Presentation of Results
Half Year, FYE June 30, 2019
February 26, 2019
Nippon Koei Co., Ltd.
Representative Director and President
Ryuichi Arimoto

I:

Accounting Report(July 2018 - Dec 2018, FYE19/6 1H)

1

2Q Results for FYE June 30, 2019
Net sales increased driven by the strong performance of the Domestic Consulting segment.
Operating loss increased due to delays in starting large-scale projects in the International
Consulting segment.

(Millions of yen)

FYE18/6 2Q
Results

FYE19/6 2Q
Results

YoY Change
Amount%39,146

△ 125
7,912

125.3%

9,523

10,215691

107.3%

Operating Income△ 2,597△ 2,344

△ 219
△ 557

-

Ordinary income△ 2,817△ 2,901

Profit attributable toowners of parent△ 1,312△ 2,331△ 1,019-

Orders47,83247,707

Net Sales

31,233Gross profit

99.7%

-

◼ While orders in the International Consulting and Power Engineering segments declined, the Domestic Consulting
and Urban & Spatial Development segments performed well. As a result, total orders remained at the same level
as the previous year.
◼ Net sales increased year on year due to sales growth in Domestic Consulting and also due to a rise in the
proportion of projects to which the percentage-of-completion method is applied.
◼ For operating income, loss was reduced in Domestic Consulting and profit increased in Power Engineering
segment. However, because of the reduced profits in other businesses, operating loss increased year on year.
◼ Profit attributable to owners of parent declined compared with the previous year, in which there was an
extraordinary gain on the sale of real estate.
2Consolidated Profit and Loss Summary (FYE 19/6 1H)
Selling, general and administrative expenses increased due to investment for growth, e.g., labor costs.

(Millions of yen)

FYE18/6 2Q
Results

YoY Change

FYE19/6 2Q
Results

Amount%Orders47,832(as a percentage
of sales)

47,707(as a percentage
of sales)

△ 125

99.7%

Net sales

31,233100.0%

39,146100.0%

7,912

125.3%

Cost of sales

21,70969.5%

28,930

73.9%

7,220

133.3%

Gross profit

9,523

30.5%

10,21526.1%

691

107.3%

SG&A

12,121

38.8%

13,03333.3%

911

107.5%

Operating income△2,597△8.3%△ 2,817△ 7.2%

△ 219

-

253

0.8%

△ 84

△ 0.2%△ 337-△2,344△7.5%△ 2,901△ 7.4%

△ 557

-

787

2.5%

-

-

△ 787

-

△1,312△4.2%△ 2,331△ 6.0%△ 1,019-

Non-operating
income / expenses
Ordinary income
Extraordinary
income/loss
Profit attributable toowners of parent

3

Profit/Loss Analysis
Increase in sales due togrowth in Domestic Consulting
and a change in the basis forrecording sales■Profit factor ■Loss factor

Cost increase comingfrom higher cost ratio(Millions of yen)

Increases in laborcosts, etc.

+2,413

Previous year’srecording of profit fromthe sale of fixed assets△1,721△382△911△1,312△338+ 320△1,276△2,331+ 489

FYE 18/6 2Q
Net Loss

Gain onSales

Cost of
Sales

General andNonadministrative operating
expenses
incomeExtraordinary Extraordinary Taxes and FYE 19/6 2Q
incomelossesother
Net Loss4

Balance sheet••••

In the current assets section, trade accounts receivable increased with further progress in shifting to
the percentage-of-completion method
Investments and other assets decreased as a result of the sale of investment securities
Current liabilities increased due to an increase in short-term borrowings
Net assets declined due to current loss and dividend payment, etc.

(Millions of yen)

FYE18/6
Results

FYE19/6 2Q
Results

Amount

113,890122,072

8,182

Current assets

54,26363,909

9,645

Property, plant and equipment

27,62427,961

337

Intangible assets

12,964

12,106△858

Investments and other assets

19,03718,095△942

Liabilities

54,44067,04912,609Current liabilities

28,441

43,161

14,720Non-current liabilities

25,99923,887△2,111

Net assets

59,44955,022△4,426

Assets5Cash Flows• For net cash from operating activities, negative cash flow was reduced due to increases/decreases intrade receivables/payables• Net cash from investing activities declined year-on-year due to the previous year’s recording of a gainon the sale of land.
• Net cash from financing activities increased due to an increase in short-term borrowings(Millions of yen)

FYE18/6 2Q
Results

FYE19/6 2Q
Results

YoY

Net cash provided by (used in)operating activities△15,319△13,816

1,502

Net cash provided by (used in)investing activities

2,504

△310

△2,814

Net cash provided by (used in)financing activities

6,833

14,636

7,803

Net increase (decrease) in cash
and cash equivalents△5,848335

6,184

Cash and cash equivalents at theend of period

11,234

15,5694,334
6

Results by Business Segment (Orders/Net Sales)(Millions of yen)OrdersDomestic Consulting
International Consulting
Power Engineering
Urban & Spatial Development
EnergyNet sales
Domestic Consulting
International Consulting
Power Engineering
Urban & Spatial Development
EnergyReal Estate/Others

Operating Income
Domestic Consulting

International Consulting
Power Engineering
Urban & Spatial Development
EnergyReal Estate/Others

FYE18/6 2Q
Results
47,832
21,675
14,197
6,598
5,356
31,233
6,335
12,731
5,608
6,209
349
△ 2,597△ 3,172
1,397
240
△ 10
△ 1,053

FYE19/6 2Q
YoY Change YoY
Change(Millionsof yen)Amount%Results
47,70799.7%△125
23,471
1,795
108.3%
11,56981.5%△ 2,627
4,568
69.2%△ 2,0307,824
2,467
146.1%
225
225
39,146
7,912
125.3%
14,071
7,736
222.1%
10,68583.9%△ 2,0456,718
1,110
119.8%
6,761
551
108.9%
364
364
543
194
155.8%△ 2,817△ 219
1,182△ 1,990△ 72△ 1,470519
279
216.4%
△ 21
△ 11
△ 113
△113
△ 1,139△86
7

Domestic Consulting◼
◼
◼

Orders exceeded the level recorded a year earlier, because large contracts were awarded by municipalities, and because of strong
orders for projects in the private sector.
Net sales increased due to strong orders in the current period as well as a rise in the proportion of projects to which the percentage-ofcompletion method is applied.
Operating loss was reduced with an increase in net sales.

