- March- MarchAprilApril
1, 2019
1, 201931, 2020
31, 2020

JGC Report 2020

MISSIONMISSIONDRI
DRIVEN.
VEN.

2-3-1,
2-3-1,
MinatoMinatoMirai,
Mirai,
Nishi-ku,
Nishi-ku,
Yokohama
Yokohama
220-6001,
220-6001,
Japan
Japan

Tel:Tel:81-45-682-1111
81-45-682-1111
Fax:Fax:
81-45-682-1112
81-45-682-1112
www.jgc.com
www.jgc.com

JGC
JGCReport
Report2020
2020

Founding Aspirations,Pursued to this Day
In Every Era, Aiming to Support the Foundations of Industry
and Society at Large
In 1928 founder Masao Saneyoshi established Japan

Through consistent growth and expansion after focusing

Gasoline Co., Ltd., predecessor of the JGC Holdings Corpo-

on EPC Services in the 1950s, founding aspiration haveration. What drove him to seek an abundant, low-cost

been passed down to each employee as the Group devel-

supply of oil for Japan was the belief that domestic produc-

oped operations in a Total Engineering segment fortion of gasoline - for which imports were surging since theOverseas Oil and Gas, Overseas Infrastructure, andGreat Kanto Earthquake - was indispensable to the nation's

Domestic EPC and Maintenance, as well as a Functional

development.

Materials Manufacturing segment in Japan.
The JGC Group will continue to grow by helping to build asustainable society and contributing to solutions for global
issues.

Founder of JGC Group

Masao Saneyoshi

News of the company's founding(as published in the predecessor of The Nikkei, October 11, 1928)

Corporate Philosophy

JGC Way

The corporate philosophy of the JGC Group, the “JGC Way,” is the fundamental platform pursuant to which the business activitiesof the group are promoted and furthermore is followed by each and every JGC Group employee and executive in their activities.

ValuesWe are driven by our shared values and commitments.
These elements express our strengths and represent the basis for how we work and deliver solutions to our clients and stakeholders:Shared Values

Challenge We venture into new business fields, overcome technical hurdles and establish innovative methodologies.
We remain dedicated to developing results-focused, thoughtful solutions that fully meet the needs of our clients
Createand benefit society as a whole.

MissionIntegrate We bring together a wide range of technologies, innovative tools

and a diverse team dedicated to increasing value to all stakeholders.

We are committed to creating a more prosperous future for our clients, for people and for society throughintegrating our core capabilities and technical expertise to generate innovative solutions.
Professional
Commitments

Deliver

We commit to overcoming obstacles through diligence and our “never-give-up” philosophy,
and to delivering quality products and services to our clients and society.

Respect

We undertake to foster mutual respect and support among all those involved in our activities
and to emphasize the importance of safety for all.

Integrity

We pledge to maintain the highest ethical standards in everything we do.

JGC Group Corporate Slogan

VisionThe corporate slogan embodies the JGC Group's strong desire to contribute to the resolution of increasingly complex issues
around the world through its business activities, including the full range of EPC services, functional materials manufacturing, and consulting.

1

JGC Report 2020

We create new value and solve problems for our clientsand society by utilizing our technical skills in the fields of engineering and functional materials.
JGC Report 20202

CONTENTS

Founding Aspirations, Corporate Philosophy

1

CONTENTS, Editorial Policy

3

CHAPTER 2

CHAPTER 3

CHAPTER 4

CHAPTER 5

CHAPTER 6JGC Group Value Creation

Materiality Initiatives

Foundation for Creating Value

Core Competencies andManagement Resources

Business Outlook

JGC STORY

Societies in Harmony with Environment

CHAPTER 1
Toward Sustainable Growth

Message from CEO

7

Message from COO

11

Message from CFO

15

Financial Highlights

17

Growth Trajectory21

JGC Group Materiality

23

Value Creation Process

25

JGC Group’s Business

27

Roadmap to the Sustainable Growth2937Working with Local Communities Around the World 39

Messages from Outside Directors

47■ Core Competencies

Corporate Governance

50

Core Competencies

67

Project Execution Capabilities

69

Human Rights, Employee Motivation

40

Quality Management System

58

Energy Access41

Compliance

59

Quality of Life

42

Risk Management61■ Management Resources

Ensuring Occupational Health and Safety

43Management Structure63

Human Capital74

ESG Data Highlights

44

Dialogue with Shareholders and Investors

64

Social and Relationship Capital

76

Manufactured Capital

78

Highlights 1

Accelerating Commercialization of Environmental
Technologies

31

Total Engineering Business

81

Functional Materials Manufacturing Business

84

Data Section

85

Highlights 2Business Innovation throughDigital Transformation

33

Period Covered
In principle, the report covers the period April 2019 to March 2020
(fiscal 2019), but also includes information related to events from
April 2020.

3

JGC Report 2020

Forward-looking Statements
Data and forecasts disclosed in this report are based on judgments andinformation available at the time of publication. The Company provides noguarantee for targets, forecasts and earnings projections, which may change
due to a range of factors.
Reference Guidelines
The JGC Report 2020 was compiled referring to thedisclosure framework of the International Integrated
Reporting Council (IIRC) and the World Intellectual Capital/Assets Initiative (WICI), as well as Guidance Supplement of the
Ministry of Economy, Trade and Industry (METI).

About UsJGC Report(Integrated Report)

Detailed(Comprehensive)

Content

https://www.jgc.com/en/about/
・Message from Top Management
・Corporate Philosophy
・Group Companies
・History
・JGC Group at a Glance

Sustainability

JGC Website
Broad

Organizations Covered in This Report
In this report, "JGC Group" and "the Group" refer to "JGC Holdings Corporation" and its subsidiary operating companies.

Information Provided
The JGC Report summarizes and presents the most relevant information related
to the JGC Group and society. For detailed and comprehensive financial andnon-financial information about the Group, please visit the JGC website.

Narrow

Purpose of This Report
The purpose of the JGC Report, which was first published in 2015, is toexplain to stakeholders how the JGC Group works to generate sustainablegrowth and increase corporate value over the medium to long term. JGC uses
this report as a tool to communicate with stakeholders as part of its efforts todeliver sustainable growth through continuous, constructive dialogue.

(Primarily aimed Target
at investors)

Editorial Policy

Information Provided

Criticalhttps://www.jgc.com/en/esg-hsse/
・Environmental Initiatives
・Social Initiatives
・Governance

Investor Relations
https://www.jgc.com/en/ir/
・IR Calendar
・Financial Statements-Summary
・Medium-Term Business Plan
・Fact SheetJGC Report 2020

4

CHAPTER 1

Toward Sustainable
GrowthIn this chapter, the JGC Group's business environment and progress ingrowth initiatives are discussed by the chairman and president, with insighton financial strategy from the chief financial officer.

07 Message from CEO
11 Message from COO
15 Message from CFO
17 Financial Highlights

5

JGC Report 2020

JGC Report 20206

Toward Sustainable Growth

CHAPTER 1

Toward Sustainable Growth

Message
Our Third Transformationfor Sustained Growth
1 Dual challenges of 2020

from

CEO

2 Long-term vision behind the next medium-termbusiness plan

Many aspects of society, industry, and everyday life havesuffered a tremendous impact from the new coronavirus

As of October 1, 2019, the JGC Group adopted a holding

pandemic (“Covid-19”) since the beginning of this year. The

company structure. We had struggled for years to develop

world as a whole now faces an unprecedented situation. It only

a diversified business portfolio that does not rely solely on

reinforces my strong impression that we are living in VUCA

overseas oil and gas, having faced turbulence about once every

times, in a situation of Volatility, Uncertainty, Complexity, anddecade in the natural resource market. Our total engineering

Ambiguity.

business now serves three segments; besides overseas oil

We have seen a complete reversal in the plant market whichand gas, we are also targeting overseas infrastructure anduntil 2019 had been recovering but now seems uncertain.

domestic EPC, as well as functional materials manufacturing.

Given that oil prices have dropped sharply from a failure ofThis gives the Group an updated management structure for

OPEC+ to agree on production cuts, and that Covid-19 hasrevenue from a multi-business portfolio. With this, we havesapped energy demand, clients including oil majors have madefulfilled my commitment to establishing a permanent Groupthe decision to reduce capital investment this year. This means

management structure poised to build our second and thirdthat 2020 presents me with two challenges as CEO. Not only

pillars of business after overseas oil and gas, as we pursue

must we grapple with somehow meeting our fiscal 2020 ordercontinued growth and gains in corporate value. (Reference:target and earnings forecasts in the midst of this uncertainty,“JGC Story: JGC Group's Business,” p. 27–28)

but we must also do this at a time when people appear to be

Significant changes have emerged this year in the wake of theredefining what is normal in society, industry, and everyday life.

emergence of Covid-19, as everyday life and our awarenessThrough all of this I must chart a course to sustained growth aschange and new needs give rise to new business. In thewell as higher corporate value, and lead the Group as a wholeenergy and environmental segments intimately linked to theto achieve these.

Group’s business, low-carbon and decarbonization trends are

Representative Director, Chairman,
and Chief Executive Officer

Masayuki SatoHas worked in finance and accounting sincejoining JGC in 1979, overseeing finance forMiddle East, North Africa, Southeast Asia, and
CIS projects.
Appointed as a director in June 2010, CFO andManaging Director, Senior General Managerof the Corporate Administrative & Financial
Affairs Division in July 2011, and Executive Vice
President in June 2012.
Representative Director and Chairman as of June2014 and CEO as of June 2017.

accelerating and we have also seen speculation that the world
may pass peak fossil fuel demand sooner than expected.

7

JGC Report 2020

JGC Report 20208

Toward Sustainable Growth

CHAPTER 1

Toward Sustainable Growth

Expanded investments in renewable energy by oil majors

In exploring new business areas, we have identified six

and others that are currently paused resume. It is clearlyand statements by chemical companies about switching to asegments as candidates for key Group businesses as ofdesirable to enhance our technical expertise in engineering

circular economy can be viewed as developments that reflect

2040. As resource-related or environmental segments, weand cost competitiveness, and to strengthen ties with overseas

We have undertaken two major transformations since thechanges occurring in a “post-Covid-19” energy and chemical

will be exploring “new energy”, “low-carbon/decarbonizedengineering subsidiaries. I would like to make overseas oil andcompany was founded in 1928. The first occurred in theindustry.

engineering”, “recycling”, and “functional materials supportinggas operations fundamentally more competitive.

1930s, as we moved on from our original business model inWith the understanding that for the Group it is essential

carbon reduction and environmental protection”. As segments

to establish a long-term vision premised on post-

pertaining to health or other social issues, we will explore

Covid-19 changes and acceleration toward low carbon and“infrastructure/industrial innovation” and “healthcare/life

decarbonization in the energy and environmental segments, wesciences”. Four of these six new areas relate to resources andSound corporate governance is the bedrock upon whichthen, despite facing many risks in a turbulent global market, weare currently developing a long-term vision for 2040.

the environment because the world will inevitably shift toward

continuous growth of the Group's corporate value depends,

have achieved sustained growth and sought higher corporate

low carbon and decarbonization, and because we anticipate

and this year was no exception to our constant improvements

value by constantly anticipating and overcoming market

significant future business opportunities here for the Group. We

and reinforcements to governance. For fuller discussions onchanges. (Reference: “JGC Story: Growth Trajectory,” p. 21–22)

will continue to study specific business and strategies in thismedium- to long-term group strategies and issues at the

Low-carbon and decarbonization trends are accelerating as

The long-term 2040 vision is based on the concept of

exploration of new segments, and we will work with a sense ofholding company board meetings, we reduced inside board

the world continues to move toward a sustainable society, andcreating shared value, or CSV (Creating Shared Value), and the

speed and profitability over the next 5–10 years.

directors by three and added an outside board director after the

we can also expect far-reaching changes to society, industry,

June 2019 general shareholders' meeting. This nine-director

and everyday life in the wake of Covid-19. Accordingly, I

system, which now has three outside board directors, will

believe it is by contributing to the solutions for a broader range

continue to be used after the June 2020 general shareholders'of social issues in the areas of resources, the environment,

meeting.

health, and society, that we will achieve sustained growth as a

3 Sustained growth by addressing social issues

affirmation that our business is fully aligned with solving social
issues. It will combine exploration of new business areas withthe transformation of current business, such as overseas oil

4 Transforming our project execution capabilities
in total engineeringand gas. In all of this, we can leverage our core competencies

5 Attaining greater corporate value

happened in the 1960s, as we took on a larger, global market
from the previously targeted limited domestic market. Since

The course of action Group management will be taking will

Besides matters related to our adoption of a holding company

corporate group. The third major transformation in a corporate

solving, and adaptability to contribute to solutions for specificgradually increase the ratio of new business areas while

structure and our long-term vision, in discussions on grouphistory long focused on overseas oil and gas will surely besocial issues, with SDGs firmly in mind. (Reference: “JGC Story:

maintaining the stability of revenue from existing overseas oil

governance the board reviews basic internal control system

implementation and success in the long-term 2040 vision

Path to Sustained Growth,” p. 29–30)

and gas operations.

policies, establishes new organizations and committees

that we are currently formulating. In this context, we recognize

In the total engineering business, fiscal 2020 will see us

under the holding company structure, reviews agenda items

that for sustained growth linked to solutions addressing apursue an orders target of ¥670 billion by securing orders in all

and approval criteria, and studies delegation of authority towide range of social issues, 2020 represents a key year forof the projects which are expected to materialize.

operating companies, as well as the addition of matters fordeveloping the long-term 2040 vision.

The matter of securing our orders target and earnings forecasts

deliberation. In my view, we have succeeded in making the

Our next medium-term business plan, to be effective as ofinitially announced for fiscal 2020 calls on us to transformboard more effective. (Reference: “Foundation for Creating

fiscal 2021, will be positioned as the first step in the long-term

our project execution capabilities and, in particular, gain

Value: Corporate Governance,” p. 50–57)

Transformation(overseas oil and gas, others)

competitiveness in overseas oil and gas projects. I also view

Business
portfolio

this as essential to ensuring success in the very competitiveenvironment we will see when the world overcomes Covid-19,

Exploration (new areas)Time

JGC Report 2020

oil refining to become an engineering company. The secondof technical expertise, project execution capabilities, problem-

Transformational and exploratory

9

6 Key year 2020 for sustained growth

global energy demand recovers, and large-scale LNG projects

Message
2040 vision, and details will be announced around May 2021.
We appreciate the ongoing support of all stakeholders.

from

JGC Report 202010

Toward Sustainable Growth

CHAPTER 1

Toward Sustainable Growth

Messagefrom

COO

Fully Committed to Overcoming
Market Uncertainty
1 Completely changed market environment

vision for the Group's third major transformation in its corporate
history, I will be encouraging proactive efforts.

In early 2020, the market conditions faced by the JGC Groupchanged drastically in the wake of sharply lower crude oil prices
and the subsequent new coronavirus pandemic (Covid-19). As

Representative Director, President,
and Chief Operating Officer

Tadashi Ishizuka
Managed numerous projects outside of Japanafter initially working in the Domestic Project
Construction Division in 1972. Appointed
Managing Director and Senior General Managerof the Project Operation Services Division inJune 2008, Senior Managing Director in 2010,
Executive Vice President and Board Director in
June 2011, Senior Executive Vice President and
CPO in February 2017, and President and COO
in June of that year.

11

JGC Report 2020

2 Securing orders for projects likely to proceedenergy demand plunged from the global economic slowdown,

In fiscal 2020, we are targeting ¥670 billion in total engineering

six oil majors including ExxonMobil and Shell announced thatorders, which breaks down to ¥400 billion in overseas oil andthey would reduce fiscal 2020 capital investment by moregas, ¥140 billion in overseas infrastructure, and ¥130 billion

than $30 billion relative to their original plans. Large-scale

in domestic EPC. We are in the difficult position of having to

LNG projects and many other capital investment plans haveachieve our target for orders amid this uncertainty as to when

been postponed, and the outlook for the plant market remains

large-scale LNG plans will materialize in a market served byuncertain.

our total engineering business, and especially in overseas oil

Despite our ¥800 billion order target for fiscal 2019, final

and gas. Nevertheless, we are fully committed to meeting thisinvestment decisions for several expected orders weretarget, in line with the following policies. (Reference: “Businesspostponed, including the Rovuma LNG project in Mozambique,

Strategies,” p. 79–84)

the Jordan Cove LNG project in the U.S., and an LNG receiving

In overseas oil and gas, we were awarded the Basra refinery

terminal in the Philippines, resulting in ¥189.6 billion of orders.

modernization project in Iraq. As an order amounting to nearly

In business results, analysis of the impact of Covid-19 on¥400 billion, the project places us in a good position to reach ourcurrent projects, accounting for risks, led us to conclude thattarget for the fiscal year. For other projects too, we will continue

net income attributable to owners of the parent remained at

to assess the possibility of materializing and securing orders for¥4.1 billion, in comparison with the forecast of ¥10 billion.

projects that are likely to proceed.

As COO, I would like to ensure that we meet our fiscal

In overseas infrastructure, we are aggressively engaged in2020 order target and results forecasts even in the current

sales activities aimed at winning orders for a non-ferrous metal

uncertainty. Moreover, as we formulate our long-term 2040

refining project in Indonesia. Additionally, we are stepping

JGC Report 202012

Toward Sustainable Growth

CHAPTER 1

Toward Sustainable Growth

up efforts to receive orders for solar power plants in Asia as

be partly impacted by a higher effective tax rate from increases

we establish a proven record in renewable energy outside of

in foreign income taxes in fiscal 2019.

New business areas of interest for 2040
Low-carbon/decarbonization engineering

New energy

Leading the shift toward reduced carbon and decarbonization of conventional energy sources

Building future energy infrastructure

Japan, following our completion of three solar power plants in

As for the effect of the pandemic on current domestic andVietnam. Overseas infrastructure is also a segment where weinternational projects, we calculated the impact on each

Recycling

Healthcare, life sciences

are increasing our workforce, and to enable the JGC Group to

project, accounting for additional costs expected in major

Promoting effective use of the world's limited resources

Keeping people healthy and contributing to the well-being of society

be profitable in multiple businesses – both nominally and inprojects and client terms and conditions, to total approximately

Infrastructure, industrial innovation

Functional materials for low-carbon and environmental purposes

Providing infrastructure that helps solve a variety of global social issues

Creating innovative materials that help industries advance

reality – we are striving to achieve our order target of ¥140

¥8 billion in fiscal 2019.

billion in fiscal 2020.

Unless there are significant changes in the businessIn domestic EPC, despite some impact from Covid-19, we

environment, we expect the impact on our fiscal 2020 results

now. Among other things, this entails rebuilding our global

key businesses in the future: the environmental segments of

can expect orders for biomass power plants, pharmaceutical

forecast to be minor, but we will continue to negotiate withproject execution framework, gaining non-price competitiveness,

new energy, low-carbon/decarbonized engineering, recycling,

manufacturing facilities, hospitals, nuclear power plant-relatedclients to recover additional costs that have arisen as adeveloping new areas, and expanding the scope of our services.

and functional materials supporting carbon reduction andservices, and refinery and petrochemical plant maintenance.

consequence of Covid-19.

In this context, we view enhanced digital transformation (DX)environmental protection.

There may be a strong sense of uncertainty in markets outside

Inevitably, current international and domestic projects must

efforts as a critical component. With regard to DX, we have

In October 2019, we established a dedicated organizationof Japan, but domestic EPC remains a supporting force inproceed under various restrictions from the standpoint

established our IT Grand Plan 2030 and are engaged in a variety

in JGC Holdings that is now active in commercializing

our total engineering business. We hope to achieve resultsof containing infection in countries where construction isof activities to prepare for our vision of project execution inenvironmental technologies for applications such as CO 2

surpassing the order target of ¥130 billion.

underway and other areas involved. This includes the LNG

the year 2030. As we digitize engineering data from process

emissions reduction and waste plastic recycling. (Reference:

In functional materials manufacturing, Covid-19 has been a

Canada project, three Algeria projects, two FLNG projects,

engineering to detailed engineering with attributes and we link

“Feature 1: Accelerating Commercialization of Environmental

cause for concern, with refineries and other sites operating

and others. Project management will remain rigorous as weit to AI design, we will continue focusing on progress toward an

Technologies,” p. 31–32). In functional materials manufacturing

at reduced capacity due to a global economic slowdown andtake the utmost care to prevent infection and maintain close

engineering transformation. (Reference: “Feature 2: Businessalso, we have stepped up development and production oflower energy demand. Nevertheless, we view this as a criticallycommunication with our clients.

Innovation Through Digital Transformation,” p. 33–34)

silicon nitride substrates for EV/HV power units, as well as

important business accounting for 25% (¥5 billion) of operating
income in the results forecast for fiscal 2020. As we monitor
market developments, we are aiming to achieve our initial sales

microplastic alternatives. These are some examples of how

4 Essential for sustained growth:transforming project execution capabilities

5 Environmental businesswith large growth potential

and operating income targets.

13

JGC Report 2020

term 2040 vision. We plan to accelerate development ofenvironmental business built on these promising technologies.

In line with the group management policy of steadily increasing

In the environmental field, to date the Group has promoted use

the ratio of new business areas while ensuring revenue fromof relatively low-impact fossil energy through the design andexisting operations, with a focus on overseas oil and gas,

construction of LNG plants while at the same time expanding

As stated in the fiscal 2020 results forecast, we project net

as COO I recognize that sustained growth for the Group isrenewable energy generation by the design and construction ofsales of ¥480 billion, gross profit of ¥43 billion, operating

unattainable without transforming and improving our projectsolar, biomass, and wind power plants. We have also developed

income of ¥20 billion, ordinary income of ¥23 billion, and net

execution capabilities in the overseas oil and gas area. I am

an array of environmental technologies.

income attributable to owners of the parent of ¥8 billion. The

determined to address this need.

Among new business areas for exploration identified ingross margin ratio is expected to remain the same as in fiscal

We also intend to transform our overseas oil and gas businessthe long-term 2040 vision under development, we view

2019, at 9.0%, but the net income mentioned will continue toas a whole, by pursuing our vision of JGC one decade fromseveral segments as likely to join the Group's portfolio of

3 Impact of Covid-19 on current projects

we are already engaged in business consistent with our long-

6 Concluding words
Fiscal 2020 is a year to meet target orders and results

Message
forecasts while establishing a long-term 2040 vision looking

toward the third major transformation in our corporate history.
As COO, I remain fully committed to overcoming current
uncertainty and achieving sustained growth.

fromWe sincerely thank you for your support.

JGC Report 202014

Toward Sustainable Growth

CHAPTER 1

Toward Sustainable Growth

Messagefrom

CFO

Liquidity in hand has improved significantly. Now that

ensure profit from current and future projects. Also important

replacement cost no longer applies in the Ichthys LNG Projectis to continue generating and expanding stable and reliable

Kiyotaka Terajima

and capital recovery is in progress from projects in Algeria,

revenue from functional materials manufacturing and total

net operating cash flow has increased. We have also obtainedengineering consisting of three businesses that include

revenue from the sale of business investment assets after

overseas infrastructure and domestic EPC, instead of relying

cross-holdings sales and a review of cross-shareholding.

solely on overseas oil and gas which as a business is affected

Current cash and cash equivalents as of the end of fiscal 2019by fluctuations in the resource market. Moreover, the long-termstood at ¥261.8 billion, a year-on-year increase of roughly

2040 vision under development will map a course for sustained¥100 billion.

growth by addressing a broader range of social issues

Financial needs for the Group include ample working capital

including resources, the environment, society, and health,for steady execution of total engineering projects, investment

which promises to hold a greater potential for generating profit.

in AI/IoT in order to keep effective business operations, capital

As CFO, I am committed to timely and accurate allocation of

investment in functional materials manufacturing, and growth

resources for growth investment, based on suitable evaluation

strategy investment in order to explore and commercializeof risks and returns from investment projects, in order topotential new pillars of business. To meet such financial needs,

improve capital efficiency through expanded profit.

After joining JGC in 1981, established businessalliances and developed contracts for domestic
and overseas projects in the Legal Department.
Appointed Executive Officer and Deputy General
Manager of the Corporate Administrative &Financial Affairs Division in 2014, Director,
Executive Officer, and Senior General Manager ofthe division in 2016 (Senior Executive Officer in2017), Executive Vice President and CFO in April
2018, and Senior Executive Vice President in April
2020.

it is our policy to consider cash in hand, among other options.

5 Shareholder return4 Toward greater capital efficiency

The Group positions shareholder return for investors as a

The Group has a target ROE of 10% or higher, accounting forkey management issue and the basis of cash dividends. Our

sluggishness in the plant market from 2015 to 2017, ourcost of equity. Although ROE improved to 4.3% in fiscal 2017

dividend payout ratio target is 30% of net income attributablediscipline in financial operations over this time has placed us

and 6.0% in fiscal 2018 in part from our success in reinforcing

to owners of the parent. Although this net income for fiscal

In an uncertain market environment that includes factors suchon a solid financial footing.

project risk management after recording a net loss in fiscal

2019 was below the forecast announced at the beginning ofas the drop in crude oil prices and the coronavirus pandemic

Early 2020 saw crude oil prices plummet after OPEC+ failed

2016, ROE subsequently declined to 1.0% in fiscal 2019. The

the fiscal year, in consideration of liquidity in hand and other(Covid-19), the Group is currently tasked with two challenges:

to agree on production cuts, and Covid-19 has resulted inreasons are that corporate tax rose on higher foreign taxes,

factors we maintained the same cash dividend as announced,

meeting fiscal 2020 order targets and results forecasts while

reduced energy demand. This has made market forecasts

among other factors, and risk to current projects posed by¥12 per share. We anticipate the same amount of ¥12 perestablishing a long-term 2040 vision for sustained growth as adifficult for total engineering as well as for functional materials

Covid-19 was partially reflected in construction profitability,

share in fiscal 2020.

corporate group.

manufacturing. For the Group to prevail in this severe

leading to lower net income attributable to owners of the

Recognizing that share buy-back is a form of shareholder

As CFO, I intend to support our efforts in the face of these twoenvironment, we recognize that sound finances are moreparent.

return, we will consider this based on an overall assessment ofchallenges through financial measures.

important than ever.

1 Current situation and duties as CFO

2 Maintaining sound financesmarket environments, the outlook for business performance,
Net income attributable to owners of parent, gross margin ratio andROE by year

Shareholders' equity ratio

（%）

（%）

To secure and execute large-scale projects in overseas oil

65

60.7

59.1

60

finances largely unaffected by short-term market trends, and to55

2

keep flexible our funding capacity for large-scale investment.

50

0

45

-2

the end of fiscal 2019, the equity ratio stood at 58%. Despite

40

57.6

57.7

2016

2017

2018

2019

(FY)

-6

7.2

ROE

9.0

6.0

0.2

16.5

2016

2017

-22.0

24.2

30

2018

1.0
4.1

2019

cash in hand, stock price developments, financial needs suchas growth strategy investment, and other considerations.
We appreciate the understanding and support of all(Billions of YEN)

4.3

4

-4
2015

6.2

6
58.2

Gross margin ratio

9.0

8

and gas engineering operations, our goal is to sustain robust

We aim to maintain a stable equity ratio of 50% or higher. As of

Net income attributable to owners of parent

1070

JGC Report 2020

its thorough project risk management and that it cut costs to

Director, Senior Executive Vice President,
and Chief Financial Officer

Implementing Financial Measures that
Support Sustained Growth15

In order to improve ROE, it is required that the Group continue

3 Liquidity in hand and stance on allocation

2.0
8.0
2020 (FY)

Targetstakeholders.

20
10
0
-10
-20

-5.5

-30

JGC Report 202016

Toward Sustainable Growth

CHAPTER 1

Toward Sustainable Growth

Financial Highlights(Millions of yen)March 31, 2011

March 31, 2012

March 31, 2013

March 31, 2014

March 31, 2015

March 31, 2016

March 31, 2017

March 31, 2018

March 31, 2019

March 31, 2020

Performance Highlights
Net Sales

447,222556,966

624,637

675,821799,076879,954

693,152

722,987

619,241

480,809

Operating Income or Operating Loss (−)

63,55967,05364,123

68,25329,74049,661−21,496

21,49523,24920,234Net Income Attributable to Owners of Parent
or Loss Attributable to Owners of Parent (−)*125,477

39,111

46,17947,178

20,62842,793−22,057

16,58924,005

4,117

New Contracts

618,203793,278594,091

818,161

769,680

320,626

506,293547,826

935,451

189,643

1,163,256

1,506,146

1,549,813

1,767,814

1,772,036

1,192,625

1,045,684

846,157

1,208,365

941,618

Total Current Assets

319,464

376,172

460,231575,886

533,538

522,747

480,865

521,320541,747

537,955

Total Current Liabilities

174,293205,771

262,439

333,353

286,533

225,203

226,457

215,773

223,559

228,386

Total Assets

468,502526,169

628,757

746,102719,754689,782646,291

684,921708,855

671,273

Total Net Assets

264,483

291,042

336,083

379,882

388,496

419,673

383,260

395,779

410,350

390,979

Shareholders’ Equity

263,983

290,415

335,534

374,654

387,480

418,695

382,215394,701

409,254

390,516

Net Operating Cash Flow

48,214

97,84785,010120,576−71,416−49,764−28,884

5,539−55,259

92,442

Investment Cash Flow

116

−18,746−28,370−18,728−23,411

8,696−12,979

11,736−4,662

19,364

Financing Cash Flow

−7,317−20,536−3,695−10,687

3,836−4,374−19,674

33,781−13,878−7,699Cash and Cash Equivalents at End of Year

161,894

222,556

284,777

385,252

297,707247,947

185,603

235,394

160,841

261,898

ROA (Return On Assets) (%)

14.1

14.6

12.6

12.2

6.1

7.4

−2.3

3.8

4.6

3.2

ROE (Return On Equity) (%)

10.0

14.1

14.8

13.3

5.4

10.6

−5.5

4.3

6.0

1.0

100.83154.90182.91186.9081.73

169.60−87.42

65.75

95.14

16.32

Cash Dividends per Share (in yen)

30.0

38.5

45.5

46.5

21.0

42.5

30.0

25.0

28.5

12.0

Gross Margin Ratio (%)

18.2

15.6

13.5

13.1

6.6

8.3

0.2

6.2

7.3

9.0

Operating Income Ratio or Operating Loss Ratio (−) (%)

14.2

12.0

10.3

10.1

3.7

5.6

−3.1

3.0

3.7

4.2

Shareholders’ Equity Ratio (%)

56.3

55.2

53.4

50.2

53.8

60.7

59.1

57.6

57.7

58.2

Current Ratio (%)

183.3

182.8

175.4

172.8

186.2

232.1

212.3

241.6

242.3

235.5

Payout Ratio (%)

29.8

24.9

24.9

24.9

25.7

25.1

–

38.0

30.0

73.5

Outstanding Contracts
Financial Position at Year-end

Cash Flow

Financial Highlights

Net Income per Share or Net Loss per
Share (−) (in yen)

*1 As a consequence of applying “Accounting Standard for Business Combinations” (ASBJ Statement No. 21, September 13, 2013),“Net income” is referred to as “Net income attributable to owners of parent” from the fiscal year ended March 2016 onward

17

JGC Report 2020

JGC Report 202018

CHAPTER 2

JGC Group
Value Creation
This chapter tells the story of the JGC Group, with highlights including
historical growth, value creation, and the path to sustained growth.

21 JGC STORY
1
2
3
4
5

31
33

Growth Trajectory
JGC Group Materiality
Value Creation Process
JGC Group’s Business
Roadmap to the Sustainable GrowthHighlights 1

Accelerating Commercialization ofEnvironmental Technologies

Highlights 2Business Innovation throughDigital Transformation

JGC office in the 1950s

19

JGC Report 2020

JGC Report 2020

20

1

JGC Group Value Creation

Net sales by year*(¥ billions)JGC STORY

1,000
Return to higher
crude oil prices.
Stronger capital investmentby producers

G r o w t h Tr a j e c t o r yDrop in projects due to global
recession from the subprime
mortgage crisis
High crude oil prices
spur capital investment
by Middle Eastern andother producers

JGC Group growth is driven by constant transformationand ceaseless diligence in adapting to changing times
and a changing world.

500
Asian financial crisis
undermines regional projects
Regional focus shifts to theMiddle East

Net sales

Fiscal year ended
March 2020

Global recession
triggers a sharp
downturn in projects

Total Engineering

Net sales¥426.7billion

Total Engineering

Functional Materials Manufacturing

Fiscal year ended
March 2010
Net sales¥376.4 billion

Total Engineering

Functional Materials Manufacturing

Fiscal year ended
March 2000

¥46.6 billion¥37.8 billion¥258.8 billion
Functional Materials Manufacturing¥21.7billion0

Key Developments*Non-consolidated figures used until fiscal year ended March 1999;
consolidated figures used from fiscal year ended March 2000.

1960

1973

OPEC establishedFirst oil crisis, fourth ArabIsraeli conflict, floatingexchange rates adopted

1962

1980

Iran-Iraq War(ends 1988)

1979

Liberalization of crude oil
imports in Japan

Second oil crisis

1985

Plaza Accord

2005

1991

2001

Gulf War

September 11
terror attacks

2003

1987

Black Monday

2011

Kyoto Protocol
comes into effectIraq War2020

The great East Japan Earthquake

2008

Subprime mortgage crisis

Global pandemicof COVID-19

2015

Paris Agreement adopted
SDGs adopted at UN summit

1928

1960s

1970s

1980s

1990s

2000s

2010s

Founded as Japan Gasoline Co., Ltd.
(currently JGC Holdings Corporation)

Concerted international
expansion

Earning a reputation as aworld-class engineering firm

Building a global network for project
execution, diversifying operations

Overcoming crisis,
responding to an era of gas demandBusiness expansion driven by accelerated
worldwide resource development

Expansion of business segments and regions,adoption of a holding company structure

Founded to build and operate domestic
refineries.

Overseas expansion takes off, as JGC
executes refinery construction projects inSouth America and moves into markets
including China, Southeast Asia, and North
Africa.

Awarded a series of orders in resource-producing
countries for oil refinery, petrochemical, andgas-processing facilities; built the first LNG
plant in Brunei. Start of environmental andenergy consulting business.

Globalization of project execution promoted,
as sudden yen appreciation reduces costcompetitiveness. Ventured into life sciences
sector and launched the fine ceramics
production business.

Withstood a wave of global restructuring and realignment inengineering; responded to growing gas demand, and secured
a succession of orders for natural gas processing and LNG
plants.

Energy demand expands in emerging countries. Higher sales
and profit through resource development projects for Middle
Eastern oil producers; now a world leader in the LNG plant
industry.

North American expansion capitalizing on regional advancesin shale oil and gas development; power generation projects
now reﬂect a commitment to offshore, thermal, and renewableenergy. As of October 2019, JGC becomes a corporate groupwith a holding company structure, pursuing stable, sustained
growth from a multi-business portfolio.

