work and private livesof employees.

Created Value

Promoting health management and improving occupational safety
and healthIn addition to promoting the health management of our employees,
we strive to maximize safety and health during our business activities,
including plant construction.

 ontributing to economic and industrial development inCemerging countries
Contributing to improved agricultural productivity
Creating jobs and transferring technology at plant construction
sites and in various economic zones

Corporate governance
We are working on building and running suitable systems based onJapan’s Corporate Governance Code while comprehensively achieving effective risk management.

Created Value
Securing a foundation for business continuity

Data Section

Waste control and treatment
Through our overall business activities—which include plant construction—we are striving to minimize waste discharge and to achieve suitable treatment and reuse.

Contributing to the resolution of food problems
By constructing fertilizer plants, we are contributing to improved agricultural productivity in countries around the world.

Medium-term Management Plan

Aim to realize anenvironmentallyfriendly society

Created Value reating human capital that contributes to the achievement ofCa sustainable society
Providing a workplace that offers job satisfaction

42

TOYO ENGINEERING CORPORATION

Integrated Report 2021

TOYO ENGINEERING CORPORATION

Integrated Report 2021

43

Environment

Aim to Realize an Environmentally Friendly SocietyManagement Vision

Examples of resource reuse activities promoted by the TOYO
future architect department
At Toyo-Japan, the TOYO Future Architect Department promotes bottom-up activities under the direct
jurisdiction of the President. The department’s resource reuse working group plays a central role in the“reuse, reduce, recycle” activity that has been conducted on an ongoing basis since FY2017. Here is an
overview of this initiative.

Medium-term Management Plan

Donating reusable office supplies and equipment to local communities

Recognizing the preservation of the global environment
and preventing global warming as issues facing all of humankind, TOYO has established “aim to realize an environmentally friendly society” as a materiality, and carries
out its business based on the following basic philosophies.

To achieve this philosophy, we will continue actively
striving to resolve the environmental issues of customers.

In both Japan and overseas markets, we thoroughly separate construction waste from our construction sites andmake sure to dispose of hazardous substances and manage contaminants. Ever since acquiring ISO14001 certification in 2004, we have maintained zero environmental
disasters. We have worked to curb the amount of waste
produced at domestic sites and have continually recycled
90% or more of our waste.

Pursuing low-environmental-impact plants

Waste Generation Amount at Domestic and Overseas Construction
Sites and the Japan Head Office from 2015 to 2020 (Six Years)

TOYO ENGINEERING CORPORATION

Integrated Report 2021

(Tons)(Tons)

50,000200

40,000160

30,000120

20,00080

10,000

40
0

0
(FY)

2015

2016

Domestic sites (left scale)

2017

2018

Overseas sites (left scale)

The Japan Head Office (right scale)

2019

2020

ties related to Social Welfare Service
Corporation Chiba City Council of Social
Welfare, nurseries operated by public interest incorporated foundations
and NPOs, Chiba City International
Association, Narashino Chamber ofCommerce and Industry, Chiba City
centers that provide employment andlifestyle support to persons with disabilities, Keisei Bus Chiba Office, Chiba
Nairiku Bus, nearby universities and elementary schools, nurseries, kindergartens (through the Children’s Departmentof Narashino City Hall), etc.

Participating in activities to recycle empty cases for disposable contact lenses
We empathize with and approve of
HOYA Corporation’s recycling initiative “Eyecity Eco Project”—an activity aimed at recycling empty cases for
disposable contact lenses—and, inFebruary of 2019, we started up ourown in-house collection activities.
An estimated 13 million people use
disposable contact lenses throughout Japan, and only about 1% of thecases are collected. The remaining
99% of cases are incinerated as garbage. Empty cases for disposable
contact lenses are made of polypropylene, regardless of manufacturer,
which is ideal for recycling. The proceeds from these recycling activities

are being donated to the Japan Eye
Bank Association.* During the 27
months since we started these activities, we have collected a total of 66
kilograms of cases, and our employees and their families are becoming
more aware of the need to recycle.
We are very grateful to be able toparticipate in this wonderful activity,
where one small contact lens casesparks increased awareness of othertypes of recycling.

Data Section

TOYO designs and constructs a wide variety of plants witha low environmental impact, with efforts centered aroundenergy savings at plants. As a licensor, we have made a series of improvements to the urea process, which has been
one of our core products since the very beginning, providing the energy-saving urea synthesis method ACES21® andspout-fluid bed type granulation process. In addition, for avariety of oil refinery and petrochemicals plants, we have de®
veloped and provide the distillation system
as a technology to promote HERO energy saving as wellas energy saving consulting services for entire plants.

44

Reducing the environmental burden atconstruction sites and at the Japan Head Office

Main donation recipients
Chiba City Board of Education, facili-

Sustainability Initiatives• We will contribute to the achievement of a sustainable community and society enabling both
the development of humanity and environmental protection.
• As an international company, we will strive toprovide engineering services in harmony withthe global environment.

Additionally, in the social infrastructure field, we have constructed numerous large-scale photovoltaic power generation plants and biomass-fired power plants, which arepromising as forms of clean energy.

We are promoting reuse activities tocentrally manage and reuse secondhand office supplies and equipmentfrom construction sites and Head
Office. The quantity and number oftypes of items brought in has been
gradually increasing. Initiatives togo paperless in particular have led
to exceed the demand of reuse files
and color indexes in the company.
Consequently, we have to datedonated a total of over 6,800 files ingood condition to nearby municipal
authorities and local communities.
Going forward, we will continue tocontribute to a society with a lower
environmental burden through coexistence with local communities.

*Japan Eye Bank Association: a non-profit public
interest corporation established to provide education on and raise awareness of corneal transplants—which can be performed to restore theeyesight of certain people—and eye banks

TOYO ENGINEERING CORPORATION

Integrated Report 2021

45

Social “Enrich people’s lives” and “People of diverse backgrounds engage in active, meaningful work”
Management Vision

We pushed ahead with health management and occupational health and safety activities so that employees
could work safely even in the midst of the COVID-19 pandemic. We also carried out activities around the topic
of inclusion—namely, respecting all types of individuals and personalities within the organization. You canread about some of our activities below.

Toyo-Japan: Ensuring employee safety andbusiness continuity during
the COVID-19 pandemic
Naoyoshi Yamaguchi

Toyo-India believes that ‘Society must profit from profit itself’

In addition, Toyo-India has donated funds to schools forand we continue to live by this commitment. These values

the repair or expansion of school buildings and facilities. And

are embodied in our business philosophy and is the founda-

Toyo-India also has provided school uniforms, materials andtion of our CSR activities which concentrate on giving backequipment needed to fight the pandemic, and constructedto the society.

Rural Child Care Centre, classrooms, toilets, and bath rooms

Even in India, there is no exception to the threat ofMedium-term Management Plan

General Manager
Security Management Department

Toyo-India: Social contribution activities in India

for schools.

COVID-19 infections that started spreading there in 2020. In

Initial COVID-19 outbreak: Seizing the initiative
to guarantee employee safety with a Crisis
Management Team

While the vaccination rollout is in full swing worldwide, there
is no guarantee that our employees are completely safe whentravelling or working at plant construction sites overseas. During
this prolonged state of emergency, there have been a numberof times where we have had no other option but to send ourengineers to sites overseas for business purposes. We are carefully examining the need for business travel at the managementlevel and allowing some trips only after sufficiently confirming
beforehand the number of local infections, healthcare infrastructure, and international medical services systems. For thosethat do travel, we are taking all possible measures by sending
them information from Japan and offering them the opportunity
to make use of the online support services of our occupational
physician at the Tsudanuma Central General Hospital.
Ensuring the safety of employees and contractors is ournumber one priority and the TOYO Group will work together
to make doubly sure of adapting to crisis management during
these times of emergency.

Led by Toyo-Japan, we made progress on instilling a work-fromhome approach at overseas group companies by quickly coming
out with a company-wide policy to encourage employees to always work from home as much as possible. We also stepped up
efforts to make sure that employees could participate in online
meetings from home primarily by improving communications infrastructure and supplying devices. Since then, meetings of theBoard of Directors, management meetings, and meetings withexternal and overseas parties have been held online wherever

economic activity owing to lockdowns in mainly the larger
cities. With the aim of assisting relief efforts, Toyo-India is undertaking the following community contribution activities andsparing no efforts to adopt measures for preventing infection
among its employees and their families.
• Provision of various medical equipment and supplies tohospitals in Mumbai, including masks, pulse oximeters,
and stethoscopes• Provision of masks, and sanitizers to the Mumbai Police• Provision of personal protective equipment, masks,
and disinfectant to public health centers• Distribution of meals to mainly migrant workers andday laborers• Donation of 17.2 million rupees (roughly ¥25.0 million) to
the PM CARES Fund, which is aimed at strengthening thefight against COVID-19• Provision of food to police personnel and people kept inquarantine centers in the state of Uttar Pradesh where a
project site is locatedToyo-Korea: Hiring of disabled athletes
Toyo-Korea hires 2 cyclists, 1 track-and-field athlete, 1 pingpong player, and 1 boccia player, in total 5 disabled athletes
through a contract for “Training and coaching disabled athletes” with the largest sports marketing agency in Korea.
They are playing actively as top athletes, with guidance on

Data Section

Spread of infections: Ensuring business continuity with the smooth transition to remote work

Prolonged state of emergency: Doubling down
on infection prevention measures

particular, the country has been greatly affected by sluggish

Sustainability Initiatives

Considering that we have multiple plant construction sites overseas, we permanently established the Security Management
Department because we need to get any information constantly
from local sources about political instabilities or risks in orderto swiftly and accurately respond to emergency situations. Risk
management tasked with preventing and avoiding danger thatthreatens the execution of business operations should be the focal point of any company’s safety measures. However, we continue to face the pressure of making extremely tough decisions
on how to grapple with the explosive growth in COVID-19 infections because we have to not only adopt temporary infection
prevention measures but also fulfill our contract obligation tocomplete plant construction. Immediately after it was reported
in January 2020 that COVID-19 infections had reached Japan’s
shores, on January 30 we set up a Crisis Management Team
spearheaded by the vice president and comprising the headsof main divisions as team members. The team wasted no timein rolling out infection prevention and BCP measures in rapid
succession before the government declared a state of emergency (April 7–May 31). For example, in addition to installing handsanitizer stations, distributing masks and sending boxes of themto overseas group companies, banning (in principle) overseas
travel, urging employees and their families stationed abroad toreturn to Japan, and recommending employees to work from
home, the team also orchestrated a one-week company-wide
teleworking trial starting on March 27.

possible. There have also been cases in which we have demonstrated a level of adaptability unimaginable in the past. For example, the process of approving design drawings and specifications
for one of our plant construction projects in Russia—a task thatwould usually took a few weeks with all of the engineers physically meeting in the same room—was accomplished entirely online thanks to web conferencing connecting Japan, India, South
Korea, and Russia. In contrast, we were also confronted by theunexpected situation of a delay in the closing of full-fiscal 2019consolidated accounts because the accounting auditors at ToyoIndia, which has its head office in Mumbai, were unable to audit
due to a strict lockdown enforced in that city.

injury prevention, rehabilitation care, and counseling for grievances through the sports marketing agency’s “Training fordisabled athletes” program. Toyo-Korea is pleased to be able
to pay its social dues of hiring the disabled and at the sametime contribute to the development of sports for the disabled.
We will provide them with active support so that the players can continue a stable career in the future and it makes asense of unity within the company.
Workplace vaccinations at Toyo-Japan for employees and their families

46

TOYO ENGINEERING CORPORATION

Integrated Report 2021

TOYO ENGINEERING CORPORATION

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47

Social “Enrich people’s lives” and “People of diverse backgrounds engage in active, meaningful work”

A new human capital system was introduced in April
Operation) and Green Strategy (Sustainable Technology
management plan. We have established the following
human capital development policy, based on rotation,

TOYO ENGINEERING CORPORATION

Integrated Report 2021

Gain the knowledge and viewpoints necessary to become the ideal image of human capital in the future.

Project manager

Assistant Team Leader
Human Capital Development Team
Human Capital Development
Department

Recruitment Team
Human Capital Development
Department

New businessproactively change their work flow. We plan to prepare training opportunities for all employees, from senior to younger,
according to their skill sets. Aiming to raise the level of skills
in digital tools (Business chat, BI tools, Low-code development tools, etc.) this year, we will hold lectures on the useof AI and provide on-the-job training using opportunities to introduce AWP (Advanced Work Packaging) to actual projects.
Also, TOYO has been conducting in-house training courses“TOYO Academy” to acquire commercial and technical expertise and business know-how mainly related to EPC. Until
now, many of the basic courses were for younger employees, but today we have added courses that can be taken by
all generations, using feedback from past projects as educational materials, and have created opportunities for hundredsof employees to participate online trainings. There are alsoplans to expand the number of fields and themes, such as ICT
literacy and recurrent education to support the relearning ofseniors, leveraging the program as a place to pass on knowledge and skills to younger employees in off-the-job training.

opportunities to take on challenges, and have them gain experience in real business environment. We are convinced that
this will enhance the quality of human capital over the medium to long term.
What is most important in developing new technologies
and businesses is to utilize the initiative and new ideas of thepersons in charge, to give them time to work hard, and to allow them to make mistakes until success. We will also workon fostering an organizational culture that allows employees
to complete their tasks until the end result is achieved, andon developing solid rules.

Career seeking

Have a specialty through experience in engineering and construction. Learn skills to cover a wide range of areas after transferringto the project department.
Experienced in EPC business, then transferred to a trading company or a venture company to acquire knowledge and know-how thatwas not available within the TOYO Group, so that employees can develop the skills to promote new businesses.
Experience different areas of the business to determine their own aptitudes and specialization.

To date, we have utilized the outside transfer of employees
as a way to strengthen business relationships and gain a wide
range of experience unavailable within TOYO. Going forward,
we plan to further expand the number of companies to which

our human capital will be seconded, such as venture companies and specialized agencies, to create an environment
where diverse experiences are possible.

Creating a rewarding place where diverse human capital work energeticallyAs an engineering company, TOYO’s only assets are its “human capital.” Regardless of nationality, we respect diverse
people, customs, and gender while fostering a corporate
culture and environment that allows diverse human capitalto flourish. In addition, we have established a remote work
Consolidated*1(FY)

No. of employees*2
MaleFemalePercentage of female
No. of engineers
Male
FemalePercentage of female
No. of managers*3
MaleFemalePercentage of female

2016
6,223
5,497
726
12%
3,021
2,733
288
10%
1,111
1,060
51
5%

2017
4,015
3,432
583
15%
2,866
2,601
265
9%
1,090
1,040
50
5%

2018
3,950
3,370
580
15%
2,811
2,533
278
10%
1,081
1,027
54
5%

2019
4,204
3,566
638
15%
2,815
2,529
286
10%
1,119
1,065
54
5%

system and are working to create a rewarding workplacethat respects work-life balance. The results of our efforts areshown by the numbers below. In addition, in June of 2019,we obtained the Eruboshi certification (two stars).

(People)Non-consolidated

2020
4,425
3,749
676
15%
2,824
2,537
287
10%
1,112
1,055
57
5%

(FY)

*1 Total of major EPC companies, including equity method companies*2 Excludes temporary employees.
*3 Equivalent to Team Manager or General Manager.
*4 Includes subsidiaries in Japan.
*5 Scope of family in TOYO’s internal rules includes children, spouses, parents, parents-in-law,grandparents, siblings, and grandchildren.
*6 Excludes employees on long-term assignments overseas, employees on temporary assignment,
mid-year recruits, employees on long-term sick leave, and employees on extended leave.
*7 In July 2020, the remote work system was revised, and the limit on the number of days was abolished.

(People)

2016
1,035
871
164
16%
791
755
36
5%
579
565
14
2%
24
54
0

No. of employees*2
MaleFemalePercentage of female
No. of engineers
Male
FemalePercentage of female
No. of managers*3
MaleFemalePercentage of female
No. of disabled persons hired*4
No. of foreign employees
No. of male employees taking
childcare leave
No. of female employees taking
4childcare leave
No. of persons taking paternity leave18
No. of persons working shorter hours
17
for childcare reasons
No. of persons working shorter hours
1
for nursing care reasons
No. of persons taking family
75
care leave*5
No. of persons taking nursing
0
care leave
Percentage of annual leave used*6
55.1%
No. of persons working from home*7
—

2017
1,030
863
167
16%
790
748
42
5%
578
561
17
3%
22
56
1

2018
973
804
169
17%
735
693
42
6%
558
539
19
3%
18
47
4

2019
998
817
181
18%
757
709
48
6%
583
561
22
4%
21
48
4

2020
968
790
178
18%
738
687
51
7%
569
543
26
5%
21
50
5

4

9

3

7

14
21

39
14

21
14

25
15

1

2

1

1

94

102

96

81

0

0

0

0

58.3%
71

62.0%
184

61.9%
207

57.6%
960

TOYO ENGINEERING CORPORATION

Integrated Report 2021

Data Section

48

Acquire different perspectives and relevant knowledge to strengthen their own targeted expertise.