FYE18/6 2Q
Results(Millions of yen)Orders

21,675(as a percentage
of sales)Net sales

6,335
5,343
991
4,163
△3,172100.0%
84.4%
15.6%
65.7%
△50.1%

Cost of sales
Gross profit
SG & A
Operating income◼ Orders
23,951
23,471
21,675◼ Net sales

YoY Change

FYE19/6 2Q
Results◼ Operating income

14,071

6,335
4,237△1,990△3,172△3,482

Amount%23,471(as a percentage
of sales)

1,795

108.3%

14,071
11,652
2,419
4,409△1,990100.0%
82.8%
17.2%
31.3%
△14.1%

7,736
6,308
1,427
245
1,182

222.1%
218.1%
244.0%
105.9%-

Progress of business strategy➢ Won several contracts worth 100 million yen or above each asa result of successful promotional activities towardmunicipalities. For NK alone, orders from municipalities
increased by 20% year-on-year.
➢ Orders for high-margin, competitive tender projects remainedat the same high level as the previous year.
➢ According to the November 2019 Dynamics Survey of 50 major
companies conducted by the Ministry of Land, Infrastructure,
Transport and Tourism, NK has a 6.6% market share of theJapanese market, an increase of 0.3 pts year-on-year.
➢ CIM-related business has increased. Actively make proposals
to orderers.
8Project Case Study / Domestic Consulting
Development of a flood forecasting system in the Chugoku region
Orderer
Contract value

River Department, Chugoku Regional Development
Bureau250 million yen

Summary of
project• Building of a flood forecasting system for the first-classriver systems (12 river systems) in the Chugoku region

Map indicating
relevant river systems• Improve forecasting accuracy by employing new
methods for flood forecasting, including using data on
water levels measured at many locations and applying
the particle filter-based data assimilation method
Source: Chugoku Regional Development Bureau

Western Japan heavy rain disaster recovery project
Orderer

Contract value
Summary of
project

Chugoku Regional Development Bureau; Hiroshima
Prefectural Government; Higashihiroshima City
Government; and Kurashiki City Government
280 million yen (in total)• A series of activities to address the heavy raindisaster in July 2018
• Planning, design and construction for restoration of
the Oda River in the Takahashi River system, whichflooded into Mabi, Okayama Prefecture. Investigationof damage, preparation of damage assessment
documents and design that cover hundreds oflocations in Hiroshima Prefecture that were affectedby river and landslide disasters* Activities under way are also included.

Source: Chugoku Regional Development Bureau
9International Consulting◼
◼
◼

Orders fell below the level a year earlier, because of a lag in the timing of receiving an order for a large-scale project and also because ofdelays in tender invitations for JICA projects.
Net sales declined year on year, because the months under review comprise a period between two phases of a large-scale project andalso because there was a lag in the timing of receiving an order.
Operating loss was posted as a result of a lower operating rate due to a lag in the timing of receiving an order, in addition to a decline in
net sales.

FYE18/6 2Q
Results(Millions of yen)Orders

14,197(as a percentage
of sales)Net sales

12,731
8,986
3,745
2,347
1,397

100.0%
70.6%
29.4%
18.4%
11.0%

Cost of sales
Gross profit

SG & A(Millions of yen)

Operating income◼ Orders◼ Net sales
12,73122,229Amount%11,569(as a percentage
of sales)△ 2,627

81.5%

10,685
8,107
2,578
2,650
△ 72

100.0%
75.9%
24.1%
24.8%
△0.7%

△ 2,045△ 878△ 1,166303△ 1,470

83.9%
90.2%
68.8%
112.9%-◼ Operating income Progress of business strategy
1,397

10,685
14,197
11,569YoY Change

FYE19/6 2Q
Results

7,959
201
△72

➢ Orders for projects in the railway sector, one of our priority
investment areas, grew by 167% year on year; however, afurther increase will be needed to achieve the plan.
➢ For the development and nurturing of local engineers, theassignment of such engineers to NK’s projects is being
conducted steadily, standing at 50% of the level set in theannual plan.
➢ A task force has been formed to ensure the thoroughimplementation of risk management.
➢ Enhanced approaches to non-ODA related businesses, suchas concession business
10

Project Case Study / International Consulting
Peru: Yellow Line (Road) Project
Location

Lima, Peru

Contract
2010-2018
construction
periodContract value approx. 1,800 million yen
Parties
involved
Summary of
project

Trujillo Bridge

JV of Nippon Koei LAC and Nippon Koei;
engineers seconded from Nippon Civic
Consulting Engineers Co., Ltd.
• Engaged in design, review, construction
supervision and management, as well as
project management, as a consultant for
the Lima Municipal Government, which isthe concession project supervisor• Total distance: 18.45 km (new road
length: 9 km, widened road length: 9.45km)(including the 2 km length of tunnels
and 13 raised intersections)• In order to construct a tunnel underneath
the Trujillo Bridge, a historical structure
built in 1610, the stone bridge needs to be
maintained through a construction methodthat prevents the subsidence of the landon which the existing structure is located.

11

Project Case Study / International Consulting
Pakistan: Dasu Hydropower Project
Location

Pakistan
Kohistan District in Khyber Pakhtunkhwa Province

Contract
2011–2023
construction
periodContract value approx. 3,600 million yen
Parties
involved

JV of five companies: Nippon Koei (lead firm),
DOLSAR (Turkey), and three local companies

Summary of
project• A large-scale dam that is unparalleled in the world.
The project is led by the Water and Power
Development Authority (WAPDA).
• The dam is planned to be constructed on themain stream of the Indus River, and will belocated 350 km north of Pakistan’s capital,
Islamabad, and 7 km upstream from Khyber
Pakhtunkhwa Province.