1930s-1950s
Full-scale EPC,
start of catalyst production business
Services begin, with refinery and petrochemical plant constructions from the
1950s supporting rapid domestic economic
growth. Production of catalysts used in theoil industry underway by the 1940s.

WEB

21

JGC Report 2020

Visit us online to learn more about JGC Group history.

https://www.jgc.com/en/about/history.html

JGC Report 2020

22

2

JGC Group Value CreationJGC STORYJGC Group Materiality

Extremely High

Process to identify materiality

achieve sustained corporate growth.
Progress in these six areas will be published in the Company’s integrated reports and online, and we will review theirsustainability and consider new materiality as needed in response to changes in macrotrends and our business.

Technical
ExpertiseSocial issues to be addressed by the Group are
selected through analysis of GRI guidelines, ISO
26000, SDGs, and other international guidelinesand global macrotrends.
Six material issues that take precedence aredetermined from a comprehensive evaluation ofpriorities from the standpoint of society, stakeholders, and the company.

Priority for stakeholders

Six issues are positioned as materiality by the JGC Group and addressed to contribute to a sustainable society and

High
High

Issues positioned as materiality are viewed as a key
element, fundamental in establishing management
policies and conducting business. Through soundbusiness activities, the JGC Group hopes to help
solve social issues and create economic, social, andenvironmental value.

OutputSixmaterial issues

Materiality

Societies in harmony with environment
P.37

Materiality toaddress
throughbusiness
activities

S

Working with local communities
around the world
P.39

Human rights,
employee motivation
P.40

Materiality toachieve as aresult ofbusiness
activities

Energy accessP.41

Quality of life
P.42

G
23

JGC Report 2020

Corporate governance, risks management
P.50

Extremely HighPriority for the company

Positioning as materiality

E

Materiality

Management policies●

Business activities●

Economic value
Social value● Environmental value

Related SDGs

STEP 1
Based on SDGs and otherguidelines, select social issues
to consider

STEP 2
Evaluate priority forstakeholders

Recognized Social Issues

STEP 3

STEP 4

Evaluate priority forthe company

Material issues are
determined from acomprehensive evaluation

Group Initiatives• Reducing the environmental impact of fossil energy• Promoting use of a greater share of renewable energy• Protecting ecosystems, maintaining biodiversity• Promoting development of products and technologies that help curb global
warming• Construction of Fossil Energy Plants with a Lighter Environmental Footprint• Construction of Renewable Energy Plants• Protecting rare plants and animals near construction sites• Producing environmentally beneficial products in volume and pioneering
environmental technology business• Contributing to economic and industrial development in emerging markets• Creating employment in emerging markets• Supporting technology transfer and human resource development inemerging markets• Construction of plants and facilities in emerging markets• Promoting procurement in emerging markets• Training and educating engineers in emerging markets• Promoting workplace diversity• Promoting female hiring and strengthening skill-building• Respecting human rights in all business activities• Promoting measures that encourage workplace diversity• Expanding the personnel system accounting for opportunities and skill-building for women• Ensuring thorough respect for human rights, including in supply chains• Meeting greater global energy demand• Promoting wider use of renewable energy that contributes tosustained growth• Enhancing productivity through greater global energy efficiency• Construction of various types of energy plants in regions worldwide• Promoting wider use of renewable energy• Making energy plants more efficient and reducing energy consumption• Responding to aging social and industrial infrastructure• Promoting development of social and industrial infrastructure in
emerging markets• Improving global medical standards• Making life more convenient and comfortable• Conducting maintenance business for social and industrial infrastructure• Construction of various infrastructure facilities in Southeast Asia
• Construction of pharmaceutical plants and medical facilities• Development and production of functional materials for electronics, everyday
products, and more

• Strengthening and improving corporate governance• Ensuring regulatory compliance in business activities• Responding appropriately to corporate and business risk

• Continuing to strengthen corporate governance and ensure efficacy• Being thorough about compliance policies, strengthen related activities• Practicing thorough risk management

JGC Report 2020

24

3

JGC Group Value CreationJGC STORY

Applying ample management resources
and strengths in each segment for maximum economic, environmental,

Va l u e C r e a t i o n P r o c e s s

Project
Execution
Capabilities

C or e C o m p e te n ci e s

P.23~24,35~44

P.67 ~
73

Solution
ProposalCapabilities

Organizational
Strengths

Ability to
Respond to
Changes

Technical
ExpertiseFiscal year ended March 2020

Human Capital

Financial Capital

P.74~75

P.86~104

Group of expert engineers

Solid financial base

P.27~28

P.81~84（Value Generated）

EPC Project Execution

Oil and Gas

Delivering plants and facilities that
support client business

Plants and facilities used for crude oil/gas gathering,gas-oil separation, offshore, LNG and gas processing,oil refining, petrochemicals and chemicals

Economic Value
P.85~124

Consolidated
net assets¥390.9 billion
Shareholders’ equity ratio
58.2％
Credit rating A+ (Rating outlook:Stable）*

7,607

Manufactured
CapitalP.76~77

P.78

Broad network of clientsand suppliers

Production platform for superior
functional materials

7,000
Approx13,000

Functional Materials Manufacturing Business

Production and Sales ofHigh-performance Materials
Providing products that
support everyday life andvarious industries*

Social Value

Catalysts

P.39 ~42

Catalysts used in oil refining and petrochemicals,
chemicals and environmental protection
Fine Chemicals

Semiconductor, IT, electronics, optical, and cosmetics
materials
Fine Ceramics*

Approx

OutcomePlants and facilities used with renewable energy,
LNG/LPG terminals, waste power, pharmaceuticals,
hospitals, airports, and non-ferrous metal refining

Social and
Relationship Capital

Suppliers

OutputInfrastructure*Long-term issuer rating, Japan Credit Rating Agency, Ltd.

Clients

Business Models
Total Engineering Business
Open-minded
Corporate
CultureManagement Resources

Consolidated
employees

Key social issues
for engagement(Materiality)

and social value and solutions to social issues.

Semiconductor, automotive, telecommunications,industrial medical and aerospace materials

Production sites in Fukuoka, Niigata,Miyagi, Aichi, and Iwate, Japan

Environmental
Value

Consulting Business*Since 1965

P.37 ~38

Providing Consulting Services
Risk
Management

Corporate
GovernanceContributing to solutions in environmental,

Consulting

Environment, energy and resources, social scienceenergy, and other fields.
Quality
Management
SystemCompliance

Value Creation Base4
P.45~6「JGC Way」

Corporate Philosophy
25

JGC Report 2020

P.01

JGC Report 2020

26

4

JGC Group Value CreationJGC STORY

Functional Materials
Manufacturing

Functional Materials
Manufacturing¥46.6billion¥6.7billion

9.7%

J G C G r o u p ’s B u s i n e s s

Total Engineering

33.3%

JGC CORPORATION (Overseas Business)
Oil & Gas Project Company
Infrastructure Project Company

Net
Sales

Operating
IncomeFiscal year ended
March 2020

JGC JAPAN CORPORATION (Domestic Business)
JGC HOLDINGS

Fiscal year ended
March 2020

Functional Materials Manufacturing

CORPORATIONJGC Catalysts and Chemicals Ltd

JGC Group creates economic, social and environmental value throughJAPAN FINE CERAMICS CO., LTD.

mainly two business models: Total Engineering (in Oil & Gas andTotal Engineering Business

Infrastructure segments) and Functional Materials Manufacturing.

¥426.7billion

Total Engineering Business

88.8%

59.7%

Japan NUS Co., Ltd.

¥12 billion

Other domestic and foreign group companies

Total Engineering Business

Functional Materials Manufacturing Business

The plants and facilities developed through projects support client business of all kinds. We work with clients from early on, in the initial planningstages of feasibility studies (FS) and front-end engineering and design (FEED). After projects are complete, operations and maintenance services arealso available. This ensures that throughout the life cycle of plants and facilities, clients can get the most from their business.

Through R&D, planning, production, and sales in this business, JGC Group offers an array of catalysts, ﬁne chemicals, and ﬁne ceramics that enhancethe value of our customers’ operations in many applications.
Sequence of business operations

R&D

Marketing

Manufacturing

Sales

Sequence of project execution

Feasibility
study

Front-endengineeringand design

Engineering

Procurement

Construction

O&M■ Covered Sectors
Catalysts

Fine Chemicals

Fine Ceramics

Catalysts used in oil refining and petrochemicals, Semiconductor, IT, electronics, optical, andcosmetics materials
chemicals and environmental protection■ Covered Sectors

Semiconductor, automotive,
telecommunications, industrial, medical andaerospace materials■ Representative Product and Service

Oil & Gas

Infrastructure

Plants and facilities used for crude oil/gas gathering, gas-oil separation,
offshore, LNG and gas processing, oil reﬁning, petrochemicals, chemicals,
and others

Plants and facilities used for renewable power generation, LNG/LPG
terminals, waste power, non-ferrous metal reﬁning, pharmaceuticalmanufacturing plants, hospitals, airports, and others■ Representative Product and Service

FCC (fluid catalytic cracking) catalysts
Construction
providing nearly agigawatt of power
domestically andoverseas

Plants accounting
for more than
30% of global
production

No.1 share of thedomestic market

No.1 share of thedomestic market

Silica Sol for HDD polishing

World's highest
thermalconductivity

High-thermal-conductivity silicon nitride substrate

More than
600 projects
completed

Consulting Business

LNG plants

27

JGC Report 2020

Solar power plants

Pharmaceutical plants

Our Consulting business spans intelligence and research, field research, analysis and evaluation, andreliability and risk assessment in environmental, energy, resources, and social sciences fields. In this broad
range of consulting services, we apply extensive experience and proven technology to help find solutions
to diverse issues faced in Japan and around the world.
JGC Report 2020

28

JGC STORYThe JGC Group pursues further growth through contributions towarda sustainable society.

Roadmap to the Sustainable Growthbusiness plan beginning in fiscal 2021. Based on creating shared value, the vision will guide us in efforts totransform current business while addressing urgent social issues on the path to sustainability, as we promote
exploration of new business areas in the context of our core competencies to take on these social issues.

Sustainability-oriented
Social Issues to Address

Stable Food Supply for All

Total global
population※1

Assurance of Health andWell-being for All

Global population
65 or older※2

Water Conservation

Global water
demand※3

Improvement ofEnergy Access

Global primaryenergyconsumption※4

Core Competencies
2020 :

7.7 billion people

2050 :

9.7 billion people

Transforming Existing Business2019 :

700 million people

Significantly more competitive, from an innovation in project execution capabilities

2050 :

1.5 billion people

2019 :

4,600km2050 :

6,000km2017 :

13,511Mtoe

2040 :

Building Foundations for
Infrastructure, Technological Innovation

Projected global demandfor infrastructuredevelopment(2016–2030)※5

Development of Safe,
Secure, Comfortable
CitiesGlobal urban
population ratio※6

Establishment ofRecycling Systems

Global waste
generatedannually※7

Promoting Decarbonized /Low-carbon Societies

Rate of CO2
reduction to meet
Paris Agreementtargets※8

Conservation of Oceans,
Marine Ecosystems

Global marine
plastic waste※93

29

17,866 Mtoe

$53 trillion

2020 :

56.2 %

2040 :

65.5 %

2018 :

2 billion tons/year

2050 :

3.4 billion tons/year

Technical Expertise

Business Segments Envisioned＊

Project Execution Capabilities
Organizational Strengths

Low-carbon /Decarbonized Engineering

Solution Proposal Capabilities

Focusing on segments that combine fossil
energy with low-carbon technologies, such as
CCS

Functional Materials Supporting
Carbon Reduction and Conserving
Environment
Contributing to greater EV/HV demand,
microplastic alternatives, and other forms ofcarbon reduction and decarbonization

Open-minded Corporate Culture

approx.

150million tons

Resource Recycling

New Energy

Responding to expanded resource recycling,such as plastic and other waste

Focusing both on conventional renewable energy
and new areas of energy, such as hydrogen andammonia

Infrastructure, Industrial Innovation

Healthcare, Life Sciences

Meeting greater demand for construction ofadvanced water, transportation, and otherinfrastructure and smart factories

Responding to global population growth, longer
life expectancy, and higher medical standards* Subject to change※6 UN“World Urbanization Prospects 2018”※2 UN“World Population Ageing 2019”※7 World Bank Group“What a Waste 2.0”

※3 IIASA“Water Futures and Solution 2016”※8 UNEP“Emissions Gap Report 2019”※4 BP“BP Energy Outlook 2019 edition”※9 McKinsey & Company and Ocean Conservancy“Stemming the tide:Land-based strategies for a plastic-free ocean”

2040
Vision(to be announced in 2021)

Ability to Respond to Changes

7.6%
By 2030 :reduction each year

※1 UN“World Population Prospects 2019”

JGC Report 2020

Exploring New Business Areas

3

Sources※5 OECD“Strategic Transport Infrastructure Needs to 2030”

The JGC Group is currently establishing 2040 Vision, a long-term vision that will inform the next medium-term

VISION 2040

5JGC Group Value CreationJGC Report 2020

30

1

JGC Group Value Creation

Highlights

Accelerating Commercialization ofEnvironmental Technologies

New Energy

Promoting Use of CO2-free Ammonia as a Hydrogen Energy Carrier

Recognizing how firmly established the trend toward building sustainable societies has become, the JGC Group regards environmental

In efforts toward a low-carbon society, we can anticipate expanded use of hydrogenbusiness in particular as a priority segment. We focus on our own environmental and other technologies, drawing on collaboration withenergy, which does not emit CO2 during combustion. However, many commercial

corporations and universities that maintain and develop other advanced technologies, to promote building new business. To accelerate thischallenges remain. From an economic standpoint, for example, large-scale and highly

development, the Sustainability Co-Creation Department was established on October 1, 2019, under direct supervision of the president.
New Areas To Explore(environmental segment)

efficient conversion to an energy carrier for transport is needed. In collaboration with
AIST, the JGC Group is promoting establishment of technologies to commercializehydrogen energy. One facet is developing new catalysts and processes to synthesize

Promising Environmental Technologies

Partners

Promoting use of CO2-free Ammonia

National Institute of Advanced
Industrial Science andTechnology (AIST)

Carbon separation, capture and reuse

NGK INSULATORS, LTD.

New Energy

Problem-Solving

ammonia (which does not emit CO2 during combustion) using hydrogen produced fromrenewable energy as a raw material.

Greenhouse Gas
Reduction■ Using Ammonia as a Hydrogen Energy Carrier
Ammonia synthesis pilot projectLow-carbon /DecarbonizedEngineering

Resource Recycling

Plastic waste gasification
chemical recycling

Production of sustainable aviationfuel (derived from used cooking oil,plastic waste, and other waste)

Ube Industries, Ltd.
Showa Denko K.K.
EBARA Environmental Plant., Ltd.
REVO International Inc.
Japan Petroleum Exploration Co., Ltd.
(JAPEX)
Marubeni Corporation
Japan Airlines Co., Ltd.
ENEOS Corporation

Renewable energy

RecyclingOriented
Society

Production of CO2-free Hydrogen

Ammonia synthesis process
HydrogenMarine Pollution
Reduction

Transport
NitrogenCompression

Synthesis

Power
generation

Ammonia

Sustainable Society as Envisioned and Pursued by the JGC Group

Low-carbon / Decarbonized Engineering

Recycling

Carbon Separation, Capture and Reuse

Gasification Chemical Recycling of Plastic Waste

Working with NGK INSULATORS, the JGC Group has

Plastic recycling is being promoted in response to global waste issues, with marine plastic

developed high-efficiency CO2 separation and capture

pollution often cited as an example. In conjunction with Ebara Environmental Plant, Ubetechnology using DDR-type zeolite membranes. Large-scale

Industries, and Showa Denko, the JGC Group supports gasification chemical recycling thatfield testing is underway in the United States. Use of theseapplies the Ebara Ube Process (EUP) to gasify waste plastic and convert it to synthetic gas

techniques – separation and capture of CO2 from associatedthat can be used in synthesis of chemicals such as ammonia or olefins.

gas during crude oil production, or removal of CO2 during
natural gas refining – helps promote CO2 recycling as well as
development of energy resources with lower environmental
impact. Gas processing costs are also reduced through thisPlastic Waste

technology, which requires less energy to remove CO2. To
meet increasing energy demand, the technology will beapplied in the development of challenging natural gas fields
with high concentrations of CO2.

RubberProducts
ChemicalFiber

Plastic
Recovery

Plastic
Products

Products

Gasification

ChemicalSynthesis

Chemicals(ammonia, ethylene,
propylene, etc.)

EUP

H2

Chemical
PlantsCO CO2Synthetic Gas

DDR-Type Zeolite Membrane(Source: NGK INSULATORS)JGC Report 2020

32

2

JGC Group Value Creation

Highlights
Innovation in executing projects

Business Innovation throughDigital Transformation

Enhancing Productivity, Creating added Value
A focus for the JGC Group is building our own DX-based advanced work packaging (AWP) system for further innovation in project execution in Total
Engineering Business.

Currently making great strides, digital transformation (DX) is expected to shake up many areas of industry and society in the future. DX is actively promoted by the
JGC Group, both to introduce innovation in existing businesses such as Total Engineering and to expand business models.

AWP（Advanced Work Packaging）

JGC Group’s DX

JGC Group AWP
Construction-driven thinking

Innovation in Executing Projects

DATA HUB

Providing Digital
Solution Services

Exploring New Business Areas

Construction

Project
Management

execution■ Making construction status

A system for efficient central management of all project information■ Providing highly transparent

plant hand-over data to clients

Based on overall optimization that the JGC Group has pursued for some time under a construction-driven approach to project execution, we have moved ahead indeveloping a Data Hub system for central management of related information and are now building our own AWP system applying these approaches. Expressing
project progress visually and forecasting progress more accurately will be possible, and in addition to higher productivity from lower costs and earlier delivery,building the Digital Twins which replicate and visually express projects as a whole will enable us to create added value.

Total Engineering

Procurement■ Overall optimization in project

In managing project execution, an orientation toward overall EPC
optimization centered on construction work requirements

visibleEnhancing Productivity,
Creating added ValueEngineering

An approach employed for efficient, just-in-time construction that eliminates waiting time by breaking down the tasks tocomplete in a project and managing them according to relevant construction work.

Pioneering New Fields
with DX

Exploring new business areas

Providing Digital Solution Services
The JGC Group is also engaged with digital solutions addressing technical challenges faced by our clients. Innovative, DX-based technical services provided by the
JGC Group in Total Engineering Business include development of Airlize LNG technology package service for stable operation and higher productivity of air-cooled
LNG plants, as well as integrated maintenance service (INTEGNANCE) for domestic oil refineries and petrochemical and chemical plants.

Four values

Innovation in executing projects

IT Grand Plan 2030: Future Vision and Roadmap for Total Engineering Business
Short-term goals

Capacity up

Higher quality/lower risks

Challenging

Generative designof critical equipment
Explicit rules
from seniors’skills

New materials
development
Generative designof plot plans(relative to 2020)

33

JGC Report 2020

Routine-workautomation

Achievable

Construction time

New Mid-term IT Stregety
Development Programs

3D Printing/of concrete
foundation
Ready-madeModule plant

Remote work-styles

Digital Twins

2026~2030

Integrated maintenanceand safety services
Support for aging facilities, corrosion/damage monitoring,risk assessment and support in international safety compliance,
human resource development, skill shortage strategies,
digitalization and automation,
catalyst/chemical remaining life estimation,
renovation project support

Engineering digital twin
implementation

2030 Targets

1/3 1/2

Construction site
as unmanned
factory
Project digital twin
implementation

AI Design

Engineering
digital twin
implementation

Man-hours

Long-term goals

New design/value delivery

大The JGC Group established the IT-based project
management technologies for Total Engineering Business in
the 1970s, and continuously refined it over time. Currently,
the JGC Group is taking on technical innovation for project
execution and project management in line with IT Grand
Plan 2030. The plan describes our future vision for thisbusiness, as enhanced by DX that is expected to evolve
rapidly, and serves as a roadmap for attaining this vision. By
2030, we aim to complete projects twice as fast with onethird the current manpower.

Smart maintenance service

Automation of field
and fab-shop

3D Printing/Construction
Automation

One-stop service

Connecting data

Providing complete suppor t for all
services from routine maintenance tore gular planne d main tenanc e andmanaging projects in line with clientneeds.

L in k in g d a t a b e t w e e n v a r i o u sapplications and ser vices. Frees
clients from routine work.

Data-driven

Benchmarking

A ccelerating work and enhancing
quality through forecasts,
decision-making, and planning basedon data analysis.

Enables comparative analysis withexternal data, drawing on extensive
records.

1
Advantage
2
Advantage

Cut costs through selectivity and focus in maintenance work
Improve profitability through maintenance planning and project management

Standardized
Module plantSmartconstruction
camps

Smart factoryfor manufacturinggroup companies

Exploring new business areas

Pioneering New Fields with DX
2022~2026

Smart Community~2022

Applying DX in the JGC Group's Total Engineering Business and Functional Materials Manufacturing Businesswill enable us to provide services that are more value-added than ever before. By linking the Group's core anddigital technologies, we are actively pioneering new business fields as well as working more efficiently in existing
businesses.

JGC Report 202034

CHAPTER 3

Materiality
Initiatives
This chapter presents key issues and specific initiatives of the
JGC Group toward sustainability in society.

37 Societies in Harmony with Environment
with Local Communities
39 Working
Around the World
40 Human Rights, Employee Motivation
41 Energy Access
42 Quality of Life
43 Ensuring Occupational Health and Safety
44 ESG Data Highlights
Solar power plant (Chiba, Japan)

35

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Materiality Initiatives

CHAPTER 3

Materiality Initiatives
Related SDGs

E Societies in Harmony with Environment
Recognized Social Issues

Protection of Rare Plants and Animals Near Construction Site

Group Initiatives

Reducing the environmental impact of fossil energy

Construction of Fossil Energy Plants with a Lighter Environmental Footprint

Conservation During LNG Canada Construction

Promoting use of a greater share of renewable energy

Construction of Renewable Energy Plants

Protecting ecosystems, maintaining biodiversity

Protecting rare plants and animals near construction sites

Promoting development of products and technologies that help curb global warming

Producing environmentally beneficial products in volume and pioneering environmental technology business

The construction site of LNG Canada Project is surrounded by grandnature, which is home to a large variety of native animals and plants. We
are executing this project in harmony with the environment through theimplementation of various conservation activities, such as realigning a river toavoid construction activities, as well as protecting native fish and expanding
their habitat.

Conceptional drawing of the plant at completion

Construction of Fossil Energy Plants with a Lighter Environmental Footprint
LNG Plant Construction
In view of energy demand from a growing global population, fossil fuels are
expected to continue to fulfill an essential role to a certain extent over the
next few decades.
Among fossil fuels, natural gas has a low volume of carbon dioxide (CO2)and nitrogen oxide (NOx) compared to coal and oil when burned, and its
use is being expanded globally as a source of energy with an extremely low
environmental burden that emits no sulfur oxide.
JGC possesses the technology to design and construct liquefaction
equipment, the heart of LNG plants-something that few companies in theworld are able to do. Since building JGC’s first LNG plant in Brunei in 1973,
over a period of 50 years we have designed and constructed LNG plants
responsible for over 30% of global output, responding to our clients’ needs
and accomplishing their projects as the leading contractor of LNG plants.
Furthermore, in recent years we have been developing technology foroffshore LNG plants constructing and improving the productivity of LNG
plants using AI technology, and we are actively working towards creating anenvironmentally friendly society through our business activities.

■ Emissions of Fossil Fuel Combustion Products (relative quantities with coal as 100)
Coal 100

Coal 100

Coal 100

Oil 80Natural gas
60

Carbon dioxide (CO₂)
Source: IEA “Natural Gas Prospects to 2010”

Oil 70Oil 70Natural gas
40

Natural gas
0

Nitrogen oxide (NOx)

Sulfur oxide (SOx)

Track record of completed
LNG plants

52

TrainsMass Production of Environmentally Beneficial Products
and Pioneering of Environmental Technology Business ※Production of Microbead Alternatives
Recent years have seen the global emergence of problems with essentiallynon-biodegradable microbead pollution in the ocean. Cosmetics
manufacturers are now using less of the plastic beads, spurred in part by an
EU policy introduced in early 2019 to phase out this material as an additive invarious products.
As an alternative to plastic microbeads on a scale of hundreds of microns,
which are used in cosmetics such as foundation, lipstick, emulsion, andsunscreen as well as abrasive products including face scrubs and toothpaste,
JGC Group develops and sells beads of silicon dioxide (silica), an abundantnatural resource that makes up nearly 60% of the Earth's crust. Silica
is a naturally circulating, sustainable mineral component. Hydrophilic

silica dissolves in water and is incorporated into phytoplankton and otherorganisms.

Silicon dioxide

Non-biodegradable plastic microbeads

Volume Production of High Thermal Conductivity Substrates for EV/HEV Power Semiconductors

Total capacity: 162,470,000 T/Y

Corresponds to over 30%
of global output

Amid growing needs for energy-efficient electric and hybrid vehicles, highspeed railways, and industrial equipment supporting a low-carbon society,
it is essential to improve the performance of power modules that control
the power of various equipment. Semiconductor substrates in particular
are central in power modules, and as vehicle performance has improved inrecent years, needs have emerged to develop robust components that do notbreak even under large currents.
By employing silicon nitride, a highly heat-resistant compound used inapplications such as ball bearings, JGC Group has succeeded in developing
silicon nitride ceramics with the world's highest thermal conductivity.
Substrates made with the material withstand current 10 times higher thanusual, which in conjunction with structural refinements that dissipate heat
well can improve motor operating efficiency.
Slated for operation in 2020, a plant to produce silicon nitride ceramic
substrates in volume is now under construction.
High thermal conductivity silicon nitride substrate※Please go to "Accelerating Commercialization of Environmental Technologies" (p.31-32) for initiatives in pioneering of environmental technology business37

JGC Report 2020

JGC Report 202038

Materiality Initiatives

CHAPTER 3

Materiality Initiatives
Related SDGs

S Working with Local Communities
Around the World
Recognized Social Issues

Related SDGs

S Human Rights,
Employee Motivation

Group Initiatives

Recognized Social Issues

Group Initiatives

Contributing to economic and industrial development in emerging markets

Construction of plants and facilities in emerging markets

Promoting workplace diversity

Promoting measures that encourage workplace diversity

Creating employment in emerging markets

Promoting procurement in emerging markets

Promoting female hiring and strengthening skill-building

Expanding the personnel system accounting for opportunities and skill-building for women

Supporting technology transfer and human resource development in emerging markets

Training and educating engineers in emerging markets

Respecting human rights in all business activities

Ensuring thorough respect for human rights, including in supply chains

Construction of Plants and Facilities in Emerging Markets

Promotion of Measures that Encourage Workplace Diversity

Contributing to Development in Algeria

Measures Respecting Diversity: Women, People with Disabilities, Seniors, Global Personnel, and Others

Algeria boasts abundant resources, including crude oiland natural gas, and here, resource exploitation andexportation is the key industry. This business supports
the country's economic and industrial development.
Starting in 1969 when JGC Group was awarded Arzew
Refinery construction by state-owned oil company
Sonatrach, the Group has contributed to national
development through construction of a variety of energy
plants that have formed a cornerstone of industry fornearly 50 years.
Besides creating many jobs for construction workers,
this plant construction also contributes to overall plant
industry growth, which is driven by our proactive stanceon procurement from domestic material and equipment
makers.

Fair personnel management that emphasizes human rights is fundamental to JGC Group. This fairness is reflected in recruitment practices and personnel
systems. Diversity and inclusion are also promoted from a belief that respecting diverse lifestyles, motivating all employees, and fostering workplaces where
everyone can reach their full potential as dynamic professionals is vital to creating a broad range of value and driving sustained growth.
■ System and Policies for Accomplishing Diversity
Women

People with Disabilities

Seniors

Global Human Resources

JGC Group has created a supportive environment,
for example through an expansion of our familycare system

JGC Group strives to strictly observe theemployment ratio designated by the Act for
Promotion of Employment of Persons with
Disabilities and provides appropriate workplaceenvironments

By raising the retirement age to 65, we support
the work of seniors at the frontlines andpromote the internal transfer of expertise

Promotion of recruitment and training ofmulticultural human resources able to work
globally

Promotion of Women’s Careers
Arzew Refinery (completed in 1973)

Training and Educating Engineers in Emerging Markets
Promoting Domestic Procurement for Construction Sites
By actively promoting domestic procurement whereplants are built, JGC Group contributes to thedevelopment of plant industries as a whole, including
material and equipment manufacturing. Technology
transfer is also supported. When JGC Group orders
equipment that is difficult to manufacture, we dispatch
our engineers to provide technical assistance tailoredto local expertise and facilities, which helps build
proficiency in new technologies.

In the energy plant business, technicians from science and technology
backgrounds, few of them women, previously comprised the majority ofcompany staff, and due to factors such as carrying out construction work
under harsh environmental conditions or a multitude of projects in Islamic
countries, the field was characterized by obstacles to women’s careers.
However, at JGC Group we have been advancing the promotion of women toleadership positions and the creation of a supportive work environment for
women through, e.g. discussions with female employees and expansion of
our family care system, including working from home, and in recent years thenumber of female employees and managers has been steadily increasing.

■ Number and Ratio of Women in Management Positions※
Number of women in
management positions(persons)
25
20
15

5.0%

6.4%

Ratio of management positions
among total female employees

6.8%

7.4%

8.0%

9.0%

8.0
6.0

10
5
0

(%)
10.0

4.0

11

15

17

19

21

24

2014

2015

2016

2017

2018

2019 (term)

2.0
0.0

※Applies to employees of the former JGC Corp., before adoption of a holding company structure on October 1, 2019.

System for Athletes with Disabilities
A system supporting athletes with disabilities who are also competitive athletes was introduced in 2018. Through work style flexibility and management by
objectives, JGC Group supports athletes with disabilities who are balancing a career with athletic endeavors as they pursue their dreams.
An athlete with a disability who is also a talented athlete

Kenta Awatari
Training for welders (Malaysia)

39

JGC Report 2020

Sport

Para TaekwondoWorks in HR management in the Talent & Organization Development Department.
Started Para Taekwondo in 2017, taking advantage of stamina and leg strengthfrom playing soccer since elementary school. Awarded a silver medal at the
Asian Para Taekwondo championships in May 2018.

JGC Report 202040

Materiality Initiatives

CHAPTER 3

Materiality Initiatives
Related SDGs

S Energy Access

Related SDGs

S Quality of Life

Recognized Social Issues

Group Initiatives

Recognized Social Issues

Group Initiatives

Meeting greater global energy demand

Construction of various types of energy plants in regions worldwide

Responding to aging social and industrial infrastructure

Conducting maintenance business for social and industrial infrastructure

Promoting wider use of renewable energy that contributes to sustained growth

Promoting wider use of renewable energy

Promoting development of social and industrial infrastructure in emerging markets

Construction of various infrastructure facilities in Southeast Asia

Enhancing productivity through greater global energy efficiency

Making energy plants more efficient and reducing energy consumption

Improving global medical standards

Construction of pharmaceutical plants and medical facilities

Making life more convenient and comfortable

Development and production of functional materials for electronics, everyday products, and more

Construction of Renewable Energy Plants
Construction of Pharmaceutical Plants

Solar Power Plant Construction in Vietnam

Construction of Pharmaceutical Plants Equippedwith Advanced Technologies

To meet rising energy demand from the country's growing population while
protecting the environment, Vietnam is promoting expanded use of renewableenergy. In 2018 the Group was awarded construction of three large-scalesolar power plants here. Each was completed successfully, applying ample
experience from some of Japan's largest solar installations. In generation
capacity, our record of solar plant construction in Vietnam has reachednearly 190 megawatts (DC), which provides power equivalent to the annual
consumption of about 130,000 households.

For nearly half a century JGC Group has been involved in pharmaceuticalplant construction in Japan and elsewhere. This record has surpassed 600
projects. Development of biopharmaceuticals and other groundbreaking
advanced medicine continues amid rapid progress in sophisticatedtreatment such as gene therapy and regenerative medicine. Meanwhile,needs for streamlined production – manufacturing with fewer workers, forexample – are growing.
To keep pace with great technological progress in medicine, JGC Group
engages in construction of advanced pharmaceutical plants, which includes
developing unattended production lines automated with robots.

Solar power plant for Gia Lai Electricity Joint Stock Company

Pharmaceutical plant for Tamura Pharmaceutical Co., Ltd.

■ Automating Steps in Tablet Production with Robots

Coating

TabletingMaking Energy Plants More Efficient, Reducing Energy Consumption

Supplying tablets

Opening containers,
collecting tablets,and closing the containers

Measures to Improve LNG Plant Productivity

Opening containers,
collecting tablets,and closing
the containers

Unattended transport

Many LNG plants built since the 1980s have air coolingthat releases waste heat from heat exchangers into
the atmosphere. However, in some, hot air from heatexchangers is drawn back into the intake. Plants affectedby this hot air recirculation (HAR) have lower cooling
capacity, which poses problems in lower productivity.
The Group has developed Airlize LNG® services thatcan control airflow and enable optimal plant design,
construction, and equipment layout to minimize theimpact of HAR. Some 10 sites have already benefited
from these services.

■ Hot Air Recirculation

Wind

Recirculation of hot exhaust air between trains

Hot exhaust air

Air-cooledheat exchanger

Hot exhaust air

Air drawn in

Air drawn in
Hot exhaust air isdrawn back into trains

LNG plant

LNG plant

Production equipment

Robot

Robot

Production equipment

Development and Production of Functional Materials for Electronics,
Everyday Products, and More
Supplying Parts for Advanced Medical Devices
Medical devices must be highly safe and reliable to fulfill their vital roles.
The array of ceramics supplied by JGC Group are used in advanced medical
devices including blood pumps, orthodontics, endoscope components, andventricular assist devices, where they fulfill supportive roles in many lives.

41

JGC Report 2020

JGC Report 202042

Materiality Initiatives

CHAPTER 3

Materiality Initiatives

S Ensuring Occupational Health and Safety

ESG Data Highlights
This table introduces our initiatives related to the environment, society, and governance (ESG) and our key performance indicators (KPI).

Basic StanceIn accordance with group policy on health and safety and basic

involving our own employees and those of partner companies. TheseHSSE* guidelines, and under the leadership of senior management,

practices are also appreciated by clients, and JGC Group will continue

JGC Group is committed to preventing worksite and traffic accidents

to maintain a rigorous approach to safety.

E

Environment-related Initiatives• Contribution to environmental protection• Environmental Improvement Activities inLine with Our Business• Promotion of the Zero Emissions Initiative■ HSSE Organization

Following the adoption of a holding company structure
in October 2019, the JHD HSSE Committee wasestablished in the holding company as the highest
authority to plan and coordinate HSSE matters for JGCGroup as a whole. The Committee deliberates on anddetermines basic Group HSSE matters, establishes,
maintains, and manages the HSSE management
system, helps develop and maintain HSSE actionplans, and oversees and manages measures toimplement the plans. Results are regularly reportedby the Committee to senior management.