Career grasping

Junichi Mizuno

Development of green human capital(Sustainable Technology and Business Development)
Sustainable technology and business development areas require different kinds of human capital compared to EPC implementation. In particular, essential requirements include,
among other things, the ability to think quickly and flexibly,
and the trait of being able to act without fear of failure. We
also need human capital who are passionate about successand have the vitality to turn even failures into positive energy.
We will cultivate a variety of skills, including the power toexplore and implement new business models, the ability of
judgment of technologies, and the quality to build external
networks to enable open innovation. Recruit human capitalwith potential to perform in new business areas, give themSpecialized

Sustainability Initiatives

Conventional EPC business will be shifted from Toyo-Japanto our group companies more than ever before to strengthen EPC through the advance group operations and DXoT.
Accordingly, Toyo-Japan employees will be involved in morechallenging projects to ensure competitiveness. Specifically,
we must develop human capital with advanced skills, suchas technical supervisors who can provide technical guidance
and project managers who can organize teams consisting ofdiverse members. Younger employees are first given on-thejob training and then assigned to small and medium-sized projects. We provide on-the-job training opportunities because it
allows them to gain a wide range of practical experience ina relatively short period of time. In addition, we will provide
mid-level employees with opportunities for growth by providing them with management experience through participationin TOYO Group companies stand-alone projects.
As for DXoT, the key is to actually experience the workflow
of conventional EPC services. We are working to raise awareness among all employees to increase their digital literacy andBase in any field. As the need grows, gain digital insights, strengthen professionalism, and explore careers.

Hiromi Nakajima

Development of blue human capital (Advanced EPC Operation)

Purposes

Digitally focused

Medium-term Management Planinterpersonal skills, and problem-solving skills.

experience in a wide range of fields. For each of the following
types, we clearly state the transfer purpose and promote proactive career development.

Typeand Business Development) of the medium-term

to hone a variety of skills, including professional skills,

Promoting the development of human capital by type through rotation
Under the new human capital system, rotation has been added to the promotion requirements for younger and mid-level
employees to provide them with multiple perspectives and2021 to realize the Blue Strategy (Advanced EPC

Management Vision

Expand human capital to advance the Medium-termManagement Plan by reforming our human capital system andstrengthening human capital development

49

Governance

Establish an Organization with Integrity and Discipline

Project Risk Management
Strengthening Post-Order Risk Management

TOYO had launched measures to strengthen project risk
management in FY2015, and has since carried out a series ofimprovements. In particular, based on a common understanding that pre-order risk screening is a decisive factor in the
success or failure of the project from our past experience, we
repeatedly carry out thorough considerations and discussion
with regard to large, important, or novel projects. In addition
to establishing the optimal project execution system throughmultifaceted risk identification and countermeasures, wehave procedures in place to ensure that orders are received
under appropriate contract conditions.
We also have a system that emphasizes pre-order risk

Recently, projects become more complex due to scaling up ofplants and multi-base execution, leading to an increase in difficulty. When constructing plants, it is essential to procure anenormous amount of materials and equipment from aroundthe world and mobilize a large number of site workers in linewith the process with the cooperation of subcontractors. For
this reason, a single delay in responding to a problem or achange in process due to a delay in the delivery of equipment
can have a negative impact, causing delays or reworking ofsubsequent processes and make costs snowball. In otherwords, in plant construction projects, there is a risk that scale
will increase costs with a multiplier effect. It is now necessary to not to use the method of managing the project basedon the experience and expertise of experienced project managers, but leverage the power of IT to advance project management. Current TOYO initiatives can be broadly categorized
into the following two points.
The first is DXoT. Projects are visualized by implementing

Strengthening Pre-Order Risk Management

For projects that are large, important, or novel

Discussing our initiative policy and strategy for each project andanalyzing risks at a strategy policy meeting

The Board of Directors determines the advisability ofstarting proposal activities

Strengthening Post-Order Risk Management
Risks to be considered• Execution system consideration

Contract conditions

Partner screening and formation• Detailed examination of contract requirements
Required deadline
Critical path of schedule• Risk consideration and countermeasure policy planning

The Board of Directors approves the risk management policy.

Assessing the suitability at a cost appraisal meeting and schedule appraisal meetingClient credibility

After order receipt
Implementing a reliable transfer from proposal activities to the project itself

At the time starting the project artner capabilities,
P
experience, resources,
and reliability

Drafting a clear execution policy and making everyone aware of it isk sharing with the clientRor partner

During project execution

Sustainability Initiatives

Proposal Activities and Cost Estimating

 roject novelty andP
special characteristics

Intra-Group formation, PM/keyperson/resource

Project Twin using cutting-edge digital solutions. Even skilledworkers with project experience cannot keep a hold on the entirety of the enormous amount of information at hand. To thisend, we are working to build a system that can collect project
information and display them on a dashboard and detect risk
signs. It enables project managers to accurately understandthe situation by using the data displayed on the dashboard
and make decisions to proceed with countermeasures without delay. Currently, we have partially implemented this system on some projects, and we are working to strengthen our
project risk management methods on a daily basis.
The second point is steadfastly implementing risk management of projects after receiving orders on a day-to-day basis. Projects are constantly changing, just like living beings.
When managing projects, it is important to be thorough inexhaustively managing risks and taking action swiftly before
the problem becomes large. This is the core of TOYO’s project risk management.

Medium-term Management Plan

screening with regard to TOYO’s characteristic standalone
EPC projects by overseas group companies in their respective markets. When entering EPC contracts, risk screening iscarried out in all group companies with the same framework
as Toyo-Japan. In addition, depending on project scale, ToyoJapan reviews the screening report that summarizes risk consideration and countermeasures. Through the goals of “advanced group operations” and “DXoT (digitalization without
sanctuary)” outlined in our medium-term management plan,
we position pre-order risk management as a means of further
strengthening our EPC business.

Management Vision

Strengthening Pre-Order Risk Management

Risks to be consideredWeather and disasters
Partner capabilities OYO Group resources
T(execution system)• Weekly and monthly management as well as reviews by division heads

 ountry risk (political,
C
economic, exchange,
tax system, public security,
infrastructure, etc.)• Strengthening construction management

Schedule• Implementing steering from a high-level perspective• Ensuring the engineering and procurement that driven by construction and operations• 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• Regularly holding meetings to report to the management

The President, Executive Vice President, and CFO approveand submit the final offer.

After the project ends

• Sharing important risks and countermeasures with other projects in progressIncreases in the quantity ofmaterials and equipment or
associated construction work
 isks of construction periodR
delays or failing to achieve
performance guarantees
 ountry risk (political,
C
economic, exchange,
tax system, public security,
infrastructure, unions, etc.)

Data Section

The heads of business divisions approve the priceTOYO Group resources

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

50

TOYO ENGINEERING CORPORATION

Integrated Report 2021

TOYO ENGINEERING CORPORATION

Integrated Report 2021

51

Governance

Establish an Organization with Integrity and Discipline

Corporate GovernanceToyo Engineering’s mission is to contribute to the sustainability of the world and society through engineering, and we aim
to achieve both sustainability 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.

Corporate Governance System
More specifically, we are doing everything in our power toestablish and run a corporate governance system, implement
suitable risk-taking management, ensure thorough compliance, actively disclose information, and maintain a dialogue
with our stakeholders.

ty, career history, and age. Additionally, we appoint Outside
Auditors who have high-level expertise and extensive experience in a variety of fields, and are able to take a birds-eyeview of our entire management and appropriately audit theadequacy of Director’s work and execution of operation.
TOYO considers the opinion of Outside Officers from theperspective of external stakeholders to be useful in ensuring
the accountability of our corporate executives and securingtransparency in management. We believe that the current system and its operation are effective in ensuring the effectivefunctioning of corporate governance in light of the business
content and structure of our company.

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 eight Directors, including
three 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 efficientbusiness 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

Shareholders Meeting
Appointment/Removal

Board of Directors

Yes

Number of Directors

9

President and CEO

1 yearNumber of
Audit & Supervisory
Board Members

4

Of which, Outside Audit & Supervisory Board Members:2(Independent Officers:2)

Nomination and Remuneration Advisory Committee
J-SOX Committee
ReportCrisis (Disaster) Headquarters

Number of Board of
Directors meetings*

Average attendance
ratio of
Outside Directors

Project Risk Management Committee

Audit

Group Management Division

19

Supervise

Operation Units

Average attendance
ratio of Outside Audit& Supervisory
Board Members

100 %Number of Audit &Supervisory Board
meetings*

20 (Outside Audit & Supervisory Board
Members 100%)Voluntary committee of
the Board of Directors

Nomination and Remuneration Advisory
Committee

Remuneration for
Directors andAudit & Supervisory
Board Members

Internal Auditing Division

Directors (excl. Outside Directors):
fixed remuneration andperformance-linked remuneration
Outside Directors and Audit & Supervisory
Board Members: fixed remuneration

Initiatives in
Recent Years toStrengthen Governance2015: A ppointed Chief Compliance Officer(CCO)
2017: E stablished Nomination andRemuneration Advisory Committee
2018: Established Compliance Department

Audit firm

Ernst & Young ShinNihon LLC

Group Companies

Auditing by Internal Auditing Division and Audit & Supervisory Board Members
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, and provides
advice and counsel regarding the operational effectiveness andefficiency of the Company. Additionally, it independently assesses the maintenance and operation of internal controls related tofinancial 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 theInternal 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 the observations 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.

Data Section

Term of Directors

LiaisonAppointment/Removal

Compliance Committee

99.1%

Of which, Outside Directors:4 (Independent Officers: 3, Female: 1)

Accounting Auditor

Sustainability Initiatives

Adoption of an executive
officer system

Audit & Supervisory Board (Members)

Appointment/Removal
Liaison

Audit

Crisis Management Office

Company with an Audit & Supervisory Board

Appointment/Removal
Audit

Executive Committee

Corporate Governance Structure (as of July 1, 2021)
Form of organization

Committee serves as an advisory body to the President & CEO
and consists of Executive Officers with specific roles (Senior
Executive Officers or above) and the heads of key divisions. The
Executive Committee reports on and deliberates important matters related to the execution of operation. The Nomination andRemuneration Advisory Committee also serves as an advisory
body to the President & CEO—its members comprising thePresident & 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 of four members, twoof which are Outside Auditors. They report and deliberate on theexecution 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.

Medium-term Management Plan

Corporate Governance Structure and Initiatives to Strengthen Governance
Our Corporate Governance Structure is as follows.
We appoint Outside Directors who have high-level expertise and extensive experience in fields such as global corporate management, accounting/finance, HR/workforce, andlegal/regulatory, and are able to take a birds-eye view of ourentire management and provide objective and practical opinions and advice from the perspective of diverse stakeholders. In line with standards for independence of outside officers as prescribed by the Tokyo Stock Exchange, three of ourfour Outside Directors are Independent Officers. In FY2020,
we newly appointed one female Director. Going forward, we
will advance efforts to ensure the diversity of the Board of
Directors, including aspects such as gender, internationali-

Management Vision

Basic Approach

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 reliability ofcompliance, risk management, and financial reports, we also pay
sufficient attention to the effectiveness and efficiency of operations. The establishment of this system enables the Board of
Directors to make decisions based on appropriate informationand subsequently, the execution of business.

*FY2020

52

TOYO ENGINEERING CORPORATION

Integrated Report 2021

TOYO ENGINEERING CORPORATION

Integrated Report 2021

53

Governance

Establish an Organization with Integrity and Discipline
Risk Management Initiatives

Evaluation of Effectiveness of the Board of Directors

Corporate Ethics and Compliance Risk Management

In order to improve the efficacy of the Board of Directors, TOYO

last year to distribute electronic copies of documents in ad-

TOYO has established a Code of Conduct, compliance manu-

activities, and strengthen the management and oversight ofregularly evaluates and analyses the Board of Directors and dis-

vance and use online conference systems when necessary.

als, and other related rules in order to abide by laws and regu-

our compliance system through regular compliance-related

lations at the root of our corporate activities, as well as social

audits performed by the internal auditing division and Audit

closes a summary of the procedures and results thereof.

justice and ethics. We have also established a Compliance& Supervisory Board Members. To facilitate the proper and• Communication among directors, information sharing

Committee chaired by the Chief Compliance Officer (CCO),

serious handling of reporting on compliance matters, we haveup the Board of Directors. The Board of Directors received aSome said that opportunities for face-to-face meetings had

and we established a Compliance Department in April ofalso established an internal reporting system as well as bothreport of the results from the Director in charge of evaluating

fallen due to the pandemic, and mutual communication

2018. In addition, we boost awareness, conduct promotional

internal and external hotlines for consultation and reporting.

the efficacy of the Board of Directors. Analysis, discussion,

among directors was less frequent than before. In order toand evaluation based on these results were conducted in the

dynamize the discussion at the Board of Directors, efforts

Fiscal 2020 Compliance Risk Management Report

January 2021 regular Board of Directors meeting. Below are

will be made to improve the operation, such as by providing

the main points of those results.

documents at a more appropriate time and offering more

Number of compliance e-Learning participants(for new recruits and employees yet to complete the program)platforms for active exchange of opinion.

Total number of mini compliance test participants

1. Points that received positive feedback to a certain extent• Debate about developing successors and• The size, composition, and operational status of thefurther utilization of the Nomination andInternal reporting/consultations

Board of Directors

Remuneration Advisory Committee

Evaluation was generally positive. It was confirmed that theSome said that there was room for continued improvement

Board of Directors is fulfilling its decision-making and super-from the perspective of strengthening the supervisory func-

visory functions for the execution of operation, and it wastion of the Board of Directors.

In December 2020, we conducted a survey of all of the

2,298
4

Bribery Risk Management

a whole is adequately secured.

Going forward, initiatives will be conducted on an ongoing ba-• Operation to curb the impact of COVID-19

sis to adequately consider individual challenges, swiftly take ac-

We are also working to enhance and expand our program forassigning a manager to each overseas group company, andA certain amount of positive feedback was received for ap-

tion, and improve the function of the Board of Directors based

preventing the bribery of foreign public officials. In addition—

we are building a system that enables them to regularly ex-

propriate operation to minimize the effects of the COVID-19

on this evaluation of the efficacy of the Board of Directors.

to enable unified compliance activities throughout the TOYO

change opinions with Toyo-Japan’s Compliance Department.

Policies on Remuneration Amounts and Determining Calculation
Methods for Directors and Audit & Supervisory Board Members

Information Security Risk Management
We regularly implement the initiatives below based on the

Remuneration for TOYO’s Directors (excluding Outside

Furthermore, in order to set appropriate remuneration lev-

Directors) is intended to be suitable, fair, and balanced andels for Directors and Audit & Supervisory Board Members andto increase their motivation to maximize the Company’s cor-strengthen accountability, the ratios for both fixed and perfor-

porate value while ensuring medium- to long-term profit formance- linked remuneration as well as the calculation formula

shareholders. More specifically, this remuneration consists offor performance-linked remuneration shall be decided by thea fixed portion—determined according to each Director’s po-

Board of Directors based on the findings of the Nomination

Fiscal 2020 Information Security Management Reportsition—and a performance-linked portion. The performance-

and Remuneration Advisory Committee—which consists oflinked remuneration is calculated based on the current net

the President & CEO and Outside Officers—after discussing

Number of serious information incidents

profit attributable to owners of the parent—which is con-

any revisions deemed necessary by the President & CEO.
Remuneration for Outside Directors and Audit & Supervisorybusiness performance—and is determined by the President

Board Members is fixed and not linked to business perfor-& CEO according to the level of contribution of each Director.

mance in light of their roles and independence.

Officer Classification

Total Remuneration(¥ million)

Fixed
Remuneration

Performance-Linked
Remuneration

Number of Eligible
Officers

Directors (excluding Outside Directors)

89

89

—

6

Audit & Supervisory Board Members (excluding
Outside Audit & Supervisory Board Members)

24

24

—

2

Outside Officers

36

36

—

8

TOYO ENGINEERING CORPORATION

Integrated Report 2021

(1) Monitoring the operational status of information security
management measures

goal for our information security recognition test is a response(2) Assessing and handling information security risks

rate of 100%, and we are strengthening our educational and(3) Handling information security incidents

awareness boosting activities.