Main body ofthe dam

Location of the dam seen from the lower river• Consultants are engaged in detailed engineering,bidding support, as well as construction
supervision and management.
• Height of dam: 242m
• Power generation capacity: 4,320MW (360MW x
12 units)• RCC gravity dam, an underground power supply
type

A 3D model of the dam and topography
12Power Engineering◼
◼
◼

Compared with the previous year, in which contracts for large-scale projects were awarded, orders for the period underreview declined, but still remain at the planned level.
Net sales increased as the abundance of outstanding orders received through the previous year were recognized as sales.
Operating income increased due to sales growth.
FYE18/6 2Q
Results(Millions of yen)Orders6,598(as a percentage
of sales)Net sales

5,608
3,859
1,749
1,509
240

100.0%
68.8%
31.2%
26.9%
4.3%

Cost of sales
Gross profit
SG & A(Millions of yen)

Operating income◼ Orders◼ Net sales
7,738

6,690 6,598

6,718
5,608

YoY Change

FYE19/6 2Q
Results◼ Operating income

Amount%4,568(as a percentage
of sales)△ 2,030

69.2%

6,718
4,727
1,991
1,472
519

100.0%
70.4%
29.6%
21.9%
7.7%

1,110
867
242

119.8%
122.5%
113.8%
97.5%
216.4%△37
279

Progress of business strategy➢ Tokyo Electric Power Company increased competitive bidding
projects for its substation facilities, among contract awarding
methods. As it was difficult to win contracts, we made a positive
shift to making proposals by capitalizing on our strengths.

1,442

4,568
519
240

➢ The mechanical and electrical consulting business performed
well, with accelerated expansion into overseas markets.
➢ In response to price competition and requests for cost-cutting,continued efforts to review designs and specifications and toensure efficient operations.

13

Project Case Study / Power Engineering
Project for replacement of remote monitoring and control
equipment, etc. at Shinkeiyo Substation
Orderer

TEPCO Power Grid

Summary of
project• NK had been engaged in many engineering
projects for the Shinkeiyo Substation, including
new construction, construction and updating work.
Our track record was highly recognized, which led
to the awarding of the contract.
• Full updating of the remote monitoring and control
equipment in the high-voltage substation of over
500 kV, for purposes of maintaining functions andimproving electric supply reliability
The remote monitoring and control equipment before
replacement work

Hotokebara Dam control system update project
Orderer

Hokuriku Electric Power Company

Summary of
project• Updating of a unit of systems in the Hotokebara
Dam in Fukui Prefecture, for monitoring andcontrolling the water discharge facilities (gates,
bulbs, etc.) and for supporting proper operation• The systems are capable of intensive monitoring
and control from the administration office near thedam and also from remote control points. Aiming todevelop a function to display guidance informationfor error-free dam operation• Completion is scheduled for March 2019

Dam control system
14

Project Case Study / Power Engineering
Pacifico Energy Bizen Mega Solar Project
Summary of
project• Won a contract for owner engineering services for the Bizen
Mega Solar Project (electricity generation capacity of 112
MW) at the former site of a golf course in Wake District,Okayama Prefecture• As an engineer for the operator, provide support in design,
supervision and management of construction work as well as
assessment of electricity generation efficiency.
• Construction commenced in August 2018, and commercial
operation is scheduled to be launched in around the spring of2020

Project site (source: Pacifico Energy)

Improvement plan for the Philippines Bicol River Flood
Forecasting and Warning System
Location

Bicol Region, Southern Luzon in the Philippines

Contract
construction
periodOrder value
Parties involved

November 2011–February 2019 (to be delivered)

Summary of
project

approx. 150 million yen
This plan is led by Power Engineering Operations, whichcollaborates with overseas business units.
• An ODA project for the Philippine Atmospheric, Geophysicaland Astronomical Services Administration• Engaged in preliminary investigations, detailed engineering,bidding support, as well as construction supervision andmanagement with respect to a flood forecasting and warning
system consisting of rain gauge stations, water levelmeasurement stations, and microwave wirelesstelecommunications lines, for the purpose of reducing flood
damage in the Bicol River Basin

Flood forecasting and warning system

15

Urban & Spatial Development◼
◼
◼

Orders were strong with a contract officially awarded for the Palace of Westminster project.
Net sales increased from the previous year due to progress in the Palace of Westminster-related operations, among others.
Operating loss expanded due to anticipatory costs, such as an increase in labor costs.
Note: Amortization and depreciation for FYE June 2019 stood at approx. 1,000 million yen (good will: 400 million yen, otherintangible fixed assets: 500 million yen).
FYE18/6 2Q
Results(Millions of yen)

YoY Change

FYE19/6 2Q
Results

Amount%Orders5,356(as a percentage
of sales)

7,824(as a percentage
of sales)

2,467

146.1%Net sales

6,209
3,346
2,862
2,873
△10

100.0%
53.9%
46.1%
46.3%
△0.2%

6,761
3,861
2,900
2,922
△ 21

100.0%
57.1%
42.9%
43.2%
△0.3%

551
514
37
49
△11

108.9%
115.4%
101.3%
101.7%-

Cost of sales
Gross profit
SG & A
Operating income(Millions of yen)

◼ Orders◼ Net sales

7,824

5,993

6,209

6,761

◼ Operating income* The exchange rate applied to actual results for FYE June 2019: 1￡=144.61 yen (The exchange rateapplied in the plan for FYE June 2019: 1￡=149.17 yen / The exchange rate applied to actual resultsfor FYE June 2018 Q2: 1￡=148.37 yen)

Progress of business strategy
76➢ The Palace of Westminster refurbishment
project has progressed.