Fiscal 2015

Fiscal 2016

Fiscal 2017

Fiscal 2018

Fiscal 2019*1

Industrial waste recycling rate (Domestic construction sites)

%

96.3

98.1

97.7

96.1

85.2

Number of incidents of leaks of hazardous substances, etc.
(Domestic and overseas construction sites)

Incidents

0

0

1

0

0

Energy-related CO² emissions (Domestic construction sites)

kgCO²/hr

0.64

1.43

3.52

2.39

0.61

%

79.4

96.0

64.2

79.5

69.5

Rate of diffusion of electronic manifests
Energy consumption (Yokohama Head Office) *2

Crude oil equivalent (kl)

2,579

2,405

2,248

2,224

2,139

Yokohama Head Office power consumption

1,000 kWh

6,720

5,974

5,571

5,497

5,221

Consumption of chilled water by Yokohama Head Office1,000 MJ

16,19515,857

14,071

15,353

15,503
7,170

Consumption of steam by Yokohama Head Office1,000 MJ

8,021

8,886

9,153

7,724

JGC Holdings: JHD

Volume of waste disposal by Yokohama Head Office1,000 kg

224

209

212

206

191

(Holding Company)

Rate of recycling of waste by Yokohama Head Office

%

66.6

64.9

65.7

61.4

59.5

S

JHD HSSE Committee

JHD Quality Assurance, Safety &Environment Department

JGC Corporation(Overseas Operating Company)

JGC Japan(Domestic Operating Company)

Oil & Gas Project Company

Number of women in management positions

Persons

15

17

19

21

24

Rate of employment of people with disabilities

%

1.75

1.81

1.82

1.87

1.97

Number of re-employed employees*3

Persons

208

189

159

109

55

Number of non-Japanese employees *3

Persons

97

94

100

89

86

Number of employees taking childcare leave (Male)

Persons

1

2

8

11

14

Number of female employees taking childcare leave (Rate ofreinstatement of female employees taking childcare leave)

Persons(%)

29(100)27(96)

24(100)24(100)19(100)Initiatives related to human rights and labor Number of employees taking spousal childbirth leavepractices
Number of employees taking sick or injured childcare leave• Promotion of diversity• Support for realization of work-life balance
Numberof employees taking nursing care leave• Support for employee career formation

Persons

72

81

81

64

80

Persons

125

115

123

185

187

Persons

4

8

20

22

11

Functional Materials
Manufacturing, others

Infrastructure Project Company

Persons

Report on Social Initiatives(the highest authority to plan and coordinate HSSE matters for JGC Group as a whole)

Number of employees taking temporary retirement for nursing care

Persons

2

2

1

0

0

Number of employees working reduced hours for childcare

Persons

37

44

42

51

47

Number of employees working reduced hours for nursing care

Persons

1

1

2

0

0

%

53

53

57

53

59

Persons

98

62

72

86

45

Rate of utilization of annual leave

Overview of Fiscal 2019 Activities

Number of employees dispatched for onsite training/ onsite
instruction

In fiscal 2019, domestic and overseas construction sites were kept aware of HSSE
matters. For office workers as well, safety training was visual, auditory, and virtual. VR
experiences also simulated accidental falls with vibration and wind pressure. In this way,
opportunities for all employees to learn about basic safety were provided. As a result,Group companies around the world maintained an outstanding safety record compared tocompetitors.

Initiatives related to health and safety• Fostering of culture of health and safety• HSSE leadership by top management• Enhancement of HSSE management
system for investment projects• Ongoing implementation of traffic safetymeasures• Further development of in-house healthand safety education• Enhancement of Head Office construction
HSSE functions

Safety training using VR

Response to Covid-19
In response to the state of emergency declared in Japan on April 7, 2020as the Covid-19 pandemic spread, JGC Group adopted teleworking andgenerally requested employees at the main office in Yokohama to refrain from
commuting. Even after the emergency was lifted on May 25, commuting has

Units

Report on Environmental Initiatives* HSSE: Health, Safety, Security and Environment

HSSE Organization

JGC’s main KPI

G

Number of employees dispatched to overseas companies, etc.

Persons

2

5

5

2

4

Total project working hours

1,000 hrs.

185,433

128,036

81,072

90,99356,478

Number of fatal accidents

Accidents

0

3

2

0

0

Number of accidents accompanied by lost work time

Accidents

14

8

9

8

7

Number of restrictions on work

Restrictions

37

25

6

11

18

Number of conditions requiring specialized treatment

Conditions

99

65

41

31

46

Rate of frequency of accidents accompanied by lost work time*4

0.015

0.012

0.022

0.018

0.025

Rate of frequency of recordable accidents *5

0.16

0.16

0.14

0.11

0.25

Times (People)

18(600)12(373)13(353)6(199)

21(559)Numbers

5

12

18

28

47

Report on GovernanceInitiatives related to fair business practices
Number of times compliance training implemented/number of• Realization of increased compliance awareness employees receiving compliance training

been combined with teleworking, among other steps to help contain the virus.
As similar measures at active construction sites, work proceeded with theutmost attention to preventing infection and maintaining safety for employees
and others alike.

Number of reports received by hotlines
Initiatives related to the promotion of
information security• Information management awarenessverification surveys and voluntary
inspections• Drills against targeted threats

Number of serious information security-related incidents

Incidents

0

0

0

0

1（*6）

Reinforcement of governance system

Number of outside directors

Persons

1

2

2

2

3

*1 Data for Fiscal 2019 applies to the scope of business covered by the former JGC Corp., before adoption of a holding company structure on October 1, 2019.
*2 E nergy consumption (Yokohama Head Office): Targets for fiscal 2015 and fiscal 2016 have been set as an average annual reduction of 1%, with 2013 as the base year.
*3 Number of re-employed employees and number of non-Japanese employees = (Number of employees in April + Number of employees in March) ÷ 2*4 Rate of frequency of accidents accompanied by lost work time = Number of accidents accompanied by lost work time × 200,000 ÷ Total project working hours*5 R ate of frequency of recordable accidents = (Number of fatal accidents + Number of accidents accompanied by lost work time + Number of restrictions on work + Number of conditions requiring specialized treatment) × 200,000 ÷ Total project working hours*6 Number of serious information security-related incidents: 1 (Emails sent to external parties due to unauthorized access)Corrective measures for the above incident: introduction of measures to prevent unauthorized access through two-factor authentication

43

JGC Report 2020

JGC Report 202044

CHAPTER 4

Foundation
for Creating Value
This chapter examines the basis of Group Value Creation. Observationsof outside directors are followed by a look at our management
framework and promotion of corporate governance, as well as risk
management and compliance initiatives.

47 Messages from Outside Directors
50 Corporate Governance
58 Quality Management System
59 Compliance
61 Risk Management
63 Management Structure
64 Dialogue with Shareholders and Investors(information disclosure, IR activities)

45

JGC Report 2020

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Foundation for Creating Value

CHAPTER 4

Foundation for Creating Value

Messages from Outside Directors

Messagefrom(Outside director profiles are provided on p. 56.)

Creating Value that
Addresses Social Issues

Outside Directors

Viewing Crises as Opportunities,
and Seizing the Future

Outside Director

Outside Director

Shigeru Endo

Masayuki Matsushima

world rankings in computing speed and other areas. When I heard a

These are trying times for the JGC Group. Investment by oil majors andcorporate structure with a sense of speed, undaunted by risks associat-

crisis has disrupted global supply chains and restricted movement,

developer at the announcement mention that rather than aiming tooil- and gas-producing countries rapidly came to a standstill this year

ed with the unknown, which come with any transformation. On thisseriously affecting the world economy. Some have observed how the

make the world's best system, they sought usability, I was impressedfrom factors such as the Covid-19 pandemic. Meanwhile, as the global

occasion, I have also advocated further promotion of efforts toward acrisis seems to be fast-forwarding historical processes. Although thisby their stance, which goes beyond functionality and emphasizes

macrotrend toward decarbonization continues over the long term, it

personnel system where international and diverse human resources can

may be a factor that undermines JGC Group performance, it can also

something responsive to user needs and valuable to society. Looking

seems inevitable that companies seeking orders in oil and gas will faceplay active roles. And especially at a stage such as this, I hope eachbe taken as an excellent opportunity to enhance corporate resilienceback in history, although Panasonic founder Konosuke Matsushitaa headwind.

member explores and vigorously discusses what the Group should be

and promote reform.

enjoyed early success in business, he later experienced stinging

But the slump in oil and gas capital investment will not last forever; there

like in 20 years and the action they themselves should take.

Last fall, the JGC Group changed course and adopted a holding

failure. He did some soul-searching after reflecting on his

is no need to be overly pessimistic, and it would also be a mistake to

Close monitoring will be needed, however, to prevent this far-reachingcompany structure. The move to a holding company represents the

single-minded pursuit of profit and lack of founding ambition, and hebelieve that continued overreliance on oil and gas poses no risk for theand rapid-fire transformation from causing undue friction or reform

Amid harsher conditions in international politics, the coronavirus

third major transformation following a move from oil refining todecided that their corporate mission would be to bring happiness toGroup.

fatigue in the workplace. There is no concern that organizational reform

engineering business in the early years after the company waspeople and make the world a better place.

With this awareness, the Group is in the process of transforming its

will disrupt governance, however. Fairness and transparency have beenfounded in the 1930s, and then another when it expanded

The Group is also improving corporate governance, which is theexisting management strategy and sales structure in pursuit of lasting,enhanced by structural improvements to corporate governance over theinternationally in the 1960s. Currently, the entire group is working tofoundation of this transformation. We also see this in recent

sustainable growth. One facet of this was adopting a holding company

past few years, such as refining the composition of the board andimplement this transformation, and a notable development toward thisdevelopments, such as establishing the Nominating and Remuneration

structure as of October 2019. In 2020 the Group has also been mapping

streamlining its management, as well as having a majority of outsideend is the formulation of the 2040 vision. In the spirit of SDGs and ESG,

Committees, introducing restricted stock compensation, and ensuringout, with input from various divisions and experts, new business that

directors in the Nominating and Remuneration Committees.

the Group's determination to take on social challenges and protect thethat at least one-third of the directors are outside directors. Steadyappears to be promising over the next 20 years. As these proposals are

It is said that crises are also opportunities. Everyone is motivated whenenvironment is becoming more apparent, and I believe we will see

progress is being made. In the future, I hope we can hold more

scrutinized relative to an array of criteria and prioritized, they will begin tothey share a sense of crisis. Getting through trying times is never easy,

specific shapes this will take in the next medium-term business plan

in-depth discussions on disclosure of non-financial information.

take shape as soon as possible. To survive in the challenging world of thebut I am convinced that when all members stand together andannounced in 2021.

Many employees in the Group have strong feelings about social value.

21st century, the JGC Group is also planning a shift toward higher

encourage each other, surely they can seize the future.

Here, I think that it may be necessary to reconsider the nature of

Taking on work with enthusiasm, doing all one can, and devoting

productivity, with both flexibility and tenacity, as a corporate group that

corporate value. As a company, one must generate profit as a matter

oneself to it. I believe this corporate heritage is the Group's greatest

has implemented digital transformation (DX).

of course. However, this by itself is no longer sufficient. Companies

core competency. Although many challenges remain, such as digital

I am of the opinion that companies may well respect their history andmust now create value that is useful not only for investors but also fortransformation, I expect the Group to continue working together andtraditions, but unless they adapt to changes in their environment, theysociety as a whole, including employees, their families, communities,

rising to the occasion with determination.

will fall into decline. I encourage the Group to move to their new

and the environment. Recently, the supercomputer Fugaku won four47

JGC Report 2020

JGC Report 2020

48

Foundation for Creating Value

CHAPTER 4

CHAPTER 4

Foundation for Creating Value

Foundation for Creating Value
Related SDGs

Message

Messages from Outside Directors

fromOutside Directors

Corporate Governance
Basic Stance

Risks and Returns
in the Engineering BusinessOutside Director

Kazuo Ueda

The JGC Group remains aware that, in line with the JGC Way

engagement, we take a proactive stance in highly transparent

corporate philosophy, the foundation for management in pursuit of

information disclosure, and viewpoints from this dialogue are applied

higher corporate value over the medium-to long-term and sustained

to strengthen governance and management.

growth is sound governance. We are therefore strengthening our

In regulatory compliance and other matters essential to appropriate

corporate governance, which we view as one of the Group's priority

corporate governance as well, the JGC Way philosophy serves as amaterial issues.

shared value that calls on each employee and officer to maintain highOur central mechanism for corporate governance is the Board

ethical standards in everything they do, so that the Group as a wholeof Directors, through which we continuously review governanceworks to enhance medium- to long-term corporate value and achieve

structures, functions, and roles. Effectiveness of the board ofsustained growth.

directors itself is analyzed and assessed each year, as we seek
progress through steady improvement. In shareholder and investor

It has been a year since I became an outside director of JGC

within a calculable range is a key component of risk management.

Holdings in June 2019. This has given me a chance to ask many

As we actively engage in these kinds of discussions, I hope it helps

questions and make a variety of suggestions at board meetings,

improve decision-making.

drawing on my expertise in finance. What interests me in particular,

In reality, Group earnings yielded an ROE of 1% in the fiscal yearof course, is whether the company earns returns commensurate

ended March 31, 2020, and the average over the past three years

with risks, as expected by shareholders.

has been less than 4%, which is far from the target. We should not

Risk and return varies greatly from one project to another. We havebe too concerned about a low rate of return over a few short years,

discussed the nature of risks, the returns expected, and thebut this is a problem if it persists long-term.

methods of risk management for each project of the JGC Group,

As for the economic environment which will affect current andand I have made various suggestions.

future return, the energy industry faces significant impact not only

The Group has targeted 10% ROE as described in the current

from short-term factors such as economic repercussions of themedium-term business plan, which took effect in 2016. At present,

pandemic but also from medium and long-term influences, as well

the rate of return on safe assets is near 0% internationally, with theas a shift toward environmental conservation. Indeed, it is in thisequity risk premium generally placed around 3–6%. Consideringcontext that the Group itself is moving ahead in formulating a 2040

that the rate of return on safe assets was previously higher than it

vision. Long-term corporate survival relies on an approach of

is now, I believe this is an appropriate level.

determining a vision of the company far in the future and then

However, if financial leverage is high–that is, the equity ratio is

calculating backward to plan for the near future.

low–higher return is expected by shareholders, and if the businessFor situations far in the future, it becomes more difficult to makerisk is high, naturally, the expected return also increases. As areasonable economic calculations. However, calmly reviewing the

textbook example of this, the expected return for each project isdistinctive knowledge and technologies that a company has built

calculated according to the extent and nature of financial andup over years in the context of the external environment willbusiness risk. If expected return exceeds this level, it will be

surely reveal the right path to take. Being competitive enough to be

adopted, but in actual business, it is not this easy.

a player in the global arena, which relatively few Japanese

For example, it is unrealistic to assume a statistical distribution ofenterprises can claim, will also be fundamental in the long-term

returns for projects in Africa and calculate risk and then cost ofvision. Looking ahead, I hope to continue contributing through thesecapital based on it. But many things are revealed if we attempt thiskinds of discussions.

Outline of Corporate Governance System
JGC maintains a board of directors and audit and supervisory board.
JGC Group has adopted a holding company structure under which
operating companies pursue the Group's core business. Separating
management from execution provides greater clarity on roles andresponsibilities of the holding company and operating companies.
The holding company's role is to formulate management policies andoversee the operating companies from a medium- to long-term groupperspective. Operating companies apply group management policies
and strategies to respond flexibly and rapidly to market characteristics
and seek further business expansion.

Body

Board of Directors

Members

Head of organization

Resolves key matters of business execution
Oversees directors' executive actions
Deliberates on medium- to long-term strategies
and issues

Generally
monthly

Nine directors (including three outside directors)
Five auditors (including three outside auditors)(For fuller discussions, others also attend as needed, such as operatingcompany officers, executive officers in charge of certain areas, and thosein relevant divisions)

Chairman and CEO
Masayuki Sato

Discusses and resolves issues based on reports of
key auditing matters●Presents opinions based on the results to directors or
the board of directors as necessary

Generally
monthly

Five auditors (including three outside auditors)

Full-time
Audit & Supervisory
Board Member
Yukihiro Makino

Deliberates on appointment and dismissal of officers,
renumeration, etc.

Annually(and as needed)●●●

Audit & Supervisory
Board

Nominating andRemuneration
Committees●

Group Investment
and Loan Committee

Chairman and CEO Masayuki Sato
President and COO Tadashi Ishizuka
Three outside directors* (Shigeru Endo, Masayuki Matsushima, and Kazuo Ueda)

Chairman and CEO
Masayuki Sato

*In order to improve fairness and transparency, the majority of the committee consists of outside directors.

Discusses the direction that the Group should takeas well as steering matters such as management/
business strategies for the Group as a whole and each
operating company

Generally
monthly

Chairman and CEO Masayuki Sato
President and COO Tadashi Ishizuka
Auditors (rotating)(Consists of members such as group company officers appointed by thechairperson)

Chairman and CEO
Masayuki Sato

Deliberates on holding company and group investment
and lending projects

Generally
monthlyStanding members: Eight directors, executive officers, and auditors of theholding company and Group.
Non-standing members: Four executive officers of the holding company
may attend, depending on the agenda.

Chairman and CEO
Masayuki Sato●Group Steering
Committee

Accounting Auditors

JGC Report 2020

Meetings●

anyway, and seeking to reduce unexpected events and keep risks

49

PurposeTo reinforce management oversight and enhance transparency toward
this end, we have appointed outside directors and outside audit/
supervisory board members meeting the criteria for independent
officers. Additionally, an executive officer system has been introduced
to ensure rapid, efficient managerial decision-making and execution.
This is intended to maximize corporate value and ensure optimal
allocation of management resources for the Group as a whole while
enhancing transparency of corporate management and strengthening
overall group governance.
Main elements of the corporate governance system are as follows.

●

CPAs Michitaka Shishido, Takemitsu Nemoto, and Atsushi Nagata of KPMG AZSA LLC audit JGC accounts.
Auditing support is provided by 11 other CPAs and nine assistants.

●●

JGC Report 2020

50

Foundation for Creating Value

CHAPTER 4

Foundation for Creating Value

Corporate Governance■ Corporate Governance System

Board of Directors
General Meeting of Shareholders

Board Functions

Appoints/dismisses

Board of Directors

The Board of Directors is responsible for decision-making on medium- to long-term group strategy and issues, and it provides oversight regarding businessexecution of group companies. Board composition is intended to enable effective and efficient execution of these functions.

Audits(six inside directors, three outside directors)
Deliberation,
reporting

Nominating Committee

Group Steering
Committee

Deliberation,
reportingSelects,
oversees

Deliberation,
reporting

Remuneration Committee

Appoints/
dismisses

ReportingAppoints/
dismisses

Deliberation,
reporting

Chairman and CEO

President and COO
Audit & Supervisory
Board

Group Investment and
Loan Committee
Group Risk Management
Committee

Other Departments

Internal Auditing Department

Accounting
Auditors

Collaborates

Basic Policy on Board Composition and Diversity
From the standpoint of further enhancing discussions on medium- to longterm group strategies and issues and of strengthening oversight regarding
business execution of group companies, the board consists of the following
members.

2 Independent outside directors are appointed in order to incorporate
outside perspectives in management, with the expectation that these
directors will provide objective advice to the board and fulfill oversightfunctions from an independent viewpoint.

1 Consists mainly of directors with broad experience in business markets
and directors with a high level of knowledge and expertise in engineering,procurement, and construction (EPC) operations, which is the primarygroup business.

As a matter of policy respecting the importance of diverse perspectives,
members are appointed not solely based on professional experience andexpertise but also on competence, regardless of nationality, race, or sex.
Although there are currently no female or foreign members, members withvarious backgrounds and global experience have been appointed, anddiversity will continue to be sought in the board.

Audits［Internal auditing］
Deliberation,
reportingCorporate administration,internal control■ Background of Directors (six internal, three outside) etc.

［Group Companies］
Overseas EPC(oil & gas, infrastructure)

Domestic EPC

Functional materials
manufacturing

Outside director attendance atboard meetings in Fiscal 2019

Businessplanning andmanagement

Projectmanagement

Masayuki Sato
Chairman and CEO

10

ー

●

●

Tadashi Ishizuka
President and COO

3

ー

●

●

Kiyotaka Terajima
Director, Senior Executive Vice
President and CFO

4

ー

●

2 Rules of Management Authority regulate the duties and authority

Masanori Suzuki
Director and Senior Executive Officer

6

ー

●

of each role, and clarify the system of responsibilities in corporate
management and business execution

Keiji Nohira
Director and Executive Officer

Newlyappointed

ー

●

●

●

●

●

Yutaka Yamazaki
Director

15

ー

●

●

●

●

●

Shigeru Endo
Outside Director

7

15/15
（100%）●

Masayuki Matsushima
Outside Director

4

14/15
（93.3%）●●

Kazuo Ueda
Outside Director

1

11/12※（91.6%）

●

●

Other

Improvement Status of Internal Control System
JGC’s Board of Directors determines the basic principles of the internal
control system and revises them as necessary.

【Improvement Status】
1 The Internal Auditing Office monitors, evaluates, and improves theeffectiveness of the internal control systems of JGC and the JGC Groupand conducts separate audits as necessary

3 Management rules for Group companies have been formulated andimplemented to ensure efficient and appropriate operations across theGroup

About JGC’s Response to the Corporate Governance CodeSince the implementation of the Tokyo Stock Exchange’s Corporate
Governance Code in June 2015, we have consistently held discussions on
appropriate corporate governance for JGC and are making steady efforts tofurther solidify our corporate governance.

51

JGC Report 2020

Background

Term asauditor(in years)

Audits【Content】
1 Implementation of all principles laid out in the CG Code2 Disclosure according to all 11 general principles, principles, andsupplementary principles required by the Tokyo Stock Exchange

Name and position at JGC

Technology●

Sales andmarketingHuman
resources

Finance andaccounting

●

●

●

Legal

Globalexperience
●

●

●

●

●

●

●

●

●

●

●

●

●

●
●

*appointed on June 27, 2019

■ Background of Auditors (two internal, three outside), etc.
Name and position at JGC

Term asauditor(in years)

Outside director attendance at
Audit & Supervisory Board in
Fiscal 2019

Yukihiro Makino
Audit & Supervisory Board Member

4

ー

●

Yasumasa Isetani
Audit & Supervisory Board Member

2

ー

●

Masao Mori
Outside Audit & Supervisory Board Member

9

26/26
（100%）●

Koichi Ohno
Outside Audit & Supervisory Board Member

6

26/26
（100%）●

Norio Takamatsu
Outside Audit & Supervisory Board Member

4

26/26
（100%）

Background
Corporate management●

Legal, finance, accounting

Economics●●

JGC Report 202052

Foundation for Creating Value

CHAPTER 4

Foundation for Creating Value

Corporate Governance

Board Effectiveness Evaluation

Director Compensation

Board effectiveness is analyzed and evaluated annually, efforts toward improvement are reviewed, and issues linked to further gains in effectiveness are discussed
by the board in pursuit of continuous improvement. Presented below are a summary of the process of evaluating board effectiveness in fiscal 2019, the survey,
results, and future issues to address, and main past efforts to enhance efficacy.

Process

Content of survey

A third-party evaluator conducts an anonymous survey of directors and auditors
Progress is reviewed, including progress in areas for improvement when effectiveness was last evaluatedOpinions are collected on current board effectiveness and ways to enhance board effectivenessThe board reviews the results, focusing on key future issues

Policy on Determining Director Compensation Amounts or Calculation Methods

Basic policy, generalshareholders' meeting
resolutions

Checks compliance with principles of Section 4, "Responsibilities of the Board," of the Corporate Governance Code, including progress since the previous evaluation
Main evaluation items: Board composition, management, discussion, oversight functions, own involvement, and management of Nominating andRemuneration Committees
Solicits open-ended responses on board performance and areas for improvement

Process fordetermining amountof compensation

Evaluation results
In addition to confirming steady progress in the establishment and operation of an internal control system for appropriate management andsupervision of group companies since adoption of a holding company structure in fiscal 2019, we have confirmed that the increase in thenumber of outside directors has enlivened board discussions. Thus, we have confirmed improved board functions in the holding company andassurance of overall effectiveness.

Evaluation results
and future issues
to address

As for the policy on determining the amount or calculation of director compensation, compensation shall not exceed the range resolved at thegeneral shareholders' meeting, and details are discussed in advance by the Remuneration Committee, whose report is considered by the board
to reach a decision
Amounts of director compensation are at the discretion of the chairman and CEO, within the range resolved at the generalshareholders' meeting
To ensure fairness and transparency, the chairman and CEO takes the results of deliberation by Remuneration Committee into account when deciding
Fixed compensation
Determined according to each director's position and the value of their duties, accounting for the capabilities required and the weight and impact of
those duties
Consists of base compensation and an allotment for directors or representative directors
Outside director compensation is limited to fixed compensation, to enable management oversight from a position independent of business execution

Issues to address for greater effectiveness, response policy
Performance-based compensation

IssuesExpanded discussion on medium- to long-term group strategies and issues
Expanded discussion on digital transformation (DX) and SDG initiatives
Expanded reporting to the board on the content of shareholder dialogue

Indexed to current-term net income attributable to owners of parent, a target in the medium-term business plan
Performance-based compensation is determined from an evaluation of each director's professional duties and contribution to fiscal-year performance,
acknowledging that in the Group's main EPC operations, several years pass from when orders are sought until projects contribute to earnings, andaccounting for whether the director contributed to gains in medium- to long-term corporate value

Policy in responding

Expand discussion on strategies and issues in enhancing group corporate value and achieving sustained growthEstablish and maintain systems for prompt and accurate business decisions by group companies and proper management and oversight by
the holding company

Fixed, performancebased, and restricted
stock compensation(new)

From fiscal 2017

From fiscal 2018

Introduced so that directors share the benefits and risks of stock price fluctuations with shareholders and conduct business accordingly, and tofurther incentivize a higher stock price and greater medium- to long-term corporate value

From fiscal 2019

Some 14,723 restricted shares corresponding to 10% of base compensation (equivalent to 22 million yen) were allocated to six directors on
August 5, 2019

Reduced inside directors by three and increased
outside directors by one following the June 2019
general shareholders' meeting, to introduce asystem of nine directors (including three outside
directors)●Reorganized various committees under the holding
company structure and revised matters discussed
by the board●

Expanded reporting to the board, including reportingon the internal control system●Increased the frequency of Risk Management
Committee meetings from once to twice a year, toreinforce the risk management system

As a greater incentive for each director in attaining performance targets, performance-based compensation will more directly reflect the extent
that targets have been met. Additionally, when targets are met, a higher proportion of variable compensation (consisting of performance-based
compensation and the restricted stock compensation described below) is applied in overall compensation
Restricted stock compensation■ Main Efforts to Date for Improving Board Effectiveness●

Main board
and committee efforts

Under a basic policy to secure the management personnel needed for greater global competitiveness and sustained gains in corporate
value, a resolution made at the 113th general shareholders' meeting on June 26, 2009 set annual director compensation at an amount notexceeding 690 million yen, with auditor compensation not exceeding 88 million yen

Expanded board discussions, especially on key
project status and other matters in the context of
adopting a holding company structure●

The restricted stock compensation system is summarized below
Scope: Directors and executive officers of the holding company and directors of group companies
Maximum monetary compensation: 90 million yen per year
Total shares of restricted stock (maximum): 71,200 shares per year (approximately 0.03% of total issued shares)
Restricted stock period: 3–30 years

Company seminars (board of the holding company)●

On-site overseas visits by outside executives (Ichthys
LNG Project)●Company seminars (general shareholders' meeting)● Various external seminars●

Director training*

Company seminars (D&O insurance, 2018 revisions
to CG Code)●Various external seminars●＊【Policy on director training】

Company seminars describing business of group
operating companies involved in manufacturing andconsulting●On-site plant and office visits by outside directors
and auditors to workplaces of the manufacturing
operating company●

Breakdown of Executive Remuneration
Breakdown of remuneration, etc.
Category

Total value of
remuneration, etc.

JGC bears costs for and provides opportunities and information for directors and auditors to acquire the knowledge and competence to fulfill their roles and responsibilities.

Fixed remuneration

Performance-based remuneration

Restricted stock compensation

Number of eligible
executives

Total amountprovidedNumber of eligible
executives

Total amountprovidedNumber of eligible
executives

Total amountprovidedNine directors (excluding outside directors)

316 million yen

nine

280 million yen

six

13 million yen

six

22 million yen

Two Audit & Supervisory Board Members(excluding outside Audit & Supervisory Board Members)

36 million yen

two

36 million yen

―

―

―

―

Six outside executives(three outside directors and three outside Audit &Supervisory Board Members)

55 million yen

six

55 million yen

―

―

―

―

※1: Directors for whom fixed compensation applies include three directors who stepped down at the end of the 123rd general shareholders' meeting on June 27, 2019 and one director who stepped down on January 30, 2020.
2: Directors for whom restricted stock compensation applies include one director who stepped down on January 30, 2020.
3: As of the end of fiscal 2019, there were eight directors (including three outside directors) and five auditors (including three outside auditors).

53

JGC Report 2020

JGC Report 2020

54

Foundation for Creating Value

CHAPTER 4

Foundation for Creating Value

Corporate Governance

Policies and Procedures for Senior Management Appointment and Dismissal
Appointment of senior management and nomination of candidates for directors
1 Deliberations of the Nomination Committee, which includes outside directors, are focused on the following items.

(1) Qualities such as character and views(2) Senior management and inside directors: Qualities such as performance and management capabilities(3) Outside directors: Qualities such as independence and expertise

Appointment
process

2 After comprehensive deliberation by the Nominating Committee, a decision is made by the Board.

Introduction of Outside Directors
This section introduces JGC’s outside directors, who serve an important role on its Board of Directors, Nominating Committee, Remuneration Committee, etc., aswell as their resumes and reasons for their appointment.

NameAppointment of senior management and nomination of director candidates follows this process and involves ample discussion before
decisions are made, with the understanding that these individuals may one day be candidates to succeed the CEO.

Dismissal process

Dismissal of senior management
In the event of any of the following, the board decides on dismissal after deliberation by the Nominating Committee.
(1) Wrongdoing, impropriety, or breach of faith(2) Violation of laws or articles of incorporation(3) Loss of the qualities and capabilities initially required for appointment
Shigeru Endo
Outside Director

Succession Plan
In nominating a director or executive officer, the Nominating Committee
addresses potential CEO succession by discussing whether the individual
possesses the qualities required of a CEO, has demonstrated the requisite
past performance, and can be viewed as a worthy successor. Only after this
discussion will the board proceed with nomination.

Furthermore, in order to make the previously tacit succession plan more
concrete and effective, relevant divisions are establishing detailed criteria on
the personal qualities, experience, and other attributes required of the CEO todraw up a specific plan for cultivating leaders based on these criteria.

Masayuki Matsushima

ResumeApr. 1974 Joined the Ministry of Foreign Affairs
Apr. 2001 Director-General, Middle Eastern and African Affairs Bureau
Feb. 2002 Director-General, Consular and Migration Affairs Department
Aug. 2003 Ambassador to The Permanent Mission of Japan to the United Nations and Other
International Organizations in Geneva and Consul General,
Consulate General of Japan in Geneva
Mar. 2007 Ambassador Extraordinary and Plenipotentiary to the Republic of Tunisia
Jul. 2009 Ambassador Extraordinary and Plenipotentiary to Saudi Arabia
Oct. 2012 Retired from the Ministry of Foreign Affairs
Jun. 2013 Outside Director, former JGC CORPORATION
Jun. 2013 Outside Director, IINO KAIUN KAISHA, LTD. (current post)
Apr. 2014 Special Assistant to the Minister for Foreign Affairs (current post)
Jun. 2018 Outside Director, ADEKA Corporation (current post)
Oct. 2019 Outside Director, JGC HOLDINGS CORPORATION (current post)

Mr. Shigeru Endo does not have direct experiencein company management, but he has served as
the Ambassador Extraordinary and Plenipotentiary
to Saudi Arabia and Tunisia and possesses uniqueexperience and knowledge of the Company’s principal
business market. He is nominated as an Outside
Director because the Company believes that he will beable to appropriately perform his expected duties as
an Outside Director, which includes providing accurate
advice and opinions for the management and businessof the Company and exerting a supervisory function
from an independent standpoint, by making the mostof the aforementioned experience and knowledge. He
satisfies the requirements of an Independent Executive
pursuant to the provision of the Tokyo Stock Exchange,
and the Company will continue to designate him as
an Independent Executive and notify the said Stock
Exchange to that effect.

Apr. 1968 Joined Bank of Japan
Jun. 1998 Executive Director, in charge of the Bank’s International Affairs
Jun. 2002 Senior Advisor, the Boston Consulting GroupFeb. 2005 Senior Executive Advisor, Credit Suisse Securities (Japan) Limited
Jun. 2008 Chairman, Credit Suisse Securities (Japan) Limited
May 2011 Senior Advisor, the Boston Consulting Group
Jun. 2011 Outside Director, Mitsui Fudosan Co., Ltd.
Jun. 2011 Outside Director, Mitsui O.S.K. Lines, Ltd. (current post)
Sep. 2014 Senior Advisor, Integral Corporation (current post)
Jun. 2016 Outside Director, former JGC CORPORATION
Jul. 2017 External Councillor, Grant Thornton Taiyo LLC (current post)
Oct. 2019 Outside Director, JGC HOLDINGS CORPORATION (current post)

Mr. Masayuki Matsushima has wide experience andknowledge in the fields of finance and corporate
management, having served as Executive Directorof Bank of Japan, and in other significant positions.
He is nominated as an Outside Director because theCompany believes that he will be able to appropriately
perform his expected duties as an Outside Director,
which includes providing accurate advice andopinions for the management and business of theCompany and exerting a supervisory function froman independent standpoint, by making the most of
the aforementioned experience and knowledge. He
satisfies the requirements of an Independent Executive
pursuant to the provision of the Tokyo Stock Exchange,
and the Company will continue to designate him as
an Independent Executive and notify the said Stock
Exchange to that effect.