(4) Information security education0

Investment Risks
We strive to mitigate the above risks with respect to the busi-

situations in which we are unable to guarantee corresponding

ness operations of TOYO group companies we invest in by

returns on investment or where additional funding is needed

establishing a collaborative system whereby our group man-due to changes in the political and economic climate of Brazil

agement division accurately understands and manages theor credit problems with our business partners might negative-

situations of each group company. Regarding business opera-

ly impact the earnings of the Group.

Data Section

sidered the most suitable indicator that reflects the Group’s

ISO 27001 information security management standards. Our

Sustainability Initiatives

pandemic thanks to efforts that had been promoted sinceGroup—we are setting up a Compliance Committee at and(FY2020)

54

66(power harassment: 2, labor/employment/moral-related: 2,
legal violations/corruption: 0)

evaluated that the effectiveness of the Board of Directors as

Total Remuneration by Type (¥ million)

Medium-term Management Plan

2. Points identified as areas for improvement

Directors and Audit & Supervisory Board Members that makeManagement VisionCorporate Governancetions conducted through our Brazilian equity method affiliate,

TOYO ENGINEERING CORPORATION

Integrated Report 2021

55

Governance

Establish an Organization with Integrity and Discipline

Three-way conversation: Sustainability and Governancelegal profession. As such, the Board of Directors will support

engineering methods and tools have become commonplace,the execution of our strategy with Aggressive Governance by

there is little room for Japanese engineering companies tomobilizing all of its members’ knowledge.

Management Visionturers possess the equipment technology. However, now thatshow their superiority in terms of cost and delivery, and we
see the current situation as one in which the second movercontractors from emerging countries are catching up fast.
Abe I understand what Mr. Funakoshi has pointed out about
the change in market structure. Global business competition
continues to intensify, and the area that is becoming a redocean is widening. This is why disciplined management, defined as governance and compliance, is getting more andNoriyoshi Torigoe

Yoshiyuki Funakoshi

Chairman(Chairman of the Board of Directors)

Director, Senior Executive Officer
Chief Compliance Officer (CCO)

Outside Auditor

Mr. Abe, Chairman (Chairman of the Board ofof other industries toward the plant engineering industry, is-project has strengthened our Defensive Governance and thishas gradually been reflected in our business performance.
The Board of Directors has been discussing new projects andprojects over a certain size when making decisions, whichsues for advanced technologies and social implementation,

has had a positive effect.

organizational theory, and human capital development.

Torigoe With regard to Defensive Governance, we have po-

Governance, which will be important for TOYO’s

Abe The assessment on the effectiveness of the Board of

sitioned compliance as an important foundation for corporate

medium-term management plan.

Directors is also conducted every year. Issues pointed out inDirectors), Mr. Torigoe, CCO, and Mr. Funakoshi,
Outside Auditor, talked about Sustainability andthe FY2020 report were to ensure high-quality proceedings

internal controls, company-wide risk management, and governance, and have established a code of conduct, related regulations, and business manuals to ensure that compliance does

Abe Currently, the Board of Directors consists of nine

limiting the length of proceedings. Measures are being taken

Directors (four Outside Directors, including three Independent

to deal with each of these issues, for instance, the active dis-

Officers), and the overall balance of knowledge, experience,cussion on the formulation of the medium-term management

and capabilities is well balanced. In addition to active discus-

plan is the good example. From now on, we need to respondsions based on the expertise of each Director and the checkto the higher level of governance required of listed companies

function exercised by the Outside Directors, in-depth discus-by the TSE Prime Market, including the revised Corporate

sions are held on sustainable growth and the improvement

Governance Code and Guidelines for Investors and Corporateof corporate value over the medium- to long-term. Four Audit

Communications. To achieve this, we believe it is essential to& Supervisory Board Members (including two Independent

provide explanations with visible stories of TOYO while spe-

Officers) also attend the Board of Directors to monitor andcifically relating it to the business environment, management

prove the compliance system on a daily basis.

confirm the appropriateness of the decision-making process

strategies, and management issues, rather than just formu-

Funakoshi Nothing will come of it unless we act first. As

for the execution of operation by the Board of Directors.

lating initiatives.

Bismarck said, “A fool learns from his own experience, The

Funakoshi As you know, I am from the petrochemicals in-

Torigoe Therefore, we need to increase the frequency ofwise man learns from history.” However, we must not act

dustry. So, naturally, I am expected to speak from a position

communication and opportunities for dialogue with our stake-with a background in the plant order side. I try to support theholders so that they can gain a deeper understanding of ourunderstanding and situational judgment of Outside Directors

initiatives to achieve sustainable growth and improve our cor-from different industries by asking questions on a case-by-porate value over the medium term. In addition to the finan-case basis about unusual practices or generally unknown back-cial results briefing, last year, the briefing on the medium-term

grounds and providing explanations. As a result, discussions

management plan announced at the end of the fiscal year waswith Outside Directors become more active, and we are work-

also held online due to the COVID-19 pandemic. Therefore,

ing to ensure that the check function works more appropriate-archived videos of the briefings are available on our website.

Aggressive Risk Management to achieve medium- to long-term

The Key to Adapting to Change isAggressive Governance

Torigoe As Mr. Funakoshi said, the risk is “the presence ofabout what risks are hidden in the business characteristics ofengineering companies and where I feel uncomfortable.

ties for in-depth discussions of management strategies, while

not violate soft law or ethics. Furthermore, TOYO’s mission is“Engineering for Sustainable Growth of the Global Community.”
Therefore, one of our materiality (Governance G) is “establish anorganization with integrity and discipline,” and we are working
to spread this throughout the TOYO Group. However, I think wemust consider there is no goal on governance. In terms of thefurther advanced group operations, which is the implementation
policy for Strengthening EPC as set forth in the medium-term
management plan, we will ensure the effectiveness of our global governance system, including local risk management, and im-without any vision. It is important to learn from the past, andfurthermore, it is very important to “change history by accumulating experience in the organization, not in individuals.” In
addition, risk management tends to be emphasized as “minimizing losses,” but only a defensive image is left in the mind.
However, we are now faced with an opportunity to “changewith the times.” TOYO needs to change its way of thinking togoals such as new businesses and business structure reform.
uncertainty,” so it can be a positive thing depending on strategy and management. We must take advantage of the changes

holders are becoming more important not only for improving
the quality of corporate governance but also for the relationship with financial and capital markets. On the other hand,
the market approach is not always the same in response tocommon global issues such as carbon neutrality and energy shift, so the current situation and time frame in emerging
countries are different from those in developed countries. We
aim to become a vibrant TOYO by steadily implementing our
medium-term management plan to meet the diverse needsof our customers, and earn the trust of our stakeholders tosatisfy their expectations.
Funakoshi One definition of engineering is that I see it as ascientific and technological activity that brings together and integrates human wisdom across different knowledge to accomplish a certain task. Specifically, what is being mentioned isthe efficient materialization of the infrastructure necessary forhuman social life, including energy and plant facilities, thereby
creating a sustainable society. That is, I believe that the essence of engineering is Integration and then Materialization.
Simply integrating is not enough. Integration that improves
value and the ability to provide something extra to the customer’s requirements is also required. Moreover, the entities
are involved in multiple industries. Since there are multiple
companies, including manufacturers, trading companies, andinfrastructures, we believe that it is essential to know the rolesand contents of each of entities to achieve valuable integration.
Needless to say, most of the value of an engineering company comes from its human capital. Thus I would like to keep saying that the driving force behind TOYO’s sustainable growth is
human capital, no matter how much the business environmentchanges. Based on this, we believe that the value of TOYO
is to develop human capital with deep knowledge and understanding, along with a broad perspective, through appropriate
education and practical experience, and to motivate them.
Abe My responsibility as Chairman of the Board of Directors
is to contribute to TOYO’s sustainable growth and the improvement of corporate value over the medium- to long-term. As
you both pointed out, we will focus on adapting to changes inthe external environment, monitoring the progress of the plan,

Torigoe The Board of Directors had active discussions on

Funakoshi TOYO’s risk management system and manage-

sustainable growth and medium- to long-term corporate value

ment cohesion have steadily improved after the bitter experi-

improvement in preparation for the formulation of our medi-

ence of the recent plant construction project. The territory of

um-term management plan. To create a company-wide vision

technical knowledge within the industry has changed drastical-

tion ourselves.

of TOYO’s future, we had heated discussions that drew only, as is pretty obvious when comparing the rise and growth

Abe Exactly as you mentioned, I believe that the key tomembers to realize “Aggressive Governance.” Of course, thethe expertise of Outside Directors in a wide range of fields

period to now, wherein the plant engineering industry was theadapting to change is Aggressive Governance, especially insecuring and development of human capital, TOYO's only as-

such as global situation, policies aimed at by the Japanesestar business of the oil and gas era. Licensors own the key

green strategy. Outside Officer comprises a diverse human

set and the future leaders, will be addressed as a top priority

government, intentions of the financial market, expectations

technology of the plant, while the basic equipment manufac-

capital from industry, finance, government, academia, and the

management issue.

TOYO ENGINEERING CORPORATION

Integrated Report 2021

in the external environment and the major trend shift toward
carbon neutrality to improve our corporate value by taking ac-

Data Section

even during the pandemic and to provide sufficient opportuni-

appropriate information disclosure and dialogue with stake-Sustainability Initiatives

The Board of Directors Holds High-level Discussions

ly. In addition, I have also expressed my own frank opinions

56

more important. In fact, the major failure of the US ethylene

Torigoe Starting in Europe, financial and capital markets
have become widely sensitive to sustainability, and timely andMedium-term Management Plan

Tomohisa Abe

Sustainability Management at TOYOand providing information disclosure and dialoguing with stakeholders, revising our plans as appropriate. And we will strive tosupport the strong implementation of TOYO’s medium-term
management plan by making full use of the knowledge of our

TOYO ENGINEERING CORPORATION

Integrated Report 2021

57

Governance

Establish an Organization with Integrity and Discipline

Directors and Audit & Supervisory Board Members (As of July 1,2021)
Management Vision

Tomohisa Abe

Haruo Nagamatsu

Masayuki Yoshizawa

Masami Tashiro

Reijiro Yamamoto

Tatsuya Terazawa

Chairman

Representative Director,
President & Chief Executive Officer

Representative Director,
Executive Vice President

Outside Director

Outside Director

Outside Director

6 years

Term of office for Directors 2 years and 4 months

Term of office for Directors

Attendance at Board of Directors meeting
18/19 (94.7%)

Attendance at Board of Directors meeting
19/19 (100%)

Attendance at Board of Directors meeting
12/12 (100%)

Attendance at Board of Directors meeting
12/12 (100%)

Reasons for appointment

Reasons for appointment

Reasons for appointment

Reasons for appointment

Mr. Masami Tashiro has many years of international experience working at financial institutions andpossesses ample experience and deep insights as acorporate manager.

Mr. Reijiro Yamamoto, who serves as the corporate manager of an investment fund managementcompany and has served as the corporate managerof various business companies, possesses ample
experience and deep insights related to finance andcorporate management.

Mr. Tatsuya Terazawa, having served in the Ministryof Economy, Trade and Industry (METI) for many
years, possesses ample experience and deep insights related to public policies, mainly in terms oftrade policy and trade promotion.

Ms. Sayoko Miyairi possesses ample business andmanagement experience related to her consulting
company work as well as professional knowledge
and broad insight as a university professor.

Message

Message

Message

Message

I will contribute to ensuring effective corporate
governance by providing alternative perspectives from my outside director’s point of view,
and pursue flexible yet robust risk management
required for an engineering company.

It is important to develop a bold strategy andbe detail-oriented in its implementation. TOYO
has leaders who can implement a strategy on
the front lines. I will call for measures thatallow TOYO’s leaders to fully demonstrate
their leadership and deliver excellent results
as a team.

Amidst the major global developments toward
carbon neutrality, we will aim to contribute toa low-carbon society by transforming TOYO’s
business portfolio. Alongside this goal, theBoard of Directors will engage in extensive
discussions to realize appropriate risk management and strengthen DX.

My expertise is transformation of corporate
and organizational culture. Drawing on myknowledge, I will contribute to fostering a
corporate culture that tackles challenges, improving teamwork and raising employee motivation, and realizing management that drives
further growth.

1

1

4

3

Term of office for Directors

5 years

Term of office for Directors

Term of office for Directors

6 years

Attendance at Board of Directors meeting 19/19 (100%)

Attendance at Board of Directors meeting 19/19 (100%)

Reasons for appointment

Reasons for appointment

Reasons for appointment

Mr. Tomohisa Abe, having been engaged in the plant sales and marketing divisions of the Company for many years, possesses ample
experience and deep insights related to planning sales and marketingstrategies. Having served the Company as Representative Director,
Senior Executive Director, and Unit Director of the Plant Business Unit,
he had been engaged in supervising the overall sales activities of theGroup. In addition, he assumed office as Chairman in April of 2020.

Mr. Haruo Nagamatsu, having served the Company as Unit Directorof the Infrastructure Business Unit, a representative of the Company’s
overseas subsidiaries, and as a project manager, possesses ample
experience and deep insights related to project and corporate management. In addition, he assumed office as Representative Director
and President & Chief Executive Officer in April of 2018.

Mr. Masayuki Yoshizawa, having served a general trading company
for many years, possesses ample experience and deep insights related to the business of the Company, including investments and EPC
businesses in energy and infrastructure fields and the management ofoverseas corporations. He assumed office as Executive Vice President
in April of 2019, and engages in promoting business reform, procurement and crisis management divisions.

Message

Message

Message

Active discussions will ensure that the Board of Directors fulfills
its function, which will strengthen the TOYO Group’s effective
governance system. Amid the changes in the socio-economic
structures, the Board of Directors will strive to find solutions tosocial issues and improve TOYO’s corporate value.

Based on our mission of “Engineering for Sustainable Growthof the Global Community,” we will pursue transparent management and implement our medium-term management plan toboth realize “an environmentally-friendly society” and “enrichpeople’s lives.”

We will achieve TOYO’s Materiality, “People of diverse backgrounds engage in active, meaningful work” and “Establish anorganization with integrity and discipline,” to earn the trustof our stakeholders and realize our corporate slogan, “YourSuccess, Our Pride.”

1

1

1

7

8

5

6

8

1 Global corporate management
2 Accounting / finance
3 HR / labor
4 Legal and regulatory
5 Technology / R&D

7 Sales marketing
8 Industry knowledge

TOYO ENGINEERING CORPORATION

Integrated Report 2021

2

9

2

9

9

9

Noriyoshi Torigoe

Kensuke Waki

Masayuki Uchida

Chihiro Ubukata

Yoshiyuki Funakoshi

Kiyohito UchidaDirector, Senior Executive Officer,
Chief Compliance officer

Director, Senior Executive Officer,
Chief Financial Officer

Senior Audit & Supervisory Board Member

Audit & Supervisory Board Member

Outside Audit & Supervisory Board Member

Outside Audit & Supervisory Board Member

Term of office for Audit & Supervisory
Board Member
5 years

Term of office for Audit & Supervisory
Board Member
2 years

Term of office for Audit & Supervisory
Board Member
6 years

Term of office for Audit & Supervisory
Board Member
6 years

Attendance at Board of Directors meeting
19/19 (100%)

Attendance at Board of Directors meeting
19/19 (100%)

Attendance at Board of Directors meeting
19/19 (100%)

Attendance at Board of Directors meeting
19/19 (100%)

Attendance at Audit & Supervisory Board
meeting
20/20 (100%)

Attendance at Audit & Supervisory Board
meeting
20/20 (100%)

Attendance at Audit & Supervisory Board
meeting
20/20 (100%)

Attendance at Audit & Supervisory Board
meeting
20/20 (100%)

Reasons for appointment

Reasons for appointment

Reasons for appointment

Reasons for appointment

Mr. Masayuki Uchida has been engaged in the
Company’s technology development and new technology-related business development for many years
and assumed office as the head of the administration
division. He possesses ample experience and deep
insights related to technology, quality management,
corporate management, and internal audits.

Having spent many years working as the head of theCompany’s finance division, Mr. Chihiro Ubukata possesses ample experience and deep insights related
to finance and accounting.

Having spent many years in corporate management in the chemicals industry, which is closely
related to our business, Mr. Yoshiyuki Funakoshi has
wide-ranging experience and deep insights related
to management.

Mr. Kiyohito Uchida possesses ample experienceand extensive knowledge gained as a lawyer.

Message

Message

Message

Message

Corporate governance will be at the heart of myactivities. I will pay close attention to all internal conduct, including that of management, andcontribute to the creation of an organization inwhich every employee works with pride andenthusiasm to achieve their mission.

