Management Policies
Strategic Overview- Interim Report FY2006 -Nobuo Seki
President and CEO
November 13, 2006

Contents
1.

Double Step-Up Plan (DSP) 2008
Progress Report
Further Upgrade Reliability Program:
Improving Chiyoda’s Reliability
Strengthen Group Operations Structure

2.

Key Factors in Our Operating Environment3.

Summary: “Reliability No. 1” andEarnings Growth
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1 Double Step-Up Plan (DSP) 2008 Progress Report
Business
VisionAiming to Be:
A “Reliability No.1” Project Company andAn Excellent Company able to “Sustain Earnings Growth”

DSP 2008’s business plan is ahead of schedule and exceeding expectations.
Measures for the following four strategies are now being implemented.
Business Strategy
Current Progress

S1

Build long-term partnership with clients
based on superior technologies bypromoting Plant Lifecycle Engineering.

(Clients)
Further strengthening of the project
accomplishment power by promoting
Smart EPC and utilizing Group’s(Execution) collective strengths.

S2S3(Finance)

S4・Further upgrade Reliability Program
Engineering criticality study, Uninterrupted start-up
・Upgrade risk management skills（Cold Eye Review）
・Upgrade advanced IT skills(especially construction IT, procurement IT)・Strengthen Group operations structure (workforce of6,000)
・Utilize “Lessons Learned” / Promote knowledge
management

Establish a lasting sound financial
position able to support the creation of
next-generation businesses.

・Enrich capital stock・Enhance profitability of license sales and selectively
invest in new technologies

Create an energetic organization andrefine employee skills.

・BSC Integrated Management
・Hire/retain professional personnel
・Re-hire our retired employees and pass on theirtechnological knowledge and expertise to the nextgeneration (Chiyoda U-Tech Co., Ltd.)(HR)BSC: Balanced Score Card (A strategic management system)

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Further Upgrade Reliability Program:
Improving Chiyoda’s Reliability

S1

Aiming for “Reliability No. 1,” we will steadily implement concrete measures
to further enhance our competitiveness

①
②
③
④

1. Lessons Learned
The Lessons Learned Committee will use a company-wide database
to extract examples of problems and success for each project anddisseminate them to related departments so they can follow examplesof success and proactively prevent problems.
2. Cold Eye Review
Independent review of design details, project planning and execution
status allows us to identify potential problems and take corrective or
supplemental action.
3. Intensive Design Review / Engineering Criticality Study
An independent task group of specialists examines advanced
technology issues and problems affecting each specialized
department. Simulations, materials and analysis technology by ouraffiliated company Chiyoda Advanced Solutions Corporation (ChAS)
are utilized in this review.
4. Uninterrupted Start-up Program
From the standpoint of trouble-free start-up, we use our own system
to detect foreseeable problems from Lessons Learned and risk
analysis. We then work to prevent the detected problems byidentifying actions that should taken in each phase of EPC, andtaking notification and preventive measures.

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S２

Strengthen Group Operations Structure

7,000

4,800
CHIYODA

5,100
Group

5,600

5,950

GES

6,000
1,250
1,100

5,000

Workforce

770

920

4,000
2,000
3,000

2,000

2,000

In response to theincrease inrevenues, we arestrengthening
Group operations
and haveincreased ourworkforce by 1,150
over the past 2 1/2years.

2,000

2,000

1,000

2,030

2,180

04/03

05/03

2,500

2,700

06/03

07/03 2Q

0

*GES＝Global Engineering Satellites in the Philippines and India
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２Key Factors in Our Operating Environment
The market remains strong, but uncertainty is growing→ Reinforce risk management

MARKET

SOCIAL ENVIRONMENT
Plant
Plantmarket
marketexpanding
expandingstrongly
strongly(Subcontractors(Subcontractorsfully
fullybooked
bookedwithprojects,shortage
with projects, shortage
ofofskilledskilledlabor)labor)

Expansion
Expansionofofgas
gasdevelopment
marketdevelopment market(LNG,(LNG,gas
gaschemicals,chemicals,etc.)
etc.)

2(Kyoto(KyotoProtocol)
Protocol)Heightened
Heightenedinterest
interest
ininCorporate
CorporateSocial
SocialResponsibility
Responsibility

Group

Plants:Plants:Larger
Largerand
andmorecomplicatedmore complicatedChiyoda Corporation

Chiyoda Kosho

Development
Developmentofof
communications
communicationsindustryindustry(IT,(IT,information
information
appliances,appliances,etc.)
etc.)

ECONOMY

GlobalGlobalenvironment
environment/ /COCO2 reduction
reduction

Chiyoda Techno Ace

ChAS

Chiyoda Advanced
SolutionsChiyoda Keiso
Group Companies

EnergyEnergyconservationconservation/ /New
Newenergy
energy(GTL,(GTL,etc.)
etc.)

Economic
Economicgrowth
growthininChina
China（Response（Responsetotorisingrisingequipment
equipment&&materialmaterialprices,
prices,etc.)
etc.)

High
Highcrude
crude
oil
oilprices
prices(Expansion(Expansionofofheavy/lightheavy/lightpricepricedifferential)differential)
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ENERGY6

３

Summary: “Reliability No. 1” and Earnings Growth
In the second year of DSP 2008, we are ahead ofschedule. We are responding steadily to recent risk
factors, and cautiously accelerating DSP 2008
programs.

1. Execute projects to win recognition as a “Reliability No. 1” Company
Success of three large LNG projects in Qatar / large domestic
petroleum projects
Cost of skilled labor up, subcontractors fully booked with projects→ Strengthen relationships with partners, enhance construction IT,etc.
Increase in uncertainty → Reinforce risk management

2. Initiate programs to achieve goals defined in DSP 2008
Early achievement of concrete goals(Shareholders’ equity of ¥70 billion, its ratio of 30%)

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Please address inquiries to:
Takuhiro Murata, Investor Relations andCorporate Communications Officer
Tel: +81-45-506-7538
Fax: +81-45-506-7085
Cell: +81-90-3348-3484
e-Mail: tamurata@ykh.chiyoda.co.jp
URL： http://www.chiyoda-corp.com/

Forward-looking Statements
The forecasts and plans in this presentation are based on information available to management on
November 13, 2006, the date these materials were prepared. Actual results may differ significantly
from these forecasts for a number of factors, including but not limited to changes in economic
conditions and operating environment in Japan and overseas.

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