Apr. 1989 Assistant Professor, Faculty of Economics, The University of Tokyo
Mar. 1993 Professor, Faculty of Economics, The University of Tokyo
Apr. 1998 Member of the Policy Board, Bank of Japan
Apr. 2005 Professor, Graduate School of Economics, The University of Tokyo
Oct. 2005 Dean, Graduate School of Economics, The University of Tokyo
Oct. 2005 Dean, Faculty of Economics, The University of Tokyo
Oct. 2008 Outside Director, Development Bank of Japan Inc. (current post)
Apr. 2017 Director, Center for Advanced Research in Finance, The University of Tokyo (current post)
Apr. 2017 Professor, Faculty of International Studies, Kyoritsu Women’s University
Jun. 2017 Professor Emeritus, The University of Tokyo (current post)
Jun. 2017 Outside Audit & Supervisory Board Member, MELCO HOLDINGS INC. (current post)
Jun. 2019 Outside Director, former JGC CORPORATION
Oct. 2019 Outside Director, JGC HOLDINGS CORPORATION (current post)
Apr. 2020 Dean, Faculty of Business, Kyoritsu Women's University (current post)
Apr. 2020 Professor, Faculty of Business, Kyoritsu Women's University (current post)

Mr. Kazuo Ueda does not have direct experience incompany management, but he has abundant academic
experience as an expert on macroeconomics. He
is nominated as an Outside Director because theCompany believes that he will be able to appropriately
perform his expected duties as an Outside Director,
which includes providing accurate advice andopinions for the management and business of theCompany and exerting a supervisory function froman independent standpoint, by making the mostof the aforementioned experience and knowledge.
He satisfies the requirements of an Independent
Executive pursuant to the provision of the Tokyo Stock
Exchange, and the Company will designate him as
an Independent Executive and notify the said Stock
Exchange to that effect.

Outside Director

Kazuo Ueda
Outside Director

55

JGC Report 2020

Reason for appointment

JGC Report 2020

56

Foundation for Creating Value

CHAPTER 4

Foundation for Creating Value

Quality Management System

Corporate Governance

Cross-shareholdings
Basic Stanceshares deemed to have lost their significance is investigated accounting forthe market environment and changes in stock prices. The review process is
described below, along with a record of past sales and reductions.

1 Purpose
Following revision in June 2018, the CG Code now includes guidance on
topics such as reduction of cross-shareholdings and the cost of capital. The
Group refrains from cross-shareholdings except in cases where maintaining
and strengthening relationships with clients and business partners willcontribute to higher medium- to long-term corporate value for the Group.
Moreover, each year, the board reviews the significance of maintaining eachcross-shareholding. Both quantitative and qualitative aspects of the sharesare reviewed. Specifically, quantitative considerations include dividend yieldand valuation gains, and aspects that are difficult to quantify include whether
business benefits and risks are commensurate with capital costs. Sale of

2 Basis for exercising voting rights

In our business, quality assurance is an essential part of achieving safe

highly talented human resources that we have continually built up

plant operation and stable production. The Quality Policy establishedthrough many years of project execution. This effort is led by theby the JGC Group is to ensure "JGC Quality" satisfying all applicable

Quality Assurance Committee, and a framework is in place for quality

requirements by globally using the knowledge, skills, systems, andassurance.

In exercising voting rights for cross-shareholdings, advantages anddisadvantages are weighed based on whether the decision will contribute tosustained growth of the company involved, and thus, higher group corporate
value over the medium to long term.

Thorough QMS-Based Quality Assurance
JGC obtained ISO 9001 certification for its quality management system(QMS) in 1993. We have actively improved our organization on a continuous
basis, led by the Quality Assurance Committee, with the aim of improving
organizational performance as appropriate to the type of work performed.
Every year, quality guidelines announced by the president of JGC are treatedas a quality policy by each operating company, department, and section,■ Review Process of Holding Objective and Stock to be Sold

Primary criteria for reviewing holding objective
Quantitative aspects

Qualitative aspects

Dividend yield from held stock,valuation gains, etc.

Difficult to quantify business benefits

which set quality targets in line with the policy. Each fiscal year, they identify
any organizational issues and formulate operating policies and action plans("Plan"), implement them ("Do"), evaluate them ("Check"), and improve themon the basis of the evaluation process ("Act"). This PDCA cycle is designed todrive continuous improvement in organizational performance.

Quality Assurance Committee
The Quality Assurance Committee meets monthly and reports directly to thepresident. The committee is chaired and comprised of operating company
senior general managers and members at the level of general manager.
The Quality Assurance Committee implements a range of remedial measures
to ensure the quality of products and services provided to clients consistently

The Board of Directors reviews the objective of cross-shareholdings each year considering both quantitative andqualitative aspects, as well as cost of capital comparisons

meets their specifications. It also evaluates the impact of those measures todrive ongoing improvements.
Once a year, the president conducts a management review of the Quality
Assurance Committee's activities, with the president leading efforts tocontinuously improve the quality assurance organization.

Concerning stock whose holding objective is determined as diminished upon review, the Board of Directors discusses
its sale, after a consideration of factors such as the market environment and changes in stock price■ Positioning of Quality Assurance Committee
President

Management Review■ History of Sales and Reductions in Cross-shareholdings Since the Introduction of the CG CodeFiscal 2015 to fiscal 2019(fiscal 2019 in parentheses)

Number of companies whose stock was soldTotal value of sales (based on acquisition price)

Reduction rate*

32 companies (three companies)

4,457 million yen（626million yen）

Approx. 35%

Quality Assurance Committee* Represents the reduction rate for publicly listed stock held as of April 1, 2015 (ratio based on acquisition prices).

Relevant
Departments

57

JGC Report 2020

JGC Report 202058

Foundation for Creating Value

CHAPTER 4

Foundation for Creating Value

Compliance
Measures to Prevent Bribery
Basic Stance

Guided by our corporate philosophy, the JGC Way, the JGC Group hasin accordance with corporate ethics, are essential to the pursuit ofpositioned compliance as the cornerstone of management, based onsustainable business development. Based on this belief, the Group has

two keywords in its list of shared values – Respect and Integrity. As

developed the JGC Group Code of Business Conduct. The code, whicha member of the international community, the JGC Group believes

must be followed by all employees, contains key points to ensure thatthat compliance with the laws of Japan and all other countries where

the JGC Group's corporate philosophy is implemented in practice.

JGC works to ensure fair business practices, in line with its basic policy ofcomplying with all anti-bribery rules and regulations, such as provisions
in Japan's Unfair Competition Prevention Law prohibiting the bribing of
foreign public officials, the US Foreign Corrupt Practices Act (FCPA) and the

UK Bribery Act 2010.The table below shows the JGC Group's regulations
and programs related to preventing bribery, based on provisions in the JGCGroup's corporate philosophy and Code of Business Conduct.

JGC Group Corporate Philosophy
JGC Group Code of Business Conduct

the Group operates, as well as fair and equitable business practices

Bribery Prevention Regulations

Group Compliance System

Regulations to prevent bribery by employees

Regulations to prevent bribery by business partners

Regulations to ensure effective operation of bribery
prevention programs

Gifts, entertainment, and travel policy

Anti-corruption policy for international commercial
representative

Rules related to the JGC Group Compliance Hotline

Policy on charitable donations

The JGC Group has established a group compliance system to ensureeach company carries out its business based on high ethical standards.
Compliance Executives appointed by each company president areconsolidating compliance activities throughout the Group and contributing
to make the activities more effective. Compliance Executives, together with

Compliance Officers, evaluate the risks and implement measures fit for eachcompany.
The JGC Group has also established Compliance Committee as a forum toshare information and collaborate among group companies. We are aiming toachieve a sense of unity to the entire group through the Committee.

Bribery risk management guidelines

Anti-corruption policy for joint ventures

Policy on political contributions

Bribery prevention training guidelines

Anti-corruption policy for suppliers and subcontractors

Compliance monitoring guidelines

Compliance Training
JGC Holdings

JGC Group Companies
Reports to

Auditors

Reports to

Appoints■ Number of Training Courses, Participants
2015

President

Forum for mutual information
sharing by JGC Holdings
and JGC Group companies

Reports totraining was held for relevant divisions and projects. E-learning on workplaceharassment was also introduced, providing employees with opportunities tolearn about harassment.

Auditors

Compliance
Committee
President

To raise compliance awareness, the Group conducts a thematic and levelspecific compliance training program. Training in fiscal 2019 was focusedon preventing corruption and responding to organized crime, and in-person

Appoints

Reports to

(FY)

2016

2017

2018

2019

Number of courses

18

12

13

6

21

Number of participants

600

373

353

199

559※

※Excluding 3,228 E-Learning participantsGroup Compliance Executive

Compliance Executive

Consults with,
reports to

Directs, instructs

Compliance Team
Disseminates
information, raises
awareness

Consults with,
reports toReports toConsults
with,notifies(answered by a professional
third-party organization)

Reports toConsults
with,notifies

Compliance Officer
Disseminates
information, raises
awareness

Division Heads
Directs, instructs

59

JGC Report 2020

Consults with,
reports toDivision Heads
Consults with,
reports toConsults
with,notifies

Employees

Indicates participation

Consults with,
reports to

Directs, instructs

JGC Group
Compliance Hotline

Directs, instructs

Consults with,
reports toCompliance Hotline
For prompt identification and prevention of compliance risks, the JGC Group
Compliance Hotline was established as a resource that employees canuse without hesitation to seek advice or report any concerns about actualor potential violations. Calls are answered by a third-party organization,
which also enables anonymous consultation and reporting. This fiscal year,
the hotline was supplemented by new internal window for the two main
operating companies, JGC and JGC Japan, in consideration of the new groupmanagement structure adopted. These are direct lines to the respective
compliance officers, which enables faster investigation and response.
Offering several ways to seek advice and report suspicions provides a moreconvenient environment for employees to receive assistance. In addition toaccepting reports from employees, we also accept reports of violation of
corporate ethics from all suppliers working with group companies.

■ Number of Reports Received by Hotlines

(FY)

2015

2016

2017

2018

2019

5

12

18

28

47

JGC Report 2020

60

Foundation for Creating Value

CHAPTER 4

Foundation for Creating Value
Related SDGs

Risk Management
Primary Group Risks and Responses
Basic StancePrimary Risk Area

Recognizing that appropriate risk management reduces losses anda whole and by building, maintaining, and refining our risk management

contributes to profits for the Group, we strive to reduce and prevent riskssystem. If risks do materialize, we respond rapidly and appropriately toroutinely by understanding and organizing risks posed to the Group as

minimize the impact and associated loss.

Risk associated with receiving and executing projects

Country risk

Nature of Typical Risks●

Change of plans, cancellation, suspension, or postponementof projects in total engineering business after orders arereceived●

Worsening financial conditions of joint venture consortium
partners as comprehensive engineering projects are
executed●

Impact on business activities from political instability, war,
revolution, domestic conflict, terrorism, sudden changes in
economic policies or conditions, or economic sanctions

Risk Management System
Based on Group Risk Management Committee rules, the JGC Group has
established and uses a comprehensive risk management system for asystematic understanding of the risks posed to the Group as a whole. We arecommitted to further reducing these risks. Management of business risks of

the Group is mainly carried out by each operating company, with significant
individual risks reported to the holding company board and discussed asnecessary.

Risk associated with natural disasters, epidemics, etc.

Foreign exchange volatility risk●●

Impact on business activities from natural disasters of
unforeseen magnitude such as earthquakes, torrential rain,or typhoons, or from global pandemics such as new strains
of influenza

Impact on sales and profit/loss from sharp fluctuations inforeign exchange rates

Risk Management System

Board of Directors

Risk of construction worker shortages, substantial
wage increases(six inside directors, three outside directors)
Deliberation, reporting

Group Risk Management
Committee(Chairman: JGC Holdings
Representative Director, President and COO)

JGC Holdings
JGC CorporationJGC Japan
JGC Catalysts and Chemicals
Japan Fine Ceramics
Japan NUS●

Oversees

Deliberation,
reporting

Representative Director,
Chairman, andChief Executive Officer

Representative Director,
President, andChief Operating Officer

Risk of substantial increases in material and equipment
costs

Overseas EPC

Domestic EPC

Dept. with jurisdiction over corporate
communications

Departments

JGC Report 2020

Use of trade insurance●

Gathering information on country risk●

Setting reasonable contract conditions with clients,
addressing force majeure clauses and regulatory changes●

Strengthening crisis management functions by the Crisis
Management Dept.

●

Establishing disaster response procedures, introducing
systems to confirm safety, and implementing disastertraining●

Gathering information on risk●

Setting reasonable contract conditions with clients,
addressing force majeure clauses and regulatory changes●

Using project contracts denominated in multiple currencies,
using overseas procurement●

Issuing orders denominated in foreign currencies, using
forward foreign-exchange agreements●

Monitoring and forecasting trends in the constructionindustry labor force for primary plant markets●

Adopting modular construction techniques to minimize onsite construction●

Working with companies that have extensive track records inlocal construction●

Monitoring and forecasting price trends for raw materials
and for materials and equipment●

Substantial rises in prices of raw materials or fuel infunctional materials manufacturing●

Placing orders for materials and equipment early on●

Diversifying suppliers●

Passing on higher prices to clients

Loss from unforeseen circumstances in the investment
environment●

Closer monitoring of existing investment projects●

Careful selection of new investments●

Legal and regulatory risk●

Restrictions under business laws and regulations such as
tax or construction laws, various domestic and international
environmental laws, import/export trade regulations including
those for security purposes, various laws and regulations toprevent corruption such as graft, or business or investment
licenses●

Developing, implementing, monitoring, and improving
compliance programs

Functional materials
manufacturing

OthersInformation security risk●

Leaks and loss of information from power outages, disasters,
failure, loss, or theft of host computers, servers, or network
equipment, external attacks, or virus infections●

Security measures such as preventing intrusion by
establishing information security policies, adopting antivirus
measures, and using encryption

Risk associated with quality●

Poor quality of supplies or items procured, recall of delivered
products due to defects, liability for damages●

Promoting quality management system activities by
establishing organizations with jurisdiction over quality
assurance●

Using product liability insurance

Risk associated with changes in the macroeconomic
environment

61●

Increased procurement costs for material and equipment in
total engineeringGroup companies(oil & gas, infrastructure)

Specific risk analysis by the holding company and operatingcompanies, monitoring of project progress and profitability●

Relevant business units
Dept. with jurisdiction overcompliance●

JGC Holdings

Investment risk

Dept. with jurisdiction overcrisis management

Impact on business activities in total engineering fromshortages of construction workers or substantial increases inwages

Countermeasures●

Impact on business activities from declining energy prices or
cooling of the global economy●

Diversifying our business portfolio by shifting to a groupmanagement structure●

Impact on the oil and gas segment and catalyst segment
served by the Group from acceleration of the shift to a lowcarbon society●

Developing technologies to reduce environmental impact●

Building value chains in collaboration with other companies
that possess advanced technologies

JGC Report 2020

62

Foundation for Creating Value

CHAPTER 4

Foundation for Creating ValueManagement Structure

Dialogue with Shareholders and Investors(As of August 2020)(Information Disclosure, IR activities)

Directors
Basic Stance

Representative Director,
Chairman andChief Executive Officer (CEO)

Representative Director,
President andChief Operating Officer (COO)

Member of the Board

Masayuki Sato

Tadashi Ishizuka

Kiyotaka Terajima

The Group considers shareholder and investor engagement

acting on this knowledge in management strategies, and striving toindispensable to sustained growth and gains in corporate value. We aredisclose not only financial but also non-financial information, we areproactive in highly transparent information disclosure that serves ascreating an environment in which shareholders have a solid, long-term

the basis for this dialogue. By listening to shareholders` and investors`

understanding of Group management policies.

opinions, providing feedback to management and relevant departments,

Main IR Activities (Fiscal 2019)
Member of the Board

Member of the Board

Member of the Board

Masanori Suzuki

Keiji Nohira

Yutaka Yamazaki

Dialog on Adopting a Holding Company Structure
We have actively engaged in dialogue to encourage an in-depth understanding among investors regarding the aims and objectives of moving to a holding
company structure, which took effect on October 1, 2019. Our aims and objectives in adopting a holding company structure were carefully explained to investors
through senior management and the IR Department. Not only did this ensure that the Group vision for growth was clear, it also gave us a better understanding ofinvestor expectations, from the variety of feedback we received.

Outside Director

Outside Director

Masayuki Matsushima

Kazuo Ueda

Enhancements to the JGC Report (Integrated Report)-*&5HSRUW

Outside Director

Shigeru Endo

Each year, JGC Report is designed to be more informative, as a key disclosure resource for investment decisions from a long-term
perspective. JGC Report 2019 featured fuller information on the message from top management, project risk management system,and our adoption of a holding company structure, as well as expanded content on non-financial matters such as process to identify
materiality, a key ESG topic. The report was selected as the "Most Improved Integrated Report" of 2019 by the domestic asset
management arm of the Government Pension Investment Fund (GPIF).s

Audit and Supervisory Board Members
Audit and Supervisory Board Member

Audit and Supervisory Board Member

Audit and Supervisory Board Member(Outside Auditor)

Audit and Supervisory Board Member(Outside Auditor)

Audit and Supervisory Board Member(Outside Auditor)

Yukihiro Makino

Yasumasa Isetani

Masao Mori

Koichi Ohno

Norio Takamatsu

Website Expansion
Enhanced information disclosure for shareholders and investors is also sought online, through a more
informative corporate website.
We are committed to keeping shareholders, investors, and an array of other stakeholders informed throughdeveloping or updating webpages related to functional materials manufacturing and sustainability, among othertopics.

Executive Officers
Senior Executive Vice President,
Chief Financial Officer (CFO)

Senior Executive Officer

Senior Executive Officer, General Manager,
Quality Assurance, Safety and Environment Dept.;
General Manager, Crisis Management Dept.

Senior Executive Officer,
General Manager, Sustainability Co-Creation Dept.

Kiyotaka Terajima

Masanori Suzuki

Yasuhiro Okuda

Masahiro Aika

Senior Executive Officer,
Chief Technology Officer (CTO)

Senior Executive Officer,
Chief Digital Officer (CDO),

Executive Officer

Executive Officer,
Advisor, Group Strategic Planning Dept.

Yutaka Yamanaka

Takuya Hanada

Masayasu Endo

Aya Yamazaki

Executive Officer,
General Manager, Government/
Industry Relations Dept.

Executive Officer,
General Manager, Group Strategic Planning Dept.

Executive Officer,
Advisor, Group Strategic Planning Dept.

Takeshi Kawasaki

Keiji Nohira

Shigeru Adachi■ IR Activities Schedule■ Main IR Activities

2nd quarter3rd quarter

Results announcement
Results briefing

Overseas IR

11

10

Results announcement
Conference call

1

8

7

6

Results announcement
Conference call2
3

AnnualSchedule

9
1st quarter

12

4
5

Ordinary generalshareholders' meeting

Activity

No. of events No. of companies

Responses to requests for information, phone calls from institutional investors in Japan/overseas

192

113

Results briefing conference calls

2

47

Results briefings by senior management263

ESG-related meetings

44Overseas IR roadshows by senior management

1212■ Ordinary General Shareholders' Meetings
Full-year results
Results announcement
Results briefing

Fiscal year 2018

Fiscal year 2019

Fiscal year 2020

June 28 (Thu)

June 27 (Thu)

June 26 (Fri)

Shareholders attending

187

227

15※

Ratio of voting rights exercised

84.1%

82.6%

84.0%

Date held※In Fiscal year 2019, we asked shareholders to avoid attending the meeting at the venue as much as possible,
as part of measures to prevent the spread of COVID-19.

63

JGC Report 2020

JGC Report 202064

CHAPTER 5

Core Competencies& Management
Resources
This chapter identifies the core competencies behind value createdby the JGC Group, as well as efforts to reinforce their underlying
management resources.

67 Core Competencies
Core Competencies
Project Execution Capabilities

74 Management Resources
Human CapitalSocial and Relationship Capital
Manufactured Capital65

JGC Report 2020

JGC Report 202066

Core Competencies and Management Resources

CHAPTER 5

Core Competencies and Management ResourcesCore Competencies

Total Engineering
Engineering Technologies
Many plants and facilities in energy and infrastructure
segments draw on our extensive and advanced design andconstruction technologies.

Our organizational strengths derive from a broad,highly skilled workforce, which allows us to offer maximum performance.

Ethylene

Organizational
Strengths

An optimal balance of quality, cost, and delivery isachieved while responding appropriately to projectrisks.

Track record

42Superior plants, facilities, and materials supplied by
the Group draw on extensive, advanced technicalexpertise.

Project
Execution
Capabilities

Ethylene plant for Chevron Phillips Chemical

Technical
Expertise

Liquefied Natural Gas (LNG)

Core Competencies

Track record

48

Diverse core competencies greatly distinguish the JGC Group in creating economic,
social, and environmental value through a
LNG plant for JSC Yamal

business model of total engineering andfunctional materials manufacturing with

Functional Materials Manufacturing

optimal distribution of management

An array of issues faced by clients are addressed in
the plants, facilities, and functional materials supplied by the Group.

Solution
ProposalCapabilities

resources.

Nanomaterial Control Technologies

Open-minded
Corporate
CultureThe open corporate culture in place encourages
each employee to pursue professional fulfillment asthey work.

Materials with unmatched performance can be supplied byleveraging the four core nanotechnologies of nanoparticle
preparation, alignment, pore structure control, and macro
structure control.

Ability to
Respond to
ChangesCeramic Production/Processing Technologies
Pioneering and innovative technologies, products, andservices provided by the Group anticipate social trends
and changes in market environments.

67

JGC Report 2020

Ceramic materials with original properties can be supplied
through integrated
R&D and production
from raw material
mixing to firing andprocessing.

JGC Report 202068Core Competencies and Management Resources

CHAPTER 5

Core Competencies and Management ResourcesCore Competencies

Core Competencies

Project Execution Capabilities

Project Execution Capabilities

Project Risk Management System

Cultivating Project Management Staff

The company is facing circumstances in which the diminishing profits ofmany risks, anappropriate response to which is the essence of project

The quality and number of PMs is one of the most important elements inindividual projects, along with their increasing scale, could have amanagement. With this understanding, all staff involved in a project, notassessing an engineering firm’s capability, and JGC works on PM training

significant impact on the profitability of the entire company.

just project and company management, always respond to risks based on

At the JGC Group we have long fostered a project implementation culture

a high risk sensitivity in all EPC functions and phases.

in an organized fashion that also involves company management.

What Is a Project Manager (PM)?

that holds that large-scale projects overseas represent an aggregation of

Utilizing project management techniques and tools in cooperation withinternal and external partners to protect established delivery times,
budgets, and quality, secure profits, complete a project, and ensure theclient’s satisfaction are the ultimate tasks of a PM.

Project Risk Areas
Technical Risks

Project Implementation Risks

Contract Terms and Other Consequent Risks

Risks that must be grasped from the perspective oftechnical specifications and scope of work. The
project team and engineering sections cooperate
to lead responses to these risks.

Risks that must be understood from the perspectiveof project implementation. The project team and PM
lead responses to these risks.

Risks that must be grasped from the perspective of contract
terms and project backgrounds. The PM leads the responseto these risks in cooperation with company management.

E.g., disagreement with design requirements, newprocesses

E.g., exchange rates, taxations, political instability, excessive
requirements of performance and delivery guarantee

Required Assets

Required Knowledge and Abilities
Comprehensive knowledge of respective technical and●Leadership, coordination and negotiation skillscommercial areas, management skills●

Strength of character and stress resistance●

Ability to set a master schedule and manning plan●

Broad horizon and decision-making abilities●

Ability to grasp cost conditions●

Logicality, planning and scheduling abilities●

Ability to establish an outline of equipment composition/scale,●

E.g., securing of internal, vendor, and subcontractor
resources

A PM is required to set short-term, mid-term, and long-term strategies
for executing a project and to participate in all project phases ranging
from design to procurement, construction, and commissioning.

costs, work processes, and man-hours based on plant capability

Risk Management Flowrequirements, and to explain this outline internally and externally

Risk response categories

Prediction and identification of risk areas
Risk profiling

Identification of risk areas based on the above risk area
categories

Elimination
Example : changing contract terms

Qualitative and quantitative risk assessment

Avoidance

Grading of identified risk areas by evaluating impacts if
risks are actualized

Sharing
Example : founding of a consortium

Retainment (conversion into costs)

Example : preventing risks
from actualizing
through active responses

Example : insurance andappropriationof contingency funds

Project Manager Training System
In order to cultivate outstanding PMs, it is important for them to undergo
diverse experiences from a young age. That is why JGC Group has created ahuman resources training plan that goes beyond the framework of company
divisions and departments, based on a human resources vision looking towards
the future. In order to prevent specific divisions from holding back outstanding

personnel and obstructing variation in their experiences, the talent andorganization development department serves as an office that monitors thestatus of PM candidates and manages them from a mid- to long-term
perspective to enable them to accumulate experience.

Decision on responses to risk areas■ Project Manager Career Path

Responses to Risks

Impact on company performanceif risks are actualizedC
A

Project manager
Project teamBusiness division management
Business, legal, andfinancial divisions

Topmanagement

DP

In response to the grading of risk areas,business division management and connecteddivisions, as well as company management,
regularly monitor the state of the project manager
and project team’s responses to risks.

Constant

Monthly

Job Rotation

External experienceand training

Project

The company implements an organized response
to risks based on the Plan, Do, Check,Act cycle.

Quarterly
Costestimationand planning

Column40s – 50s

PM in small
andmedium-scale
projects

JV organization

Construction
management

DesignMonitoring frequency

30s – 40s

Entering the company – 30s

Overseassubsidiaries

Assistant toPM inlarge-scale
project

PM inlarge-scale
projects

Corporate
dispatching
Internal and external
training programs

PM in projectof overseas
subsidiaries

Compatibility of Appropriate Responses to Risks and Contracting Competitiveness69

Appropriately predicting and identifying risk areas during the estimation and planningbuffer to the bidding price for risk retainment (establishment of contingencies), thisstage, based on past project experience and identification of corresponding project

may jeopardize cost competitiveness. At JGC Group we strive to balance appropriate

characteristics, is an essential prerequisite to securing revenue during the projectrisk management with securing of cost competitiveness by utilizing our entire expertise

execution stage. However, if responses to identified risks tend towards adding a risk

to aim for proactive responses to risk, such as avoidance, prevention, and reduction.

JGC Report 2020

Creation and implementation of a human resources
training plan that goes beyond the framework ofcompany divisions and departments, based on ahuman resources vision looking towards the future

Holding company top management

Operating companies management

Project management
development department

Group talent and organization
development department (office)JGC Report 202070

Core Competencies and Management Resources

CHAPTER 5

Core Competencies and Management ResourcesCore Competencies
Project Execution Capabilities

Project Management Experts in the JGC Group
Meet the next generation of project managers in the JGC GroupEPC Contractors Prove Their WorthTheir Risk Management Capabilities

Always Committed to Successful Projects, andInspiring the Same Commitment in Others

Nobuyoshi Mizutani

Hiroshi Komiyama

Joined JGC in 1994 after studying electrical andinformation engineering.
After a stint in instrument and control engineeringand project control, moved to a project department.
With past experience in multiple projects as aproject manager, he currently takes on large refinery
projects as a project director.

Joined JGC in 1998 after studying chemical systemengineering.
After working in process and instrumentation/control
engineering, moved to a project department in 2004.
Having served as an engineering and project manager
in multiple projects, he currently focuses on LNG
projects as a project director.

Share your thoughts on project management.

Describe an ideal project manager.

The key to a successful project is initially defining with those

They always rise to challenges, and their leadership inspires

involved what will constitute success, sharing a vision of theteam members to move ahead. Remaining aware of changes inultimate goal, setting targets for each function and stage withconditions surrounding the project is also essential, as is thethis goal in mind, and managing the process of achieving it. The

ability to make decisions flexibly and responsively. They also

Their presence in projects is central. Every last participant,broader environment of projects is constantly changing, which

need unwavering faith that they will make their project aclients. Another is managing risk, and yet another is managing

including clients and external stakeholders, is glad to have been

makes it important to adjust our trajectory as needed, but thesuccess in the end, regardless of the challenges, and thishuman resources to maintain high performance from members.

involved and would be pleased to work with the same members

ultimate goal we envision must remain steady.

conviction inspires those around them.

The essence of project management is to anticipate potential

again. They drive a team with a genuine passion for the project,

Success in large projects is unattainable if we rely on theissues as projects unfold, to prevent them through far-reaching

making the most of members' shared sentiments, determina-

personal capabilities of a project manager. The role they mustinsight and imagination building on past experience and internaltion, and sense of achievement. Earning the trust of clients andfulfill as project leaders is to create an organization that drives

expertise garnered by the company, and, as we also apply new

all other stakeholders also calls for charisma.

projects forward through the shared wisdom of many diverse

Share your thoughts on project management.

must also choose the most effective risk response, as we focus
on the success of the project instead of the interests of any

Amid greater stakeholder diversity and complexity in larger

particular organization.

projects and a faster pace of change in the world, the areas
where we must respond with what are called soft skills have

Describe an ideal project manager.

become increasingly important. One such skill is building ashared awareness among the companies involved, including

members brought together from inside and outside of thetechnologies, to maximize performance in project execution.

What is the key to risk management?
Thorough risk profiling at the planning stage is clearly vital, but
in the execution stage as well, we must refine our profiling in
response to constantly changing conditions and deal with risk
promptly as part of PDCA cycles. It is easy to have a system inplace for risk management, but making countermeasures workorganically takes commitment and the ability to get things done.
Through open risk-sharing discussions with all stakeholders, we

71

JGC Report 2020

EpisodeDescribe an experience that proved to bea growth opportunity.
As I was gaining experience in design engineering andproject control, I felt a strong desire to take on the responsibilities of a project manager and see projects through tocompletion. I wouldn't be who I am today without the chance
to grow tremendously from my first experience as project
manager, where I saw a refinery renovation project inSingapore through from estimation to completion.

company.

EpisodeWhat is the key to risk management?

Describe an experience that proved to be a growth
opportunity.

Eliminating, avoiding, and sharing risks should be prioritized as
proactive responses to the risk factors we predict and extract.
Only as a last resort should we also take the passive responseof bearing risk by retaining risk factors as a cost. If risk emerges during a project, to avoid falling behind, I believe we must

After joining the project department, I was fortunate to haveopportunities to work closely with project directors andproject managers on several projects. It was an invaluable
learning experience, seeing how specific policies andstrategies informed project leaders' decision-making, andobserving their relationship-building and negotiation withclients and joint-venture partners.

act decisively in implementing the response plans in place.

JGC Report 202072

Core Competencies and Management Resources

CHAPTER 5

Core Competencies and Management ResourcesCore Competencies

Management Resources

Project Execution Capabilities

Human Capital

Project Management Experts in the JGC Group
Human capital is the Group's most important management resource, whether in total engineering, functional materials manufacturing, or consulting. We
are actively working to create a supportive work environment, establish training systems for our diverse workforce, and expand our human resources
evaluation and remuneration systems to enhance employee motivation.

Defining Needs and Proposing Ideal
Solutions in Line with Client Conditions

Mayumi Kannan
Joined JGC in 2002 after studying architectural
engineering.
Began in a project department serving the healthcare
sector. Through job rotation, also experienced
overseas on-site assignment in oil & gas sector.
Engaged as a project engineer and manager in many
projects for hospitals and nursing care centers.

Human Resources Sought and Overview of Personnel Management
JGC Group employees are required to possess advanced technicalwell-rounded personnel policies centered on training, evaluation/remu-capabilities and expertise, appreciate different cultures and diversity inneration, and employee benefits. Outstanding and ambitious members

order to work with others of many nationalities, and a mental attitude that

who share our respect for the social significance of Group business join

helps us make the most of our organizational strengths.

us through a variety of ways, whether they are new graduates in Japan,

The Group seeks out the qualified workforce we envision throughrecent graduates, mid-career, or individuals with disabilities.

■ Achieving Our Human Resources Vision Through Well-rounded HR Policies
Outline of Personnel Management

Hiring of human resources focused on diversity

Describe the roles and capabilities expected ofproject managers serving the healthcare industry.

Describe an ideal project manager.
Although management capabilities are obviously necessary,

In my own area of healthcare (focused on hospitals and nursing

perhaps the ideal project manager also possesses a goodcare centers), JGC proposals often end up determining thebalance of technical expertise and skills for architecture,

specific requirements and functionality of the facilities planned.

equipment, and electrical applications, and can apply these

Building on an understanding of local healthcare and in line withskills as needed. Having this flexibility in responding, though it

client conditions, project managers must gain a clear vision of

may be subtle, is pivotal to smooth progress in projects. And

the medical care and nursing services that facilities should

ideally, project managers should be able to earn the trust of any

enable, and then put together proposals for suitable facilities.

client early on through a combination of good communication

Design proposals are also an important factor. In the execution

skills, persuasiveness grounded in an understanding of people

stage, each project manager must fulfill many roles, in partand extensive experience, and other traits.

Extensive training system to provide
management techniques,
knowledge, and skills through Off-JT,
in addition to OJT

Highly motivational personnel
evaluation and remuneration system

An Employee Benefit System
That Supports a
Positive Work Environment

because we may have fewer project members than in other JGC
business segments. This calls on me to gather information from

Episodefar and wide, and to take the initiative and delve into any

Describe an experience that proved to be a growth
opportunity.

matters I feel should be investigated.

What is the key to risk management?
Close communication with internal and external stakeholders, ashared awareness of variables and concerns in project execution, and responsiveness. I try not to put off deciding how to

In my tenth year at JGC, job rotation gave me an opportunity
to work on-site at an Indonesian LNG project. Not all
construction companies' expertise and reliability is asconsistent as we find in Japan, so my management duties
took me on-site to see that relevant design and construction
standards were met. Although I struggled to cope with somesituations in this unfamiliar environment, I still draw on theexperience in my current work.

Human Resources We Aim to Cultivate●●

Advanced technical capabilities andexpertise
Project management capabilities

Demonstration oforganizational strength

Global business responseTechnologies, capabilities and skills●

Receptivity toward different
cultures and diversity●●

Building relationships oftrust among employees
Strong sense of responsibility tocomplete projects

deal with issues.

73

JGC Report 2020

JGC Report 202074Core Competencies and Management Resources

CHAPTER 5

Core Competencies and Management Resources

Management Resources

Management Resources

Human CapitalSocial and Relationship Capital

Human Resources with a Wide Range of Expertise

Since the 1950s, the Group has provided plant and facility design andelectronic material companies. In consulting, we provide research andconstruction and maintenance services to clients in diverse energy

analysis services to utilities and government agencies through a collabo-

infrastructure fields in Japan and overseas. In functional materials

rative network of experts and authorities in Japan and overseas.

manufacturing, we supply a variety of products and materials with originalThrough these operations, we have gained client trust and built a solid

properties, responding rapidly and flexibly to the needs of a broad range

customer base.

Total Engineering

Functional Materials Manufacturing

Consulting

about

about

about

6,000

900

200

A workforce of experts with diverse expertise.

Members with a command of nanomaterial

Members with academic knowledge in a

Technical capabilities spanning all engineer-control technologies in the catalysts/finevariety of fields such as engineering,ing fields: such as chemical, architectural,chemicals field or ceramics production andscience, and agriculture who offer researchmechanical, electrical, control, safety, and IT

processing technology in the fine ceramics

and analysis to solve client challenges.