I will make efforts so that TOYO’s executives andemployees can work toward realizing the goalsof the medium-term management plan with asense of fulfillment, while complying with laws,
regulations, and company rules. Namely, we will
create arrangements that enable this and ensure
the effectiveness of operations at each TOYOGroup company.

The discussions of the executives tend to become subjected to their logic. As someone froma different industry, I will keep in mind to pointout any flaws and shortcomings during the discussions. I will support management in finding aproper balance between the brake and accelerator, which is essential for risk-taking, in orderto move in the right direction.

I will conduct audits to ensure that correct management decisions are made and that they are executed properly in compliance with the processesof investigation, examination, judgment, implementation, and check. Based on my experience asa legal professional, I will also make recommendations regarding risk management aspects and thecreation of risk management systems.

5

2

1

4

11 months

Term of office for Directors

3 years

Attendance at Board of Directors meeting 12/12 (100%)

Attendance at Board of Directors meeting 19/19 (100%)

Reasons for appointment

Reasons for appointment

Mr. Noriyoshi Torigoe has many years of experience working at aquasi-public lending institution, and he possesses ample experienceand deep insights related to environment, energy, and infrastructurebusinesses. He assumed office as a Chief Compliance Officer in Aprilof 2021, and engages in Internal Auditing Division and Safety, Quality
and Environment Management Division.

Mr. Kensuke Waki, having served the Company as the head of thefinance and accounting divisions, possesses ample experienceand deep insights related to finance and accounting. He assumed
office as a Chief Financial Officer in April of 2017, and engages inmanaging projects and the management of the Company’s financeand accounting divisions.

Message

MessageThrough our constant efforts to address Materiality, we willbuild a relationship of trust with our stakeholders, bring dynamism to TOYO, and contribute to realizing a sustainable society
and improving TOYO’s corporate value.

We will create an environment that allows us to embrace the challenge toward Sustainable Technology and Business Development
strategy. At the same time, we must thoroughly manage risk andmaximize long-term profits while optimizing short-term profits. To
this end, I will make every effort so that sound and appropriate
decisions are made from a financial perspective.

22

9 Knowledge of other industries

Note) Numbers above mean specialized knowledge andexperience held by Directors and Audit & Supervisory
Board Members.

9

11 months

4

8

9

3

8

8

8

5

8

9

Data Section

6 Project management

8

Term of office for Directors

Sustainability Initiatives

Execution abilities of Directors and Audit &Supervisory Board Members

7

Outside Director
11 months

Medium-term Management Plan

Attendance at Board of Directors meeting 19/19 (100%)Term of office for Directors

58

4 years

Term of office for Directors

Sayoko Miyairi

9

TOYO ENGINEERING CORPORATION

Integrated Report 2021

59

Ten-Year Financial and Non-Financial Highlights
Toyo Engineering Corporation and Consolidated Subsidiaries
Years ended March 31
Management Vision

Millions of yen

2012/3

2013/3

2014/3

2015/3

2016/32017/3

2018/3*3

2019/32020/32021/3

Net sales

157,881

228,723

230,124

311,454299,813431,917335,697

294,993

219,094

184,000

Gross profit (loss)

24,91824,20025,155

17,21430,513

15,971(12,521)

10,636

18,765

18,557

Financial Highlights

15.8

10.6

10.9

5.5

10.2

3.7

(3.7)

3.6

8.6

10.1

SG&A expenses

19,57722,606

24,69924,57019,426

17,98020,42916,25016,875

16,941

Operating income (loss)

5,341

1,593

455

(7,356)

11,087(2,009)(32,951)(5,613)

1,890

1,615

Ordinary income (loss)

5,102

4,032

4,942

(25,280)

3,873

1,603

(27,821)

3,426

2,467

2,781

Gross profit margin (%)

3,728

1,457

967

(20,965)

3,038

1,472

(26,846)

(818)

1,664

814

Comprehensive income

2,597

3,178

4,088

(25,534)

8,492

1,066

(25,758)(3,818)

(376)

4,097

New orders

269,188

290,444

365,137

470,369

443,537

116,790309,325

298,052

187,054

122,895

Backlog of contracts

359,120

410,492

538,023

659,005

823,066

492,682448,629426,373

389,236

310,691

Total assets

222,415

240,694

257,480

261,609

321,836

317,089

251,861

239,694

208,719

218,255

Total net assets

69,26571,091

74,831

44,97951,036

51,331

25,17636,35735,98040,077

Interest bearing debt ratio (%)

38,84040,08744,797

31,91832,64531,84430,841

32,71027,62928,167

Net debt(53,195)(31,588)(52,137)(58,543)(91,480)(90,858)(75,694)(65,197)(52,584)(66,316)

30.1

28.9

28.5

17.2

15.8

16.2

10.0

15.1

17.2

18.3

Equity ratio (%)

5,710(18,986)

21,244(4,192)

46,37618,984(22,824)(25,828)(18,696)

17,753(2,417)(1,587)(1,638)

9,587(11,776)(16,650)

6,386

1,354

7,980

(2,712)Financing activities cash flows

102

(532)

3,167

(14,341)

1,099(1,548)(1,174)

16,768(6,159)(451)

Dividends per share (annual) (yen)

6.0

5.0

3.0

4.0

4.0

2.0

0.0

0.0

0.0

0.0

97.15

37.99

25.23

(546.72)

79.24

38.42

(700.30)(20.51)

28.40

13.91

1,747.08

1,815.75

1,913.07

1,170.99

1,329.60

1,337.40

654.91554.11

544.16650.52

Price earnings ratio (PER)

20.3

53.8

93.9

—

18.5

36.3

—

—

11.4

56.2

Return on equity (ROE)

5.6

2.1

1.4

(35.9)

6.3

2.9(70.3)

(2.7)

4.6

2.2

4,494

4,548

4,747

4,463

4,397

4,287

4,085

3,997

3,991

3,943

1,055

1,026

1,037

1,084

1,092

1,035

1,030

973

998

968

Industrial waste recycling rate
(Domestic construction sites)

93

71

95

99

96

96

96

91

91

90

Industrial waste volumes
at the Head Office in Japan

149

155

160

138

166

148

141

129

95

58

0

0

0

0

0

0

0

0

0

0

0.09

0.09

0.07

0.08

0.07

0.06

0.05

0.11

0.06

0.07

0.24

0.22

0.22

0.22

0.21

0.49

0.46

0.37

0.30

0.51

Earnings per share (EPS)* (yen)1Book value per share (BPS)*1 *2 (yen)Sustainability Initiatives

Operating activities cash flows
Investing activities cash flows

Medium-term Management Plan

Profit (loss) attributable toowners of parent

Non-Financial Highlights
Number of employees*4(Number of employees in Toyo-Japan)

Lost Time Incident Rate (LTIR)*

5

Total Recordable Incident Rate (TRIR)*

6*1 The company conducted a one-for-five reserve stock split of common shares effective October 1, 2017. The figures for “Book value per share (BPS)”
and “Earnings per share (EPS)” have been calculated on the assumption that the stock split had been conducted at the beginning of the fiscal year ended
March 31, 2012.
*2 Upon calculation of “Book value per share (BPS)”, Residual assets attributable to class A preferred stocks is deducted from 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 is based on retrospective application.

60

TOYO ENGINEERING CORPORATION

Integrated Report 2021

Data Section

Number of harmful substance leak accidents(Domestic/overseas construction sites)*4 E
 xcluding temporary employees*5 L ost Time Incident Rate (LTIR) = Total Lost Time Incidents × 1,000,000 / Employee-Worked Man-Hours*6 T
 otal Recordable Incident Rate (TRIR) = Number of Recordable Incidents × 1,000,000 / Employee-Worked Man-Hours

TOYO ENGINEERING CORPORATION

Integrated Report 2021

61

Financial Section Consolidated Financial Statements
Management Vision

Consolidated Balance Sheets
Toyo Engineering Corporation and Consolidated Subsidiaries As of March 31, 2021 and 2020
Thousands of U.S.
dollars (Note 1)

Millions of yen

2021

Assets2021

2020

Current assets:
Cash and deposits (Note 14)

Thousands of U.S.
dollars (Note 1)

Millions of yen

Liabilities and Net Assets:

2021

2020

2021

¥ 72,555¥ 64,053

10,61317,00895,863

693

554

6,259

61,13864,193552,235

533

459

4,814

Current liabilities:¥ 97,609

881,663

Notes payable, accounts payable for construction
contracts and other55,130461,286

Short-term loans payable (Notes 4, 8)

19,391

166,877

Income taxes payable¥ 81,989$

51,069Costs on uncompleted construction contracts (Note 7)

18,475

Accounts receivable-other

4,218

7,138

38,099Advances received on uncompleted construction contracts

Deposits paid

5,005

6,236

45,208Provision for bonuses$

655,360

Forward exchange contracts

2,393

422

21,615

Provision for warranties for completed construction

18

158

162

Other

16,71518,188150,980

Provision for loss on construction contracts (Note 11)

359

349

3,242

(1,114)(692)(10,062)

Provision for loss on guarantees

45

—

406

194,373

187,804

1,755,695

Allowance for doubtful accounts
Total current assets

Forward exchange contracts
Other
Total current liabilities

1,027

1,409

7,866

63,932

153,193

155,672

1,383,732

16,4199,964

148,306

Non-current liabilities:

Property, plant and equipment:
14,42814,510130,322

Machinery, vehicles, tools, furniture and fixtures

5,190

5,031

46,879Land (Note 4)

6,209

6,264

56,083

Leased assets

1,913

1,120

17,279

27

19

243

Accumulated depreciation and impairment loss

(16,131)(15,429)(145,704)

Total property, plant and equipment

11,638

11,517105,121Long-term loans payable (Notes 4, 8)

718

388

6,485

Deferred income taxes (Note 20)

4,309

2,408

38,921

Net defined benefit liability (Note 19)

1,213

1,950

10,956

389

390

3,513

Lease obligations

Provision for losses on business of subsidiaries and affiliates

1,934

1,964

17,46924,984

17,066225,670

178,177

172,739

1,609,402

Capital stock (Note 13)

18,19818,198164,375

Capital surplus

4,567

4,567

41,251Retained earnings

14,677

13,862

132,571

(446)

(445)

(4,028)36,99736,182

334,179

Other
Total non-current liabilities
Total liabilities

Sustainability Initiatives

Buildings and structures (Note 4)

Construction in progress

156
7,078

Medium-term Management Plan

Notes receivable, accounts receivable fromcompleted construction contracts and otherContingent liabilities (Note 5)
Net assets:
Shareholders’ equity:

Intangible assets:
Other
Total intangible assets

1,792

1,338

16,186

1,792

1,338

16,186

Treasury stock, at cost
Total shareholders’ equity
Investments and other assets:

Accumulated other comprehensive income:
2,658

2,842

24,008Valuation difference on available-for-sale securities

(128)

(425)

(1,156)Long-term loans receivable

4,602

4,598

41,568Deferred gains (losses) on hedges

1,495

(764)

13,503Net defined benefit asset (Note 19)

3,391

—

30,629Foreign currency translation adjustments

(525)

1,687

(4,742)

Deferred income taxes (Note 20)

526

480

4,751

Remeasurements of defined benefit plans

2,096

(820)

18,932

2,938

(323)

26,537

Other (Notes 3, 4)
Allowance for doubtful accounts

3,829

4,701

34,585(4,557)(4,563)(41,161)

Total investments and other assets

10,4508,059

94,390Total non-current assets

23,881

20,914

215,707¥ 218,255¥ 208,719$ 1,971,411

Total assets

Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets

142

121

1,282

40,07735,980361,999¥ 218,255¥ 208,719$ 1,971,411

Data Section

Investments in securities (Notes 3, 17)

See notes to consolidated financial statements.

62

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63

Consolidated Statements of Comprehensive Income (Loss)

Toyo Engineering Corporation and Consolidated Subsidiaries Years ended March 31, 2021 and 2020

Toyo Engineering Corporation and Consolidated Subsidiaries Years ended March 31, 2021 and 2020
Thousands of U.S.
dollars (Note 1)

Millions of yen

2021

2020

2021

¥ 219,094$ 1,661,999

165,443

200,328

1,494,381

18,557

18,765

167,618

Valuation difference on available-for-sale securities

Selling, general and administrative expenses (Notes 9, 10)

16,941

16,875

153,021

Deferred gains on hedges

Operating income

1,615

1,890

14,587

Foreign currency translation adjustments

Cost of sales (Note 11)
Gross profit

Interest income

613

1,012

5,536

Dividends income

221

53

1,996

Foreign exchange gains, net

285

—

2,574

Equity in earnings of affiliates

632

1,451

5,708

Miscellaneous income

386

632

3,486

2,140

3,149

19,329Total non-operating income

2021

2020

2021

¥

829

¥ 1,681

$

297

(302)

2,682

2,260

698

20,413

(462)

(788)

(4,173)Remeasurements of defined benefit plans

2,917(1,221)

26,348

Share of other comprehensive loss of affiliates accounted
for by the equity method(1,744)(444)(15,752)

3,268(2,057)29,518(376)$ 37,006

4,076

(381)

36,81620

4180

Net income

7,488

Other comprehensive income (loss) (Note 12)

Total other comprehensive income (loss)
Comprehensive income (loss)¥ 4,097¥

Medium-term Management Plan

Non-operating income:Thousands of U.S.
dollars (Note 1)

Millions of yen¥ 184,000

Net sales

Management Vision

Consolidated Statements of Income

Comprehensive income (loss) attributable to:
Owners of parent
Non-controlling interests
See notes to consolidated financial statements.

Non-operating expenses:
422

Foreign exchange losses, net

—

1,908

—

Loss on valuation of investments in securities

155

—

1,400

Miscellaneous expenses

396

241

3,576

973

2,572

8,788

2,781

2,467

25,119Gain on sales of investments in capital

—

1,857

—

Gain on sales of shares of an affiliate

—

116

—

—

1,973

—

2,781

4,441

25,119

1,686

2,036

15,228

Total non-operating expenses
Ordinary income

3,802

Sustainability Initiatives

421

Interest expenses

Extraordinary income:

Total extraordinary income
Profit before income taxes
Income taxes (Note 20):
Income taxes
Income taxes-deferred

265

724

2,393

Total income taxes

1,952

2,760

17,631

829

1,681

7,488

14

16

126

Net income
Net income attributable to:
Owners of parent

¥

814

¥

1,664

$

Data Section

Non-controlling interests

7,352

See notes to consolidated financial statements.

64

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Consolidated Statements of Cash Flows

Toyo Engineering Corporation and Consolidated Subsidiaries Years ended March 31, 2021 and 2020

Toyo Engineering Corporation and Consolidated Subsidiaries Years ended March 31, 2021 and 2020

Millions of yen

Balance as of April 1, 2019

Treasurystock,
at costDeferred
losses onhedgesTotal accumulated
RemeaForeignothercurrency surements
Nontranslation of defined comprehensive controlling
benefitadjustinterests
income
plans
ments

2021
Total
net
assetsCapitalsurplus¥ 18,198¥ 25,749¥ (8,984)¥ (445) ¥ 34,519(21,182)

21,182

—

—

—

1,664

1,664

—

1,664

(0)

—

(0)

Net income attributable toowners of parent
Purchase of treasury stock(0)

Net changes of items otherthan shareholders’ equity¥ 18,198¥ 4,567¥ 13,862—(302)¥ (445) ¥ 36,182¥ (425)¥ (1,463)¥ 2,908¥400¥ 1,722¥ 116¥ 36,357

698(1,220)(1,221)(2,045)4(2,040)(764)¥ 1,687¥ (820)¥ (323)¥ 121¥ 35,980

Total accuValuation
mulatedRemeaForeign
differenceothercurrency surements
DeferredonNon(losses) translation of defined compreavailableTotal
hensive controlling
benefitadjustgains
for-saleshareholdinterests
incomeplans
ments
ers’ equity securities on hedges

Total
net
assets¥Millions of yen

Balance as of April 1, 2020

Treasurystock,
at costCapitalstock

CapitalsurplusRetainedearnings¥ 18,198¥ 4,567¥ 13,862¥ (445) ¥ 36,182

814

814

—

814

(0)

—

(0)

Net income attributable toowners of parent(0)

Purchase of treasury stock
Net changes of items otherthan shareholders’ equity
Balance as of March 31, 2021

¥ 18,198¥ 4,567¥ 14,677¥ (425)¥ (764)

—

297

2,260

¥ (446) ¥ 36,997¥ (128)¥ 1,495¥ 1,687¥ (820)¥ (323)¥ 121¥ 35,980

2,917

3,262

20

3,283

(525)

¥ 2,096¥ 2,938¥ 142¥ 40,077

Total accuValuation
mulatedRemeaForeign
differenceothercurrency surements
DeferredonNon(losses) translation of defined compreavailableTotal
hensive controlling
benefitadjustgains
for-saleshareholdinterests
incomeplans
ments
ers’ equity securities on hedges

Total
net
assets¥Thousands of U.S. dollars (Note 1)

Balance as of April 1, 2020

Capitalstock

CapitalsurplusRetainedearnings

Treasurystock,
at cost$ 164,375$ 41,251$ 125,210$ (4,019) $ 326,817

7,352

7,352

—

7,352

(0)

—

(0)

Net income attributable toowners of parent(0)

Purchase of treasury stock
Net changes of items otherthan shareholders’ equity
Balance as of March 31, 2021

$ 164,375$ 41,251

See notes to consolidated financial statements.