5,555 5,356➢ Partnership with a Canadian architecturaldesign firm → P.28
△10

△21

➢ As a result of promotional activities toward
ASEAN, the NK Group is currently working on
13 projects → P.31
16

Project Case Study / Urban & Spatial Development
Refurbishment of the Palace ofWestminster
Orderer

British parliament

Summaryof project• Overall architecturaldesign tasks for majorrenovation of the
Palace of Westminster• The project planconsists of plans forStages 0–7, and abasic plan is currently
being implemented inStage 1.
• Cumulative orders
received up to February
2019 amounted tomore than approx.
4,000 million yen.

17

Project Case Study / Urban & Spatial Development
Cavendish III Physics Laboratory
Orderer

The University of Cambridge

Contract
value
Summaryof project

500 million yen• Construction of a physics laboratory forworld-leading research on the premises of
the University of Cambridge• BDP’s facility design, structural analysis,
and sound teams are participating in the
project

National Children’s Hospital, Dublin, Republic of
IrelandOrderer

Contract
value
Summaryof project

National Pediatric Hospital Development
Board
Irish Government
2,900 million yen(cumulative value of orders received by BDP)

• A central facility in Ireland for pediatrichealthcare• BDP has been engaged in basic planningand basic design since 2014, and continues
to work on the project through design
execution• Scheduled to be completed in 2022
18

Energy◼ Orders for renewable energy (solar) monitoring services, etc.
made progress.

◼ Net sales include revenue from monitoring services andelectric power sales in the Domestic Power Generation
business.
◼ There was operating loss due to anticipatory costs for theInternational Energy Management business.
Energy business areas/progress

Renewable energy monitoring/consulting services for rationaluse of energy

Power engineering
Production
PlantsConstruction
Energymanagement

Domestic energy management

Transferredin FYE18/6

Orders

Net sales
Cost of sales
Gross profit
SG & A
Operating income

FYE19/6 2Q
Results(as a percentage
225
of sales)364
100.0%
293
80.4%
71
19.6%
184
50.5%
△113
△31.0%

International energy management
Ancillary and otherservices, investment➢ Won two contracts for an extra high-voltage
power plant monitoring system (a track recordof five contracts)➢ Introduced a battery energy storage system in
R&D Center; currently working on the VPP
demonstration project funded by METI

➢ Working on two projects for battery storage EPC
services in the UK in collaboration with NEC ES➢ Established an SPC with Belgian company Yuso
BVBA, and projects are being developed

Domestic power generation

International power generation

Development andConsolidated
operation of hydropower
in FYE18/6

Group
company
KOEI Energy(Millions of yen)facilities in Japan➢ Seven hydropower plants are in operation in
Japan, while two plants are under construction➢ Won a contract for a power generation facility
with a spiral water turbine, which is underconstruction

Development andoperation of power
facilities abroad➢ Development of a small hydropower generation
facility in the Cikaengan River Basin, Indonesia➢ Working on the Biomass Fuel Power Generation
Project in Mindanao, Philippines
19

Project Case Study / Energy
Project for Introduction of a Small Hydropower
Generation Facility in Midori Dam
Orderer
Contract
value
Summary of
project

Hokkaido Government Okhotsk General Subprefectural
Bureau760 million yen• A project for constructing a small hydropower
generation facility (with an output of 500 kW) in an existing
agricultural dam (Midori Dam) situated in Kiyosato,
Hokkaido• By emphasizing our technical capabilities and proventrack record, we won a contract in the form of a
package contract consisting of three phases, i.e.,engineering, procurement and construction (EPC)• Collaboration of three segments: Domestic Consulting(Sapporo branch), Power Engineering, and Energy• Scheduled completion date: May 2021

Solar power plant monitoring system
Contract
value
Summary of
project

46 million yen• Won a contract involving a solar power station
monitoring system for a large-scale solar power plant(with a maximum capacity of approx. 37 MW) built on
the former site of a golf course named Fukushima
Ishikawa Country Club• Deliver the monitoring system, deploy engineers, andimplement monitoring services• The largest monitoring system for an extra high-voltage
power plant among similar systems awarded to NK
An image of the monitoring display
20

II: FYE 19/6 Forecast

21

FYE June 2019 Forecast(Millions of yen)OrdersDomestic Consulting
International Consulting
Power Engineering
Urban & Spatial Development
EnergyNet sales
Domestic Consulting
International Consulting
Power Engineering
Urban & Spatial Development
EnergyReal Estate/Others

Operating Income
Domestic Consulting
International Consulting
Power Engineering
Urban & Spatial Development
EnergyReal Estate/Others
Ordinary Income
Profit attributable to owners of parent
Operating margin (%)
ROE (%)

No changes have been made to the forecast for
the entire FYE June 2019 period.

FYE 18/6
Results
104,350
48,52926,716
15,943
12,855
179
106,023
46,59528,88915,762
13,040
354
1,381
6,561
4,279
2,649
1,873
173
△ 18
△ 2,396
6,721
4,555
6.2
8.1

FYE19/6
Forecast
125,000
46,00044,00014,00016,0004,000
115,000
44,00031,00020,00016,500
2,500
1,000
6,200
3,500
2,400
2,600
600
△ 100
△ 2,800
6,100
4,100
5.4
6.9

YoY Change
Amount20,649△ 2,529
17,283△ 1,943
3,144
3,820
8,976
△ 2,595
2,110
4,237
3,459
2,145
△ 381
△ 361
△ 779
△ 249
726
426
△ 81
△ 403
△ 621
△ 455

YoY Change%
119.8%
94.8%
164.7%
87.8%
124.5%
2,228.6%
108.5%
94.4%
107.3%
126.9%
126.5%
704.6%
72.4%
94.5%
81.8%
90.6%
138.8%
345.2%
90.8%
90.0%

22

FYE June 2019 Forecast
Overall

The overall plan will be achieved with the strong performance of theDomestic Consulting and Urban & Spatial Development segments, although
there remain uncertain factors regarding the achievement of the profit planfor the International Consulting and Power Engineering segments

Domestic
Consulting• With the budget for National Resilience totaling 7 trillion yen (throughFY2021), orders will increase• Make efforts to win large-scale/important projects