Engineering. Project management skills tofield, who respond quickly and flexibly toensure an optimal balance of cost, schedul-client needs.

members

members

membersof clients from energy and chemical companies to semiconductor and■ Primary Clients by Segment

Total Engineering Business
Overseas Oil and Gas

ing, and quality control. Knowledgeable in

Oil majors
National oil companies in oiland gas-producing countries● Petrochemical and chemicalcompanies, others

commercial areas such as legal/contracts or
accounting/tax.

Domestic

Overseas Infrastructure
Power producers
Oil and gas producers● Nonferrous metal companies,
othersOil and gas companies
Petrochemical and chemical companies● Electric power companies, power producers● Pharmaceutical companies,
hospitals, others

●

●

●

●

●

●

Training System
JGC Group cultivates human resources with high technical proficiency

which comprises various training programs; and support for self-im-

and expertise, awareness of other cultures and diversity, andtheprovement, such as acquiring certifications or improving language skills.

mentality required for teamwork through our training system consistingIn our Off-JT, we cultivate personnel through stepwise implementa-of three main pillars: on-the-job training (OJT), which includes an onsite

tion of differing types of training in response to the skills required oftraining system and a job rotation system; off-the-job training (Off-JT),differing types of employees, as shown in the graphic below.

Featured Projects■ Overview of Diverse Off-the-job Training System

Manager

Organizational management training

Building expertise

External programs

Division manager training

Specialist

Management course program
Organizational management training

Overseas/domestic training programs

Leadership training

Roleplay-based training

LNG plant (Russia)

Functional Materials Manufacturing Business

Data analysis and evaluation
basic training

Catalysts and Fine Chemicals
Oil companies● Petrochemical and chemicalcompanies● Electronic materials companies● Optical device materials companies● Cosmetics companies, others●

Staﬀ

Building business skills
Training in overseas business communication

English negotiation training

New employee training

Pharmaceutical plant (Toyama Prefecture)

JGC Techno-College※1

JEEP (e-learning)※2
Self-management training

Solar power plant (Vietnam)

English presentation training

Fine Ceramics●

Semiconductor materials/fabrication companies●

Electronic device materials/fabricationcompanies●

Optical device materials/fabrication companies●

Medical device materials/fabrication companies●

Manufacturing/fabrication companies, others

Consulting Business●

Utilities, gas companies●

Research institutes●

Government, municipalities,
othersOn-site training※1 Specialty lectures conducted by employee volunteers with the aim of passing on techniques, skills, and experience from senior to junior staff※2 Various technical courses on process design, detailed design, project management, IT, and other topics

75

JGC Report 2020

JGC Report 202076

Core Competencies and Management Resources

CHAPTER 5

Core Competencies and Management Resources

Management Resources

Management Resources

Social and Relationship Capital

Manufactured Capital

JGC Group treats suppliers as partners in value creation, working with them to ensure mutual competitiveness and success through optimum quality, cost,

JGC Group maintains a network of production sites in Kitakyushu, Niigata, Sendai, Aichi, and Iwate, Japan that provide a stable supply of superior

and delivery. We select suppliers based on a fair and comprehensive assessment of factors such as quality, price, delivery, and technical capabilities,functional materials in conjunction with the technological innovation of adjacent R&D centers.

while also fully taking into account environmental considerations, human rights, health and safety, and information security during this process.

Production Network for Superior Functional Materials

Global Supply Chain
Emphasizing the Importance of Suppliers as Partners in Value CreationJGC Catalysts and Chemicals Ltd.
Niigata Operation Center

Cooperation with partner companies in countries around the world is essential for plant construction. JGC Group has created a global supply chain

Manufacturing of catalyst, environmental,
and new energy products

for plant construction, thanks to more than half a century of implementing numerous projects overseas. JGC Group treats suppliers as partners inJapan Fine Ceramics Co., Ltd.
Iwate Factory
Ceramics refining and fabrication

value creation, working with them to ensure success through optimum quality, cost and delivery.

General trading companies
Marketing support,
information gathering, etc.

Financial institutions
Project implementation,
financing, etc.

Consulting companies
Economicassessments, etc.

Insurance companies
Insurance forrisk hedging, etc.

JGC Catalysts and Chemicals Ltd.
Kitakyushu Operation Center
Manufacturing of catalyst, environmental,
new energy, and fine products

EPC BusinessJapan Fine Ceramics Co., Ltd.
Tomiya Factory

EPC Project
FS

FEED

Engineering

Procurement

Construction

O&M

Domestic and overseas
EPC contractors
Joint-venture partners, etc.

Manufacturing of engineering ceramics andelectroceramics

Clients
National oil companies,
oil majors, etc.

Licensors
Process licensing

Subcontractors
Construction work

Engineering design
subsidiaries
Design work and project
implementation support

Suppliers
Equipment manufacturing,materials supply

Transportation companies
Equipment andmaterials transportation

TopicsJapan Fine Ceramics Co., Ltd.
Head Office Factory

Vendor Technical Support Group Activities
In the Train 9 LNG plant construction project for Petronas that was completed in 2017, we stationed engineers from JGC
vendor technical support group at four manufacturers in Malaysia from the start of the project to provide production support
for a total of 140 units of equipment weighing 3,000 tons, including towers, vessels, and heat exchangers.
Thanks to the technical assistance provided based on comprehensive judgments made regarding the capabilities ofeach manufacturer and the difficulty of the specified equipment, these relatively inexperienced manufacturers
succeeded in manufacturing equipment that fulfilled the quality requirements, on schedule. The new track record
established through this project will help these manufacturers to obtain equipment orders for other projects. The
company views the positive relationships with suppliers that have been achieved as a result of these efforts asvaluable business partner assets, and for this reason, actively provides technical assistance to manufacturers.

77

JGC Report 2020

Japan Fine Ceramics Co., Ltd.
Meito Factory

Japan Fine Ceramics Co., Ltd.
MMC Factory

Manufacturing of engineering ceramics andelectroceramics

Manufacturing of metal-matrix composites

Ceramics refining and fabrication

Training for welders

JGC Report 202078

CHAPTER 6Business Outlook
This chapter describes our Total Engineering and Functional Materials
Manufacturing operations, growth opportunities in each segment, and midto long-term risks.

81 Total Engineering Business
Overseas Oil and Gas
Overseas Infrastructure
Domestic EPC

84 Functional Materials Manufacturing Business
Catalysts and Fine Chemicals
Fine Ceramics

79

JGC Report 2020

JGC Report 2020

80

Business Outlook

CHAPTER 6

Business Outlook

Total Engineering Business
Overseas Oil & Gas Sector

Overseas Infrastructure Sector

Satoshi Sato

Terumitsu Hayashi

Director,
Company President,
Oil & Gas Project Company,
JGC CORPORATION

Director,
Company President,
Infrastructure Project Company,
JGC CORPORATION

Covered Sectors

Covered Sectors

Engineering, procurement and construction of plants and facilities in sectors such as crude oil and gas
gathering, refinery, gas processing, LNG (liquefied natural gas) and petrochemicals

New Contracts in Fiscal 2019

approx.

55

New Contracts Targeted for Fiscal 2020

billion yen

400billion yen

New Contracts in Fiscal 20195

approx.

New Contracts Targeted for Fiscal 2020

billion yen

140billion yen

Growth Opportunities

Increasing energy demand, driven in part by global population growth
Increased demand for LNG and other fossil fuels with lower environmental impact

Growth Opportunities

Increasing demand for new infrastructure, as populations in emerging markets grow
Increasing demand for renewable energy, toward a low-carbon society

Mid-to Long-term Risks

Lower demand for fossil fuels as a whole
Postponement of client capital investment plans from resource market stagnation

Mid-to Long-term Risks

Sluggish capital investment from an economic slowdown in emerging markets

Business Policy

Business Policy

Orders in fiscal 2019 remained low. Factors included postpone-

project. We are targeting 400 billion yen in orders.

The low level of orders in fiscal 2019 can be attributed to factors

In this key Southeast Asia region, higher infrastructure demand isment of the final investment decision for a large-scale LNG plant

In the medium to long term, solid capital investment in oil and gas

such as FID postponement for an LNG Receiving Terminal

expected. We will be coordinating projects through attentive

construction project in Mozambique awarded in October 2019, inis expected, in consideration of increasing energy demand fromconstruction project in Southeast Asia for which JGC was a

proposals to potential clients from the upstream planning stage,

the wake of a global economic slowdown from the pandemic

global population growth. Through greater competitiveness driven

preferred bidder. The outlook in fiscal 2020 remains uncertain

as we take an account-focused approach aimed at securing

outbreak of COVID-19 and sharp drops in crude oil prices.

by digital technologies, and by introducing low-carbon / decar-

due to the impact of the pandemic, but we will be working toward

continuous orders. By steadily receiving and executing projects

Although the fiscal 2020 market environment is still uncertain, webonized technologies, we are pursuing sustained growth in thissteady orders for projects that are expected to advance, including

with ample margins, we will be developing overseas infrastructure

will continue working to secure orders for projects expected tocore JGC Group business.

Non-Ferrous Metals projects in Southeast Asia, as we continue toas a second profitable pillar of JGC Group business following

pursue order targets.

overseas oil and gas.

move ahead, such as a planned Middle East refinery upgrading

81

Engineering, procurement, and construction of infrastructure facilities focused on renewable energy power
generation (solar, biomass, wind), LNG/LPG terminals, waste power generation, pharmaceuticals and foodfactories, hospitals, airports, non-ferrous metal smelting, etc.

JGC Report 2020

JGC Report 202082

Business Outlook

CHAPTER 6

Business Outlook

Total Engineering Business

Functional Materials Manufacturing Business
Catalysts and Fine Chemicals Sector

Domestic Sector

Covered Sectors
Development and production of catalysts used in petroleum refining, chemical, and environmental
conservation and of fine chemical products used as materials in semiconductor, IT/electronics,
optics, cosmetics, and other applications

Shoji Yamada
Representative Director,
President,
JGC JAPAN CORPORATION

Growth Opportunities

Expanding demand for new chemical refining catalysts at petroleum refineries
Increased demand for environmental catalysts and cosmetics ingredients made withsilica beads, reflecting increased environmental awareness
Increased demand for anti-reflective materials, semiconductor abrasives, and otherfunctional coating materials from adoption of HDTVs and 5G technology

Mid- to Long-term Risks

Slowdown in exports of functional coating materials from economic stagnation in China
Declining demand for petroleum refining catalysts from lower crude oil prices

Toshiharu Hirai
Representative Director,
President,
JGC Catalysts andChemicals Ltd.

Business Policy
Favorable orders for fluid catalytic cracking (FCC) catalysts, chemical catalysts, and environmental
conservation catalysts in fiscal 2019 were offset by a slowdown in exports of functional coating

Oil Refining Catalysts (FCC Catalysts)

materials and other fine chemicals due to factors such as U.S.-China trade friction.
Pandemic impact was minimal in fiscal 2019, but in fiscal 2020, it is expected to act in concert

Covered Sectors

with lower crude oil prices to undermine catalyst demand. We are monitoring developments care-Engineering, procurement, construction and maintenance of plants and facilities for oil and gas,chemicals, pharmaceuticals and laboratories, healthcare (medical and welfare), renewable energy
power generation, nuclear energy-related, and more
New Contracts in Fiscal 2019130

approx.

fully. Looking ahead, we will seek expanded orders by enlarging our share of the domestic FCC
catalyst market and branching out overseas, cultivating new chemical catalyst opportunities,

Silica Beads

promoting sales and developing more applications for functional coating materials, and enhancing

Cosmetics Ingredients(Silica Beads, an Environmentally Friendly
Inorganic Material)

productivity in cosmetics materials.

New Contracts Targeted for Fiscal 2020

billion yen

130

Fine Ceramics Sectorbillion yen

Covered Sectors
Development and production of ceramic materials for semiconductor, automotive, telecommunica-

Growth Opportunities

Mid-to Long-term Risks

Increasing demand for maintenance as refining and petrochemical plants deterioration
Increasing demand for renewable energy, toward a low-carbon society
Increased capital investment in life sciences from a declining birthrate and aging population
Increased nuclear power plant decommissioning related
Less new large-scale capital investment in refining and petrochemicals from lower fossil
fuel demand and stagnation of crude oil prices
Sluggish capital investment in infrastructure field from a domestic economic slump

tions, industrial, medical, and aerospace applications

Growth Opportunities

Mid- to Long-term Risks

Increased demand for parts used in optical communication and semiconductor applications
from adoption of 5G
Increased demand for high-thermal-conductivity silicon nitride substrates from adoptionof electric and hybrid vehicles

Hiroshi Tanaka
Representative Director,
President,
Japan Fine Ceramics Co., Ltd.

Postponement of semiconductor investment plans from Chinese economic stagnation

Schematic model of thin-film circuit (graphic)

Castellation

Business Policy
Through-holeBusiness Policy

83

5G adoption in China was slower than expected in fiscal 2019, and orders were sluggish for com-

Orders on the level expected were secured in fiscal 2019, supported byfluctuations, such as biomass power generation plants, decommissioning

ponents used in optical communication and in semiconductor deposition and etching equipment.

a robust maintenance sector and a series of orders in areas such as

nuclear power facilities services, pharmaceutical plants, health care

In fiscal 2020, we will continue to monitor the market impact of the global economic slowdown

biomass and solar power plants, pharmaceutical plants, laboratories,

facilities, and chemical projects.

from the pandemic. We will be seizing new opportunities in circuit boards used for optical com-and health care facilities.

We will continue to hone our technologies and expand operations,munication and looking to venture into wireless communication, LEDs, sensors, and other fields

In fiscal 2020 as well, we will continue to fulfill a supporting role inhoping to contribute domestically as Japan pioneers solutions to a

Meanwhile, we are looking forward to a smooth startup at a new factory for high-thermal-conduc-steady group earnings by expanding orders centered on infrastructure

declining birthrate, aging population, and other issues faced bytivity silicon nitride substrates used in power units of electric vehicles, where we will seek quality

projects not easily swayed by the pandemic or crude oil priceindustrialized nations.

and productivity for volume production as we develop this business into a pillar of profitability.

JGC Report 2020

Lange coupler
Thin-film resistor

Thin-film capacitor

Side patternThin-film inductor

Coated integrated circuit

JGC Report 202084

Data Section

87 Six-Year Summary
88 Analysis of Performance and Financial Position
93 Consolidated Balance Sheets
95 Consolidated Statements of Income
96 Consolidated Statements of Comprehensive Income
97 Consolidated Statements of Changes in Net Assets
99 Consolidated Statements of Cash Flows
101 Notes to Consolidated Financial Statements
118 Independent Auditor’s Report
119 Supplemental Explanation
120 Internal Control Report (Translation)
Independent Auditor’s Report on the financial Statements
121 and Internal Control Over Financial Reporting (Translation)
123 JGC Group124 Outline of JGC
85

JGC Report 2020

JGC Report 202086

Six-Year Summary

Analysis of Performance and Financial Position(As of March 31 of each year)

Our View of the Operating Environment

Consolidated⃝ Assets
Current assets as of the end of the consolidated fiscal year stood at ¥537,955(Millions of yen)

2015

2016

2017

2018

2019

2020

In the consolidated fiscal year under review, toward the goal of steady and prompt

Net Sales

799,076879,954

693,152

722,987

619,241

480,809

attainment of further gains in corporate value, the Group adopted a holding company

and deposits increased by ¥101,057 million, notes receivable, accounts receivable

Operating Income (Loss)

29,74049,661△21,496

21,49523,24920,234structure as of October 1, 2019, seeking to become a corporate group with stable,from completed construction contracts, and other declined by ¥87,406 million,

Net Income (Loss) Attributable to
Owners of Parent

20,62842,793△22,057

16,58924,005

4,117

solid earnings from multiple businesses.

accounts receivable by ¥9,471 million, and short-term loans receivable by ¥3,592

537,955

In the Total Engineering segment, those in the overseas oil and gas businessmillion, with suspense payments included in current assets and other declining by¥3,457 million. Total non-current assets stood at ¥133,317 million, a year-on-year

Total Current Assets

533,538

522,747

480,865

521,320541,747

million, a year-on-year decline of ¥3,792 million. As for main factors, although cash

Total Current Liabilities

286,533

225,203

226,457

215,773

223,559

228,386(which includes oil refining, petrochemicals, gas processing, LNG, etc.) saw plans

Working Capital

247,005

297,544

254,408

317,200

318,188309,569

announced for several capital investment projects in oil- and gas-producing

decline of ¥33,789 million. This was mainly attributable to a ¥28,281 million decline

Current Ratio (%)

186.2

232.1

212.3

241.6

242.3

235.5

countries, centered on large-scale LNG plants and oil refineries. Similarly, those in

in investment and other assets. Accordingly, total assets amounted to ¥671,273

Net Property and Equipment

78,56076,25569,87755,22255,44049,794the overseas infrastructure business (including power generation, nonferrous metals,

million, a year-on-year decline of ¥37,581 million.

Total Assets

719,754689,782646,291

684,921708,855

671,273

pharmaceuticals, medical, etc.) of this segment expected renewable energy plants

Long–term loans payable

22,71520,991

12,631

4,294

3,949

347

and other capital investment plans to be implemented in Asia and beyond, where

388,496

419,673

383,260

395,779

410,350

390,979⃝  Liabilities

Total Net Assets

populations and economies are growing. But with the spread of the coronavirus

New Contracts

769,680

320,626

506,293547,826

935,451

189,643

Current liabilities as of the end of the consolidated fiscal year stood at ¥228,386

pandemic (hereafter, "Covid-19") since the beginning of 2020, the global economy

1,772,036

1,192,625

1,019,621

846,157

1,208,365

941,618

million, a year-on-year increase of ¥4,826 million. As for main factors, although

Net Income (Loss) per Share (in yen)

81.73

169.60△87.42

has faced a slowdown, which, in conjunction with a sharp fall in crude oil prices as

65.75

95.14

16.32

trade and accounts payable for construction contracts declined by ¥23,852 million,

Cash Dividends per Share (in yen)

21.0

42.5

30.0

25.0

28.5

12.0

producers such as Saudi Arabia and Russia increased output, led to some client

corporate bonds with payment due within one year increased by ¥20,000 million andNumber of Employees

7,332

7,489

7,554

7,610

7,841

7,607

capital investment plans being postponed amid market uncertainty.

advances received on uncompleted construction contracts by ¥9,123 million. Total

In the domestic business of this segment, continuous capital investment was seen

non-current liabilities stood at ¥51,907 million, a year-on-year decline of ¥23,037

in maintenance of existing refineries, construction of chemical plants, renewable

million. This was mainly attributable to corporate bonds declining by ¥20,000 million

energy plants and life science facilities.

and long–term loans payable by ¥3,602 million.

Meanwhile, in current domestic and overseas projects, favorable progress was madeAccordingly, total liabilities amounted to ¥280,293 million, a year-on-year decline ofoverall. The spread of Covid-19 has restricted the movement of people and supplies,¥18,211 million.

Outstanding Contracts

however, making it increasingly likely that equipment production and construction
work will face delays.
In the Functional Materials Manufacturing segment, those in the catalyst business
saw favorable sales of FCC, chemical, and environmental catalysts. However,those in the fine chemicals and fine ceramics businesses faced ongoing market
adjustment and sluggish orders from factors such as a slowdown in functional paintmaterial exports on prolonged U.S.-China trade friction and the postponement of
capital investment by semiconductor manufacturers from slow 5G adoption in China.

Results of Operations⃝ Net Assets
Current net assets as of the end of the consolidated fiscal year stood at ¥390,979
million, a year-on-year decline of ¥19,370 million. As for main factors, althoughprofit attributable to owners of the parent amounted to ¥4,117 million, cash
dividends paid came to ¥7,190 million, with valuation difference on available-for-salesecurities declining by ¥5,033 million and foreign currency translation adjustmentsby ¥12,522 million. Accordingly, the shareholders' equity ratio stood at 58.2%,
compared to 57.7% at the end of the previous fiscal year.

In the consolidated fiscal year under review, the JGC Group reported net sales of¥480,809 million (down 22.4% year on year), an operating income of ¥20,234
million (compared with an operating income of ¥23,249 million in the previous fiscal
year), an ordinary income of ¥22,367 million (compared with an ordinary income of¥32,304 million in the previous fiscal year), and a net income attributable to ownersof the parent of ¥4,117 million (compared with a net income of ¥24,005 million in
the previous fiscal year). ROE was 1.0%.

87

JGC Report 2020

JGC Report 202088

Segment Information⃝   Functional Materials Manufacturing Business

Cash Flow2018.32019.32020.3

Shareholders’ equity ratio

57.6

57.7

58.2

Shareholders’ equity ratio(market basis)

85.2

52.4

32.6

Interest-bearing liabilities tocash flow ratio

12.2

－

0.6

profit before income taxes amounted to ¥25,943 million, which with factors includingInterest coverage ratio

12.1

－

600.9

a decline in notes and accounts receivable, trade, led to an increase of ¥92,442

Notes: Shareholders’‌equity ratio: (Total net assets – Minority interests) / Total assets
Shareholders’ equity ratio (market basis): Total market capitalization / Total assets
Interest-bearing liabilities to cash flow ratio: Interest-bearing liabilities / Cash flow
Interest coverage ratio: Cash flow / Interest expense* All indicators are calculated using consolidated financial figures.
* “Interest-bearing liabilities” includes all liabilities on the consolidated balance sheet on which interest is paid.
“Cash flow” is cash flow from operating activities shown in the consolidated statements of cash flow. “Interest
expense” is the amount of interest paid shown in the consolidated statements of cash flows.
* In fiscal years where cash flow is negative, the interest-bearing liabilities to cash flow ratio and the interest
coverage ratio are denoted by a dash.

In functional materials manufacturing, steady sales of FCC, chemical, and⃝ Total Engineering Businessenvironmental catalysts stood in contrast to declining international sales of catalytic

In overseas oil and gas pursued orders in Southeast Asia, the Middle East, Africa,hydrotreating products. A slowdown was also seen in fine chemicals, in exports ofNorth America, and Russia/CIS. In June 2019, JGC was awarded a FEED contract

products such as functional coating materials, on U.S.-China trade friction. In finefor the LNG plant for maritime fuel in Oman, followed in October by an order for

ceramics, as 5G adoption in China has been slower than expected, orders wereconstruction of a large-scale LNG plant in Mozambique. The project order amountsluggish for components used in optical communication and in semiconductor

will be recorded after the client's final investment decision.

deposition and etching equipment.

In overseas infrastructure, client negotiations are underway in anticipation of formally

These efforts by the Group form the basis for the following performance figures byconcluding the contract for an LNG receiving terminal construction project in which

segment for the consolidated fiscal year under review.

medical facilities, as well as maintenance for existing oil refineries and other sites.

investment securities, compared to a decline of ¥4,662 million the previous fiscal year.

dividends paid, compared to a decline of ¥13,878 million the previous fiscal year.
Total Engineering Business

900

700

FID postponement on the spread of Covid-19 and falling crude oil prices.

600

Overall, progress in current projects has been favorable, but the pandemic has made500

delays in construction and other work increasingly likely.

400

To contribute toward sustainable societies by taking on the global challenge of

300

technologies, aiming for rapid creation of environmental business.
Discussions on potential collaboration with Ebara Environmental Plant Co., Ltd., Ube
Industries, Ltd., and Showa Denko K.K. to promote gasification chemical recycling

Shareholders’ Equity(left scale)

450

670.0
564.0

53.8
387.4

426.7

Shareholders’ Equity Ratio(right scale)

60.7(Billions of yen)

643.3

Free Cash Flows

Shareholders’ Equity and Shareholders’ Equity Ratio

828.4

for the consolidated fiscal year, orders remained at ¥189,600 million due to client

October 1, 2019. The Department will build value chains centered on environmental

Functional Materials
Manufacturing Business(Billions of yen)800 745.0

business, the Group established the Sustainability Co-Creation Department onused in investing activities increased by ¥19,364 million, mainly due to sales of

Net Sales by Reporting Segment

Although ¥800,000 million in orders for comprehensive engineering was targeted

environmental issues, and to respond to the growing market for environmental

increase of ¥100,326 million. With regard to net cash used in operating activities,

Net cash used in financing activities declined by ¥7,699 million, mainly due to cash

In March 2020 JGC JAPAN also received a construction project order for a biomass
power plant in Miyagi.

of the end of the consolidated fiscal year stood at ¥261,898 million, a year-on-year

million, compared to a decline of ¥55,259 million the previous fiscal year. Net cash

the Group is a preferred bidder.
In the domestic, orders were secured for construction of pharmaceutical plants andCurrent cash and cash equivalents (hereafter, "net cash") on a consolidated basis as

59.1

57.6

418.6
382.2

(Billions of yen)

58.2

57.7

394.7

409.2

（%）

60

390.5

300

0

90
60

40

30

11.8

17.2

0

200
100

120

37.4

37.6

39.9

42.1

45.9

2015.32016.32017.32018.32019.3

46.6

150

20

-30
-41.0

-60

2020.302015.32016.32017.32018.32019.32020.3

0

-90

-41.8
-59.9

-94.8

-120
2015.32016.32017.32018.32019.32020.3addressing the global issue of plastic waste began in August 2019, followed in
February 2020 by the start of a feasibility study with Japan Airlines Co., Ltd.,Marubeni Corporation, and JXTG Nippon Oil & Energy Corporation on domestic
production and sales of sustainable aviation fuel made with industrial and municipal
waste, including plastic waste.

89

JGC Report 2020

JGC Report 2020

90

Analysis of New Contracts

Busines Outlook

In the fiscal year under review, orders received totaled ¥189,643 million.

⃝   Total Engineering Businessas we pursue steady orders for projects with ample margins. To respond to changes⃝   Functional Materials Manufacturing Business

The tables below provide a breakdown of new contracts in the total engineering

The market environment for this segment is currently uncertain, in overseas oil andin overseas oil and gas and other areas of the business environment, we will also be

As for functional materials manufacturing segment, in catalysts, we will enlarge ourbusiness by sector and regiongas business, with some client capital investment plans postponed from the spread

accelerating expansion of our operations into overseas infrastructure and exploring

share of the domestic FCC catalyst market and branch out overseas, as we cultivate
new chemical catalyst opportunities. In fine chemicals, we will seek expanded

New Contracts by Business Sector
2019.3
Oil and gas development
projects

37.5

Petroleum refining projects

45.4

2020.310.1
29.0

of Covid-19 and a drop in crude oil prices. However, in the medium to long term, it is

new enterprises for an optimal business portfolio. In project execution as well, we will

(Billions of yen)

anticipated that energy demand will increase and various needs will emerge with thebe accelerating digitization, in IT/IoT applications and elsewhere, as we move aheadorders by promoting sales and developing more applications for functional coating2020.3(Percentage of newcontracts)

growing population in emerging markets. Demand for infrastructure in Asia is also

in streamlining operations without limiting ourselves to conventional methods. Withinmaterials, and by enhancing productivity for cosmetics materials. In fine ceramics,

expected to remain steady in this time frame. Thus, capital investment plans that are

the domestic segment, we will pursue business in hopes of contributing toward a

we will be seizing new opportunities in circuit boards for optical communication andcurrently at a standstill may gradually be implemented as the market environment

low-carbon or decarbonized economy and helping Japan pioneer solutions to issues

moving aggressively into areas such as wireless communication, LEDs, and sensors.

15.3%

recovers, and with economic growth, these projects are likely to become more

faced by industrialized nations. Meanwhile, we will also fulfill the role of an incubator

We are also preparing for a smooth startup at a new factory that will produce highin overseas expansion of new business originally developed in Japan. To the extent

thermal conductivity silicon nitride substrates for electric and hybrid vehicles, where

5.3%

LNG projects

665.9

13.9

7.4%

diverse. In the domestic segment as well, continuous capital investment is expected

Chemical projects

94.8

50.7

26.7%

for infrastructure facilities and other projects. As JGC Group continues efforts topossible, our next earnings forecast reflects the impact of Covid-19 on performance,

we will seek quality and productivity in anticipation of volume production. To theprevent the spread of Covid-19 while monitoring changes in the market environment,from construction delays and other aspects of current projects, but we will be closely

extent possible, the impact of Covid-19 on this business is accounted for in our next

we will work together toward higher added value and greater cost competitivenessmonitoring developments

earnings forecast, but future developments will be monitored.

Power generation, nuclear
power and new energy

32.2

42.4

22.4%

Living and generalproduction facility

31.3

21.6

11.4%

Environmental protection,social development and IT

16.9

13.2

7.0%

Others

11.0

8.4

4.5%

New Contracts by Region(Billions of yen)

2019.32020.32020.3(Percentage of newcontracts)

Japan

133.3

127.1

71.2%

Asia

94.8

30.2

17.0%

Africa

2.0

8.4

4.7%

Middle East

40.5

12.4

7.0%

North America and Other

664.6

11.2

0.1%

91

JGC Report 2020

JGC Report 202092

Consolidated Balance Sheets(March 31, 2020 and 2019)

March 31ASSETS

2020

March 31
2019

2020

(Millions of yen)March 31
LIABILITIES AND NET ASSETS

2020(Thousands of U.S. dollars)

March 312019

(Millions of yen)

(Note 1)CURRENT ASSETS:

2020(Thousands of U.S. dollars)(Note 1)CURRENT LIABILITIES:Cash and deposits (Notes 3, 12 & 15)¥261,899¥160,842$ 2,406,496

Notes and accounts receivable (Notes 2, 9 & 15)

145,276

232,683

1,334,889

Inventories (Note 4)

34,68036,028318,662

437

4,029

4,016

95,822

109,341

880,475

Reserve for job warranty costs

976

1,154

8,968

Reserve for losses on contracts

11,10917,765102,077

Short-term loans receivable (Notes 2, 9,12 & 15)
Other current assets (Notes 2, 9 & 15)
Allowance for doubtful accounts
TOTAL CURRENT ASSETS(158)(1,175)(1,452)537,956

541,748

4,943,086

PROPERTY AND EQUIPMENT (Notes 3 & 10):Land (Note 13)

18,581

18,491

170,734

Buildings and structures

59,852

59,915549,959

Machinery and equipment

60,02664,888551,557

Construction in progress
Other

Short-term loans and current maturities of long-term debt
(Notes 2, 3 & 9)

¥ 20,227¥ 614$ 185,859

Notes and accounts payable (Notes 2, 9 & 15)

68,23992,092

627,024

Advances received on uncompleted contracts (Note 2)

83,228

74,105

764,752

Income taxes payable

1,956

3,011

17,973

Other current liabilities (Notes 2, 9 & 15)

42,651

34,819391,904

TOTAL CURRENT LIABILITIES

228,386

223,560

2,098,557

LONG-TERM LIABILITIESLong-term debt, less current maturities (Notes 3, 9 & 15)

30,34753,949278,848

16,972

16,180155,950

1,015

1,015

9,326

910

935

8,362

Net defined benefit liability (Note 5)

4,423

4,402

40,641

Deferred tax liabilities for land revaluation (Note 13)

143,792

148,631

1,321,253

Other long-term liabilities (Note 11)

3,574

3,801

32,840Less accumulated depreciation(93,997)(93,191)(863,705)

TOTAL LONG-TERM LIABILITIES

51,90874,945476,964

NET PROPERTY AND EQUIPMENT

49,79555,440457,548

TOTAL LIABILITIES

280,294

298,505

2,575,521

23,55523,511

216,438CONTINGENCIES (Note 6)

INVESTMENTS AND OTHER ASSETS:
Investments in unconsolidated subsidiaries
and affiliates (Notes 8 & 15)

23,39637,929214,977

Investment securities (Notes 3, 8 & 15)

21,412

31,065

196,747

Long-term loans receivable (Note 15)

143

-

1,314

21,71325,197

199,513

569

605

5,228

16,29016,871

149,684

Deferred tax assets (Note 11)
Net defined benefit asset (Note 5)
Other
TOTAL INVESTMENTS AND OTHER ASSETSTOTAL ASSETS
The accompanying notes are an integral part of these statements.

83,523

111,667

767,463¥ 671,274¥ 708,855$6,168,097

NET ASSETS (Note 7):
SHAREHOLDERS’ EQUITY
Common stock
Authorized 600,000,000 shares,
Issued259,110,861 shares in 2020
and 259,052,929 shares in 2019
Capital surplus

25,65325,609235,716

Retained earnings

375,641

376,1453,451,631

Treasury stock, at cost
6,748,713 shares in 2020, 6,746,081 shares in 2019

(6,739)(6,739)(61,921)418,110418,526

3,841,864

Net unrealized holding gains on securities (Notes 8 & 15)

2,206

7,240

20,270

Deferred losses on hedges (Note 9)(1,005)(277)(9,234)

Revaluation reserve for land (Note 13)(10,891)(10,891)(100,074)

Foreign currency translation adjustments(16,491)(3,968)(151,530)

TOTAL SHAREHOLDERS’ EQUITYACCUMULATED OTHER COMPREHENSIVE INCOME

Remeasurements of defined benefit plans (Note 5)(1,412)(1,376)(12,974)

TOTAL ACCUMULATED OTHER COMPREHENSIVE INCOME(27,593)(9,272)(253,542)

NON-CONTROLLING INTERESTSTOTAL NET ASSETSTOTAL LIABILITIES AND NET ASSETS

93

JGC Report 2020

463

1,096

4,254

390,980

410,350

3,592,576¥ 671,274¥ 708,855$ 6,168,097

JGC Report 202094

Consolidated Statements of Income

Consolidated Statements of Comprehensive Income(March 31, 2020 and 2019)(March 31, 2020 and 2019)Year ended March 31
2020

Year ended March 31
2019Year ended March 31

2020(Millions of yen)

2020

(Thousands of U.S. dollars)Year ended March 31
2019(Millions of yen)

(Note 1)NET SALES (Note 10)¥ 480,810¥ 619,241$ 4,417,991
4,019,673(Note 1)NET INCOME

COST OF SALES

437,461574,279

Gross profit

43,34944,962

398,318

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

23,11521,712

212,395

Net unrealized holding losses on securities (Notes 8 & 15)

Operating income

20,23423,250185,923

Deferred gains (losses) on hedges (Note 9)

Interest and dividend income

6,525

6,454

59,956

Remeasurements of defined benefit plans (Note 5)

Interest expense

(187)

(393)

(1,718)

Share of other comprehensive income of affiliates accounted

Gain on sales of investment securities (Note 8)

5,649

2,372

51,907for using equity method

OTHER INCOME (EXPENSES):

Loss on impairment of fixed assets (Note 10)

-

(574)

-

(5,229)(528)(48,047)

Equity in earnings of affiliates

3,876

3,218

35,615

Loss on devaluation of investment securities (Note 8)

(866)

(8)

(7,957)

Provision for loss on business liquidation
Loss on sales of investment securities (Note 8)-(1,457)

-

-

(151)

-

Provision of allowance for doubtful accounts(3,124)-(28,706)

Loss on sales of shares of subsidiaries and affiliates(3,211)-(29,505)

Gain on sales of shares of subsidiaries and affiliates

2,247

-

20,647

29

333

266

Other, net (Note 8)

Income before taxes on income

5,709

9,266

52,45825,94332,516238,381

147,855¥ 4,258¥ 24,239$ 39,125(5,190)(3,929)(47,689)

(728)

234

(6,689)(12,165)(3,157)(111,780)

(251)

480

(2,306)(196)

86(1,801)OTHER COMPREHENSIVE INCOME (Note 16)

Translation adjustments

Exchange loss, net

2020(Thousands of U.S. dollars)

TOTAL OTHER COMPREHENSIVE INCOME¥ (18,530)¥ (6,286)$ (170,265)

TOTAL COMPREHENSIVE INCOME¥ (14,272)¥ 17,953$ (131,140)

Comprehensive income attributable to owners of the parent¥ (14,412)¥ 17,727$ (132,427)

¥ 140

¥ 226

$ 1,287

Comprehensive income attributable to non-controlling interests
The accompanying notes are an integral part of these statements.