$ 132,571$ (3,838)$ (6,900)$ 15,238$ (7,406)$ (2,917)$ 1,092$ 324,993

—

2,682

20,413(19,980)

26,34829,464180

29,654$ (4,028) $ 334,179$ (1,156)$ 13,503$ (4,742)$ 18,932$ 26,537$ 1,282$ 361,999

Cash flows from investing activities:
Net (increase) decrease in time deposits
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Proceeds from sales of shares of an affiliate
Proceeds from sales of investments in capitalNet decrease (increase) in short-term loans receivable
Other, net
Net cash (used in) provided by investing activities

2,781
1,508
(10)
416
(292)

4,441
1,442
(10)
14
(6)

$ 25,119
13,621(90)
3,757(2,637)

14
(834)
421
(609)
(16)
(632)
155
—
—

(1,793)(1,065)422
373
0(1,451)—(116)(1,857)126(7,533)
3,802(5,500)(144)(5,708)
1,400
—
—

4,329
1,022
2,270
8,549

11,3806,561(806)(17,470)

39,102
9,231
20,504
77,219(3,048)1,231
681
17,937
1,195(356)(1,022)
17,753(4,158)(5,395)(6,883)(16,380)
1,079
(349)
(3,045)(18,696)(27,531)
11,1196,151
162,017
10,793(3,215)(9,231)
160,355(1,340)
(388)
59
(890)
—
—
2
(155)
(2,712)

1,721
(464)
18
(660)
3,081
4,255
(3)
32
7,980

(12,103)(3,504)532(8,039)——18(1,400)(24,496)(4,401)
14,682(10,236)
(495)
(0)
(451)
(318)
14,27080,213¥ 94,483(1,088)900(5,459)(511)(0)(6,159)(818)(17,694)
97,907¥ 80,213(39,752)
132,616(92,457)(4,471)(0)(4,073)(2,872)
128,895
724,532$ 853,427¥

Data Section

Cash flows from financing activities:
Net decrease in short-term loans payable
Proceeds from long-term loans payable
Repayment of long-term loans payable
Repayment of finance lease obligations
Other, net
Net cash used in financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period (Note 14)

¥

2021

2020

Sustainability Initiatives(2,212)

Cash flows from operating activities:
Profit before income taxes
Depreciation and amortization
Amortization of goodwill
Increase in allowance for doubtful accounts
Decrease in net defined benefit liability
Increase (decrease) in provision for loss on
construction contracts
Interest and dividends income
Interest expenses
Foreign exchange (gains) losses(Gain) loss on sales of property, plant and equipment
Equity in earnings of affiliates
Loss on valuation of investments in securities
Gain on sales of shares of an affiliate
Gain on sales of investment in capital
Decrease in notes receivable, accounts receivable fromcompleted construction contracts
Decrease in costs on uncompleted construction contracts
Decrease (increase) in accounts receivable-other
Increase (decrease) in notes and accounts payable-trade
Decrease in advances received on uncompleted
construction contracts
Decrease (increase) in deposits paid
Other, net
SubtotalInterest and dividends income received
Interest expenses paid
Income taxes paid
Net cash provided by (used in) operating activities

Medium-term Management Plan

Capitalstock¥ (123)Thousands of U.S.
dollars (Note 1)

Millions of yen

Retained(deficit)
earnings

Transfer to retained earnings
from capital surplus

Balance as of March 31, 2020

ValuationdifferenceonavailableTotal
for-saleshareholders’ equity securities

Management Vision

Consolidated Statements of Changes in Net Assets

See notes to consolidated financial statements.

66

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Management Vision

Notes to Consolidated Financial Statements
Toyo Engineering Corporation and Consolidated Subsidiaries

1. BASIS OF PREPARATION

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(a) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its significant subsidiaries.
Investments in significant affiliates are accounted for by the equity method. As of March 31, 2021, the numbers of consolidated
subsidiaries and affiliates accounted for by the equity method were 13 and 4, respectively.
Toyo Engineering Korea Limited, Toyo Engineering Corporation (China) and 5 other subsidiaries are consolidated using theirfinancial statements as of their respective fiscal year end, which falls on December 31, and necessary adjustments are made totheir financial statements to reflect any significant transactions from January 1 to March 31. Intercompany accounts and transactions are eliminated in consolidation. The difference between the acquisition cost and the equity in the net assets at the time ofacquisition is amortized in principle within 20 years on a straight-line basis.

(d) Costs on Uncompleted Construction Contracts
Costs on uncompleted construction contracts are stated at cost, determined by the identified-cost method.

68

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(g) Allowance for Doubtful Accounts
The Company and its consolidated subsidiaries have provided an allowance for doubtful accounts at an estimated amount of probable and reasonably possible bad debts and an estimated amount computed on the actual percentage of credit losses.
(h) Provision for Bonuses
Provision for bonuses to employees is provided at the expected payment amount for the fiscal year.
(i) Provision for Warranties for Completed Construction
Provision for warranties for completed construction is provided based on past experience.
(j) Provision for Loss on Construction Contracts
Provision for loss on construction contracts is provided in case the material loss is expected for a certain large-scale contract work.
(k) Provision for Loss on Guarantees
Provision for loss on guarantees is provided based on the financial position of the guaranteed entity.
(l) Provision for Losses on Business of Subsidiaries and Affiliates
Provision for losses on business of subsidiaries and affiliates is provided based on the financial position of the subsidiaries
and affiliates.
(m) Retirement Benefits
Net defined benefit liability at year-end is stated based on the fair value of plan assets and the projected benefit obligation.
As to calculation of the projected benefit obligation, the expected benefit payments at the year-end have been recorded mainly
at the amount calculated based on benefit formula.
Actuarial gain or loss is amortized by the straight-line method within the average of the estimated remaining service years of
the employees (over 9 years) in the year following the year of recognition.
Unamortized actuarial gain or loss is provided with tax effect as a component of remeasurements of defined benefit plans
under accumulated other comprehensive income of net assets.

Data Section(c) Derivative Financial Instruments
The Company and certain consolidated subsidiaries enter into various derivative transactions in order to manage certain risk arising from adverse fluctuations in foreign currency exchange rates and interest rates. Derivative financial instruments are carried atfair value with changes in unrealized gain or loss charged or credited to operations, except for those which meet the criteria fordeferral hedge accounting under which unrealized gain or loss is deferred as a component of net assets.
Deferral hedge accounting is adopted for derivatives which qualify for hedge accounting, under which unrealized gain or loss isdeferred. Hedging instruments are derivative transactions such as foreign exchange forward contract, currency option, currency
swap and interest rate swap, and hedged items are primarily forecast sales and costs denominated in foreign currencies, andreceivables and payables denominated in foreign currencies. Hedge effectiveness is not assessed if the substantial terms andconditions of the hedging instruments and the hedged forecasted transactions are the same. The Company and its consolidated
subsidiaries manage derivative transactions in accordance with their internal “Policies and Procedures for Risk Management”.

(f) Leases
Depreciation of assets under finance leases which do not transfer ownership of the leased assets to the lessee is calculated by
the straight-line method over the lease period with the residual value estimated at zero.
In addition, foreign consolidated subsidiaries adopted International Financial Reporting Standard (“IFRS”) 16 “Leases”.
Accordingly, the subsidiaries, as lessees, account for all leases on the balance sheet, in principle, and depreciation of leased
assets is calculated based on the straight-line method.

Sustainability Initiatives(b) Securities
All debt and equity securities other than equity securities issued by subsidiaries and affiliates are classified into one of three categories: trading, held-to-maturity or available-for-sale securities. Trading securities are bought and held principally for the purposeof selling them in the near term. Held-to-maturity securities are those securities which the Company and its consolidated subsidiaries have the ability and intent to hold until maturity. All securities not included in trading or held-to-maturity are classified asavailable-for-sale securities.
Trading securities are recorded at fair value. Held-to-maturity securities are recorded at amortized cost, adjusted for the amortization or accumulation of premiums or discounts. Unrealized gains or losses on trading securities are included in earnings. Other
securities classified as available-for-sale securities are recorded at fair value with changes in unrealized holding gain or loss, netof the applicable income taxes, included directly in net assets. Non-marketable securities classified as available-for-sale securities are recorded at cost.
Cost of securities sold is determined by the moving-average method.

(e) Depreciation and Amortization
Depreciation of property, plant and equipment is principally computed by the declining-balance method based on the estimateduseful lives of the assets. However, buildings acquired on or after April 1, 1998, and facilities attached to buildings and structuresacquired on or after April 1, 2016 are depreciated on a straight-line method.
The useful lives of property, plant and equipment are as follows:
Buildings and structures: 3 to 50 years
Machinery, vehicles, tools, furniture and fixtures : 2 to 20 years
Amortization of intangible assets of the Company and its consolidated subsidiaries is calculated principally by the straight-line
method. Software for internal use is amortized on a straight-line method 5 years of the estimated available period.

Medium-term Management Plan

Toyo Engineering Corporation (the “Company”) and its domestic consolidated subsidiaries maintain their accounting records andprepare their financial statements in accordance with accounting principles generally accepted in Japan, and its foreign consolidated subsidiaries maintain their books of account in conformity with those of their respective countries of domicile. The accompanying consolidated financial statements have been compiled from the accounts prepared by the Company in accordancewith the provisions set forth in the Financial Instruments and Exchange Law of Japan and with accounting principles generally accepted in Japan, which are different in certain respects as to the application and disclosure requirements of International
Financial Reporting Standards.
For the convenience of readers, the accompanying consolidated financial statements and the relevant notes have also beenpresented in U.S. dollars by translating all Japanese yen amounts at the exchange rate of ¥110.71 to U.S.$1.00 prevailing on
March 31, 2021.
As permitted, amounts of less than one million yen have been omitted. As a result, the totals shown in the accompanying
consolidated financial statements (both yen and in U.S. dollars) do not necessarily agree with the sum of the individual amounts.

(n) Foreign Currency Translation
Both short-term and long-term receivables and payables in foreign currencies are translated at the rates of exchange in effect atthe balance sheet date and differences arising from the translation of these accounts are credited or charged to profit or loss.
The balance sheet accounts of the consolidated foreign subsidiaries are translated at the rates of exchange in effect at thebalance sheet date, except for capital stock and capital surplus, which are translated at their historical exchange rates. Revenues,
expenses and net income for the year are translated at the rates of exchange in effect at the balance sheet date. Differences arising from translation of the accounts of foreign subsidiaries and affiliates are presented as “Foreign currency translation adjustments” and “Non-controlling interests” in the accompanying consolidated balance sheets.
TOYO ENGINEERING CORPORATION

Integrated Report 2021

69

(p) Cash and Cash Equivalents
For the purposes of the consolidated statements of cash flows, the Company and its consolidated subsidiaries consider all
highly liquid investments with insignificant risk of changes in value purchased with an original maturity of 3 months or less to
be cash equivalents.

(r) Consolidated Tax Return System
The Company files a consolidated tax return with domestic its fully-owned subsidiaries.
(Adoption of Tax Effect Accounting for the Transition from Consolidated Taxation System to the Group Tax Sharing System)
With respect to items subject to the review of the Non-Consolidated Taxation System conducted to coincide with transition fromthe Consolidated Taxation System to the Group Tax Sharing System, established under the Act on Partial Revision of the Income
Tax Act, etc. (Act No.8 of 2020), the Company and its certain domestic consolidated subsidiaries have not applied the provision of
Paragraph 44 of “Implementation Guidance on Tax Effect Accounting” (Accounting Standards Board of Japan (“ASBJ”) Guidance
No.28, February 16, 2018) in accordance with the treatment set out in Paragraph 3 of “Practical Solution on the Treatment of Tax
Effect Accounting for the Transition from the Consolidated Taxation System to the Group Tax Sharing System” (ASBJ Practical
Issues Task Force No.39, March 31, 2020) and the amounts of deferred tax assets and deferred tax liabilities are based on theprovisions of tax laws in effect before the revision.
(s) Advances Received on Uncompleted Construction Contracts
Advances received on uncompleted construction contracts from customers are shown as a liability, not as a deduction from theamount of costs on uncompleted construction contracts.

(v) Additional Information(Significant Accounting Estimates)
1. Revenue recognition based on the percentage-of-completion method
1) The amount of revenue recognized by the percentage-of-completion method in the consolidated statement of income for the fiscal
year ended March 31, 2021.
Millions of yen

Thousands of
U.S. dollars

2021

2021

¥ 167,021$ 1,508,635

TOYO ENGINEERING CORPORATION

Integrated Report 2021

(1) Overview
The accounting standard and implementation guidance mainly focus on the recognition of revenue and cash flows arising fromcontracts with customers. Revenue is recognized by applying the following five-step model.
Step 1: Identify the contract
Step 2: Identify performance obligations
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to performance obligations
Step 5: Recognize revenue based on progress of performance obligations(2) Planned date of application
The above accounting standard and implementation guidance are scheduled to be applied from the beginning of the fiscal year
ending March 31, 2022.
(3) Effects of application of the accounting standard and the implementation guidance
At present, the Company is in the process of evaluating the impact on the consolidated financial statements from the adoptionof the accounting standard and implementation guidance.

(1) Overview
ASBJ developed “Accounting Standard for Fair Value Measurement” and “Implementation Guidance on Accounting Standard
for Fair Value Measurement” and established the guidance defines the fair value measurement method, to improve the international comparability of accounting standards. These accounting standards and implementation guidance will be adopted for thefair values of the following items.
—Financial instruments defined in “Accounting Standard for Financial Instruments”—Inventories held for trading purposes defined in “Accounting Standard for Measurement of Inventories”
In addition, revised “Implementation Guidance on Disclosures about Fair Value of Financial Instruments” requires to disclose thebreakdown of financial instruments by level of their fair values.

Data Section2) Information of significant accounting estimates related to identified items
The Company and its consolidated subsidiaries recognize revenue using the percentage-of-completion method when revenue andcosts of construction contracts of which the percentage of completion can be reliably estimated.
Total cost of contracts is estimated based on key assumptions and the progress till the fiscal year end. Those assumptions include
estimated unit price, quantity, process, man-hours, etc. based on quotations from suppliers and sub-contractors and involve past experience. In addition, the Company and its consolidated subsidiaries set the assumptions based on the contract details.
The Company and its consolidated subsidiaries recognized additional costs based on the assumptions that the impact of spread of
COVID-19 will not deteriorate significantly in the future, and the business environment surrounding the Company and its group companies will improve gradually from the fiscal year ending March 31, 2022.

70(Accounting Standards Issued But Not Yet Effective)
Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020)
Implementation Guidance on Accounting Standard for Revenue Recognition (ASBJ Guidance No. 30, March 26, 2021)

Accounting Standard for Fair Value Measurement (ASBJ Statement No. 30, July 4, 2019)
Implementation Guidance on Accounting Standard for Fair Value Measurement (ASBJ Guidance No. 31, July 4, 2019)
Accounting Standard for Measurement of Inventories (ASBJ Statement No. 9, July 4, 2019)
Accounting Standard for Financial Instruments (ASBJ Statement No. 10, July 4, 2019)
Implementation Guidance on Disclosures about Fair Value of Financial Instruments (ASBJ Guidance No. 19, March 31, 2020)(u) Research and Development Costs
Research and development costs are charged to income when incurred.

Year ended March 31,
Net sales

2. Valuation of deferred tax assets
1) The amount of deferred tax assets
See “20. INCOME TAXES.”
2) Information on significant accounting estimates related to identified items
The Company and its consolidated subsidiaries recorded a valuation allowance of ¥24,053 million ($217,261 thousand) for deferred tax
assets as of March 31, 2021 mainly for deferred tax assets attributable to the Company and certain of its domestic consolidated subsidiaries that apply the Group Tax Sharing System.
The Company and its certain domestic consolidated subsidiaries make accounting estimates to determine the recoverability ofdeferred tax assets. This estimate is based on the expected taxable income for the year ending March 31, 2022, which incorporates
downside risks such as the occurrence of risk events in ongoing projects and delays in awards of future expected projects.
Accordingly, the reversal of the valuation allowance as a result of increase in future profitability and considering relevant qualitative
factors and uncertainties may affect consolidated business results of the fiscal year ending March 31, 2022.