International
Consulting• Seek to ensure that large contracts are won as market conditions arefavorable

Power
Engineering• In the second half, it is hoped that large-scale projects will progress, while
there is a concern that profitability may decrease for projects involving
major clients

Urban & Spatial
Development• The Westminster-related business and healthcare projects make progress• A positive outlook owing to the addition of Canadian firm Quadrangle

Energy• The European base begins full operation in April 201923

III: Progress of Priority Investment
Areas in the Medium-termManagement Plan

24

Medium-term Management Plan "NK-Innovation 2021"(FYE19/6 - FYE21/6)
In the first half of FYE June 2019, full operation of the railway business was commenced in Bangladesh, while the addition of a
Canadian architectural design firm to the Group generated positive effects
Business strategy
Enhancement ofoperating system
for Railways
Business

Overseas expansion
of Urban & Spatial
Development
Business

Key initiatives● Develop and strengthen the production system in alliance, etc., with local companies●● Improve project management ability by further evolution of IT tools●●●Strengthen technological abilities of regional engineers with teaching materials from the head office and theimplementation of OJT● Develop a cooperative structure between the NK Group and BDP local subsidiaries (Singapore, India and China) to
win urban development projects in Asia and specific projects● Strengthen the superiority and uniqueness in smart city development by accumulating track records of projects
combining civil engineering and architecture●●●●Construct cooperative structures with each segment and R&D Center led by domestic divisions for theacceleration of global expansion utilizing domestic know-ho

Initiatives in FY2019• Winning large-scale
projects in
Bangladesh
Establishment of a
local subsidiary• Acquisition of sharesin a Canadianarchitectural design
firm• Expansion of projects
in Asia● Engage in investment and business in Europe where liberalization of electric power is under way to accumulate theknow-how for energy management in anticipation of electric power system reform●●●Construct a supply chain by securing overseas manufacturing bases of water power products

Establishment ofEnergy Business●● Develop products by international standards (mainly equipment for transformer substations)• Establish abusiness base inEurope●●● Develop and operate distributed power sources in Japan and Asian region●●● Reinforcement of domestic management base and support for the promotion of global strategies
Creation of businesses
and overseas
expansion ofConsulting Business

Product
development andoverseas
expansion ofPower Engineering
Business● Promotion of priority business areas(Disaster-prevention/mitigation. Modal connect, local/urban revitalization,
information/energy areas)●Creation of new businesses centered on management techniques to improve the value of infrastructure●Expansion of machine/electricity consulting business by offering services relating traffic transportation andmaintenance/management, etc.
●●● Achievement of synergies through cooperation with other segments● Reinforcement of price competitiveness and improvement of productivity in existing business areas● Domestic Consulting● International
Consulting● Power Engineering● Urban & Spatial
Development● Energy● R&D, Head Office25

Priority investment area (1)Enhancement of operating system for Railways Business
Market trends
World population

Proportion of urban population

7.6 billion in 2018▼
Expected to reachapprox. 9.8 billion by
2050*

55% at present▼
Expected toreach 68% by
2050**

Characteristics of railway business consulting
operations• Cover a wide range of
specialty areas
Civil engineering (elevated/underground structures, tunnels, bridges, land
formation), architecture (design, structure), architectural equipment,
operational planning, demand forecasting, tracks, signals,
telecommunications, etc.

• A large number of personnel are needede.g., 87 people engaged in designing the Dhaka MRT Line 1; 93 inconstruction supervision and management for the Cairo Metro Line 4* World Bank data** United Nations World Urbanization Prospects: The 2018 Revision• The global consulting market is stable and its market size
stands at approx. 7.5 trillion yen a year.
• Japan’s ODA loans stand at approx. 1.5 trillion yen a year.
Its ODA loans to the transportation sector have increased. It
is hoped that the amount of loans provided to the railway
sector and to the transportation sector as a whole willremain at approximately 500 billion yen and 1 trillion yen,respectively.

Production systemenhancement measures

The team ofengineers
working on the
Dhaka MRT Line
6 project• Significant workload for detailed engineering
e.g., 15,000 pages of drawings and 60,000 pages of structural
calculation sheets for the Cairo Metro Line 4• Increase and develop own personnel, and enhance management capabilities• Increase in personnel from outsourcing companies• Collaboration among overseas segments and with other segments/Group companies• Business partnerships with other companies

Under the Medium-term Management Plan, the railway business sales target for FYE 21/6 is 8.8 billion yen, an
increase of 50% in three years.
26

Priority investment area (1)Enhancement of operating system for Railways Business
Won a contract for the Dhaka Mass Rapid Transit Development Project (Line 1) in
Bangladesh
A contract for the Dhaka MRT Development
Project (Line 1) was awarded to a joint venture
formed by seven companies including the NKGroup.
BIM is utilized for detailed engineering.

International airport

Purbachal

Total distance:
approx. 28 km
Total number of stations: 19 (provisional figure)
Project period:
Nov. 2018–Jun. 2022
Contract value:
approx. 3,200 million yen for the
NK Group(total: approx. 5,250 million yen)

Establish a local corporation in Bangladesh
Established in September 2018. We are proactively
developing human resources and nurturing local
engineers so that they can develop into international
engineers.