TAXES ON INCOME (Note 11):
Current

16,091

15,081

Deferred

5,594(6,804)51,401NET INCOME

4,258

24,23939,125

141

233

1,296

¥4,117¥ 24,006

37,830NET INCOME ATTRIBUTABLE TO NON-CONTROLLINGINTERESTS
NET INCOME ATTRIBUTABLE TO OWNERS OF THE PARENT

Yen

U.S. dollars

AMOUNTS PER SHARE OF COMMON STOCK:(Note 1)

Net income¥ 16.32¥ 95.14$ 0.15

Cash dividends applicable to the year¥ 12.00¥ 28.50$ 0.11

The accompanying notes are an integral part of these statements.

95

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Consolidated Statements of Changes in Net Assets(March 31, 2020 and 2019)

Common stock

SharesAmountCapital surplus(Thousands of shares)
Balance at April 1, 2018259,053

Retained earnings

Treasury stock,at costNet unrealized holding
losses on securities(Notes 8 & 15)¥ 355,572¥ (6,737)¥ 11,169

Deferred gains (losses)on hedges(Note 9)(Millions of yen)
¥ 23,511

Revaluation
reserve for land
(Note 13)

Foreign currencytranslation adjustments

Remeasurements ofdefined benefit plans

Non-Controlling Interests(Millions of yen)

¥ 25,609

Net income attributable to owners of the parent

24,006

Cash dividends(6,308)¥ (518)¥ (10,919)¥ (1,170)¥ (1,816)¥ 1,078(28)

Decrease of land revaluation
0

Gain on disposal of treasury stock

0
2,903

Effect of change in scope of equity method accounting(3,929)Net unrealized holding losses on securities

241

Net deferred gains on hedges
Foreign currency translation adjustments(2,798)

Increase of treasury stock(2)

Remeasurements of defined benefit plans

440

Net changes during the year

28

Balance at March 31, 2019

259,053¥ 23,511¥ 25,609

Issuance of common stock

58

44

44

¥ 376,145

Net income attributable to owners of the parent

4,117

Cash dividends(7,191)

Effect of change in scope of consolidation

1,001

Gain on disposal of treasury stock¥ (6,739)¥ 7,240¥ (277)18¥ (10,891)¥ (3,968)¥ (1,376)¥ 1,096(0)
1,569

Effect of change in scope of equity method accounting
Net unrealized holding losses on securities(5,034)

Net deferred losses on hedges(728)

Foreign currency translation adjustments(12,523)

Remeasurements of defined benefit plans(36)

Net changes during the year
Balance at March 31, 2020

(633)
259,111¥ 23,555

Common stock¥ 25,653

Capital surplus¥ 375,641¥ (6,739)¥ 2,206¥ (1,005)

Retained earnings

Treasury stock, at cost

Net unrealized holding
losses on securities(Notes 8 & 15)

Deferred losses onhedges(Note 9)$ 3,456,262$ (61,921)$ 66,526$ (2,545)(Thousands of U.S. dollars)(Note 1)
Balance at April 1, 2019
Issuance of common stock$ 216,034$ 235,312

404

404

Revaluation reserve forland (Note 13)¥ (16,491)

Foreign currencytranslation adjustments¥ (1,412)

Remeasurements ofdefined benefit plans

37,830Cash dividends(66,076)

Non-Controlling Interests$ (100,074)$(36,461)$ (12,644)$ 10,070

9,198

Gain on disposal of treasury stock(0)

Effect of change in scope of equity method accounting

14,417Net unrealized holding losses on securities(46,256)

Net deferred losses on hedges(6,689)Foreign currency translation adjustments(115,069)

Remeasurements of defined benefit plans(330)

Net changes during the year
Balance at March 31, 2020

¥ 463

(Thousands of U.S. dollars)(Note 1)

Net income attributable to owners of the parent
Effect of change in scope of consolidation¥ (10,891)(5,816)$ 216,438$ 235,716$ 3,451,631$ (61,921)$ 20,270$ (9,234)$ (100,074)$ (151,530)$ (12,974)$ 4,254

The accompanying notes are an integral part of these statements.

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Consolidated Statements of Cash Flows(March 31, 2020 and 2019)Year ended March 31
2020

Year ended March 31

Year ended March 31
2019

2020

2020

(Millions of yen)

Year ended March 31
2019

2020

(Millions of yen)(Thousands of U.S. dollars)(Thousands of U.S. dollars)(Note 1)

(Note 1)
CASH FLOWS FROM INVESTING ACTIVITIES:CASH FLOWS FROM OPERATING ACTIVITIES:
Income before taxes on income¥25,943¥32,516$238,381

Adjustments to reconcile income before taxes on income to
net cash provided by (used in) operating activities:
Depreciation and amortization(4,435)(7,321)

Proceeds from sales of property and equipment

Payments for purchases of property and equipment

39

83(40,752)
358

Payments for purchase of investment securities(1,463)(2,451)(13,443)

7,016

7,291

64,468

Payments for purchases of intangible assets(2,234)(2,344)(20,527)

-

574

-

Proceeds from sales of investment securities

25,395

5,943

233,346

Increase in allowance for doubtful accounts

3,893

887

35,771

Decrease in reserve for losses on contracts(4,156)(4,004)(38,188)

Proceeds from sales of shares of subsidiaries resulting inchange in scope of consolidation

1,284

-

11,798

836

97

7,682

Loss on impairment of fixed assets

Increase in net defined benefit plans
Interest and dividend income

-

1,867

-

779

(439)

7,158

19,365(4,662)

177,938(119)(6,525)(6,454)

187

393

1,718

Exchange (gain) loss

2,060

(581)

18,929Equity in earnings of affiliates(3,876)(3,218)(35,615)

Gain on sales of investment securities(5,649)(2,221)(51,907)

Net decrease in short-term loans(13)(5,222)

7,957

Proceeds from long-term loans

2

2

18

8,858

Repayments of long-term loans(297)(1,850)(2,729)Interest expense

Loss on devaluation of investment securities866

8(59,956)

Proceeds from liquidation of subsidiaries and affiliates
Other
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIESCASH FLOWS FROM FINANCING ACTIVITIES:

Loss on sales of shares of subsidiaries and affiliates

964-(Gain) Loss on sales of property and equipment

(39)

6

(358)

(Increase) Decrease in notes and accounts receivable

86,286(46,936)

792,851(Increase) Decrease in inventories

1,345(6,223)

12,359Cash dividends paid to non-controlling interests(12,340)

Other(198,861)

Decrease in other assets
Increase (Decrease) in notes and accounts payable(1,343)(52,533)(21,642)

4,011

Increase in advances received on uncompleted contracts

9,342

26,902

85,840

Other

7,158

4,116

65,772

Subtotal

102,666(45,369)

943,361Interest and dividends received

7,548

7,359

69,356

Interest paid

(154)

(471)

(1,415)

Income taxes paid

(17,618)(16,778)(161,886)

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

92,442(55,259)

849,416

Net (increase) decrease in treasury stock

0

(1)

0

(7,193)(6,311)(66,094)

(214)

(208)

(1,966)

16

(289)

147

NET CASH USED IN FINANCING ACTIVITIES(7,699)(13,879)(70,743)

EFFECT OF EXCHANGE RATE CHANGESON CASH AND CASH EQUIVALENTS(3,782)(752)(34,751)

NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS

100,326(74,552)

921,860

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR

160,842

235,394

1,477,919

731

-

6,717

¥ 261,899¥ 160,842$ 2,406,496

Cash dividends paid

INCREASE IN CASH AND CASH EQUIVALENTS FROM NEWLYCONSOLIDATED SUBSIDIARIESCASH AND CASH EQUIVALENTS AT END OF YEAR (Note 12)
The accompanying notes are an integral part of these statements.

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100

Notes to Consolidated Financial Statements
Note 1 : SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESConsolidated subsidiaries

Location(a)BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements of JGC HOLDINGS CORPORATION

Capital Share
2020

2019

(d)CONVERSION OF FOREIGN CURRENCIES AND TRANSLATION OF STATEMENTS
Receivables and payables denominated in foreign currencies are translated into Japanese yen(h)RECOGNITION OF SALES, CONTRACT WORKS IN PROGRESS AND ADVANCESRECEIVED ON UNCOMPLETED CONTRACTS

at the year-end rates.

Sales on contracts for relatively large projects, which require long periods for completion and

JGC CORPORATION*1

Japan

100%

-

Balance sheets of consolidated overseas subsidiaries are translated into Japanese yen at thewhich generally include engineering, procurement (components, parts, etc.) and construction

prepared in accordance with the provisions set forth in the Japanese Financial Instruments

JGC JAPAN CORPORATION *2

Japan

100%

100%

year-end rates except for net assets accounts, which are translated at the historical rates.

on a full-turnkey basis, are recognized on the percentage-of-completion method, primarily

and Exchange Act and its related accounting regulations, and in conformity with accounting

JGC PLANTECH AOMORI CO., LTD.

Japan

100%

100%

Income statements of consolidated overseas subsidiaries are translated at average rates except

based on contract costs incurred to date compared with total estimated costs for contract

principles generally accepted in Japan (“Japanese GAAP”), which are different in certainJGC Catalysts and Chemicals Ltd.

Japan

100%

100%

for transactions with the Company, which are translated at the rates used by the Company.

completion.

respects as to application and disclosure requirements from International Financial Reporting

JAPAN FINE CERAMICS CO., LTD.

Japan

100%

100%

Meito Giken Co.,Ltd. *3

Japan

100%

100%

(e)UNIFICATION OF ACCOUNTING POLICIES APPLIED TO FOREIGN SUBSIDIARIES FOR

Contract works in progress are stated at cost determined by a specific identification method

NIKKI BUSINESS SERVICES CO., LTD.

Japan

100%

100%

International Financial Reporting Standards or U.S. generally accepted accounting principles,JAPAN NUS CO., LTD.

Japan

89%

89%

with adjustments for the specified five items as applicable. The accompanying consolidated

JGC Mirai Solar Co., Ltd.*4

Japan

-

financial statements have been translated into English (with some expanded descriptions) fromJGC SINGAPORE PTE LTD

Singapore

the consolidated financial statements of the Company prepared in accordance with Japanese

JGC PHILIPPINES, INC.

Philippines(Nikki Holdings Kabushiki Kaisha, the “Company”) and its consolidated subsidiaries have beenStandards.
The accounts of consolidated overseas subsidiaries are prepared in accordance with either

GAAP and filed with the appropriate Local Finance Bureau of the Ministry of Finance as required

and other items directly attributable to the contract, and job-related overheads. Selling, general

18 “Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries forand administrative expenses are charged to operations as incurred and are not allocated to51%

Consolidated Financial Statements” (“PITF No. 18”). PITF No. 18 requires that accounting

contract job work costs.

100%

100%

policies and procedures applied by a parent company and its subsidiaries to similar transactions

100%

100%

and events under similar circumstances should, in principle, be unified for the preparation of

The Company normally receives payments from customers on a progress basis in accordance100%

the consolidated financial statements. PITF No. 18, however, as a tentative measure, allows

with the terms of the respective construction contracts.

Saudi Arabia

JGC Gulf Engineering Co. Ltd.

Saudi Arabia

75%

75%

JGC OCEANIA PTY LTD

Australia

100%

100%

JGC America, Inc.

U.S.A.

100%

In addition, certain reclassifications have been made to present the accompanying consolidated

JGC (GULF COAST), LLC

U.S.A.

financial statements in a format which is more familiar to readers outside Japan. Furthermore,

JGC Exploration Eagle Ford LLC

certain reclassifications of previously reported amounts have been made to reconcile the

JGC EXPLORATION CANADA LTD.

included in the statutory Japanese language consolidated financial statements, but not required
for fair presentation, is not presented in the accompanying consolidated financial statements.

consolidated financial statements for the year ended March 31, 2019 to the 2020 presentation.

PT. JGC INDONESIA

100%

a parent company to prepare consolidated financial statements using foreign subsidiaries’
financial statements prepared in accordance with either International Financial Reporting(i)INVENTORIESStandards or U.S. generally accepted accounting principles. In this case, adjustments forInventories of the Company and its consolidated subsidiaries are stated at cost determined100%

the following five items are required in the consolidation process so that their impacts on net

using the moving-average method (which writes off the book value of inventories based on

100%

100%

income are accounted for in accordance with Japanese GAAP unless the impact is not material.

decreases in profitability) except for contract works in progress as stated in Note 1(h).

U.S.A.

100%

100%

(1)

Canada

100%

100%

(2)

Actuarial gains and losses of defined benefit plans recognized outside profit or loss(j)OPERATING CYCLE(3)

Capitalized expenditures for research and development activities

Assets and liabilities related to long-term contract jobs are included in Current assets and(4)

Fair value measurement of investment properties, and revaluation of property,

Current liabilities in the accompanying consolidated balance sheets, as they will be liquidated inplant and equipment, and intangible assets

the normal course of contract completion, although it may require more than one year.

Indonesia

49%

100%

The translation of the Japanese yen amounts into U.S. dollars is included solely for theconvenience of readers outside Japan, using the prevailing exchange rate at March 31, 2020,

Affiliates under the equity method

Location

which was ¥108.83 to U.S. $1. The convenience translations should not be construed as
representations that the Japanese yen amounts could be converted into U.S. dollars at this or
any other rate of exchange.

Nikki -Universal Co., Ltd.
Swing Corporation*5

Swing AM Corporation(b)PRINCIPLE OF CONSOLIDATIONThe consolidated financial statements include the accounts of the Company and its significant

Swing Engineering Corporation*5

subsidiaries that include less than 50% owned affiliates controlled through substantial

Rabigh Arabian Water
and Electricity Company *6

ownership of majority voting rights or existence of substantial control. All significant intercompany transactions and account balances are eliminated in consolidation.
Investments in non-consolidated subsidiaries and affiliates over which the Company has theability to exercise significant influence over operating and financial policies of the investees
are accounted for by the equity method.
The number of consolidated subsidiaries and affiliates accounted for using the equity method
at March 31, 2020 and 2019, was as follows:
2020

2019

Consolidated subsidiaries

18

17

Affiliates under the equity method

42Consolidated subsidiaries and affiliates accounted for using the equity method at March 31,
2020 and 2019, was as follows:

Japan
Japan

*5

and comprised of direct materials, components and parts, direct labor, subcontractors’ fees

The Accounting Standards Board of Japan has issued ASBJ Practical Issues Task Force No.

JGC Gulf International Co. Ltd.

by the Japanese Financial Instruments and Exchange Act. Certain supplementary information

CONSOLIDATED FINANCIAL STATEMENTS

Capital Share
2019

2018

50%

50%

33%

33%

Japan

33%

33%

Japan

33%

33%

Saudi Arabia-

25%

Investments in non-consolidated subsidiaries and affiliates not accounted for by the equity
method are carried at cost, adjusted for any substantial and non-recoverable decline in value.
The effect on net income and retained earnings from those investments not accounted for underthe equity method is immaterial.
*1 At the year ended March 31, 2020, JGC Corporation was included in the consolidation because
it was newly established.
*2 JGC PLANT INNOVATION CO., LTD. changed the name to JGC JAPAN Corporation on October
1, 2019.
*3 At the year ended March 31, 2020, Meito Giken Co.,Ltd. was included in the consolidation because
its effect on the consolidated financial statement became significant.
*4 At the year ended March 31, 2020, JGC Mirai Solar Co., Ltd. was excluded from the scope of
consolidation because the Company sold its all shares.
*5 At the year ended March 31, 2020, Swing Corporation, Swing AM Corporation, and Swing
Engineering Corporation were included in the scope of the equity method because its effect on the
consolidated financial statement became significant.
*6 At the year ended March 31, 2020, Rabigh Arabian Water and Electricity Company was excludedin the scope of the equity method because the Company sold its all shares.

(5)

Goodwill not subjected to amortization

Reclassification adjustments recognized in other comprehensive income on subsequentchanges of fair value of equity instruments(k)PROPERTY AND EQUIPMENT, DEPRECIATION AND FINANCE LEASES
Property and equipment are stated at cost, except for certain revalued land as explained in(f)ALLOWANCE FOR DOUBTFUL ACCOUNTS

Note 13. Depreciation of property and equipment is calculated primarily using the straight-line

Notes and accounts receivable, including loans and other receivables, are valued by providing

method for buildings used for business operation and structures which were acquired sincefor individually estimated uncollectible amounts plus the amounts for probable losses calculatedApril 1, 2016, and the declining-balance method for other property and equipment over theby applying a percentage based on collection experience to the remaining accounts.

estimated useful lives of the assets based on the Corporate Tax Code of Japan.

In Investments and other assets, the amount of Allowance for doubtful accounts is deductedfrom Long-term loans receivable and Other.

Expenditures for new facilities and those that substantially increase the useful lives of existing
property and equipment are capitalized. Maintenance, repair and minor renewals are charged(g)MARKETABLE SECURITIES, INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES

to expenses as incurred.

AND AFFILIATES, AND INVESTMENT SECURITIESThe Company and its consolidated subsidiaries are required to examine the intent of holding

The cost and accumulated depreciation applicable to assets retired or otherwise disposed ofeach security and classify those securities as (1) securities held for trading purposes, (2) debt

are eliminated from the related accounts and the gain or loss on disposal is credited or charged

securities intended to be held to maturities, (3) equity securities issued by subsidiaries andto income.

affiliates, and (4) all other securities that are not classified in any of the above categories(hereafter, “available-for-sale securities”). The Company and its consolidated subsidiaries did(l)IMPAIRMENT OF FIXED ASSETS

not have the securities defined as (1) above for the years ended March 31, 2020 and 2019.

The Company and its consolidated subsidiaries review their long-lived assets for impairment
whenever events or changes in circumstances indicate the carrying amount of an asset or

Available-for-sale securities with available fair market values are stated at fair market value.

asset group may not be recoverable. An impairment loss would be recognized if the carrying

Unrealized gains and losses on these securities are reported, net of applicable income taxes, asamount of an asset or asset group exceeds the sum of the undiscounted future cash flows

a separate component of net assets. Realized gains and losses on the sale of such securities

expected to result from the continued use and eventual disposition of the asset or asset group.

are computed using the moving-average method. Other securities with no available fair market

The impairment loss would be measured as the amount by which the carrying amount of thevalue are stated at moving-average cost. Equity securities issued by subsidiaries and affiliates,

asset exceeds its recoverable amount, which is the higher of the discounted cash flows fromwhich are not consolidated or accounted for using the equity method, are stated at moving-

the continued use and eventual disposition of the asset or the net selling price at disposition.

average cost.
(m)RETIREMENT AND SEVERANCE BENEFITS AND PENSION COSTS(c)CONSOLIDATED STATEMENTS OF CASH FLOWS(1)Employees’ severance and retirement benefits

In preparing the consolidated statements of cash flows, cash on hand, readily available deposits

If the market value of available-for-sale securities declines significantly, such securities areand short-term highly liquid investments with negligible risk of changes in value, and maturities

restated at fair market value and the difference between fair market value and the carrying

The Company and its consolidated subsidiaries provide two types of post-employment

not exceeding three months at the time of purchase are considered to be cash and cash

amount is recognized as loss in the period of decline (See Note 8). For equity securities with

benefit plans, unfunded lump-sum payment plans and funded non-contributory pension

equivalents.

no available fair market value, if the net asset value of the investee declines significantly, suchplans, under which all eligible employees are entitled to benefits based on the level of wages

securities are required to be written down to the net asset value with the corresponding losses

and salaries at the time of retirement or termination, length of service and certain otherin the period of decline. In these cases, such fair market value or the net asset value will be thefactors.

carrying amount of the securities at the beginning of the next year.

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102

The Company and its certain consolidated subsidiaries also have a defined contribution(s)PER SHARE INFORMATION

treatment of paragraph 3 of “Practical Solution on the Treatment of Tax Effect Accounting

incorporate the core principle of IFRS 13 in the light of improving the international comparability

pension plan, which was transferred from a portion of defined benefit pension plan.

Net income per share is computed by dividing net income available to common shareholders by

for the Transition from the Consolidated Taxation System to the Group Tax Sharing System”

of financial statements and then add additional alternative treatments to the extent thatthe weighted-average number of common shares outstanding for the period.

(ASBJ Practical Issues Task Force No.39, March 31, 2020) instead of applying the provisioninternational comparability would not be significantly impaired where any business practices

on paragraph 44 of “Implementation Guidance on Tax Effect Accounting” (ASBJ Guidance No.

operated in Japan need to be considered.

The Company and its consolidated subsidiaries provided allowance for employees’
severance and retirement benefits at March 31, 2020 and 2019, based on the estimatedCash dividends per share have been presented on an accrual basis and include dividends to be

28, February 16, 2018), regarding the transition to the group tax sharing system establishedamounts of projected benefit obligation, actuarially calculated using certain assumptions

approved after the balance sheet date but applicable to the year then ended.

in “Act for Partial Amendment of the Income Tax Act, etc.” (Act No.8 of 2020 ) , and items for(2)Planned date of application

which the non-consolidated taxation system were reviewed in line with the transition to the

To be applied from the beginning of the fiscal year ending March 31, 2022.

and the fair value of the plan assets at that date.
(t)DERIVATIVE TRANSACTIONS AND HEDGE ACCOUNTING

group tax sharing system.
(3)Impact of the application of the accounting standards, etc.

The method of attributing the amount of expected retirement benefit in each period is a

The accounting standard for financial instruments requires companies to state derivative

benefit formula basis.

financial instruments at fair value and to recognize changes in the fair value as gains or losses(x)ACCOUNTING STANDARDS NOT YET APPLIED, ETC

unless the derivative financial instruments are used for hedging purposes.

(Accounting standards for revenue recognition)(Accounting standards for Disclosure of Accounting Estimates)●“Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29 on March 30,●“Accounting standards for Disclosure of Accounting Estimates” (ASBJ Statement No. 31 on

The Company and its consolidated subsidiaries recognize past service costs as expenses
using the straight-line method over 12 years within the average of the estimated remaining

If derivative financial instruments are used as hedges and meet certain hedging criteria, theservice lives of the employees, and actuarial gains and losses as expenses using theCompany and its consolidated domestic subsidiaries defer recognition of gains or losses

declining-balance method over 12 years within the average of the estimated remaining

resulting from changes in fair value of derivative financial instruments until the related losses orservice lives.

gains on the hedged items are recognized.

2020, Accounting Standards Board of Japan)●“Implementation

The amount of the impact on consolidated financial statements is currently under evaluation.

March 31, 2020, Accounting Standards Board of Japan)

Guidance on Accounting Standard for Revenue Recognition” (ASBJ

Guidance No.30 on March 30, 2020, Accounting Standards Board of Japan)●“Guidance on Disclosures about Fair Value of Financial Instruments” (ASBJ Guidance No. 19

on March 31, 2020, Accounting Standards Board of Japan)(1)Overview
Regarding to the causes of the estimation uncertainty, whose disclose are required in “TheInternational Accounting Standards Board 1 “Presentation of Financial Statement” (IAS 1 in

However, certain consolidated subsidiaries recognized actuarial differences as expenses in

However, in cases where foreign exchange forward contracts are used as hedges and meetthe period incurred.

certain hedging criteria, foreign exchange forward contracts and hedged items are accounted(1)Overview

as highly useful information for financial statements users, there were requests to consider

for in the following manner (Allocation Method):

The International Accounting Standards Board (IASB) and the Financial Accounting Standards

disclosure them as note information in Japan GAAP. Therefore, the Accounting Standards

Board (FASB) in the United States jointly developed comprehensive accounting standards for

Board of Japan (ASBJ) has developed accounting standards for disclosure of accounting

revenue recognition and published the “Revenue from Contracts with Customers” (IFRS 15 inestimates and published them.

(2)Officers’ severance and retirement benefits
Consolidated domestic subsidiaries provide for liabilities in respect of lump-sum severance(1)If a foreign exchange forward contract is executed to hedge an existing foreign currency

the IASB) chapter125 published by International Accounting Standards Board (IASB) in 2003,

and retirement benefits to directors and corporate statutory auditors computed on thereceivable or payable,

the IASB and Topic 606 in the FASB) in May 2014. Given that IFRS 15 will be applied from a

The basic policy of the ASBJ in developing accounting standards for disclosure of accounting

assumption that all officers retired at a year-end.

(i) The difference, if any, between the Japanese yen amount of the hedged foreign currency

fiscal year starting on or after January 1, 2018 and that Topic 606 will be applied from a fiscal

estimates is not expanding individual notes, but decide principles (disclosure purpose) andreceivable or payable translated using the spot rate at the inception date of the contract

year starting after December 15, 2017, the Accounting Standards Board of Japan (ASBJ) has

each company decides concrete disclosures based on their presentation purpose referencing(n)RESEARCH AND DEVELOPMENT COSTS

and the book value of the receivable or payable is recognized in the statement of income

developed comprehensive accounting standards for revenue recognition and published them in

the IAS 1 chapter125.

Research and development costs for the improvement of existing skills and technologies orin the period which includes the inception date, andstep with the Implementation Guidance.

the development of new skills and technologies, including basic research and fundamental(ii) The discount or premium on the contract (that is, the difference between the Japanese

The basic policy of the ASBJ in developing accounting standards for revenue recognition is(2)Planned date of application

development costs, are charged to income in the period incurred. The total amount of research

yen amount of the contract translated using the contracted forward rate and thatthought to be setting accounting standards, with the incorporation of the basic principles of

To be applied from the ending of the fiscal year ending March 31, 2021.

and development expenses, included in Costs of Sales and Selling, General and Administrativetranslated using the spot rate at the inception date of the contract) is recognized over

IFRS 15 as a starting point, from a standpoint of comparability between financial statements,(Accounting Standard for Accounting Policy Disclosures, Accounting Changes and Error

expenses, was ¥ 6,861 million ($ 63,043 thousand) and ¥ 5,825 million, respectively, in 2020

the term of the contract.

which is one of the benefits of ensuring consistency with IFRS 15, and to be adding alternative

Corrections)accounting treatments without losing comparability if there is an item that we should take into●“Accounting Standard for Accounting Policy Disclosures, Accounting Changes and Errorand 2019.
(2)If a foreign exchange forward contract is executed to hedge a future transaction denominated(o)TAXES ON INCOME

in a foreign currency, the future transaction will be recorded using the contracted forward

The Company and its consolidated subsidiaries provide tax effects of temporary differences

rate, and no gains or losses on the foreign exchange forward contract are recognized.

between the carrying amounts and the tax basis of assets and liabilities. The asset and liability

account in practices, etc. that have been conducted in Japan.

Corrections” (ASBJ Statement No. 24 on March 31, 2020, Accounting Standards Boardof Japan)(2)Planned date of application
To be applied from the beginning of the fiscal year ending March 31, 2022.

(1)Overview

approach is used to recognize deferred tax assets and liabilities for the expected future tax

Also, where interest rate swap contracts are used as hedges and meet certain hedging criteria,

consequences of temporary differences.

the net amount to be paid or received under the interest rate swap contract is added to or(3)Impact of the application of the accounting standards, etc.

about “Accounting principles and procedures adopted when the related accounting standards

deducted from the

The amount of the impact on consolidated financial statements is currently under evaluation.

are not clear”. ASBJ made necessary revisions and published the accounting standard for(p)RESERVE FOR JOB WARRANTY COSTS

interest on the liabilities for which the swap contract was executed (Special method for interest(Accounting Standards for Fair Value Measurement, etc.)

accounting policy disclosures, accounting changes and error corrections.

A reserve for the estimated cost of warranty obligations is provided for the Company’srate swap).

●“Accounting Standard for Fair Value Measurement”(ASBJ Statement No. 30 on July 4, 2019,

In expanding the notes about “Accounting principles and procedures adopted when the related

engineering, procurement and construction work at the time the related sales on contracts
are recorded.

Accounting Standards Board of Japan (ASBJ) was requested to consider expanding the notes

Accounting Standards Board of Japan)(u)ACCRUED BONUSES TO DIRECTORS AND CORPORATE AUDITORS
Accrued bonuses to directors and corporate auditors are provided by the estimated amounts,(q)RESERVE FOR LOSSES ON CONTRACTS

which are obligated to pay to directors and corporate auditors after the fiscal year-end, based

A reserve for losses on contracts is provided for an estimated amount of probable losses toon services provided during the current period.

be incurred in future years in respect of construction projects in progress. The reserve for●“Accounting Standard for Measurement of Inventories” (ASBJ Statement No. 9 on July 4,

2019, Accounting Standards Board of Japan)(v)ACCRUED BONUSES TO EMPLOYEES

the reserve is presented in the consolidated balance sheets. The offset amount was ¥ 2,494

Accrued bonuses to employees are provided by the estimated amounts, which are obligatedmillion ($ 22,916 thousand) as of the year ended March 31, 2020.

to pay to employees after the fiscal year-end, based on services provided during the current

Accounting Standards Board of Japan)

accounting standards are clear.
(2)Planned date of application
To be applied from the ending of the fiscal year ending March 31, 2021.

Implementation July 4, 2019, Accounting Standards Board of Japan)●“Guidance on Disclosures about Fair Value of Financial Instruments” (ASBJ Guidance No. 19

on March 31, 2020, Accounting Standards Board of Japan)

period.
(r)PROVISION FOR LOSS ON BUSINESSES LIQUIDATION(Note 1-2), in order not to affect any past business practices operated in Japan when the related●“Accounting Standard for Financial Instruments” (ASBJ Statement No. 10 on July 4, 2019,●“Guidance on Accounting Standard for Fair Value Measurement” (ASBJ Guidance No. 31

losses on contracts and the related contract work in progress are offset, and the net amount ofaccounting standards are not clear”, continue to apply the Corporate Accounting Principles(y)Additional Information(Accounting estimates related to COVID-19 pandemic)
Under the influence of the COVID-19 pandemic and the government actions of each country,(1)Overview

the total engineering business expects extended the project periods and extra costs for the

A reserve for business liquidation is provided for an estimated amount of probable losses to(w)CONSOLIDATED TAX PAYMENT SYSTEMThe International Accounting Standards Board (IASB) and the Financial Accounting Standards

ongoing projects due to reduced productivity because of work home, temporary evacuation

be incurred in future years in respect of losses associated with business reorganization and

The Company and its certain domestic consolidated subsidiaries adopt the consolidated

Board (FASB) have established detailed guidance regarding fair value measurement (IFRS 13

from infected areas, and restrictions on movement of overseas construction workers andrationalization. Provision for loss on business liquidation was recorded in the amount of ¥taxation system from the first quarter of the fiscal year ended March 31, 2020.

“Fair Value Measurement” in IFRS and Topic 820 “Fair Value Measurement” in FASB). The

transportation of goods.

ASBJ repeatedly considered the guidance regarding fair value of financial instruments andTherefore, the Company estimated extra costs at the moment for each of major projects that

1,464 million as of the year ended March 31, 2019, and it was the an estimated amount ofprobable losses to be incurred in future years in respect of losses associated with business(The application of Tax Effect Accounting for the Transition from the Consolidated Taxation

disclosure in order to improve the comparability with such international accounting standards,

were affected by the COVID-19 pandemic, considering each contract condition, and reflected

reorganization and rationalization for the consolidated subsidiary JGC America, Inc.

System to the Group Tax Sharing System)

and issued the Accounting Standard for Fair Value Measurement and the Implementation

them in the total contract costs for those projects in recognizing net sales and cost of sales in

The Company and its certain domestic consolidated subsidiaries calculated the amount

Guidance on Accounting Standard for Fair Value Measurement.

the current consolidated fiscal year.

of deferred tax assets and liabilities according to the tax acts before amended based on

ASBJ’s basic policy in developing the new Fair Value measurement standards is to first103

JGC Report 2020

JGC Report 2020

104

Future spread and settle down of COVID-19 will vary greatly depending on the country or
region. The company estimated the impact by setting assumptions after carefully examining theNote 5 : RETIREMENT BENEFIT PLAN

Long-term debt consisted of the following:(Thousands of
U.S. dollars)(Note 1)situation in the main projects. The assumption is basically based on that the current situation
will gradually improve in the future and our business environment will return to normal by thefollowing year end.
In addition, this estimate was the best estimate at the date of preparation of consolidated
financial statement, but there is great uncertainly in the assumptions using for the estimate.
Therefore, if the settle down situation of COVID-19 and the effect for economic environmentchanges, this estimate may affects the financial position, financial performance and cash flows
after the next consolidated fiscal year.
(z)CHANGES IN PRESENTATION(Consolidated balance sheets)“Provision for loss on business liquidation”, which was presented separately in the previous
fiscal year, is included in “Other non-current liabilities” under “Long-term liabilities” for the(Millions of yen)March 31,
Secured Loans
1.26% loans frombanks
due serially through 2032

presented as “Provision for loss on business liquidation” on the consolidated balance sheets forthe previous fiscal year has been reclassified as “Other non-current liabilities”.

2020

2019

¥-

¥ 3,817(a)DEFINED BENEFIT PLAN

(Millions of yen)(1)Movement in retirement benefit obligations

2020

$-

March 31,

2020

2019

2020

¥ 50,729¥ 51,005$ 466,131

Service cost

2,040

2,040

18,745Interest cost

294

257

2,701

367

525

3,372

0.09%‐0.20% bonds due serially through2022

50,00050,000459,432

Benefits paid

50,36754,342462,804

Less current maturities(20,020)(393)(183,956)

Long-term debt due after one year

¥ 30,347¥ 53,949$ 278,848

Actuarial (gain) loss

130

(357)

1,195

(2,183)(1,904)(20,059)

Past service costs

30

(155)

276

Increase in a newly consolidated
subsidiary

30

-

276

Other
Assets pledged as collateral for Short-term loans and Long-term debt at March 31, 2020 and“Loss on devaluation of investment securities”, which was included in “Other, net” under “Other

2019, were as follows:(Thousands of
U.S. dollars)(Note 1)

(Millions of yen)

Balance at beginning of year

(Consolidated statements of income)Balance at end of year

28

(157)

256

¥ 51,098¥ 50,729$469,521

income (expenses)” in the previous fiscal year, is presented separately for the fiscal year ended(Thousands of
U.S. dollars)(Note 1)March 31, 2020 due to its increased materiality. As a result,¥ 8 million included in “Other, net”
under “Other income (expenses)” on the consolidated statement of income for the previous
fiscal year has been reclassified as “Loss on devaluation of investment securities”.