Sustainability Initiatives(t) Income Taxes
Deferred tax assets and liabilities are determined based on the differences between carrying amounts of existing assets and liabilities in the financial statements and their respective tax bases. Deferred tax assets and liabilities are measured using the enacted
tax rates and laws which will be in effect when the differences are expected to be reversed.

Accordingly, changes in the estimated total cost by the occurrence of unexpected risk events and changes in estimates may affectbusiness results for the fiscal year ending March 31, 2022.

Medium-term Management Plan(q) Consumption Taxes
Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes.

Management Vision(o) Recognition of Revenues
Revenues and costs of construction contracts of which the percentage of completion can be reliably estimated, are recognizedby the percentage-of-completion method. The percentage of completion is calculated at the cost incurred as a percentage of theestimated total cost. The completed-contract method continues to be applied for contracts for which the percentage of completion cannot be reliably estimated.

(2) Planned date of application
The above accounting standards and implementation guidance are scheduled to be applied from the beginning of the fiscal year ending
March 31, 2022.
(3) Effects of application of the accounting standards and implementation guidance
At present, the Company is in the process of evaluating the impact on the consolidated financial statements from the adoptionof the accounting standards and implementation guidance.

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71

7. COSTS ON UNCOMPLETED CONSTRUCTION CONTRACTS(Impact of Global Spread of COVID-19 on Accounting Estimates)
As for impairment test of non-current assets, the Company estimated the future cash flows based on the assumption that the
impact of spread of COVID-19 will not deteriorate significantly in the future, and the business environment surrounding theCompany and its group companies will improve gradually from the fiscal year ending March 31, 2022.

8. SHORT-TERM AND LONG-TERM DEBT

Investments in and advances to unconsolidated subsidiaries and affiliates included in investments in securities and other in the
consolidated balance sheets as of March 31, 2021 and 2020 are as follows:
Thousands of
U.S. dollars

Millions of yen

As of March 31,
Investments in unconsolidated subsidiaries and affiliates
Other

2021

2021

2020

¥ 504
480

¥ 995
518

$ 4,552
4,335

4. PLEDGED ASSETS
The following assets as of March 31, 2021 and 2020 were pledged as collateral:Thousands of
U.S. dollars

Millions of yen

2021

2020

2021

¥

¥

$ 5,7178,156
1,237$ 15,120

633
903
137
¥ 1,674

731
956
146
¥ 1,834

These assets above were mainly pledged for issuing the performance bonds.

Contingent liabilities as of March 31, 2021 are as follows:

Other
Total

As of March 31,
Costs on uncompleted construction contracts

2021

2021

2020

¥ 93

¥ 237

The average interest rates on the short-term loans payable outstanding as of March 31, 2021 and 2020 are 3.06% and1.39%, respectively.
The average interest rates on the current portion of long-term loans payable outstanding as of March 31, 2021 and 2020are 1.16% and 0.14%, respectively.
The average interest rates on the long-term loans payable outstanding as of March 31, 2021 and 2020 are 1.11% and1.09%, respectively.
The following schedule shows the maturities of long-term loans payable subsequent to March 31, 2021:
Years ended March 31,
2022
2023
2024
2025
2026
2027 and thereafter

Millions of yen

Thousands of
U.S. dollars¥ 8,209
7,354
8,815
220
30
—

$ 74,148
66,42579,622
1,987
270—

The following schedule shows the maturities of lease obligations subsequent to March 31, 2021:
Years ended March 31,
2022
2023
2024
2025
2026
2027 and thereafter

Millions of yen

Thousands of
U.S. dollars

¥ 416
322
76
76
48
195

$ 3,757
2,908
686
686
433
1,761

Millions of yen

Thousands of
U.S. dollars

¥ 26
¥ 26

$ 234
$ 234

Details

Performance bond etc.

9. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
The main components of selling, general and administrative expenses for the years ended March 31, 2021 and 2020 are as follows:
Thousands of
U.S. dollars

Millions of yen

6. COMMITMENT LINE CONTRACTS
In order to maintain access to a stable and effective sources of operating capital, the Company has entered into commitment line
contracts with 10 trading banks. The status of these commitment line contracts as of March 31, 2021 and 2020 is as follows:

72

TOYO ENGINEERING CORPORATION

Integrated Report 2021

2021

2020

2021

¥ 9,000—¥ 9,000¥ 8,000—¥ 8,000$ 81,293—$ 81,293

Years ended March 31,
Salaries
Provision for bonuses
Retirement benefit expenses
Depreciation
Research and development costs

2021

2020

2021

¥ 7,079
373
745
803
2,346

¥ 7,155
367
1,137
752
1,925

$ 63,941
3,369
6,729
7,253
21,190TOYO ENGINEERING CORPORATION

Integrated Report 2021

Data Section

Thousands of
U.S. dollars

Millions of yen

As of March 31,
Total amount of commitment line contracts
Used amount
Available amount of commitment line contracts$ 840

As of March 31, 2021 and 2020, short-term loans payable and long-term loans payable with financial covenants concerning
the financial condition or business results of the Company and its consolidated subsidiaries and affiliates amounted to ¥8,720
million ($78,764 thousand) and ¥8,480 million, respectively.

5. CONTINGENT LIABILITIESGuaranteed parties

Thousands of
U.S. dollars

Millions of yen

Sustainability Initiatives

As of March 31,
Collateral
Buildings
Land
Other
Total

Costs on uncompleted construction contracts and provision for loss on construction contracts related to the construction contracts
with substantial anticipated losses are not offset. Costs on uncompleted construction contracts corresponding to provision forloss on construction contracts as of March 31, 2021 and 2020 are as follows:

Medium-term Management Plan

3. INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES AND AFFILIATESManagement Vision(Changes in Presentation)(Adoption of Accounting Standard for Disclosure of Accounting Estimates)
Effective from the end of the fiscal year ended March 31, 2021, the Company adopted Accounting Standard for Disclosure of
Accounting Estimates (ASBJ Statement No. 31, March 31, 2020). Therefore, the Company presented information related tosignificant accounting estimates in the notes to the consolidated financial statements.
However, comparative information for the fiscal year ended March 31, 2020 has not been disclosed in “Note 2. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES, (v) Additional Information” in accordance with the transitional provisions set forthin Article 11 of Accounting Standard for Disclosure of Accounting Estimates.

7313. SUPPLEMENTARY INFORMATION FOR CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

Research and development costs included in cost of sales and selling, general and administrative expenses for the years ended
March 31, 2021 and 2020 amounted to ¥2,346 million ($21,190 thousand) and ¥1,925 million, respectively.

For the year ended March 31, 2021
(a) Type and number of outstanding shares
Number of shares

11. PROVISION FOR LOSS ON CONSTRUCTION CONTRACTS
The amount of gross increase in provision for loss on construction contracts included in cost of sales in the consolidated statements
of income for the years ended March 31, 2021 and 2020 are as follows:
Thousands of
U.S. dollars

Millions of yen

Years ended March 31,
Amount of provision for loss on construction contracts

2021

2021

2020

¥ 359

$ 3,242¥ 349

Thousands of
U.S. dollars

Millions of yen

2021

2020

2021

¥

¥

$

364

(382)

3,287

—

189

385
(88)
297

(382)
80
(302)

3,477
(794)
2,682

2,247

82

20,296

643
2,891
(631)
2,260

615
698
(0)
698

5,807
26,113(5,699)20,413

(462)
(462)
(462)

(788)
(788)
(788)

(4,173)(4,173)(4,173)Issued stock:
Common stock
Class A preferred stock
Total
Treasury stock:
Common stock
Total

Integrated Report 2021

38,558,507
20,270,300
58,828,807

—
—
—

—
—
—

38,558,507
20,270,300
58,828,807

225,464
225,464

697
697

—
—

226,161
226,161

For the year ended March 31, 2020(a) Type and number of outstanding shares
Number of shares

Type of shares

Issued stock:
Common stock
Class A preferred stock
Total
Treasury stock:
Common stock
Total

Balance as ofbeginning of year

Increase in shares
during the year

Decrease in shares
during the year

38,558,507
20,270,300
58,828,807

—
—
—

—
—
—

38,558,507
20,270,300
58,828,807

224,680
224,680

784
784

—
—

225,464
225,464

(49)
3,835
(917)
2,917

(1,744)¥ 3,268(1,221)(170)(1,391)170(1,221)(444)¥ (2,057)

35,082(442)
34,640(8,282)
26,348(15,752)$ 29,518

Balance as ofend of year

Note: T reasury stock increased by 784 shares due to the purchase of shares less than one unit.

14. CONSOLIDATED STATEMENTS OF CASH FLOWS
A reconciliation between the balance of cash and deposits reflected in the accompanying consolidated balance sheets and thatof cash and cash equivalents in the accompanying consolidated statements of cash flows as of March 31, 2021 and 2020 are
summarized as follows:
Thousands of
U.S. dollars

Millions of yen

3,884

Balance as ofend of year

As of March 31,
Cash and deposits
Time deposits with maturities over 3 months
Cash and cash equivalents

2021

2020

¥ 97,609(3,125)¥ 94,483¥ 81,989(1,776)¥ 80,213

2021$ 881,663(28,226)$ 853,427

15. LEASES(a) Finance Leases(a-1) Finance leases which do not transfer ownership of the leased assets to the lessee
The main component of the leased assets is the rental offices of the foreign subsidiaries.
Depreciation methods
See “2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (f) Leases “(b) Operating Leases
Operating Leases (as Lessee)
Future minimum lease payments subsequent to March 31, 2021 for noncancelable operating leases are summarized as follows:
Millions of yen

Thousands of
U.S. dollars

2021

2021

¥ 143
24
¥ 168

Data Section

TOYO ENGINEERING CORPORATION

Decrease in shares
during the year

Note: T reasury stock increased by 697 shares due to the purchase of shares less than one unit.

As of March 31,
Within 1 year
Over 1 year
Total

74

Increase in shares
during the year

Sustainability Initiatives

21

Type of shares

Balance as ofbeginning of year

Medium-term Management Plan

12. OTHER COMPREHENSIVE INCOME
Years ended March 31,
Valuation difference on available-for-sale securities:
Amount arising during the year
Reclassification adjustments for gains and losses realized
in profit or loss
Valuation difference on available-for-sale securities
before tax effectTax effect
Valuation difference on available-for-sale securities
Deferred gains on hedges:
Amount arising during the year
Reclassification adjustments for gains and losses realized
in profit or loss
Deferred gains on hedges before tax effectTax effect
Deferred gains on hedges
Foreign currency translation adjustments:
Amount arising during the year
Foreign currency translation adjustments before tax effectForeign currency translation adjustments
Remeasurements of defined benefit plans:
Amount arising during the year
Reclassification adjustments for gains and losses realized
in profit or loss
Remeasurements of defined benefit plans before tax effectTax effectRemeasurements of defined benefit plans
Share of other comprehensive loss of affiliates accounted
for by the equity method:Amount arising during the year
Total other comprehensive income (loss)

Management Vision

10. RESEARCH AND DEVELOPMENT COSTS$ 1,291216$ 1,517

TOYO ENGINEERING CORPORATION

Integrated Report 2021

75

Thousands of U.S. dollars

1. Condition of Financial Instruments
The Company and its consolidated subsidiaries hold their temporary cash surplus through low-risk financial assets and raise funds
through borrowings from banks.
Derivative financial instruments are utilized for reducing the risk of exchange rate fluctuations, interest rate fluctuations, andcredit. Therefore, there are no derivatives for speculative purposes.

The fair value of financial instruments is based on their quoted market prices, if available, or reasonably estimated amounts if
there is no market price. Since various assumptions and factors are reflected in estimating the fair value, different assumptions
and factors could result in different fair value. In addition, the notional amounts below are not necessarily indicative of the actual
market risk involved in derivative transactions.

Millions of yen¥¥

50,000TOYO ENGINEERING CORPORATION

Integrated Report 2021¥

50,001

¥ —

1

4,218
(1)
4,216

4,218

1

930
152,756
72,555
2,404
24,62899,587930
152,759
72,555
2,404
24,643
99,602

—
2
—
—
14
14

110
2,127
2,237

110
2,127
2,237

—
—
¥ —

¥

881,663$ —451,630

451,6399

38,099(9)38,081

38,09998,400
1,379,785
655,360
21,714
222,455
899,530

8,400
1,379,812
655,360
21,714
222,590899,665

—
18
—
—
126
126

993
19,212
20,205993
19,212
20,205——$ —461,286(9,655)(3) Accounts receivables-otherLess: Allowance for doubtful accounts (*1)
Accounts receivable-other, net(4) Investments in securities
Available-for-sale securities
Total of assets(1) Notes and accounts payable for construction contracts and other(2) Short-term loans payable(3) Long-term loans payable (including current portion)
Total of liabilities
Derivatives (*2)
not designated as hedging instruments
designated as hedging instruments (*3)
Total derivatives$

Unrealized gain /(loss)$$

Millions of yen

Unrealized gain /(loss)

As of March 31, 2020
(1) Cash and deposits(2) N otes receivable, accounts receivable fromcompleted construction contracts
Less: Allowance for doubtful accounts (*1)
Notes receivable, accounts receivable fromcompleted construction contracts, net

Book Value

Fair Value¥ 81,989¥ 81,989¥ —54,47254,473

1(3) Accounts receivables-otherLess: Allowance for doubtful accounts (*1)
Accounts receivable-other, net

7,138
(30)
7,108

7,109

1

637
144,207
64,053
6,811
20,161
91,026637
144,209
64,054
6,811
20,192
91,058

—
2
0
—
31
32

158
(764)
(605)

158
(764)
(605)

—
—
¥ —

(4) Investments in securities
Available-for-sale securities
Total of assets(1) Notes and accounts payable for construction contracts and other(2) Short-term loans payable(3) Long-term loans payable (including current portion)
Total of liabilities
Derivatives (*2)
not designated as hedging instruments
designated as hedging instruments (*3)
Total derivatives

55,130(658)¥¥

Data Section

76

97,609881,663

Unrealized gain /(loss)

51,069
(1,069)(3) Accounts receivables-otherLess: Allowance for doubtful accounts (*1)
Accounts receivable-other, net(4) Investments in securities
Available-for-sale securities
Total of assets(1) Notes and accounts payable for construction contracts and other(2) Short-term loans payable(3) Long-term loans payable (including current portion)
Total of liabilities
Derivatives (*2)
not designated as hedging instruments
designated as hedging instruments (*3)
Total derivatives

97,609$Fair Value

Sustainability Initiatives

Fair ValueBook Value(*1) Notes receivable, accounts receivable from completed construction contracts and accounts receivable—other listed above are offset
by the corresponding figures of allowance for doubtful accounts listed above.
(*2) Net receivables and payables derived as a result of derivative transactions are presented. Values in parentheses show contra-asset
account, net liabilities and unrealized loss.
(*3) The fair values of foreign exchange forward contracts other than the deferral hedge accounting is applied are charged or credited to
the fair values of the hedged items.

2. Fair Value of Financial Instruments
Book value, fair value, and net unrealized gain or loss of financial instruments consist of the following:
The following does not include items for which it is extremely difficult to determine the fair value.

Book Value

As of March 31, 2021
(1) Cash and deposits(2) N otes receivable, accounts receivable fromcompleted construction contracts
Less: Allowance for doubtful accounts (*1)
Notes receivable, accounts receivable fromcompleted construction contracts, net

Medium-term Management Plan

Notes receivable, accounts receivable from completed construction contracts are exposed to credit risks of customers andrisks of exchange rate fluctuations. The Company deals with these risks by organizing careful reviews on awarded contracts,
letters of credit, and export credit insurance. The Company minimizes exchange fluctuation risks by entering into corresponding
forward-exchange contracts, in principle.
Investments in securities are exposed to volatility risks of market price. The Company manages these risks by periodic monitoring, as they mainly consist of stocks of business partners.
Notes payable, accounts payable for construction contracts and other are mostly due within 1 year.
Borrowings from banks are raised mainly for capital investment or working capital. For some long-term loans payable, theCompany entered into interest swap agreements to minimize risks of interest rate fluctuations.
Regarding derivatives, forward-exchange contracts are used to minimize exchange fluctuation in foreign-currency operations,and interest-swap contracts are used to minimize interest rate fluctuations.