Kamalapur

Recent Projects in Bangladesh for which aContract Was Awarded★＝railway projects included

Project nameService period

Order
value

Dhaka Mass Rapid Transit (MRT) Development Project (Line 1) ★

Nov. 2018–May 2022

3,117

Small-scale Water Resources Development Project (Phase 2)

Nov. 2018–Dec. 2023

556

Local Administration Enhancement ProjectJan. 2018–Jun. 2021

40

Expansion Project for Existing Airport in Dhaka

Apr. 2017–Apr. 2021

2,258

Project for Construction of New Airport in Dhaka

Jul. 2016–Mar. 2019

1,307

Matarbari Ultra Super Critical Coal-fired Power ProjectJan. 2015–Dec. 2023

1,508

National Transmission Network Development Project

Dec. 2013–Jun. 2019278

Dhaka Mass Transit Development Project ★

Nov. 2013–Apr. 2023

3,722

27

Priority investment area (2)Overseas expansion of Urban & Spatial Development Business
Added a Canadian architectural design firm to the NK Group in February 2019 with an aim to
expand markets outside the UK
Method ofacquisition

BDP’s local subsidiary in Canadaacquired a 49% share in Quadrangle

Location

Toronto, CanadaYear offoundation

1986

Number of
employees

approx. 200

Medium-term Management Plan sales
forecast for Urban & Spatial Development
Quadrangle’s strong areas• Multifunctional high-risebuildings• Broadcasting facilities• Universal design• Interior design

BDP’s strong areas• Large-scale urban
development• Healthcare facilities• Educational facilities• Repair of historical structures

To be included in the
consolidated financial
statements for FYE 2019/6
Q3 (5 months)(in 100 million yen)

35 expected from
Quadrangle+ Creation of synergy

230

165

Expansion of businesses in both Canada and the UK throughthe combination of the two companies’ strengths

Proportion of BDP’ssales outside the UK

FYE 18/6

FYE 20/6

14%

30%
28

Priority investment area (2)Overseas expansion of Urban & Spatial Development Business
Track record of Quadrangle Architects Limited

Characteristics of theCanadianmarket• Has many similarities to the UK in terms of businesspractices• PPP and concession business are thriving• Construction demand is strong, with a significant
number of high-rise building construction projects

Studio Towers on RichmondTorontoYonge and Gerrard,
Toronto29

Priority investment area (2)Overseas expansion of Urban & Spatial Development Business
Track record of Quadrangle Architects Limited

Valhalla Urban Community
TorontoCompletion: 2025

100 Broadview Avenue
Toronto2016

80 Atlantic Avenue
Toronto2019

Samsung Electronica
Toronto201730

Priority investment area (2)Overseas expansion of Urban & Spatial Development Business
The NK Group, including BDP, is currently working on 13 projects in Asia
Philippines: development of MRT station building (private)
NK/BDP/Philkoei International Inc.

Thailand: Development ofareas surrounding rapid transit
stations
NK/BDP/Tamano Consultants/
Thai Koei

India: Smart Cities Development ProjectNK India/BDP India

31

Priority investment area (3)Establishment of Energy Business• The U.S. and Europe are ahead of the rest of the world in the ancillary power storage business and the mini grid VPPbusiness
Market• In Asia, energy storage, distributed power source and other related businesses are in progress
environment • In Japan, preparations are being made toward the goal of separating power transmission from power generation in
2020, but at present, the situation is not clear

Establishing a business base in Holland for theenergy business in Europe

NIPPON KOEI ENERGYEUROPE B.V.(NKEE)

Key activities

RotterdamUK• Establishment of energy business in Europe• Business development and sales promotion aimed at
project formation• Provision of information toward the development of power
storage business in Asia and Japan• EPC services, etc.

Belgium

To build a track recordin Europe

Steps for businessdevelopment

FYE 18/6

Provide ancillary services to
National Grid of the UK throughour product (NK-EMS)FYE 19/6

Investment inGore Street
Capital(renewableenergy fund)Develop 25 MW
electric power
storage systembusiness with
Yuso

Participate inbattery storage
EPC projects
together with
NEC ESFYE 20/6

Establish abusinessbase inEuropeMake achievements in the energy business in Europe, acquire relevant know-how and build a
network in the industry

Develop projects in theenergy storage systembusiness, regulation,
establish a profit
structure through multiple
services such as
operational know-how

Develop theenergy storage
and distributed
power source
business in Asia
and Japan
32Technology / Human Resources
Technology
Promotion of company-wide technology strategies• Steadily making progress. For the 10 themes in the third year after the launch, an assessment of possible continuation will be
carried out, by taking into consideration the level of progress, information sharing and collaboration status, business status,
etc.

Development of critical next-generation technology
AI-based flood forecasting model

Satellite monitoring of infrastructure deterioration

水位・雨量
レーダー雨量7レーダー雨量6レーダー雨量5レーダー雨量4レーダー雨量3
レーダー雨量2
レーダー雨量18 channels

3 channels
RG

B

heightwidth
一般的な画像の入力データ構造

heightwidth
水位予測の入力データ構造

Won a contract for AI-based river technology development
services.
(led by Kyushu Technology Office of the Ministry of Land,
Infrastructure, Transport and Tourism; and R&D Center of
Nippon Koei)

This is a system that allows for efficient monitoring of
infrastructural deterioration through the use of Earth observation
satellites. As a result of demonstration experiments conducted on
the banks of first-class rivers, the system was determined to havereached a level for practical use.

Human Resources
Human resources programs••

Existing training programs are being operated smoothly, and new programs for skill improvement are to be launched.
For overseas group companies, E-Learning contents will be distributed beginning in April 2019.
33

Capital Policy/Dividend Policy
Dividend policy— Dividends (yen)⚫ Pay dividends steadily for intended payout
ratio of 30% and enhance returns for
Dividshareholders in a manner commensurate
endwith rising levels of income— Payout ratio (%)

polic✓ Planning to pay a dividend of ¥75.0 for FYE 18/6.
y*Past dividends are recalculated based on the ratio after share consolidation.

Capital policy•

Enhance corporate value through the improvement of capital efficiency and businessexpansion by making investments for future growth

Capit
al
Securing of
Policyfinancial

Enhancementof corporate
valuesoundness

Investments for
future growth

Improvement of
capital efficiency

Stable dividends/
enhancement ofshareholder return34

Act with integrity and contribute to society through technology and engineering.

This material is for information purposes only and is not intended to solicit any action. Nippon Koei prepared this material(including earnings forecast) based on credible information available at the time of publication and on certain
assumptions we deemed reasonable at the time. Actual business results, etc. may vary substantially due to various
factors.