(Millions of yen)March 31,(Consolidated statements of cash flows)“Loss on devaluation of investment securities”, which was included in “Other” under “Cash flows
from operating activities’’ in the previous fiscal year, is presented separately for the fiscal year
ended March 31, 2020 due to its increased materiality. As a result, ¥ 4,124 million presented
as “Other” under “Cash flows from operating activities’’ on the consolidated statements ofcash flows for the previous fiscal year has been reclassified as “Loss on devaluate of investment
securities” ¥ 8 million and “Other” ¥4,116 million.

2020

2019

2020

Buildings and structures, at net book
value

¥-

¥ 188

$-

Machinery and equipment, at net book
value

-

4,340

-

Cash and deposits

-

1,103

-

1,900

1,900

17,458¥ 1,900¥ 7,531$ 17,458

Investments securities
Total

Note 2 : RECEIVABLES FROM AND PAYABLES TO UNCONSOLIDATEDSUBSIDIARIES AND AFFILIATES
Significant receivables from and payables to unconsolidated subsidiaries and affiliates at March
31, 2019 and 2018, were as follows:(Thousands of
U.S. dollars)(Note 1)

(Millions of yen)March 31,
Notes and accounts receivable
Short-term loans receivable
Other current assets
Short-term loans
Notes and accounts payable

2020

2019

2020

¥ 2,210¥ 1,453$ 20,307

435

834

3,997

4,051

5,887

37,223

107

121

983

1,040

1,316

9,556

Advances received on
uncompleted contracts

230

1,869

2,113

Other current liabilities

603

608

5,541

(Millions of yen)2021

¥ 20,020$ 183,956

2022

20

184

2023

30,020275,843

2024

3

28

304

2,793

¥ 50,367$ 462,804

2025 and thereafter
Total

Balance at beginning of year

Note 4 : I NVENTORIESMarch 31,

Note 3 : BORROWINGS AND ASSETS PLEDGED AS COLLATERAL(Thousands of
U.S. dollars)(Note 1)

2020

2019

2020

¥ 35,459¥ 35,601$ 325,820

Interest cost

294

257

2,701

Expected return on plan assets

(577)

(529)

(5,302)

Net actuarial gain and loss amortization

790

716

7,259

Past service cost amortization

(220)

(234)

(2,021)¥ 2,327¥ 2,250$21,382

Total retirement benefit expenses(5)Remeasurements of defined benefit plans

2020

2019

Actuarial losses

¥ 28

¥ 820

$257

Past service costs

(250)

(79)

(2,297)

March 31,
Actuarial losses that are yet to berecognized

Balance at end of year

971

1,007

8,922

(1,453)(1,349)(13,351)

28

(79)

257

¥ 34,949¥ 35,459$ 321,134(3)Reconciliation from retirement benefit obligations and plan assets to net defined

7

13

65

¥ (215)¥ 754$ (1,975)(Thousands of
U.S. dollars)(Note 1)

(Millions of yen)

5,302
(5,816)

Contributions paid by the employer

2020(6)Cumulative effect of remeasurements of defined benefit plans

529

Benefits paid

(Thousands of
U.S. dollars)(Note 1)

(Millions of yen)March 31,

(250)

Past service costs that are yet to berecognized
Total balance

2020

2019

2020

¥ (3,683)¥ (3,736)$ (33,842)

1,697

1,917

15,593¥ (1,986)¥ (1,819)$ (18,249)(7)Plan assets
Components of plan assets

benefit liability and asset.
March 31, 2020
(Thousands of
U.S. dollars)(Note 1)

(Millions of yen)March 31,

2020

2019

2020

Funded retirement benefit obligations¥ 37,259¥ 37,434$342,360

Plan assets(34,949)(35,459)(321,134)

2,310

1,975

21,226

13,83913,295

127,162

Allowance for officers’ lump-sum
severance benefits

254

305

2,334

Total net defined benefit liability¥ 16,403¥ 15,575$ 150,722

2020

2019

2020

¥ 22,990¥ 24,472$ 211,247

Net defined benefit liability

16,972

16,180155,950

Net defined benefit asset

(569)

(605)

(5,228)¥ 16,403¥ 15,575$ 150,722

March 31, 2019

Bonds

68%

66%

Equity securities

16

19

Cash and cash equivalents

1

1

Other

15

14

100%

100%

Total
Long-term expected rate of return

Current and target asset allocations and historical and expected returns on various categoriesof plan assets have been considered in determining the long-term expected rate of return.

(8)Actuarial assumptions

Finished goods and merchandise

5,366

4,765

49,306the annual rates of 0.30% and 0.27% at March 31, 2020 and 2019, respectively. Such loans

2,636

2,810

24,221are generally renewable at maturity.

Raw materials and others

JGC Report 2020

$ 18,745

577

Unfunded retirement benefit obligations

Works in process105¥ 2,040(633)(Thousands of
U.S. dollars)(Note 1)

Short-term loans consisted mainly of unsecured notes and bank overdrafts and bore interest at

Total

2020

¥ 2,040

Total balance

Inventories:
Contract works in progress

2019

Service cost

Actuarial (gain) loss

Inventories at March 31, 2020 and 2019 were summarized as follows:(Millions of yen)

2020

Expected return on plan assets

Other(Thousands of
U.S. dollars)(Note 1)

Year ending March 31,

March 31,

March 31,

Others(2)Movement in plan assets(Millions of yen)

The annual maturities of Long-term debt outstanding at March 31, 2020 were as follows:(Thousands of
U.S. dollars)(Note 1)and 2019 were summarized as follows:

Unsecured Debt
0.4% – 0.48% loans frombanks and insurance companies
due serially through 2023(some debt
has no fixed term)

fiscal year ended March 31, 2020 due to its decreased materiality. As a result, ¥ 1,464 million(4)Retirement benefit expenses

The significant components of the pension plans as of and for the years ended March 31, 2020

Total net defined benefit liability

The principal actuarial assumptions at March 31, 2020 and 2019 were as follows:

Discount rate

March 31, 2020

March 31, 2019

Principally 0. 25%

Principally 0. 25%

3,688

3,981

33,888Long-term expected rate of returnPrincipally 1.5%

Principally 1.5%

¥ 34,680¥ 36,028$318,662

Expected rate of salary increase

Principally 4.4%

Principally 4.4%

JGC Report 2020

106

(d)SALES OF SECURITIES CLASSIFIED AS OTHER SECURITIES(Thousands of U.S. dollars) (Note 1)(b)DEFINED CONTRIBUTION PENSION PLAN
The Company’s contributions were ¥ 440 million ($ 4,043 thousand) and ¥ 432 million for theyears ended March 31, 2020 and 2019, respectively.

March 31, 2020

Acquisition cost

Book value

Difference

Equity securities$ 42,929$ 75,154$ 32,225

Note 6 : CONTINGENCIES(Millions of yen)of its trading agents, suppliers, subcontractors and certain subsidiaries and affiliates. The

March 31, 2020

Acquisition cost

Book value

Difference

aggregate amount of such guarantees was ¥7,432 million ($68,290 thousand) and ¥Equity securities¥ 3,270¥ 2,438¥ (832)

2019

March 31, 2020

2020

Sales proceeds¥ 7,938¥ 5,890$ 72,939

Aggregate gain

5,649

2,372

51,907Aggregate loss

-

(151)

-

Note 9 : DERIVATIVE TRANSACTIONS AND HEDGE ACCOUNTING(Millions of yen)

(2) The Company has guaranteed employees’ housing loans and others from banks in the2020

Equity securities:(2)Securities with book values not exceeding acquisition costs:

10,633million at March 31, 2020 and 2019, respectively.

(Thousands of
U.S. dollars)(Millions of yen)March 31,

(1) It is a business practice in Japan for a company to guarantee the indebtedness of certain(Millions of yen)amount of ¥9 million ($83 thousand) and ¥10 million at March 31, 2020 and 2019,

March 31, 2019

Acquisition cost

Book value

Difference

As explained in Note 1 (v), the accounting standard for financial instruments requires companies

respectively.

Equity securities

¥0

¥0

¥ (0)

to state derivative financial instruments at fair value and to recognize changes in the fair value
as gains or losses unless derivative financial instruments are used for hedging purposes.

(Thousands of U.S. dollars) (Note 1)

Note 7 : NET ASSETS
Under the Japanese Corporation Law (“the Law”) and regulations, the entire amount paid for
nUnder the Japanese Corporation Law (“the Law”) and regulations, the entire amount paid forthe new shares as additional paid-in capital, which is included in capital surplus.
Under the Law, companies are required to set aside an amount equal to at least 10% of cash

-

4,801

258

258

2,554

13,50916,063618

618

Buy U.S. dollars

2,514

13,214

15,728891

891

Buy AUD

1,164

-

1,164

(184)

(184)

Buy CAD

4,801

-

4,801

(258)

(258)

15

15

88

(15)

(15)

Fair value

Profit or loss
evaluation

mitigating future risks of interest rate increases and lowering the financing costs with respect
B.The following tables summarize book values of securities with no available fair values or
securities not valued by fair market prices as of March 31, 2020 and 2019.

to borrowings.

The derivative transactions are executed and managed in accordance with the establishedpolicies and within the specified limit on the amounts of derivative transactions allowed.
The following summarizes hedging derivative financial instruments used by the Company and(Thousands of
U.S. dollars)(Note 1)

(Millions of yen)March 31,

2020

2019

2020

Non-listed equity securities¥ 7,957¥ 10,839$ 73,114

38

38

349

Total

(Millions of yen)

Foreign currency forward contracts and interest rate swap contracts are subject to risks ofContract amountforeign exchange rate changes and interest rate changes, respectively.

2,800

1,720

25,728¥ 10,795¥ 12,597$ 99,191

hedged items:
Hedging instruments:

Foreign currency forward contracts

Interest rate swap contracts

March 31,

2020

2019

2020

Securities of unconsolidated subsidiaries¥ 6,050¥ 6,227$ 55,591

Securities of affiliates

17,34631,702

159,386¥ 23,396¥ 37,929$ 214,977

Due within
one yearInterest on loans payable

Due after
one year

Total

Forward exchange
contracts

Buy GBP¥ 38,558¥-¥ 38,558

¥ 27

¥ 27

45

-

45

(0)

(0)

Total

Fair value

Profit or loss
evaluation$ (8,068)

Foreign currency accounts receivable,accounts payable and future transactions
denominated in a foreign currency(Thousands of U.S. dollars) (Note 1)

Contract amountMarch 31, 2020

Due within
one year

Due after
one year

Forward exchange
contracts$ 653,955$ 121,419$ 775,374$ (8,068)

Sell Euro

91,335-91,335230

230

changes in the hedging derivative instruments. However, where the principal conditions

Sell CNY

23,468124,129

147,597(5,679)(5,679)underlying the hedging instruments and the hedged assets or liabilities are similar, theSell CAD

44,115-

44,115

2,371

2,371

evaluation of hedge effectiveness is not performed.

Buy CNY

23,468124,129

147,597

5,679

5,679

The Company’s financial instrument counter-parties are all prime banks with high ratings, and

Buy U.S. dollars

23,100

121,419

144,519

8,187

8,187

Buy AUD

10,696-

10,696(1,691)(1,691)

Buy CAD44,115-

44,115(2,371)(2,371)The Company evaluates hedge effectiveness semi-annually by comparing the cumulative(Thousands of
U.S. dollars)(Note 1)March 31, 2019

Sell U.S. dollars
Hedged items:(b)UNCONSOLIDATED SUBSIDIARIES AND AFFILIATES:
changes in cash flows from or the changes in fair value of hedged items and the corresponding

the Company does not expect non-performance by the counter-parties.

Sell U.S. dollars(a)FAIR VALUE OF UNDESIGNATED DERIVATIVE FINANCIAL INSTRUMENTS
Fair value of undesignated derivative financial instruments as of March 31, 2020 and 2019, isProduct Swapsummarized as follows:

Sell Nickel

809

-

809

138

138

respectively.

Buy Nickel

809

-

809

(138)

(138)

The Company and its consolidated domestic subsidiaries follow a policy of devaluation of

Fair value of forward exchange contracts is stated based on the quoted price from banks.

million ($ 7,957 thousand) and ¥ 8 million for the years ended March 31, 2020 and 2019,¥ 3,507

4,801

Buy CNY88

The Company recognized loss on devaluation for investment securities in the amount of ¥ 866
Difference

Sell CAD-(c)LOSS ON VALUATION OF INVESTMENT SECURITIES:¥ 8,179(618)-

AVAILABLE-FOR-SALE SECURITIES WITH AVAILABLE FAIR VALUES:

Book value

(618)

88

Total

¥ 4,672

16,063

88(Millions of yen)

Acquisition cost

13,509

Buy Nickel

appropriations are recognized in the period in which they are approved by the shareholders.

Equity securities

2,554

Sell Nickel

have not been accrued in the consolidated financial statements as of March 31, 2020. Such

March 31, 2020

25

Sell CNY

foreign currency exchange rates with respect to foreign currency receivable and payable andAt the annual shareholders’ meeting of the Company held on June 26, 2020, the shareholders(Millions of yen)25

$ (7,645)

non-consolidated financial statements of the Company in accordance with the Law.

(1) Securities with book values exceeding acquisition costs:¥ (878)9,940$ 22,402

Non-listed affiliate’s bondsecurities with available fair values as of March 31, 2020 and 2019.

¥ 84,384-$ 30,047

of common stock.

A.The following tables summarize acquisition costs and book values stated at the fair value of¥ 13,2149,940

Equity securities

Subscription certificate

Note 8 :INFORMATION ON SECURITIES¥ 71,170

Sell Euro

Sell U.S. dollars

Product Swapthe legal earnings reserve and additional paid-in capital remained equal to or exceeded 25%

approved cash dividends amounting to ¥3,028 million ($ 27,823 thousand). Such appropriations¥ (878)Forward exchange
contracts

derivative financial instruments only for the purpose of mitigating future risks of fluctuation of

by a resolution of the Board of Directors.

The maximum amount that the Company can distribute as dividends is calculated based on theProfit or loss
evaluation

The Company utilizes foreign currency forward contracts and interest rate swap contracts aseliminate or reduce a deficit by a resolution of the shareholders’ meeting or can be capitalized

retained earnings by a resolution of the shareholders’ meeting as long as the total amount ofFair value

Difference(a)AVAILABLE-FOR-SALE SECURITIES WITH NO AVAILABLE FAIR VALUES:

the Law, however, additional paid-in capital and legal earnings reserve may be transferred to

Total

Book value

Under the Law, the legal earnings reserve and additional paid-in capital can be used toAdditional paid-in capital and legal earnings reserve may not be distributed as dividends. Under

Due after
one yearAcquisition cost

dividends and other cash appropriations in a legal earnings reserve until the total of the legal
earnings reserve and additional paid-in capital equals 25% of common stock.

Due within
one yearMarch 31, 2020

new shares is required to be designated as common stock. However, companies may, by aresolution of the Board of Directors, designate an amount not exceeding one-half of the price ofContract amountavailable-for-sale securities. The policy of devaluation for the Company and its consolidated(Millions of yen)March 31, 2019

Acquisition cost

Book value

Difference

Equity securities¥ 8,563¥ 18,468¥ 9,905

domestic subsidiaries is that if the available fair value of the securities declines by 50% or more,compared with acquisition cost, all the corresponding securities are devalued as such decline
is considered to be substantial and non-recoverable in value. In addition, in the case whereby
the available fair value of the securities declines by more than 30% but by less than 50%, theCompany and its consolidated domestic subsidiaries examine the recoverability of the fair valueof the securities and devaluate if those securities are considered to be unrecoverable.

107

JGC Report 2020

JGC Report 2020

108

(b)FAIR VALUE OF DERIVATIVE FINANCIAL INSTRUMENTS DESIGNATED AS HEDGINGINSTRUMENTS
Fair value of derivative financial instruments designated as hedging instruments as of March 31,

March 31, 2020

2020 and 2019 is summarized as follows:

Accounting
method(Millions of yen)March 31, 2020
Accounting
methodHedging instruments

Allocation
method(Note 1(t))

Forward exchange
contracts Buy AUD

Allocation
method(Note 1(t))

Forward exchange
contracts Buy U.S.
dollars

Allocation
method(Note 1(t))

Forward exchange
contracts Sell U.S.
dollars

Allocation
method(Note 1(t))

Forward exchange
contracts Sell Euro

Contract amount
Hedged item

Accounts
payableAccounts
payableAccounts
receivable

Contract
amountPortion over
one year¥ 8,619

885

¥-

264

484

-

Fair value¥ (1,355)

29

The following is information about sales and profit or loss by reported segments for the years ended March 31, 2020 and 2019:(Thousands of U.S. dollars)(Note 1)

(Millions of yen)Contract amountContract
amountPortion over
one yearHedging instruments

Hedged item

Fair value

Allocation
method(Note 1(t))

Forward exchange
contracts Buy AUD

Accounts
payable$ 79,197

Allocation
method(Note 1(t))

Forward exchange
contracts Buy U.S.
dollars

Accounts
payable8,132

Allocation
method(Note 1(t))

Forward exchange
contracts Sell U.S.
dollars

Accounts
receivable

4,447

-

(37)

Allocation
method(Note 1(t))

Forward exchange
contracts Sell Euro

Accounts
receivable

6,019

-

(18)

$ - $ (12,451)

2,426

655

-

(4)

(2)

Hedging instruments

Hedged item

Allocation
method(Note 1(t))

Forward exchange
contracts
Buy Euro

Accounts
payableAllocation
method(Note 1(t))

Forward exchange
contracts
Buy AUD

Accounts
payableAllocation
method(Note 1(t))

Forward exchange
contracts
Sell U.S. dollars

Accounts
receivable

Principal
method(Note 1(t))

Forward exchange
contracts
Sell Euro

Accounts
receivable

Principal
method(Note 1(t))

Interest rate swap
contracts
Long-term
Receive variable rate
debt
and Pay fixed rate swap

Portion over
one year

Fair value

¥ 758

¥-

¥ (50)(215)

business performance. The operations of the Company and its consolidated subsidiaries areclassified into two reportable segments: the total engineering business and the functional
materials manufacturing business.
Major activities included in the total engineering business are design, procurement,
refining, petrochemicals, gas, chemicals, nuclear energy, metal refining, biochemical, food,
pharmaceuticals, medical, logistics, information technology, environment conservation andpollution control. Major activities in the functional materials manufacturing business include

4,942

-

(6)

manufacturing and distribution of chemical and catalyst products (FCC catalysts, hydro treating
catalysts, deNOx catalysts, petrochemical catalysts, etc) and new functional material products(colloidal silica, coating materials for surface treatment, material for semiconductors and

113

-

(1)

cosmetic products, etc.).
In addition, since the Group changed to a holding company structure on October 1, 2019, the¥ 473,418
436¥ 473,854¥7,392
2,305¥ 9,697¥ 480,810
2,741¥ 483,551¥(2,741)¥ (2,741)¥ 480,810¥ 480,810

Segment profit
Segment assets
Depreciation and amortization
Capital expenditures¥ 12,071¥ 394,521¥ 3,432¥ 1,887¥ 6,743¥ 59,414¥ 2,499¥ 3,569¥ 18,814¥ 453,935¥ 5,931¥ 5,456¥ 1,542¥ 17,613¥ 1,087¥ 417¥ 20,356¥ 471,548¥ 7,018¥ 5,873¥ (122)¥199,726¥ (2)¥ 1,941¥ 20,234¥ 671,274¥ 7,016¥ 7,814*1.The "Other" category includes business activities of consulting, management of real estate, power and water supply and oil and gas production.
*2. “Adjustment” were as follows;(1) Adjustment for Segment profit and Depreciation and amortization represent the elimination of intersegment transactions.
(2) Adjustment for Segment assets includes corporate assets unallocated to any reportable segment of ¥ 200,015 million ($ 1,837,866 thousand). Corporate assets are mainly Cash and deposits, Investment securities,
and fixed assets (Buildings and structures, and Lands, etc) of the Company.
(3) Adjustment for Capital expenditures represents corporate assets unallocated to any reportable segment.
(4) The corporate assets are not allocated to any reportable segment, but Depreciation and amortization for the corporate assets are allocated to the reportable segments considering the burden rate.
*3.Segment profit is reconciled to Operating income of consolidated statements of income.

(Millions of yen)

Year ended March 31, 2019
Net sales:
External customers
Inter-segment
Total
Segment profit
Segment assets
Impairment
Depreciation and amortization
Capital expenditures

Total Engineering

Reported Segment
Functional Materials
Manufacturing

Sub-Total

Other

Total

Adjustment

Consolidated¥ 564,045
177¥ 564,222¥ 45,9978¥ 46,005¥ 610,042
185¥ 610,227¥ 9,199
2,081¥ 11,280¥ 619,241
2,266¥ 621,507¥(2,266)¥ (2,266)¥ 619,241¥ 619,241¥ 13,778¥ 629,975¥ 574¥ 3,353¥ 5,041¥ 7,400¥ 56,218¥¥ 2,496¥ 3,249¥ 21,178¥ 686,193¥ 574¥ 5,849¥ 8,290¥ 1,990¥ 29,915¥¥ 1,446¥ 337¥ 23,168¥ 716,108¥ 574¥ 7,295¥ 8,627¥ 82¥ (7,253)¥¥ (4)¥-¥ 23,250¥ 708,855¥ 574¥ 7,291¥ 8,627*1.The "Other" category includes business activities of consulting, management of real estate, power and water supply and oil and gas production.
*2.Adjustments for Segment profit, Segment assets and other items represent the elimination of intersegment transactions.
*3.Segment profit is reconciled to Operating income of consolidated statements of income.

As a result, the revenues and expenses associated with the group administrative management
3,442

3,160

(239)

(Thousands of U.S. dollars) (Note 1)

operations are allocated to each reportable segment. In addition, the corporate assets retainedby the Company are processed as adjustment.

significant accounting policies in Note 1.

Year ended March 31, 2020
Net sales:
External customers
Inter-segment
Total
Segment profit
Segment assets
Depreciation and amortization
Capital expendituresJGC Report 2020

Consolidated

Company will be responsible for group administrative management operations.

The accounting policies of the segments are substantially the same as those described in the109

Adjustment

Note 10 : SEGMENT INFORMATION(a)OVERVIEW OF REPORTED SEGMENTS

construction and performance test services of machinery and plants for petroleum, petroleum
-

Total

¥ 46,653
13¥ 46,666

Executive Officer for decisions on the allocation of management resources and for assessing

Contract
amount

22,798

Other¥ 426,765
423¥ 427,188

can be obtained among the constituent units of the Company and regularly examined by Chief

Contract amountAccounting
methodSub-Total

The reported segments of the Company are those units for which separate financial statements(Millions of yen)March 31, 2019

Total Engineering

266

Fair value of forward exchange contracts is stated based on the quoted price from banks.
Accounts
receivableYear ended March 31, 2020
Net sales:
External customers
Inter-segment
Total

Reported Segment
Functional Materials
Manufacturing

Total Engineering

Reported Segment
Functional Materials
Manufacturing

Sub-Total

Other

Total

Adjustment

Consolidated$ 3,921,391
3,887$ 3,925,278$ 428,678
119$ 428,797$ 4,350,069
4,006$ 4,354,075$ 67,922
21,180$ 89,102$ 4,417,991
25,186$ 4,443,177$(25,186)$ (25,186)$ 4,417,991$ 4,417,991$ 110,916$ 3,625,113$ 31,535$ 17,339$ 61,959$ 545,934$ 22,963$ 32,794$ 172,875$ 4,171,047$ 54,498$ 50,133$ 14,169$ 161,840$ 9,988$ 3,832$ 187,044$ 4,332,887$ 64,486$ 53,965$ (1,121)$ 1,835,210$ (18)$ 17,835$ 185,923$ 6,168,097$ 64,468$ 71,800JGC Report 2020110

Note 11 : TAXES ON INCOME(b)RELATED INFORMATION
I.INFORMATION BY GEOGRAPHY(2)Significant components of the Company’s and its consolidated subsidiaries’

Income taxes applicable to the Company and its domestic consolidated subsidiaries comprise
corporate taxes, inhabitants’ taxes and enterprise taxes which, in the aggregate, resulted in(1)Net SalesYear ended March 31, 2020
Japan

¥ 193,048

Middle East

¥ 62,710¥ 48,813

Africa¥ 64,968(Millions of yen)

Other

¥ 90,955

Total¥ 20,316¥ 480,810*1. Net sales are classified by the place of customers’ address.
*2. Other includes Australia ¥ 7,662 million ($ 70,403 thousand).

East andSoutheast
Asia

Japan
¥ 195,329¥ 64,058

MiddleEast

Africa¥ 92,302¥ 93,126

Oceania¥ 30,669

Other

Total

¥ 143,757 ¥ 619,241

¥-

$-

¥-

$-

¥-

Deferred tax assets:

-

-

-

-

-

-

financial statement purposes for the years ended March 31, 2020 and 2019,

Accounts payable

-

-

-

-

-

-

were as follows:

Loss on devaluation of investment
securities

rate and the Company’s and its consolidated subsidiaries’ effective tax rate for

2020

2019

30.6%

30.6%

Non-deductible expenses

1.6

0.9

Non-taxable dividend income

(2.9)

(2.0)

Tax credit for research anddevelopment expenses

(0.1)

(2.3)

-

(2.3)

2.7

2.0

Foreign tax credit*1. Net sales are classified by the place of customers’ address.
*2. Oceania includes Australia ¥ 30,669 million.
*3. Other includes Russia ¥ 110,590 million.

Tax loss carryforwards with
unrecognized tax effects
Valuation allowancesYear ended March 31, 2020
Japan

East andSoutheast
Asia

Middle East

AfricaNorth
America

Other

Total

$ 1,773,849$ 576,220$ 448,525$ 596,968$ 835,753$ 186,676$ 4,417,991(Millions of yen)

Years ended March31, Year ended March 31,
2020
2019

March 31,
2020

Japan

¥ 46,382¥ 49,734$ 426,188

Other

3,413

5,706

31,360Total¥ 49,795¥ 55,440$ 457,548

II. INFORMATION BY MAJOR CUSTOMERSThe following is information on major customers which account for 10% or more of the Net
sales on the consolidated statements of income for the years ended March 31, 2020 and 2019:Year ended March 31, 2020

(Millions of yen)(Thousands of
U.S. dollars)(Note 1)

Related segments¥ 81,654$ 750,289

Total engineering

LNG CanadaYear ended March 31, 2019

2.6

3.6

(4.0)

Deductible foreign corporate tax

37.4

-

Adjustment for gain on sales ofshares of affiliate

8.8-

Past years corporate tax(Thousands of
U.S. dollars)(Note 1)

6.3

Differences in tax bases of theenterprise tax

Equity in earnings of affiliates(2)Property and equipment

Other
Effective tax rate

March 31,

0.5

(3.0)
2.2

(0.3)

0.8

83.6%

25.5%

(Millions of yen)

Related segments¥ 110,467

Total engineering

SONATRACH SPA¥ 67,220

Total engineering

2019

2020

¥ 5,354¥12,371$ 49,196

2023
2024

-

-

-

-

-

-

6,125

5,826

56,280

2025

-

-

-

-

-

-

4,016

5,350

36,902

4,863

4,794

44,6852026 and
thereafter

17,877

164,265(15,369)(141,220)2,508

23,045¥ 17,877$ 164,265¥ (15,369)$ (141,220)¥ 2,508$ 23,045

Tax loss carryforward *2

17,877

14,442

164,265

Total

Allowance for doubtful accounts

3,291

2,092

30,240Accrued bonuses to employees

1,913

2,043

17,578-

1,586

12,579*1 The amount of Tax loss carryforward is an amount multiplied by the statutory tax rates.
*2 The amount of Tax loss carryforward (amount measured using the statutory tax rates) ¥ 17,877
million ($ 164,265 thousand) was mainly due to the loss before income tax at some foreign
consolidated subsidiaries, the non-taxable dividend income, the deductible foreign corporatetax, and the deduction of deductible temporary difference of Notes and accounts payable at theCompany and some consolidated subsidiaries. Regarding the deferred tax assets ¥ 2,508 million($ 23,045 thousand) of the Tax loss carryforward, a valuation allowance was not recognized for the
portion deemed to be recoverable based on estimates of future taxable income.

Foreign tax credit
Adjustment of percentage
completion method

1,369

759

Depreciation

628

705

5,770

Reserve for job warranty costs

267

341

2,453

Loss on devaluation of fixed assets

132

311

1,213

Deferred losses on hedges

425

83

3,905

Accrued enterprise tax

350

214

3,216

1,296

1,662

11,90947,90652,579440,191(15,369)(14,442)(141,220)

Subtotal deferred tax assets
Valuation allowance for tax loss
carryforward *2
Valuation allowance for deductible
temporary difference(9,587)(9,326)(88,092)

Total valuation allowances *1(24,956)(23,768)(229,312)

Total deferred tax assets

22,95028,811

210,879(Millions of yen)
Year ended March 31, 2019

Tax losscarryforward*1

Valuation
allowance

¥-

¥ -

¥-

2021

-

-

-

2022

-

-

-

2023

-

-

-

-

-

2025 and thereafter

2024

14,442(14,442)-

Total¥ 14,442¥ (14,442)¥-*1 The amount of Tax loss carryforward is an amount multiplied by the statutory tax rates.

Deferred tax liabilities:
Net unrealized holding gains on
securities(904)(3,192)(8,307)

Net defined benefit asset

(129)

(159)

(1,185)Reserve for advanced depreciationof noncurrent assets
Total deferred tax liabilities(Thousands of
U.S. dollars)(Note 1)

(Millions of yen)March 31,

2020

2019

JGC Report 2020

2020

Deferred tax liabilities

(204)

(263)

(1,874)(1,237)(3,614)(11,366)¥ 21,713¥ 25,197$ 199,513*1 For the year ended March 31, 2020, the valuation allowances increased by ¥1,188 million ($10,916
thousand). This is mainly due to decrease valuation allowance for Foreign tax credit by ¥1,586 million($14,573 thousand), and increase valuation allowance for Allowance for doubtful accounts by ¥1,224
million ($11,247 thousand), Loss on devaluation of investment securities by ¥598 million ($5,495
thousand), and valuation allowance for Tax loss carryforward by ¥926 million ($8,509 thousand).
*2 The amount of Tax loss carryforward and its deferred tax assets will expire as follows;Year ending March 31, 2020

Undistributed earnings
of foreign consolidated
subsidiaries
OthersTotal deferred tax liabilities

¥ 891

¥ 531

$ 8,187

69

118

634

¥ 960

¥ 649

$ 8,821Note 12 : N
 OTES TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS

Reconciliation of cash in the consolidated balance sheets and Cash and cash
equivalents in the consolidated statements of cash flows was as follows:This information is not disclosed, as this information is disclosed in Note 10 (a) for the years

111

Deferred tax
assets*2

2020

III.INFORMATION ON IMPAIRMENT LOSS
ended March 31, 2020 and 2019.

$-

Reserve for losses on contracts

Other
(4.6)

2020

Net defined benefit liability

Net deferred tax assets

JSC YAMAL LNG

Deferred tax assets*2

2021

Statutory tax rate

Year ended March 31, 2019

Valuation allowance(Thousands of(Thousands of(Thousands of(Millions of yen) U.S. dollars) (Millions of yen) U.S. dollars) (Millions of yen) U.S. dollars)(Note 1)
(Note 1)
(Note 1)

2022

(1)The following table summarizes the differences between the statutory tax

North
AmericaTax loss carryforward*1(Thousands of
U.S. dollars)(Note 1)statutory tax rates of 30.6% for the year ended March 31, 2020 and 2019, respectively.
East andSoutheast
Asia

Year ended March 31, 2019deferred tax assets and liabilities as of March 31, 2020 and 2019, were as follows:(Millions of yen)March 31,

2020

2019

(Thousands of
U.S. dollars)(Note 1)

2020

Cash and deposits¥ 261,899¥ 160,842$ 2,406,496

Cash and cash equivalents¥ 261,899¥ 160,842$ 2,406,496

JGC Report 2020112

Note 13 : L AND REVALUATION(2)Market risk management (risk of exchange rate and prices fluctuations)

B. FAIR VALUES OF FINANCIAL INFORMATION(a)FAIR VALUES OF FINANCIAL INSTRUMENTS

Pursuant to Article 2 of the Enforcement Ordinance for the Law Concerning Land Revaluation

The Company monitors the balance of the foreign currency receivable and payable byeffective March 31, 1998, the Company recorded its owned land used for business at theeach currency and every month and utilizes foreign currency forward contracts and foreign

Fair values of financial instruments as of March 31, 2020 and 2019 were summarized as follows:

fair value as of March 31, 2002, and the related revaluation difference, net of income taxes,

currency deposit to hedge the risk of fluctuations. The Company uses commodity swaps

The financial instruments, whose fair values were difficult to measure, were not included in the table below and were summarized in B (b).

was debited to Land revaluation, net of deferred tax portion in the Net Assets section. The

to mitigate the risk of price fluctuations associated with commodities using in the EPC

applicable income tax portion was reported as Deferred tax liabilities for land revaluation in(Engineering, Procurement and Construction) business.

the consolidated balance sheets at March 31, 2020 and 2019. When such land is sold, land

Regarding marketable securities and investment securities, the Company periodicallyrevaluation is reversed and debited to retained earnings.

examines fair value and the financial condition of the issuing entities and revises its portfolio
based on its relationships with issuing entities.
The derivative transactions are executed and managed by the Finance & Accounting

Note 14 : RELATED PARTY TRANSACTIONS

Department in accordance with the established policies and within the specified limit on

This information is not disclosed, as this is immaterial for the years ended March 31, 2020

the amounts of derivative transactions allowed. The Department periodically provides

and 2019.

administrative reports on the results to the financial director and treasurer.
the amounts of derivative transactions allowed. The Department periodically provides
administrative reports on the results to the financial director and treasurer.

Note 15 : FINANCIAL INSTRUMENTS
A. QUALITATIVE INFORMATION ON FINANCIAL INSTRUMENTS(3)Management of liquidity risk associated with capital procurement(payment default risk)(a)POLICIES FOR USING FINANCIAL INSTRUMENTS

The Company manages liquidity risk by creating and updating a capital deployment plan

The Company manages surplus capital using financial instruments that are short-term andbased on reports from each division.