As of March 31, 2021
(1) Cash and deposits(2) Notes receivable, accounts receivable fromcompleted construction contracts
Less: Allowance for doubtful accounts (*1)
Notes receivable, accounts receivable fromcompleted construction contracts, net

Management Vision

16. FINANCIAL INSTRUMENTS(*1) Notes receivable, accounts receivable from completed construction contracts and accounts receivable—other listed above are offset
by the corresponding figures of allowance for doubtful accounts listed above.
(*2) Net receivables and payables derived as a result of derivative transactions are presented. Values in parentheses show contra-asset
account, net liabilities and unrealized loss.
(*3) The fair values of foreign exchange forward contracts and interest rate swaps other than the deferral hedge accounting is applied arecharged or credited to the fair values of the hedged items.

TOYO ENGINEERING CORPORATION

Integrated Report 2021

77

Millions of yen

As of March 31, 2020
Cash and deposits
Notes and accounts receivablefrom completed construction contracts
Accounts receivable-other
Total

Within 1 year

After 1 year
through 5 years

After 5 years
through 10 years

After 10 years¥ 81,989

¥

—

¥—

¥—

54,296
6,647¥ 142,933

834
491¥ 1,325

—
—
¥—

—
—
¥—

(Note 4) Schedule for repayment of bonds and long-term loans payable
See ’’8. SHORT-TERM AND LONG-TERM DEBT”.
Medium-term Management Plan

Liabilities(1) Notes payable, accounts payable for construction contracts and otherBook values for items which are settled in a short-term are used as fair values of these items because they are nearly equal tosuch book values. Fair values of other items are based on the present value discounted by an appropriate discount rate coupledwith the remaining maturity and credit risks.
(2) Short-term loans payable
Book values are used as fair values because they are nearly equal to such book values.
(3) Long-term loans payable (including current portion)
The present values of the principal and total interest, discounted by the rate assumed to be applied to the new borrowings under
the same conditions, are used as the fair values.

Management Vision(Note 1) Computational method and related issues
Assets(1) Cash and deposits
Book values are used as fair values because they are nearly equal to such book values.
(2) (3) Notes receivable, accounts receivable from completed construction contracts and accounts receivable—otherBook values for items which are settled in a short-term are used as fair values of these items because they are nearly equal tosuch book values. Fair values of other items are based on the present value discounted by an appropriate discount rate coupledwith the remaining maturity and credit risks.
(4) Investments in securities
Fair value of stock items are based on the market prices and bond items are based on the market prices or their price provided
by financial institutions.

17. INVESTMENTS IN SECURITIESThe acquisition cost, unrealized gain and loss and the related book value of available-for-sale securities with available fair values
as of March 31, 2021 are summarized as follows:
Millions of yen

As of March 31, 2021
Securities whose carrying value exceeds their acquisition costs:
Equity securities
Total

Book value

Acquisition cost

Unrealized gain

¥ 930
¥ 930

¥ 526
¥ 526

¥ 403
¥ 403

As of March 31, 2021
Securities whose carrying value exceeds their acquisition costs:
Equity securities
Total

Book value

Acquisition cost

Unrealized gain

$ 8,400$ 8,400$ 4,751$ 4,751$ 3,640$ 3,640

Thousands of U.S. dollars

Derivative Transactions
See “18. DERIVATIVE TRANSACTIONS”.

Proceeds from and gain on sales of securities for the year ended March 31, 2021 are as follows:

Sustainability Initiatives(Note 2) Financial instruments of which it is extremely difficult to determine the fair value
Unlisted securities that amounted to ¥1,586 million ($14,325 thousand) as of March 31, 2021 and ¥1,572 million as of March
31, 2020 are excluded from the above table because they are deemed extremely difficult to determine the fair values; they do
not have market prices and it is not possible to conduct alternative methods such as the estimation of their future cash flows.

Millions of yen(Note 3) Redemption schedule for monetary assets, and investments in securities with maturities
Millions of yen

As of March 31, 2021
Cash and deposits
Notes and accounts receivablefrom completed construction contracts
Accounts receivable-other
Total

Within 1 year

¥ 97,609

After 1 year
through 5 years¥

After 5 years
through 10 years

After 10 years

¥—

¥—

—

49,6153,763¥ 150,988

1,454
455
¥ 1,909——¥—

Within 1 year

After 1 year
through 5 years

After 5 years
through 10 years

After 10 years

—

$—

$—

13,133
4,109$ 17,243

—
—
$—

—
—
$—

Thousands of U.S. dollars

As of March 31, 2021
Cash and deposits
Notes and accounts receivablefrom completed construction contracts
Accounts receivable-other
Total

78

TOYO ENGINEERING CORPORATION

Integrated Report 2021$

881,663448,152
33,989$ 1,363,815$

Proceeds

Year ended March 31, 2021
Equity securities

Proceeds¥ 39

Gain on sales

Loss on sales

¥ 36

¥—

Thousands of U.S. dollars$ 352

Gain on sales

Loss on sales

$ 325

$—

Impairment of investments in securities
For the year ended March 31, 2021, the Company recognized ¥155 million ($1,400 thousand) of impairment loss on unlisted
securities.
The acquisition cost, unrealized gain and loss and the related book value of available-for-sale securities with available fair values
as of March 31, 2020 are summarized as follows:
Millions of yen

As of March 31, 2020
Securities whose carrying value exceeds their acquisition costs:
Equity securities
Subtotal
Securities whose carrying value does not exceed their acquisition costs:
Equity securities
Subtotal
Total

Book value

Acquisition cost

Unrealized gain

¥ 506
¥ 506

¥ 390
¥ 390

¥ 115
¥ 115

¥ 130
¥ 130
¥ 637

¥ 138
¥ 138
¥ 529

¥ (7)
¥ (7)
¥ 107

TOYO ENGINEERING CORPORATION

Integrated Report 2021

Data Section——¥—

Year ended March 31, 2021
Equity securities792. Derivatives designated as hedging instruments(1) Currency-related

For the year ended March 31, 2021
1. Derivatives not designated as hedging instruments(1) Currency-related

Millions of yen

Main hedged
items

Millions of yen

All notionalamounts

Notional
amounts due
over 1 year

Fair value

Unrealized
gain / (loss)¥ 1,670
1,060
5,252

¥

—
—
1,368

¥ (20)53
28¥ (20)
53
28

1,343
176
¥ 9,50357
32¥ 1,458

46
1
¥ 110

46
1
¥ 110

All notionalamounts

Notional
amounts due
over 1 year

Thousands of U.S. dollars

Fair value

Unrealized
gain / (loss)

Deferral hedge accounting method:
Foreign exchange forward contracts
Selling
USD
EUR
BuyingUSD
EUR
Alternative method:
Foreign exchange forward contracts
Selling
USD
EUR
Buying
USD
EUR
Total

Accounts
receivableandaccounts
payableAccounts
receivableandaccounts
payableAll notionalamounts

Notional
amounts due
over 1 year

¥ 1,901
2,681

¥

—
—

26,492
19,746

329
6,456

9,901
1,156

—
—

1,247
1,981
¥ 65,110——¥ 6,786

Fair value

Computational
method of fairvalue

¥ (120) Based on(38) prices offeredby financial
1,308 institutions

Medium-term Management Plan

Non-market transaction:
Foreign exchange forward contracts
Selling
USD
EUR
JPY
Buying
USD
EUR
Total

977

N/A

Based onforwardexchange
contract prices

Thousands of U.S. dollars$ 15,084
9,574
47,439$——12,356$ (180)478
252$ (180)478
252

12,1301,589$ 85,836

514
289$ 13,169

415
9
$ 993

415
9
$ 993

The fair value is based on forward exchange contract prices.

Main hedged
items

Deferral hedge accounting method:
Foreign exchange forward contracts
Selling
USD
EUR
BuyingUSD
EUR
Alternative method:
Foreign exchange forward contracts
Selling
USD
EUR
Buying
USD
EUR
Total

Accounts
receivableandaccounts
payableAccounts
receivableandaccounts
payableAll notionalamounts$ 17,170
24,216

Notional
amounts due
over 1 year$——

239,291
178,357

2,971
58,31489,431
10,441——

11,263
17,893$ 588,113——$ 61,295

Fair value

Computational
method of fairvalue

Sustainability Initiatives

Non-market transaction:
Foreign exchange forward contracts
Selling
USD
EUR
JPY
Buying
USD
EUR
Total

Management Vision

18. DERIVATIVE TRANSACTIONS$ (1,083) Based on(343) prices offeredby financial
11,814 institutions
8,824

N/A

Based onforwardexchange
contract prices

80

TOYO ENGINEERING CORPORATION

Integrated Report 2021

TOYO ENGINEERING CORPORATION

Integrated Report 2021

Data Section

The fair value of the foreign exchange forward contracts which alternative method is applied, is charged or credited to that ofaccounts receivable and accounts payable, since such foreign exchange forward contracts are accounted together with accounts
receivable and accounts payable.

81

Millions of yen

All notionalamounts¥

Notional
amounts due
over 1 year649
11,313¥

6,219
79¥ 18,260

Unrealized
gain / (loss)

Fair value

23
2,858

¥ (29)
121¥ (29)
12128—¥ 2,911

68
(2)
¥ 158

68
(2)
¥ 158

The Company and certain consolidated subsidiaries have either funded or unfunded defined benefit plans and lump-sum payment
plans and the defined contribution plans.
The Company and certain consolidated subsidiaries provide lump-sum or pension which is based on salary and service timein the defined benefit plans and introduce cash balance-style pension plans in a part of defined benefit plans. In this institution,
hypothetical individual employee accounts which are equal to the source of deposit and pension by each buyer are established.
In these accounts, the interest credit which is based on the movement of market interest rate and the contribution credit which
is based on the salary level, etc. are accumulated. In a part of defined benefit plans, etc., retirement benefit trust is established.
In lump-sum payments plans (part of which becomes funded as a result of benefit trust although the system is unfunded), thelump-sum based on the salary and service time as retirement benefits is provided.
Defined contribution plans and lump-sum payments for certain consolidated subsidiaries are accounted for using the simplified method in which calculates retirement benefit liabilities and retirement benefit expenses.
(1) Changes in defined benefit obligations

The fair value is based on forward exchange contract prices.

Millions of yen

Main hedged
items

All notionalamounts

Notional
amounts due
over 1 year

¥ 2,026923
32,30524,935

2,718
9,819

Accounts
receivableandaccounts
payable

6,005
2,364

337
282

1,819
958
35
¥ 71,373

194——¥ 14,214¥

861—

Fair value

¥

(131)
39
480
(1,152)

N/A

Computational
method of fairvalue

Based onprices offeredby financial
institutions

Based onforwardexchange
contract prices

The fair value of the foreign exchange forward contracts which alternative method is applied, is charged or credited to that ofaccounts receivable and accounts payable, since such foreign exchange forward contracts are accounted together with accounts
receivable and accounts payable.
(2) Interest-related
Millions of yen

Notional
amounts due
over 1 year

Fair value

Computational
method of fairvalue

Accounting method:
Special method forinterest rate swap
Total

Interest swap
Long-term
contracts
loans payable
floating for
fixed rate swap

¥ 7,300¥—¥ 7,300¥—

N/A

Based onprices offeredby financial
institutions

2021

2020

¥ 18,613
886
222
(666)
(1,319)3¥ 17,739¥ 18,764
900
228
155
(1,387)(46)¥ 18,613

2021$ 168,123
8,002
2,005
(6,015)(11,914)27$ 160,229(2) Changes in plan assets
Thousands of
U.S. dollars

Millions of yen

Beginning of year
Expected return on plan assets
Actuarial gains and losses
Contributions by the employer
Benefit paid
Other
End of year

2021

2020

¥ 16,663
467
3,278
500
(1,044)53¥ 19,917¥ 18,198
507(1,271)559(1,137)(194)¥ 16,663

2021$ 150,510
4,218
29,6084,516(9,430)478$ 179,902(3) Reconciliation of defined benefit obligations and plan assets to net benefit liability and asset
The reconciliation of the defined benefit obligations and plan assets to net defined benefit liability and asset recognized in the
consolidated balance sheets as of March 31, 2021 and 2020 are as follows:
Thousands of
U.S. dollars

Millions of yen

Funded defined benefit obligations
Plan assets
Subtotal
Unfunded defined benefit obligations
Net amount of liability and asset recognized in consolidatedbalance sheets
Liabilities (net defined benefit liability)
Assets (net defined benefit asset)
Net amount of liability and asset recognized in consolidatedbalance sheets

2021

2020

2021

¥ 16,616(19,917)(3,300)1,122¥ 17,367(16,663)704
1,246$ 150,085(179,902)(29,807)
10,134(2,177)
1,213(3,391)

1,950
1,950
—

(19,663)
10,956(30,629)

1,950$ (19,663)¥ (2,177)¥

Data Section

Transaction type

All notionalamounts

Beginning of year
Service cost
Interest cost
Actuarial gains and losses
Benefit paid
Other
End of year

Sustainability Initiatives

Accounts
receivableandaccounts
payableMain hedged
items

Thousands of
U.S. dollars

Millions of yen

2. Derivatives designated as hedging instruments(1) Currency-related

Medium-term Management Plan

Non-market transaction:
Foreign exchange forward contracts
Selling
USD
JPY
Buying
USD
EUR
Total

Deferral hedge accounting method:
Foreign exchange forward contracts
Selling
USD
EUR
BuyingUSD
EUR
Alternative method:
Foreign exchange forward contracts
Selling
USD
EUR
Buying
USD
EUR
SGD
Total

Management Vision

19. RETIREMENT BENEFITS

For the year ended March 31, 2020
1. Derivatives not designated as hedging instruments(1) Currency-related

The fair value of the interest rate swaps which special method is applied, is charged or credited to that of long-term loans payable,
since such interest rate swaps are accounted together with long-term loans payable.

82

TOYO ENGINEERING CORPORATION

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TOYO ENGINEERING CORPORATION

Integrated Report 2021

83

Thousands of
U.S. dollars

Millions of yen

2021
Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial gains and losses
Other
Total

2021

2020

¥ 886
222
(467)
(109)
9
¥ 541

$ 8,002
2,005(4,218)(984)
81$ 4,886

¥ 900
228
(507)
34
163
¥ 819

(5) Remeasurements of defined benefit plans

2021

2020

2021

¥ 3,835¥ 3,835¥ (1,391)¥ (1,391)$ 34,640$ 34,640(6) Accumulated remeasurements of defined benefit plans
The unrecognized actuarial gains and losses recognized in accumulated other comprehensive income (amount before income tax
effect) as of March 31, 2021 and 2020 are as follows:
Thousands of
U.S. dollars

Millions of yen

2021
Unrecognized actuarial gains and losses
Total

2021

2020

¥ 3,014¥ 3,014$ 27,224$ 27,224¥ (820)¥ (820)(7) Major breakdown of plan assets
2020

18%
53%
12%
17%
100%

27%
41%
13%
19%
100%

25% and 18% of total plan assets as of March 31, 2021 and 2020, respectively, are included in the retirement benefit trust.
(8) Basis of actuarial calculation
Basis of calculation of projected benefit obligation for the years ended March 31, 2021 and 2020 are as follows:
Discount rate
Expected rate of return on plan assets
Expected salary increase rate

2021

2020

Mainly 0.185%
Mainly 2.5%
Mainly 3.1%

Mainly 0.08%
Mainly 2.5%
Mainly 3.1%

84

TOYO ENGINEERING CORPORATION

Integrated Report 2021

Thousands of
U.S. dollars

Millions of yen

As of March 31,
Deferred tax assets (gross):
Net operating loss carry forwards (*2)
Accounts payable for construction contracts
Provision of allowance for doubtful accounts
Net defined benefit liability
Interest income receivable
Provision for loss on construction contracts
Deferred losses on hedges
Other
Total deferred tax assets (gross)
Valuation allowance for net operating loss carry forwards (*2)
Valuation allowance for deductible temporary differences
Total valuation allowance (*1)
Total deferred tax assets (gross)
Deferred tax assets-Deferred tax liabilities
Total deferred tax assets

2021

2020

2021

¥ 13,135
5,290
2,316
1,106
1,040
93
—
1,920
24,903(13,133)(10,919)(24,053)
849
(323)
526

¥ 13,429
4,475
2,198
1,414
845
89
225
1,859
24,538(13,426)(10,312)(23,738)
799
(319)
480

$ 118,643
47,782
20,919
9,990
9,393
840
—
17,342
224,939(118,625)(98,627)(217,261)
7,668(2,917)
4,751

Deferred tax liabilities (gross):
Undistributed earnings of subsidiaries and affiliates
Valuation difference on available-for-sale securities
Gain on securities contribution to retirement benefits trust
Deferred gains on hedges
Remeasurements of defined benefit plans
Other
Total deferred tax liabilities (gross)
Deferred tax assets-Deferred tax liabilities
Deferred tax liabilities
Net deferred tax liabilities(1,719)
(123)
(656)
(631)
(917)
(316)
(4,365)56(4,309)¥ (3,782)(1,522)
(35)
(652)
(0)
—
(303)
(2,515)106(2,408)¥ (1,928)(15,527)(1,111)(5,925)(5,699)(8,282)(2,854)(39,427)505(38,921)$ (34,161)(Changes in Presentation)
Deferred gains on hedges, which had been included in “Other” under Deferred tax liabilities (gross) for the year ended March 31,
2020, is presented separately for the year ended March 31, 2021 because its materiality has increased.
To reflect this change in presentation, ¥(0) million of deferred gains on hedges which had been previously included in “Other”
under Deferred tax liabilities (gross), was reclassified and presented separately.
(*1) Future deductible temporary differences arising from accounts payable for construction contracts and other have increased,
while net operating loss carry forwards has decreased. As a result of a study of the recoverability of these, total valuation
allowance has increased by ¥315 million ($2,845 thousand) from the end of previous fiscal year.
(*2) A breakdown of net operating loss carry forwards and valuation allowance by expiry date as of March 31, 2021 and 2020 are
as follows:
Millions of yen

As of March 31, 2021
Years ended March 31,
2022
2023
2024
2025
2026
2027 and thereafter
Total

Net operating loss
carry forwards

¥

—
—
14
—
—
13,121¥ 13,135

Valuation
allowance

¥

—
—
(14)
—
—
(13,119)¥ (13,133)

Data Section

Defined contribution plans
The contributions by the Company and subsidiaries to the defined contribution plans were ¥311 million ($2,809 thousand) and¥306 million for the years ended March 31, 2021 and 2020, respectively.