For inquiries about our IR information, please contact:
Corporate Communication Office, Corporate Planning Dept., Nippon Koei Co., Ltd.
03-5276-2454
35

IV: References

36Corporate Profile◼Corporate NameNIPPON KOEI CO., LTD.
◼Date of Foundation
June 7, 1946
◼Capital¥7,437 million◼Number of Employees 4,923 (consolidated)◼Consolidated Subsidiaries 62◼Businesses Domestic Consulting
International Consulting
Power Engineering
Urban & Spatial
Development
Energy◼Management Philosophy
Act with integrity and contribute to society throughtechnology and engineering.

◼ Founder

Yutaka Kubota (1890-1986)

Before WWII, Yutaka Kubota was engaged
in the development of hydropower
resources (e.g. Suiho Dam/700MW, in the
Korean Peninsula, one of the world's
largest at that time).

After the War, in a bid to work toward therestoration of Japan and reconstruction ofcountries damaged by the War, he founded
the Company at the age of 56.
Known as the "Father of Overseas Engineering Cooperation", he wasawarded the Grand Cordon of the First Order of the Rising Sun in
1985.
He directed projects in many countries throughout the world until he
was 90 years old, contributing to development in developing countries.

Transition of Sales / Operating Income (Millions of yen)

FY18/6 Sales by Geographical Location— Net sales — Operating income

37

Business Development
Domestic Consulting

International Consulting

Power Engineering

We have implemented approx. 3,000
projects/year to underpin the foundations ofpeople's daily lives, such as development andmaintenance of social capital including rivers,
roads, etc., and regional reforms to realize
prosperous and safe living.

We have supported the growth of developing
countries in Africa, the Middle East, Latin
America and, especially, in Asia by providing
support in a broad range of fields including
water resources, energy, urban development,
transportation, agricultural development, andenvironment control.

We have worked on the development of powersources and the promotion of businessaccommodating electricity demand in Japan andoverseas. The Company has engaged in new
construction and repairs of substations, switchingstations, power stations, the formation of dam
management systems at hydroelectric power
plants, etc.

Urban & Spatial

EnergyWe strive to create multifunctional, well-organized,
barrier-free, eco-friendly and beautiful life space inemerging economies in Asia and other developing
countries/regions through development projects ofsocial infrastructure design, such as of railway
stations, airport buildings, rearrangement of thestreetscape, etc.

Amid increasingly strict environmental
regulations, we provide energy consultationand perform design and installation ofhydropower/solar facilities in the field of
renewable energy.

FY18/6 Sales distribution ratio38

Job Description for Civil Engineering Consultants
Domestic: Mainly involved through the design stage. Core customers are primary government organizations including the
Ministry of Land, Infrastructure, Transport and Tourism, and secondary government organizations including prefectural andother local governments.
Overseas: Involvement varies by project, and can range from planning and construction to construction supervision andmanagement. Core customers include the Japan International Cooperation Agency (JICA), other governmental agencies,
the United Nations and the World Bank.

Planning

DesignPlan and draft,
Basic engineering,feasibility studies Detailed engineering

Construction
Competitive bids,
Providing
Proposals

Bid evaluation and support
for supplier selection

Operation/
Management

Contract supervision and management Operational consulting
Construction supervision andManagement consulting
management

Domestic

Consultant (NK)Construction (General Contractors, etc.)

Overseas

Consultant (NK)Surveillance (NK)Construction (General Contractors, etc.)

Example: Chronic traffic congestion problems in Region A
Planning

DesignConstruction

Provide engineering services forstudies, planning, design and otheractivities.

Supervise the work of contractors on behalfof the client (supervision and management)

Completion ofroad・ Should roads or subways be constructed?
・ Is the project economically viable?
・ Propose the optimum construction
methods given the terrain(General contractors, manufacturers, etc.)
Execution of construction work according to thespecifications agreed upon by the contractee andcivil engineering consulting firm

Provided as aservice toresidents
39

Nippon Koei's Development Along with Social Progress
NipponKoei
XSocietyBusiness
Development

Formulation of business base,
Fostering positive relationshipwith foreign governments

Comprehensive strength anddevelopment capability toencompass various fields

Flexible responses tochanges in environmentand social needs

Stable supply of electricity
Development of infrastructure
for daily life

Establishment of foundation
for industrial growth

Realization of sustainable
society

Dam

Electricity
Production

Rivers anddrainageTransportation

Environmental
systemNKInnovation
2021
NKAIM
Urban & spatial
development

Maintenanceandmanagement

Building
National
Resilience
Longer operating
lives of infrastructure
Environmental
responses

Advances

Deregulation ofelectricity
business

Infrastructure
exportEstablishment ofsocial capital
Restoration of
infrastructure fordaily livings
Human
Resources

Provision of employment
opportunities for engineers whocame back alive from overseas
territories

Improvement in quality ofengineers,
Training of engineers in extensive
industrial fields

Improving social reputation ofengineering consultants
Transfer of technologies todeveloping countries

Stage

Foundation stage

Growth stage

Maturation stage

Innovation stage

Era

Restoration in the postwar
period1946-1960s

High economic growth
Population increase
1970s-1990s

Collapse of bubble economy
Global warming
1990s-2000s

Great East Japan Earthquake
Urban problems
2011-Present

Recruitment of regional engineers
Paying attention to work-life balance40

Strengths of Nippon Koei
(1) Sustainable business model developed
along with progress in society(Win-win relationship between society and theCompany)

Implementation of transformation to meetmarket needs(2) Japan's leading engineering consultant(Business domains, technologies, and humanresources)

Comprehensive strength: Capable of solving
sophisticated or complex issues
Human resources: Has the largest number ofengineers in the industry

Commercialization of solutions on social
issuesConsolidated
net sales:¥106 billion

No. ofcountries inwhich businessis undertaken:
160

Technologies: Equipped with in-house R&D
facilities and a number of patents

No. of orders
per year: over
5,500

No. of patents
acquired:92

No. of
Professional
Engineers*:
1,584*Certified by the Japanese government

Provide solutions on needs of the era and realize sustainable business expansion
and profitability growth41

Position in Industry
Nippon Koei is Japan's leading civil engineering consultant.
Ra
nk

Sales (Millions of yen)Company

Segment ofConst. Consultation

Corporate
Total

1

Nippon Koei

45,37961,734

2

Pacific Consultants Co.,LTD.