(Millions of yen)March 31, 2020

March 31, 2019

Carrying amount

Estimated fair value

Difference

Carrying amount

Estimated fair value

Difference

Cash and deposits
Notes and accounts receivable, net*1
Short-term loans receivable
Other receivables*2
Investment securities
Long-term loans receivable, net*1
Total Assets¥ 261,899
145,276
437
84,074
10,616143¥ 502,445¥ 261,899
145,276
437
84,074
10,616145¥ 502,447¥2¥2¥ 160,842
231,764
4,029
93,545
18,468¥ 508,648¥ 160,842
231,764
4,029
93,545
18,468¥ 508,648¥¥-

Notes and accounts payable
Long-term debt*3
Total Liabilities¥ 68,239
50,347¥ 118,586¥ 68,239
50,395¥ 118,634

¥48
¥ 48

¥ 92,092
53,949¥ 146,041¥ 92,092
54,097¥ 146,189

¥148
¥ 148

Derivative financial instruments, net¥ (1,478)¥ (1,478)¥-¥ (484)¥ (484)¥-carry low risk. The Company uses derivatives to mitigate the risks that are described below, anddoes not use derivatives for speculative transactions.

(d)SUPPLEMENTAL INFORMATION ON THE FAIR VALUE OF FINANCIAL INSTRUMENTS(Thousands of U.S. dollars) (Note 1)

The fair value of financial instruments is based on market prices, or a reasonable estimate of(b)FINANCIAL INSTRUMENTS, ASSOCIATED RISKS AND THE RISK MANAGEMENT SYSTEM

fair value for instruments for which market prices are not available. Estimates of fair value

Notes and accounts receivable expose the Company to customer credit risk. Investment

are subject to fluctuation because they employ variable factors and assumptions.

securities are mainly related to the business and capital alliance companies and expose theIn addition, the contractual amounts of the derivatives transactions discussed in B (a) below

Company to the changes in market prices. Loans receivable are mainly related to subsidiaries
and affiliates.
Most Notes and accounts payable are due within one year. Some accounts payable associatedwith purchasing machines and construction contracts are denominated in foreign currencies,
which expose the Company to the risks of exchange rate fluctuations. The Company generally
procures capital required under its business plan through bank loans. Some bank loans andbond expose the Company to the risks of interest rate fluctuations.
The Company uses derivatives transactions including foreign exchange forward contracts toare not an indicator of the market risk associated with derivatives transactions.

March 31, 2020
Carrying amount

Estimated fair value

Difference

Cash and deposits
Notes and accounts receivable, net *1
Short-term loans receivable
Other receivables*2
Investment securities
Long-term loans receivable, net *1
Total Assets$ 2,406,496
1,334,889
4,016
772,526
97,547
1,314$ 4,616,788$ 2,406,496
1,334,889
4,016
772,526
97,547
1,332$ 4,616,806

$18
$ 18

Notes and accounts payable
Long-term debt*3
Total Liabilities$ 627,024
462,620$ 1,089,644$ 627,024
463,061$ 1,090,085

$441
$ 441

$ (13,581)$ (13,581)$-

hedge the risk of exchange rate fluctuations associated with accounts receivable and payable
denominated in foreign currencies and commodity swaps to hedge the risk of price fluctuations
associated with commodities using in the EPC (Engineering, Procurement and Construction)business. The details of hedge accounting of the Company such as methods, hedging policies,
hedged items and recognition of gain or loss on hedged positions are explained in Note 1(t) and

Derivative financial instruments, net*1 The amount of individual allowance for doubtful accounts is deducted from Notes and accounts receivable and Long-term loans receivable.
*2 Other receivables are classified as Other current assets in the consolidated balance sheets.
*3 The current portion of bonds payable are included in Long-term debt.

Note 9 “Derivative Transactions and Hedge Accounting”.
(c)RISK MANAGEMENT SYSTEM FOR FINANCIAL INSTRUMENTS(1)Credit risk management (counter-party risk)
The Company has established internal procedures for receivables under which the related
divisions are primarily responsible for periodically monitoring counter-party status. The
department manages amounts and settlement dates by counter-party and works to quickly
identify and mitigate payment risk that may result from situations including deterioration of
the financial condition of counter-parties.
In using derivatives transactions, the Company mitigates counter-party risk by conducting
transactions with highly creditworthy financial institutions.

113

JGC Report 2020

JGC Report 2020

114

The following methods and assumptions were used to estimate the fair value of the financial(b)FINANCIAL INSTRUMENTS, WHOSE FAIR VALUES WERE DIFFICULT TO MEASURE

Note 16 : O
 THER COMPREHENSIVE INCOME

instruments.

The financial instruments, whose fair values were difficult to measure, as of March 31, 2019

Reclassification adjustments of the Company’s and consolidated subsidiaries’ otherand 2018, were summarized as follows:

comprehensive income for the years ended March 31, 2020 and 2019, were as follows:(Millions of yen)

Cash and deposits, and Marketable securities
All deposits and negotiable certificates of deposit are short-term. Therefore, the carrying
amount is used for the fair value of these items because these amounts are essentiallythe same.

(Millions of yen)

2020

2019

2020

¥ 23,396¥ 37,929$ 214,977

March 31,
Unconsolidated subsidiaries and affiliates

Notes and accounts receivable
Notes and accounts receivable are short-term. Therefore, the carrying amount is used forthe fair value of short-term receivables because these amounts are essentially the same.

7,957

Non-listed equity securities

73,114

10,83938

Subscription certificate

349

38

2,800

Non-listed affiliate’s bond

Short-term loans receivable(Thousands of
U.S. dollars)(Note 1)

25,728

1,720(Thousands of
U.S. dollars)(Note 1)

(Millions of yen)March 31,

2020

2019

2020

¥ (2,653)¥ (3,440)$ (24,378)

Net unrealized holding losses on securities
Unrealized holding losses arising during
the year
Reclassification adjustment(4,825)(2,221)(44,335)

Sub-total(7,478)(5,661)(68,713)

the fair value of short-term receivables because these amounts are essentially the same.

It is difficult to measure the fair value of these financial instruments because there is nomarket price available and it is not practical to calculate future cash flow. Therefore, these

Reclassification adjustment

108

40

992

Other receivables

financial instruments were not included in the Investment securities described in B (a).

Sub-total

(973)

338

(8,941)Other receivables are short-term. Therefore, the carrying amount is used for the fair valueof short-term receivables because these amounts are essentially the same.

Translation adjustments arising during
the year

The maturities of the financial instruments at March 31, 2020 were as follows:In addition, Note 8 provides information on marketable securities by holding intent.
Long-term loans receivable
Fair value of Long-term loans receivable is estimated as discounted present value of total
principal and interest using assumed interest rates for equivalent new loans. With respect
to doubtful claims, because the amount obtained by deducting the irrecoverable balance,

2031 and
thereafterYear ending March 31

2021¥ 261,899

¥-

¥-

¥-

Notes and accounts
receivable

145,276

-

-

-

437

-

-

-

84,074

-

-

-

-

143

-

-

¥ 491,686

¥ 143

¥-

¥-

Short-term loans receivable
Other receivablebalance sheet as of the current year approximate the fair value, this amount is deemed toLong-term loans receivable,
net
Total Assets

2022 - 2025

Notes and accounts payable
Notes and accounts payable are short-term. Therefore, carrying amount is used for the fair(Thousands of U.S. dollars) (Note 1)

value of short-term payables because these amounts are essentially the same.
Year ending March 31
Cash and deposits

Long-Term Debt
approximates carrying amount because the Company’s creditworthiness does not varyNotes and accounts
receivablesignificantly after assuming long-term debts. Therefore, carrying amount is used for

Short-term loans receivable

In addition, fair value

fair value of floating-rate long-term debt. Fair value of fixed-rate long-term debt is thediscounted value of total principal and interest using an assumed interest rate on equivalent
new loans and bonds.
Derivative financial instruments
Please refer to “DERIVATIVE TRANSACTIONS AND HEDGE ACCOUNTING” in Note 1(t) and

Other receivable
Long-term loans
receivable, net
Total Assets

2021(9,933)298(12,165)-2022 - 2025

$ 2,406,496$-

2026 2030$-

1,334,889

-

-

-

4,016

-

-

-

772,526

-

-

-

-

1,314

-

-

$ 4,517,927$1,314$-$-

Please see Note 3 for the maturities of long term-debt.

--(111,780)(3,157)¥ (5,661)¥ 1,732¥ (3,929)

338

(104)

234

-

(3,157)

Remeasurements of defined benefit plans

754

(274)

480

Equity for equity method affiliates

86

-

86

Other comprehensive income¥ (7,640)¥ 1,354¥ (6,286)

Year ended March 31, 2020

Before-tax
amountIncome tax
effectNet-of-tax
amount$ (68,713)$ 21,024$ (47,689)(8,941)

2,251(6,690)Net unrealized holding gains (losses) on
securities(111,780)-(111,780)

Remeasurements of defined benefit plans(1,975)(331)(2,306)Equity for equity method affiliates(1,801)-(1,801)$ (193,210)$ 22,944$ (170,266)

Translation adjustments

Other comprehensive income

Defined benefit plans during the year

(651)

272

Reclassification adjustment

436

482

4,006

Sub-total

(215)

754

(1,975)(5,981)Equity for equity method affiliates

Note 17 : BUSINESS COMBINATIONS(Transition to a Holding Company Structure through a Corporate Separation)
After resolved at the general meeting of shareholders held on June 27, 2019, the Company

Share of other comprehensive incomeof affiliates accounted for using equity
method arising during the year

(344)

86

(3,161)

Reclassification adjustment

148

-

1,360

Sub-total

(196)

86

(1,801)

Before-tax amount(21,027)(7,640)(193,210)

Income tax effect

2,497

1,354

22,944¥ (18,530)¥ (6,286)$ (170,266)

Total other comprehensive income

2031 and
thereafter$-(12,165)(111,780)(3,157)

Remeasurements of defined benefit plans

Cash and deposits

which estimated based on collectable amounts from the amount stated in the consolidated
be the fair value.

Sub-total

2026 2030

Net-of-tax
amount(3,157)

Translation adjustments

Deferred gains (losses) on hedges

Reclassification adjustment(Millions of yen)

Fair value of Investment securities is the price listed on securities exchanges for equities.

entered an absorption-type corporate separation with JGC CORPORATION as the splitting
company and the wholly owned two subsidiaries as the successor companies and the JGCgroup has adopted the form of a holding company structure.In addition, JGC CORPORATION
has been changed the name to JGC HOLDINGS COPORATION as of October 1, 2019.
(Transactions under common control, etc.)
1. Outline of the transaction(1) Details of the business subject to the business combination
EPC (Engineering, Procurement and Construction) business for various plants andTax effects allocated to each component of other comprehensive income for the years
ended March 31, 2020 and 2019, were as follows:

facilities(2) Date of the business combination
October 1, 2019

(Millions of yen)

(3) Legal form of the business combination

Before-tax
amountIncome tax
effectNet-of-tax
amountAbsorption-type corporate separation with the Company as the splitting company and¥ (7,478)¥ 2,288¥ (5,190)

The successor companies of the businesses are as follows;

(973)

245

(728)

(12,165)-(12,165)

Remeasurements of defined benefit plans

(215)

(36)

(251)

Equity for equity method affiliates

(196)

-

(196)

¥ (21,027)¥ 2,497¥ (18,530)

Year ended March 31, 2020
Net unrealized holding gains (losses) on
securities
Deferred gains (losses) on hedges
Translation adjustments

Other comprehensive income

JGC Report 2020

(1,081)

Translation adjustments(c)MATURITIES OF FINANCIAL INSTRUMENTS

Investment securities

115

Deferred gains (losses) on hedges

Income tax
effect(Thousands of U.S. dollars) (Note 1)

Deferred gains (losses) on hedges arisingduring the year

Note 9.

Net unrealized holding gains (losses) on
securities

Deferred gains (losses) on hedges

Short-term loans receivable are short-term. Therefore, the carrying amount is used for

Floating-rate long-term debt reflects market interest rates.

Year ended March 31, 2019

Before-tax
amountthe wholly owned two subsidiaries as the successor companies
EPC business for various plants and facilities overseas……JGC CORPORATION
EPC business for various plants and facilities in Japan……JGC JAPAN CORPORATION(JGC Plant Innovation Co. Ltd. has been changed the name to JGCJAPANCORPORATION as of October 1, 2019)(4) Other matters related to the outline of the transaction

JGC Report 2020116

Independent Auditor’s Report

JGC group’s main business of EPC operations, the Beyond the Horizon medium-term

Note 19 : OTHER

business plan for fiscal 2016–2020 calls for an ongoing focus on the oil and gas(Ichthys LNG Project)sector while expanding further into the field of infrastructure. In non-EPC operations,JKC Australia LNG Pty Ltd, an Australian company operating as a joint venture among KBR,

Opinionevents or conditions that may cast significant doubt on the Group’s ability to continue as a going

the plan calls for stronger involvement in manufacturing, among other types of

Chiyoda Corporation and the Company’s subsidiary, (hereinafter referred to as “JKC”) has

We have audited the accompanying consolidated financial statements of JGC Holdings

concern. If we conclude that a material uncertainty exists, we are required to draw attention

business. Further growth and expansion are sought in both areas of operations.

contracted with INPEX Operations Australia Pty Ltd. (hereinafter referred to as the “Client”)

Corporation (formerly JGC Corporation) and its consolidated subsidiaries (collectively referredin our auditor’s report to the related disclosures in the consolidated financial statements or, if

To pursue this vision of a corporate group with greater corporate value steadily, but

to perform the engineering, procurement, construction and commissioning of onshore LNG

to as “the Group"), which comprise the consolidated balance sheets as at March 31, 2020 andsuch disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit

with a sense of speed, we have transited to a holding company as the group’s new

facilities in Darwin, Australia (hereinafter referred to as the "Ichthys LNG project"). The

2019, the consolidated statements of income, comprehensive income, changes in net assets

evidence obtained up to the date of our auditor’s report. However, future events or conditions

management structure.

execution of the Ichthys LNG project has been substantially completed and the plant handed

and cash flows for the years then ended, and notes to the consolidated financial statements,

The Company is seeking to grant more independence to future primary businessover to the Client in August 2018.

comprising a summary of significant accounting policies, other explanatory information.

operating companies, enable more proactive, agile business operations, and bring

To the Board of Directors of JGC Holdings Corporation:●

Conclude on the appropriateness of management’s use of the going concern basis of accounting
and based on the audit evidence obtained, whether a material uncertainty exists related to

may cause the Group to cease to continue as a going concern.
●

Evaluate whether the presentation and disclosures in the consolidated financial statements are

In our opinion, the accompanying consolidated financial statements present fairly, in all materialin accordance with accounting standards generally accepted in Japan, the overall presentation,

about globally optimal resource allocation and accurate governance of group

Notwithstanding the above situation, JKC and the Client have not reached a final settlement

respects, the consolidated financial position of the Group as at March 31, 2020 and 2019, and its

structure and content of the consolidated financial statements, including the disclosures, andmanagement.

about part of the additional costs incurred due to increase in services scope and other factors,

consolidated financial performance and cash flows for the years then ended in accordance withwhether the consolidated financial statements represent the underlying transactions andand the parties are currently under a few arbitration processes.

accounting principles generally accepted in Japan.

2. Outline of the accounting treatment applied

events in a manner that achieves fair presentation.
●

Obtain sufficient appropriate audit evidence regarding the financial information of the entities

The Company treated the transaction as a transaction under common control in

In addition, to fulfill its obligations under the contract with the Client, JKC awarded a

Basis for Opinion

or business activities within the Group to express an opinion on the consolidated financial

accordance with the Accounting Standard for Business Combination (ASBJ Statement

fixed-price EPC contract to a subcontractor for the design, procurement, construction and

We conducted our audit in accordance with auditing standards generally accepted in Japan. Our

statements. We are responsible for the direction, supervision and performance of the group

No21 dated January 16, 2019), and the Implementation Guidance on the Accounting

commissioning of the combined cycle power plant (hereinafter referred to as the "Power

responsibilities under those standards are further described in the Auditor’s Responsibilities foraudit. We remain solely responsible for our audit opinion.

Standard for Business Combination and Accounting Standard for Business

Plant"). The subcontractor was a consortium consisting of General Electric Company,

the Audit of the Consolidated Financial Statements section of our report. We are independent

We communicate with audit & supervisory board members and audit & supervisory board

Divestitures (ASBJ Guidance No .10 dated January 16, 2019).

General Electric International, Inc., UGL Engineering Pty Limited and CH2M Hill Australia Pty.

of the Group in accordance with the ethical requirements that are relevant to our audit of theregarding, among other matters, the planned scope and timing of the audit, significant audit

Limited (hereinafter referred to as a "Consortium"). During the execution of the project, theconsolidated financial statements in Japan, and we have fulfilled our other ethical responsibilities

findings, including any significant deficiencies in internal control that we identify during our audit.

Consortium unilaterally repudiated the contract and entered into an arbitration demandingin accordance with these requirements. We believe that the audit evidence we have obtained is

We also provide audit & supervisory board members and audit & supervisory board with a

Note 18 : SUBSEQUENT EVENT

damages. While JKC having hired another subcontractor and pay costs to complete the Powersufficient and appropriate to provide a basis for our opinion.

statement that we have complied with relevant ethical requirements regarding independence,(Issue Bonds)

Plant, JKC is making a counter-claim under the arbitration, pursuing recourse against theBased on the resolution made at the meeting of the Board of Directors of the Company held

Consortium to recover all of the costs.

on June 8, 2020, the Company will issue the following unsecured bonds.

and communicate with them all relationships and other matters that may reasonably be thought
Responsibilities of Management and Audit & supervisory board members and audit &to bear on our independence, and where applicable, related safeguards.

supervisory board for the Consolidated Financial Statements
In view of the above overall, if the arbitrations against the Client or the Consortium results

Management is responsible for the preparation and fair presentation of the consolidated financial

Convenience Translation

in a disadvantageous result for JKC, this could have a negative impact on the Company’s

statements in accordance with accounting principles generally accepted in Japan, and for such

The U.S. dollar amounts in the accompanying consolidated financial statements with respect toconsolidated financial position.

internal control as management determines is necessary to enable the preparation of consolidated

the year ended March 31, 2020 are presented solely for convenience. Our audit also included theUnder 1.000% per annum

financial statements that are free from material misstatement, whether due to fraud or error.

translation of yen amounts into U.S. dollar amounts and, in our opinion, such translation has beenIssue date

From July 1, 2020 to March 31, 2021

In preparing the consolidated financial statements, management is responsible for assessing themade on the basis described in Note 1 to the consolidated financial statements.

Maturity period

Within 5 years

Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going

Redemption method

Bullet repayment

concern in accordance with accounting principles generally accepted in Japan.

Interest required to be disclosed by the Certified Public Accountants Act of Japan

Application of funds

Bonds redemption

Audit & supervisory board members and audit & supervisory board are responsible for overseeing

We do not have any interest in the Group which is required to be disclosed pursuant to thethe directors’ performance of their duties including the design, implementation and maintenanceprovisions of the Certified Public Accountants Act of Japan.

Total amount of issue

Under ¥20,000 million ($183,773 thousand)Issue price¥100 per face value of ¥100 of bondInterest rateof the Group’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error,

Michitaka Shishido

and to issue an auditor’s report that includes our opinion. Reasonable assurance is a highDesignated Engagement Partner

level of assurance, but is not a guarantee that an audit conducted in accordance with auditing

Certified Public Accountant

standards generally accepted in Japan will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in theaggregate, they could reasonably be expected to influence the economic decisions of users takenon the basis of these consolidated financial statements.

Takemitsu Nemoto
Designated Engagement Partner

As part of our audit in accordance with auditing standards generally accepted in Japan, we

Certified Public Accountant

exercise professional judgment and maintain professional skepticism throughout the audit. We
also:●

Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks,

Atsushi Nagata

and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The

Designated Engagement Partner

risk of not detecting a material misstatement resulting from fraud is higher than for one resulting

Certified Public Accountant

from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, orthe override of internal control.
●●

Obtain an understanding of internal control relevant to the audit in order to design audit

KPMG AZSA LLC

procedures that are appropriate in the circumstances, while the objective of the audit is not to

Yokohama Office, Japan

express an opinion on the effectiveness of the Group’s internal control.

June 26, 2020

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.

117

JGC Report 2020

JGC Report 2020

118

Supplemental Explanation

Internal Control Report (Translation)

Internal Control over Financial Reporting in JapanNOTE
The following is an English translation of the report on internal control over financial reporting filed under the Financial Instruments and Exchange Act in Japan (“ICOFR under the Act”). This report ispresented merely as supplemental information.
There are differences between the management assessment of ICOFR under the Act and one conducted under the attestation standards established by the American Institute of Certified Public Accountants(“the AICPA”).
In the management assessment of ICOFR under the Act, there is detailed guidance on the scope of the management assessment of ICOFR, such as quantitative guidance on business location selection
and/or account selection. In the management assessment of ICOFR under the attestation standards established by the AICPA, there is no such guidance. Accordingly, based on the quantitative guidance
which provides an approximate measure for the scope of assessment of internal control over business processes, we used a measure of approximately two-thirds of total sales and others for the selectionof significant locations and business units.

Under the Financial Instruments and Exchange Act in Japan (“the Act”), which was enacted in June 2006, the management of all listed companies in Japan are required to implement
assessments of internal control over financial reporting (“ICOFR”) as of the end of the fiscal year and the management assessment shall be audited by independent auditors, effective fromthe fiscal year beginning on or after April 1, 2008.
We have evaluated our ICOFR as of March 31, 2020, in accordance with “On the Revision of the Standards and Practice Standards for Management Assessment and Audit concerning Internal
Control Over Financial Reporting (Council Opinions)” published by the Business Accounting Council on March 30, 2011.
As a result of conducting the evaluation of ICOFR for the year ended March 31, 2020, we concluded that our internal control system over financial reporting as of March 31, 2020 was operating
effectively and reported as such in the Internal Control Report.
Independent Auditor, KPMG AZSA LLC, performed an audit of our management assessment on the effectiveness of ICOFR under the Act.

[TRANSLATION]
Internal Control Report
1

Framework of Internal Control Over Financial Reporting
Masayuki Sato, Representative Director, Chairman and Chief Executive Officer (CEO), and Kiyotaka Terajima, Chief Financial Officer (CFO) of JGC Holdings Corporation (formerly JGC

An English translation of the Internal Control Report and the Independent Auditor’s Report filed under the Act is provided on the following pages.

Corporation) (“the Company”) are responsible for establishing and maintaining adequate internal control over financial reporting as defined in the rule “On the Revision of the Standards
and Practice Standards for Management Assessment and Audit concerning Internal Control Over Financial Reporting (Council Opinions)”.
Because of its inherent limitations, internal control over financial reporting (“ICOFR”) may not completely prevent or detect misstatements.

JGC Holdings Corporation (formerly JGC Corporation)
2

Assessment Scope, Timing and Procedures
We have assessed our ICOFR as of March 31, 2020 in accordance with assessment standards for internal control over financial reporting generally accepted in Japan.
We assessed the design and operation of our company-level control and based on this assessment, we analyzed business processes within the scope of the internal control to beassessed, identified a key control that would have a material impact on the reliability of financial reporting and assessed whether the basic components of internal control are operatingwith regard to the key control.
We assessed the effectiveness of ICOFR of the Company, consolidated subsidiaries and equity-method affiliates to the extent necessary in light of their degree of impact on the reliabilityof financial reporting.
In assessing the effectiveness of internal control, we decided on reasonable scope of assessment for the significant business processes in light of their degree of quantitative andqualitative impact on financial reporting based on the assessment of the company-level control.
Locations and business units that did not have a material effect on financial reporting were excluded from the scope of assessments.
In assessing the period-end financial reporting process, we decided on reasonable scope of assessment in light of its degree of quantitative and qualitative impact on financial reportingin a similar manner as company-level control.
In assessing the business processes other than described above, based on the assessment of the company-level controls, we assessed the significant business locations based on sales
levels until combined sales amounts reach approximately two-thirds on a consolidated basis and the business processes which impact the accounts (sales, accounts receivable andinventory) that were closely associated with the significant business locations’ business objectives.

3

Results of Assessment
As a result of the above assessment, the Company’s management has concluded that, as of March 31, 2020, the Company’s ICOFR was effective.

4

Supplementary Information
Not applicable.

5

Other
Not applicable.

119

JGC Report 2020

JGC Report 2020120

Independent Auditor’s Report on the financial Statements
and Internal Control Over Financial Reporting (Translation)
NOTE
The following is an English translation of the Independent Auditor’s Report on the financial Statements and Internal Control Over Financial Reporting filed under the Financial Instruments and Exchange Act
in Japan (“the Act”). This report is presented merely as supplemental information.
There are differences between an audit of ICOFR under the Act and one conducted under the attestation standards established by the American Institute of Certified Public Accountants (“the AICPA”).
In an audit of ICOFR under the Act, the auditor expresses an opinion on management’s report on ICOFR and does not express an opinion on the company’s ICOFR directly. In an audit of ICOFR under theattestation standards established by the AICPA, the auditor expresses an opinion on the company’s ICOFR directly.
Also in an audit of ICOFR under the Act, there is detailed guidance on the scope of an audit of ICOFR, such as quantitative guidance on business location selection and/or account selection. In an auditof ICOFR under the attestation standards established by the AICPA, there is no such guidance. Accordingly, based on the quantitative guidance which provides an approximate measure for the scope ofassessment of internal control over business processes, we used a measure of approximately two-thirds of total sales and others for the selection of significant locations and business units.

OpinionIn our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of JGC Corporation and its consolidated subsidiaries as of March 31, 2019 andtheir financial performance and cash flows for the year ended March 31, 2019, in accordance with accounting principles generally accepted in Japan.
Audit of Internal Control
Pursuant to the second paragraph of Article 193-2 of the Financial Instruments and Exchange Act in Japan, we also have audited the Company’s report on internal control over financial
reporting of the consolidated financial statements of JGC Corporation as of March 31, 2019 (“Internal Control Report”).
Management’s Responsibility for the Internal Control ReportManagement is responsible for the design and operation of internal control over financial reporting and the preparation and fair presentation of the Internal Control Report in conformity with

[TRANSLATION]

assessment standards for internal control over financial reporting generally accepted in Japan. Internal control over financial reporting may not completely prevent or detect financial statement

Independent Auditor’s Report
June 26, 2020
To the Board of Directors of JGC Corporation

misstatements.
Auditor’s Responsibility

KPMG AZSA LLC
Designated Limited Liability Partner,
Engagement Partner,
Certified Public Accountant: Michitaka Shishido
Designated Limited Liability Partner,
Engagement Partner,
Certified Public Accountant: Takemitsu Nemoto
Designated Limited Liability Partner,
Engagement Partner,
Certified Public Accountant: Yoshinori Saito

Our responsibility is to express an opinion on the Internal Control Report based on our internal control audit. We conducted our internal control audit in accordance with auditing standards forinternal control over financial reporting generally accepted in Japan. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonableassurance about whether the Internal Control Report is free from material misstatement.
An internal control audit involves performing procedures to obtain audit evidence about the assessment of internal control over financial reporting in the Internal Control Report. The procedures
selected depend on the auditor’s judgment, including significance of effect on the reliability of financial reporting. Also, an internal control audit includes evaluating the appropriateness of thescope, procedures and result of the assessment determined and presented by management as well as evaluating the overall internal control report presentation.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
OpinionIn our opinion, the Internal Control Report, in which JGC Corporation states that internal control over financial reporting was effective as of March 31, 2019, presents fairly, in all material
respects, the assessment of internal control over financial reporting in conformity with assessment standards for internal control over financial reporting generally accepted in Japan.
Interest
The firm and the engagement partners do not have any interest in the Company for which disclosure is required under the provisions of the Certified Public Accountants Act of Japan.

Audit of Consolidated Financial Statements
Pursuant to the first paragraph of Article 193-2 of the Financial Instruments and Exchange Act in Japan (“the Act”), we have audited the consolidated financial statements of JGC Corporation(the “Company”) and its consolidated subsidiaries included in the Financial Section, namely, the consolidated balance sheet as of March 31, 2019, the consolidated statement of income,consolidated statement of comprehensive income, consolidated statement of changes in net assets and consolidated statement of cash flows for the fiscal year from April 1, 2018 to March
31, 2019, and a summary of significant accounting policies, other explanatory information and consolidated supplementary schedules.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in Japan, andfor such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatements, whether due tofraud or error.
Auditor’s Responsibility
Our responsibility is to independently express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards
generally accepted in Japan. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free frommaterial misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our
judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, weconsider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in thecircumstances, while the objective of the financial statement audit is not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management as well as evaluating the overall presentation of theconsolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

121

JGC Report 2020

JGC Report 2020122Outline of JGC

JGC Group

As of March 31, 2020

As of March 31, 2020

Total Engineering

OthersFunctional Materials Manufacturing

Equipment Procurement
JGC Trading & Services Co., Ltd.

■ JGC CORPORATION■ JGC Catalysts and Chemicals Ltd.

■ JGC JAPAN CORPORATION■ JAPAN FINE CERAMICS CO., LTD.

Specialized Consulting Services
JAPAN NUS CO., LTD.

■ JGC PLANTECH AOMORI Co., Ltd.

■ MEITO GIKEN CO., LTD.

● Nikki-Universal Co., Ltd.

● Nikki-Universal Co., Ltd.

Office Support Services
NIKKI BUSINESS SERVICES CO., LTD.

236 (Consolidated: 7,607)

Percentage of total (%)

37,264

14.76

Japan Trustee Services Bank, Ltd. (Trust Account)

27,08310.73

JGC Trading and Services Co., Ltd.

12,112

4.79

JGC-S SCHOLARSHIP FOUNDATION

8,433

3.34

■ JGC OCEANIA PTY LTD

JP MORGAN CHASE BANK 385632(Standing Proxy: Mizuho Bank, Ltd.)

5,556

2.20

■ JGC America, Inc.

Sumitomo Mitsui Banking Corporation

5,500

2.17

■ JGC Gulf Engineering Co. Ltd.

Trust & Custody Services Bank, Ltd. (Securities Investment Trust Account)

4,150

1.64

■ Consolidated subsidiaryJapan Trustee Services Bank, Ltd. (Trust Account 5)

3,926

1.55

● Equity-method subsidiary or affiliate

JP MORGAN CHASE BANK 385151(Standing Proxy: Mizuho Bank, Ltd.)

3,778

1.49

○ Non-equity-method subsidiary or affiliate

THE BANK OF NEW YORK 133972(Standing Proxy: Mizuho Bank, Ltd.)

3,451

1.36

■ PT. JGC INDONESIA■ JGC Gulf International Co. Ltd.

(Notes)1. Number of shares is rounded down to the nearest thousand. Percentage of total is rounded down to the second decimal place.
2. The Company holds 6,748 thousand shares (2.60%) of treasury stock, but this is excluded from the above list of major shareholders.
3. Percentage of total is calculated excluding treasury stock.

Total Engineering

Engineering & Construction
Services¥23,554,870,000

Number of Employees

Number of shares (Thousands)

JGC HOLDINGS CORPORATIONBusiness

CapitalThe Master Trust Bank of Japan, Ltd. (Trust Account)■ JGC PHILIPPINES, INC.

Water Treatment Business● Swing Corporation● Swing AM Corporation● Swing Engineering Corporation

October 25, 1928

Major Shareholders■ JGC SINGAPORE PTE LTD

Oil & Gas Production and Sales Business
JGC (GULF COAST), LLC
JGC Exploration Eagle Ford LLC
JGC EXPLORATION CANADA LTD.

EstablishedCompanyCountry

CapitalProportion of Voting Rights HeldJGC CORPORATION

Japan¥1,000,000,000

100%

JGC JAPAN CORPORATION

Japan¥1,000,000,000

100%

Other

Authorized Shares

600,000,000

Issued and Outstanding Shares

259,110,861

Number of Shareholders

19,613JGC SINGAPORE PTE LTD

Singapore

S$2,100,000100%

Administrator of the

Mitsubishi UFJ Trust and Banking Corp.

JGC PHILIPPINES, INC.

Philippines

PHP1,300,000,000

100%

Shareholders’ Register

1-4-5, Marunouchi, Chiyoda-ku, Tokyo 100-8212,

Indonesia

US$3,270,000

PT. JGC INDONESIAJapan

49% JGC HOLDINGS CORPORATION 34%

JGC JAPAN CORPORATION 14%
JGC Gulf International Co. Ltd.

Saudi Arabia

SAR262,500,000

Australia

A$847,000,000

100%

U.S.A.

US$51,000

100%

Saudi Arabia

SAR500,00075%

JGC Holdings Stock Price (Yen)JGC PLANTECH AOMORI Co., Ltd.

Japan

¥50,000,000

100% JGC JAPAN CORPORATION 100%

5,000

Process Licensing Services

Nikki-Universal Co., Ltd.

Japan

¥1,000,000,000

Country

CapitalJGC Catalysts and Chemicals Ltd.

Japan

¥1,800,000,000

100%

JAPAN FINE CERAMICS CO., LTD.

Japan

¥300,000,000

100%

MEITO GIKEN CO., LTD.

Japan

¥10,000,000

100%

Nikki-Universal Co., Ltd.

Japan

¥1,000,000,000

50%

50%

Functional Materials Manufucturing34.31%

Financial
instruments firms

2.15%

Other domestic corporations
11.76%

4,000
3,000

Company

Proportion of Voting Rights Held
2,000
1,000
0
2020
2016
2017
2018
2019
1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7OthersBusiness

CompanyCountry

CapitalProportion of Voting Rights Held

Equipment Procurement

JGC Trading and Services Co., Ltd.

Japan

¥40,000,000

24%Specialized Consulting Services

JAPAN NUS CO., LTD.

Japan

¥50,000,000

88%

Office Support Services

NIKKI BUSINESS SERVICES CO., LTD.

Japan

¥1,455,000,000

100%

Water Treatment BusinessSwing CorporationJapan¥5,500,000,000

33％

Swing AM Corporation

Japan¥100,000,000ーSwing Engineering Corporation

Japan¥300,000,000ー

JGC（GULF COAST）, LLC

U.S.A.

US$77,350,000

100%

JGC Exploration Eagle Ford LLC

U.S.A.

US$65,000,000

100%

JGC EXPLORATION CANADA LTD.

Canada

C$160,885,000100%

Oil & Gas Productionand Sales Business

123

Foreign investors

Financial institutions
39.79%

Stock Price

Maintenance Services

JGC Gulf Engineering Co. Ltd.

2.60%

9.39%

JGC SINGAPORE 5%
JGC America, Inc.

Treasury stock

Figures have been rounded to two decimal places.

Individuals and others

100% JGC HOLDINGS CORPORATION 94%

JGC OCEANIA PTY LTD

Distribution of Shareholders (%)

JGC Report 2020

Volume (Thousands of shares)

80000
60000
40000
20000
0

2016
2017
2018
2019
2020
1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7

JGC Report 2020124