(1) Significant components of the deferred income tax assets and liabilities

Sustainability Initiatives

2021
Components of plan assets
Securities
StocksCash and deposits
Other
Total

The statutory tax rate applicable to the Company and its domestic subsidiaries for the years ended March 31, 2021 and 2020 was
approximately 30.5%. Income taxes of the foreign subsidiaries are based generally on the tax rates applicable in their countries ofincorporation.

Medium-term Management PlanThousands of
U.S. dollars

Millions of yen

Actuarial gains and losses
TotalManagement Vision

20. INCOME TAXES(4) Retirement benefit expenses

Deferred tax
assets

¥—
—
—
—
—
1
¥ 1

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85

Years ended March 31,
2022
2023
2024
2025
2026
2027 and thereafter
Total

$

—
—
126
—
—
118,516$ 118,643

Valuation
allowance

$

—
—
(126)
—
—
(118,498)$ (118,625)

Deferred tax
assets(1) Information by geographical segment based on the locations of projects
Millions of yen

$—
—
—
—
—
9
$ 9

Year ended March 31, 2021
Net Sales

Deferred tax
assets

¥ 2
—
—
—
—
—
¥ 2

Japan

India

Russia

Other

Total

¥ 85,305¥ 28,959¥ 20,001¥ 49,733¥ 184,000

Japan

India

Russia

Other

Total

$ 770,526$ 261,575$ 180,661$ 449,218$ 1,661,999

Year ended March 31, 2021
Property, plant and equipment

Japan

Indonesia

Year ended March 31, 2021
Property, plant and equipmentJapan$ 69,641$ 16,448

Year ended March 31, 2020
Net Sales

Japan

India

RussiaOther¥ 65,060¥ 39,964¥ 17,923¥ 96,146

Year ended March 31, 2020
Property, plant and equipment

Japan

Thousands of U.S. dollars

Year ended March 31, 2021
Net Sales

Millions of yen

Millions of yen

Net operating loss
carry forwards

¥

14
—
—
445
—
12,969¥ 13,429

Valuation
allowance

¥

(12)
—
—
(445)
—
(12,969)¥ (13,426)¥ 7,710

2021

2020

30.5%

2.7%
(0.3%)
0.7%
43.4%(4.7%)(5.9%)(7.1%)(6.9%)
2.2%
8.8%
7.1%
—
—
(0.3%)
70.2%

5.3%(9.7%)
0.5%
3.0%(0.9%)(6.5%)
49.9%(10.0%)(0.2%)
7.9%(15.3%)
2.4%
6.6%(1.3%)
62.2%

Other

Total

¥ 801

¥ 11,638

Thousands of U.S. dollars

India

Other

$ 11,787$ 7,235

Total$ 105,121

Millions of yen

Total¥ 219,094

Millions of yen¥ 7,869

Indonesia

India¥ 2,012

¥ 871

Other

Total

¥ 763

¥ 11,517(Changes in presentation)
Russia, which had been included in “Other” for the year ended March 31, 2020, is presented separately for the year ended March
31,2021 because the corresponding amount exceeded 10% of net sales on the consolidated statement of income for the year
ended March 31, 2021.
Nigeria, Indonesia and Thailand which had been presented separately for the year ended March 31, 2020, are included in“Other” for the year ended March 31, 2021 because the corresponding amounts are below 10% of net sales on the consolidated
statement of income for the year ended March 31, 2021.
To reflect these changes in presentation, ¥17,923 million attributable to Russia for the year ended March 31, 2020, which had
been previously included in “Other,” was reclassified and presented separately, while ¥28,512 million attributable to Nigeria,¥26,841 million attributable to Indonesia, and ¥22,767 million attributable to Thailand for the year ended March 31, 2020, which
had been previously presented separately, are reclassified as “Other” as of March 2020.
India, which had been included in “Other” for the year ended March 31, 2020, is presented separately for the year ended
March 31, 2021 because the corresponding amount exceeded 10% of property, plant and equipment on the consolidated balance
sheets as of March 31, 2021.
To reflect this change in presentation, ¥871 million attributable to India as of March 31, 2020, which had been previously
included in “Other,” was reclassified and presented separately.

Sustainability Initiatives

30.5%¥ 1,305

Indonesia(2) The effective tax rate on income before income taxes in the accompanying consolidated statements of income were not equal
to the above-mentioned statutory tax rate for the following reasons for the years ended March 31, 2021 and 2020.
Years ended March 31,
Statutory tax rate in Japan
Adjustments:
Permanently nondeductible expenses
Permanently nontaxable income
Per capita levy on corporate inhabitant tax
Temporary differences excluded from calculation of deferred tax assets
Difference in tax rates for foreign subsidiaries
Difference in tax base between corporate income tax and enterprise tax
Net operating loss carry forwards etc.
Equity in earnings of affiliates
Adjustment of tax in prior years
Non-income based tax in foreign countries
Undistributed earnings of subsidiaries and affiliates
Changes in tax rate of foreign subsidiaries
Adjustment for consolidation of gain on sales of shares of an affiliate
Other
Effective tax rate

India

¥ 1,821

Medium-term Management Plan

As of March 31, 2020
Years ended March 31,
2021
2022
2023
2024
2025
2026 and thereafter
Total

Management Vision

21. SEGMENT INFORMATION

Millions of U.S. dollars

Net operating loss
carry forwards(2) Information by major clients
Millions of yen

Year ended March 31, 2021
LLC Irkutsk Polymer Plant

Net SalesYear ended March 31, 2021
LLC Irkutsk Polymer Plant

Net Sales

Segment$ 174,663

EPC

Year ended March 31, 2020
Hindustan Urvarak & Rasayan Limited
Indorama Eleme Fertilizer & Chemicals Limited

Net Sales

Segment

EPC

Data Section¥ 19,337

Thousands of U.S. dollars

Millions of yen

86

TOYO ENGINEERING CORPORATION

Integrated Report 2021

¥ 32,855¥ 28,512

Segment

EPC
EPC

TOYO ENGINEERING CORPORATION

Integrated Report 2021

87For the year ended March 31, 2021

1. Related Party Transactions
For the year ended March 31, 2021

Name: Estaleiros do Brasil Ltda.

Millions of yen
Millions of yen

Summary of Transaction
transactions amount

Loan for
operatingfund¥—

Title ofaccount

Accountbalance

Transaction
amountTitle ofaccount

AccountbalanceLong-term
loans
receivable¥ 3,707$—

Long-term
loans
receivable$ 33,483

Category: Affiliate
Address: Brazil
Capital and investments:
58,828 thousands BRL
Business: Construction
Equity ownership percentage:
50% indirectly
Relation with related party:
Loan for operating fundTransaction
amountThousands of U.S. dollars

Title ofaccount

Accountbalance

Transaction
amountTitle ofaccount

Accountbalance

Loan for
operating fund¥—

Short-term
loans
receivable¥ 4,034$—

Short-term
loans
receivable$ 36,437

Repaymentof loan for
operating fund

185

—

—

1,671

—

—
Medium-term Management Plan

Name: NEDL-CONSTRUCOES DE
DUTOS DO NORDESTE LTDA.
Category: Affiliate
Address: Brazil
Capital and investments:
18,270 thousands BRL
Business: Construction
Equity ownership percentage:
42.5% directly
Relation with related party:
Loan for operating fundThousands of U.S. dollars

Summary oftransactions

Management Vision

22. RELATED PARTY INFORMATION

For the year ended March 31, 2020
Millions of yen

Name: Estaleiros do Brasil Ltda.

For the year ended March 31, 2020
Millions of yen

Summary of Transaction
transactions amount

Loan for
operatingfund¥—

Title ofaccount

Long-term
loans
receivable

Accountbalance¥ 3,707

Category: Affiliate
Address: Brazil
Capital and investments:
57,749 thousands BRL
Business: Construction
Equity ownership percentage:
50% indirectly
Relation with related party:
Loan for operating fundTransaction
amountLoan for
operating fund¥—Repaymentof loan for
operating fund884

Accrued interest
income5

Title ofaccount

Accountbalance

Short-term
loans
receivable¥ 5,389——

Note: 1. Interest rate on loan is determined by considering effective market rates.
Sustainability Initiatives

Name: NEDL-CONSTRUCOES DE
DUTOS DO NORDESTE LTDA.
Category: Affiliate
Address: Brazil
Capital and investments:
17,141 thousands BRL
Business: Construction
Equity ownership percentage:
42.5% directly
Relation with related party:
Loan for operating fund

Summary oftransactions

Notes: 1. Interest rate on loan is determined by considering effective market rates.
2. The Company reserved ¥3,707 million ($33,483 thousand) of allowance for doubtful accounts as of March 31, 2021,
against the loan above.
3. The Company reserved ¥3,707 million of allowance for doubtful accounts as of March 31, 2020, against the loan above.

Data Section

88

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89

Management Vision

2. Summary of Financial Statements of Significant Affiliates
For the year ended March 31, 2021, the significant affiliate was TS Participações e Investimentos S.A.
Its condensed financial information is as follows:
Millions of yen

As of and for the year ended March 31,
Total current assets
Total non-current assets
Total current liabilities
Total non-current liabilities
Total net asset deficiencies

2021

2021

¥ 10,833
3,236
9,030
17,493¥ (12,404)$ 97,850
29,22981,564
158,007$ (112,040)¥$ 69,523
6,882$ 5,247

¥

7,697
762
581

Medium-term Management Plan

Net sales
Profit before income tax
ProfitThousands of
U.S. dollars

For the year ended March 31, 2020, the significant affiliates were MODEC and Toyo Offshore Production Systems Pte.Ltd. and
TS Participações e Investimentos S.A.
Their condensed financial information is as follows:
Millions of yen

2020

As of and for the year ended March 31,
Total current assets
Total non-current assets
Total current liabilities
Total non-current liabilities
Total net asset deficiencies¥ 13,627
3,483
31,266
1,864¥ (16,020)
¥
¥

5,270
1,749
1,656

Sustainability Initiatives

Net sales
Profit before income tax
Profit23. AMOUNTS PER SHARE
Yen

As of and for the years ended March 31,
Net assets per share
Income attributable to owners of parent per share

U.S. dollars

2021

2020

¥ 650.52
13.91¥ 544.16
28.40

2021
$ 5.87
0.12

Income attributable to owners of parent per share is computed based on the Income available for distribution to shareholders ofcommon stock and the weighted average number of shares of common stock outstanding during each year.
For the calculation of income attributable to owners of parent per share, the number of Class A preferred stock was included.
Net assets per share are computed based on the number of common stock outstanding and the net assets excluding non-controlling interests and residual assets attributable to Class A preferred stock at the year end.

Data Section

90

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Integrated Report 2021

91

Management Vision
Medium-term Management Plan
Sustainability Initiatives
Data Section

92

TOYO ENGINEERING CORPORATION

Integrated Report 2021

TOYO ENGINEERING CORPORATION

Integrated Report 2021

93

Management Vision
Medium-term Management Plan
Sustainability Initiatives
Data Section

94

TOYO ENGINEERING CORPORATION

Integrated Report 2021

TOYO ENGINEERING CORPORATION

Integrated Report 2021

95

Stock Information (As of March 31, 2021)

Capital Stock Issued

Stock Exchange Listing

Tokyo Stock Exchange

Authorized Shares

Common Shares

Common Shares

Management Vision¥18,198 million

Capital Stock

38,558,507

Class A Preferred Shares 20,270,300
Number of Shareholders

100,000,000

Common Shares

17,125Class A Preferred SharesClass A Preferred Shares 25,000,000

2

Editor’s Note
Thank you very much for paying interest on TOYO’s 2021 Integrated Report.

Major Shareholders

We placed the utmost importance on expressing the enthusiasm of our

1. Common Shares

Custody Bank of Japan, Ltd.
(Sumitomo Mitsui Trust Bank,
Limited Re-trust Account,
Mitsui Chemicals, Inc.
Pension Trust Account)

22.89

14.93

concept of the report.
By letting people know that our medium-term management plan is not

Integral Team Limited Partnership

17,576—29.99

only a managerial goal but also a challenge to the future with the dreams

Innovation Alpha Team L. P.

2,693

—

4.59

and aspirations of all employees working at the TOYO Group. We wish if
the report will help as many of our stakeholders as possible to have expec-

Notes) 1. The shareholding ratio was calculated based on the exclusion oftation and a sense of familiarity with TOYO.

the 226,161 shares of treasury stock.

5,140

13.44

8.77

Medium-term Management Plan

8,754

in the medium-term management plan at the time we started making the

Number Voting rights Percentageof shares
ratio
of total(thousands)(%)(%)

Number Voting rights Percentageof shares
ratio
of total(thousands)(%)(%)

Mitsui & Co., Ltd.

employees who are fully committed to the business strategies outlined

2. Class A Preferred Shares

2. Class A preferred stock do not have any voting rights.

All members of Corporate Communications Department
1,299

3.39

2.21

Taisei Corporation

1,000

2.61

1.70

SSBTC CLIENT OMNIBUS
ACCOUNT

511

1.33

0.87

Sumitomo Mitsui Banking
Corporation

470

1.22

0.80

Custody Bank of Japan, Ltd.
Trust Account 5

402

1.05

0.68

Custody Bank of Japan, Ltd.
Trust Account 6

358

0.93

0.61

Corporate Strategy Division
Toyo Engineering Corporation

Sustainability Initiatives

The Master Trust Bank of Japan, Ltd.
Trust Account

Global Network

Toyo-China
ShanghaiToyo-Korea
Seoul

Toyo-Europe
Milan

Toyo-Japan
Chiba

IKPT
Jakarta

TOYO ENGINEERING CORPORATION

Integrated Report 2021

https://www.toyo-eng.com/jp/en/

TEC Project Services
Chiba

Toyo-Malaysia
Kuala Lumpur

96

Planning & Production: Toyo Engineering Corporation (Securities code: 6330)

Toyo-USA
Houston

Production: IMC Branding, Inc. / Editor-in-chief: Izuru Kako / Editor: Hirotoshi Konuma / Designer: Yoshinobu Iwai / Director: Toru Yamamoto
Photography by Yasuo Mikome, ASAHIDO

TSPISão Paulo

Data Section

Toyo-India
MumbaiToyo-Canada
Calgary

Editing Policy

Caution Concerning Forward-Looking Statements

The 2021 Integrated Report was prepared to provide stakeholders with a better understanding of TOYO’s financial information (such as our management
policies and financial results) and non-financial information (such as businessenvironment and its connections to society). These are based on the Guidance
for Collaborative 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.” Thesestatements are based on management’s current expectations and are subject
to uncertainty and changes in circumstances. Actual results may differ due tochanges in economic, business, competitive, technological, regulatory, and other factors.

TOYO ENGINEERING CORPORATION

Integrated Report 2021

97

TOYO ENGINEERING CORPORATION
2-8-1 Akanehama,Narashino-shi, Chiba 275-0024, Japan
https://www.toyo-eng.com/jp/en2021