44,341

46,522

3

CTI Engineering Co., Ltd.

33,86335,440

4

Yachiyo Engineering Co., Ltd.

20,402

20,747

5

JR East Consultants Company

19,591

21,008

6

Oriental Consultants Co., LTD.

19,143

19,186

7

Nihon Suido Consultants Co., Ltd

17,335

17,511

8

KOKUSAI KOGYO CO., LTD.

16,94637,914

9

NEWJEC Inc.

16,463

16,812

10

IDEA Consultants, Inc.

16,42016,88018

Tamano Consultants Co., Ltd. (strong point: urban planning)

11,23713,01289

NIPPON CIVIC CONSULTING ENGINEERS CO.,LTD(strong points: underground spatial planning, tunnels)

1,992

2,001

※ Source: Nikkei Construction, April 23, 2018 edition. Ranking by engineering consultant division sales (according to published financial results)
42

Group Vision
To provide services that are of value in building safe and reliablesocial infrastructure and comfortable living spaces.

43

NK-Innovation 2021
Continue to evolve into a global
consulting and engineering firm

NK-Innovation
2021
Net sales ¥140 billion
Operating income¥12.6 billion

To provide services that areof value in building safe andreliablesocial infrastructure andcomfortable living spaces

2030 Social
Development Goals(SDGs)(IFRS)

Rapid progress of urbanization
Climate change and lack of natural resources

Changes in demographics
Progress in technologies
Higher geopolitical risks

Concentrated
investment areas
Common measures
for all companies
44

New Medium-term Management Plan "NK-Innovation 2021"(FYE19/6 - FYE21/6)- NK-Innovation 2021 Three years of tackling various innovations to become a truly global company
FYE2021/6 Plan (IFRS assumed)
Net sales

Operating income

Operating margin

ROE (Return on Equity)¥140 billion¥12.6 billion

9.0%

12.7%

Basic Objective
Continue to evolve into a global consulting and engineering firm
Business strategy
Enhancement of operating
system for Railways Business

Overseas expansion of Urban &Spatial Development Business

Creation of businesses and overseas
expansion of Consulting Business

Establishment of Energy
Business

Product development and overseas expansion ofPower Engineering BusinessGroup-wide measures
Establishment of one-stop marketing system / Investment in technologies and humanresources / Enhancement of group governance45

NK-Innovation 2021 Plan by Business Segment(Millions of yen)OrdersDomestic Consulting
International Consulting
Power Engineering
Urban & Spatial Development

EnergyNet sales
Domestic Consulting
International Consulting
Power Engineering
Urban & Spatial Development
EnergyReal Estate/Others
Operating Income
Domestic Consulting
International Consulting
Power Engineering
Urban & Spatial Development
EnergyReal Estate/Others
Ordinary income
Profit attributable to owners of parent

FYE18/6
Results
104,350
48,52926,716
15,943
12,855
179
106,023
46,59528,88915,762
13,040
354
1,381
6,561
4,279
2,649
1,873
173
- 18
- 2,396
6,721
4,555

FYE19/6
Plan
125,000
46,00044,00014,00016,0004,000
115,000
44,00031,00020,00016,500
2,500
1,000
6,200
3,500
2,400
2,600
600
- 100
- 2,800
6,100
4,100

FYE20/6
Plan (IFRS)
125,000
49,00036,20015,80018,0005,900
125,000
45,50036,50020,50018,000
3,500
1,000
7,900
3,500
3,100
2,600
1,700
0
- 3,000
5,200

FYE20/6
Plan (IFRS)
140,000
52,00039,70017,00023,8007,300
140,000
50,00040,00022,00023,0004,000
1,000
12,600
3,600
3,400
3,200
2,500
1,700
- 1,800
8,700

Introduction of International Financial Accounting Standards (IFRS) is scheduled for FYE20/6, and plans for FYE20/6 and FYE21/6 show IFRS-applied figures.
46

Domestic Consulting
Nippon Koei's Operating Results in Domestic Consulting(¥ million)

Public Works Expenditures (¥ trillion)
 Initial budget  Supplementary

FY 2013

FY 2014

FY 2015

FY 2016

FY 2017

FY 2018(Plan)■Orders■Net Sales■Operating Income

FYE 13/3 FYE 14/3 FYE 15/6 FYE 16/6 FYE 17/6 FYE 18/6 FYE 19/6
(Plan)

47

International Consulting
Initial ODA Budget in the General Account(¥ billion)

Nippon Koei's Operating Results in International Consulting(¥ million)■Orders

FY 2013

FY 2014

FY 2015

FY 2016

FY 2017

FY 2018■Net Sales■Operating Income

FYE 13/3 FYE 14/3 FYE 15/6 FYE 16/6 FYE 17/6 FYE 18/6 FYE 19/6
(Plan)48

Power Engineering
Repair Expenses and Facility Investment and Its
Distribution for Tokyo Electric Power Co., Ltd. (¥ billion)■Orders■ Repair Exp. ■ Facility Inv.

FY 2012FY 2013

FY 2014

FY 2015

Nippon Koei’s Operating Results in PowerEngineering Business (¥ million)

FY 2016

FY 2017■Net Sales■Operating Income

FYE 13/3 FYE 14/3 FYE 15/6 FYE 16/6 FYE 17/6 FYE 18/6 FYE 19/6
(Plan)49

Urban & Spatial Development
Sales Trend of Top 164 Research and
Designing Companies (Billions of dollars)

Sales of top 164 firms in 2016 by sector(Billions of dollars)■Architecture ■Transport

Nippon Koei’s Operating Results in
Urban & Spatial Development
Business (¥ million)■Orders■Net Sales■Operating Income■Others

FYE 17/6 FYE 18/6 FYE 19/6
(Plan)

Source of data: ENR Magazine (issued in August 2017)50