Engineering
for the Future

02

SANKI REPORT 2017

SANKI REPORT 201703

CONTENTS
Sanki Engineering Group Philosophy

Local
Communities
NGOs,
NPOs,
and Citizens’GroupsGovernment
andAdministrative
Authorities

Value Creation
throughBusiness Activities
Customers

Employees

Shareholders
and Investors

Partners
Business
Partners

Sanki Engineering Group Compliance Declaration

04

Sanki Engineering Group Philosophy

05

Editorial Policy/Contents

06

Financial and Non-Financial Highlights

08

History of Sanki Engineering

10

Sanki Engineering’s Value Creation

12

Financial Report and Corporate Information
Overviewof Our Businesses by Segments

14

Message from the President

20

Progress in the Medium-Term Management Plan

Sanki Engineering Group Code of Conduct
and Action Guidelines

Business Report
Editorial Policy

Sanki Engineering GroupManagement Philosophy
Sanki Standard

Sanki Engineering Group Management Philosophy
Sanki Standard

We create comfortable environments through engineering andwidely contribute to social development.
We will refine our skills and wisdom with the aim of increasing client satisfaction.
We will place significance on communication and mutual respect.
We will remain aware that we are a member of society and will act accordingly.

Aiming to Produce a Tool that Further Boosts
Understanding of the GroupWe have positioned the SANKI REPORT, the annual report of
Sanki Engineering, as a key, integrated communication tool
for reaching all our stakeholders. The report provides financial
information, including financial performance and a businessoverview, along with management strategies and a report on
corporate social responsibility activities with respect to eachstakeholder. We hope it will further boost understanding of the
Sanki Engineering Group’s philosophy, business activities andfuture direction and we welcome feedback for enhancing ouroperations and information disclosure. In compiling the report,
we adopted the following approach in 2017.
• We created a new page providing an overview of SankiEngineering’s value creation process (pages 10 and 11).
• We added a breakdown of net sales for the Facilities
Construction Business in the “Overview of Our Businesses
by Segments” page (pages 12 and 13).
• So that the business reports are easier to read, we createdlists that summarize the major points of progress made infiscal 2016 and plans for fiscal 2017 (pages 25, 29 and 53).
• We reported on our ongoing efforts to sort and review ourcurrent SDG activities (page 50).
• We added targets and self-assessments to the lists provided
at the start of each section of the CSR Report (page 51).
• We added new significant information on the following:assessment of the effectiveness of directors, number of maleand female managers, number of employees taking elderly
care leave and paid leave, and consolidated data for major
environmental items.
Reference Guidelines• “International <IR> Framework” of the International
Integrated Reporting Council• Ministry of the Environment’s “Environmental Reporting
Guidelines 2012”• GRI Sustainability Reporting Guidelines Ver. 4 (G4)• ISO 26000

The Sanki Engineering Group marked the start of its journey toward the centenary of its foundingin 2025 by formulating the Management Vision and the Sanki Engineering Group Management
Philosophy, which carries the spirit of the Group’s former Corporate Credo, in December 2015.
The Management Philosophy is a comprehensive statement of the Sanki EngineeringGroup’s purpose in society and presents three values. The Sanki Engineering Group is pursuingsustained growth by ensuring all Group executive officers and employees uphold these sharedvalues and is contributing to the creation of a sustainable society. Under the Sanki EngineeringGroup Compliance Declaration, which summarizes issues related to corporate ethics andlegal compliance, all Group executive officers and employees will strive to create value forstakeholders and society at large by performing their daily job duties in accordance with the
Sanki Engineering Group Code of Conduct, which lays out the basic principles of appropriate
conduct, and the more specific Sanki Engineering Group Action Guidelines.

04

SANKI REPORT 2017

Organizations Covered by the Report• Financial information shows consolidated Group figures.
• Non-financial information is based on non-consolidated
figures for Sanki Engineering Co., Ltd. When the information
concerns the Group, organizations covered by the data are
specified in the text, list or graph.
Reporting Period
April 2016–March 2017 (Some information from outside thisperiod has been included with the period specified.)

Precaution on Performance Outlooks, etc.
In addition to past and present information concerning the SankiEngineering Group, this report includes the targets, plans, outlooks,
strategies, forecasts of future performance and other information
drawn from our long-term vision “Century 2025,” Medium-termManagement Plan “Century 2025” Phase 1 (FY2016–2018), andother sources. Please be aware that these forecasts are the best
estimates by Sanki Engineering management and based on theinformation available at the time, and actual performance may
differ significantly from these forecasts, owing to changes such as
in economic conditions, market trends and exchange rates.

24

Facilities Construction Business

28

Machinery Systems Business

32

Environmental Systems Business

36

Real Estate Business37

Research and Development

CSR ReportManagement40

Corporate Governance

44

Compliance48

Risk Management

50

CSR Management

52

Relationship with Customers

55

Relationship with Shareholders and Investors

56

Relationship with Business Partners

58

Health and Safety at Worksites

60

Relationship with Employees

64

Relationship with the Environment

69

Relationship with Local Communities

Financial Report and Corporate Information
72

Financial Report

102

Corporate Information, Business Locations andGroup Companies

104

Share Information

105

Third-Party Opinion

SANKI REPORT 201705

Financial and Non-financial Highlights(Millions of yen)
Year ended
March 31, 2013

Year ended
March 31, 2014

Year ended
March 31, 2015

Year ended
March 31, 2016

Year ended
March 31, 2017

Financial Data
• Orders Received and Net Sales (millions of yen)

Fiscal Year
Orders received

165,800

168,295

173,398

183,270

185,880

Net sales

154,658

171,496

179,598

178,901

168,512Selling, general and administrative expenses

15,19915,60415,015

16,41916,526

Operating income

2,391

2,818

2,951

6,509

6,012

Ordinary income

2,680

3,146

3,809

8,135

6,880

Profit (loss) attributable to owners of parent*(4,992)

1,763

2,461

5,327

4,698

Cash flows from operating activities

9,729(9,403)

(139)

5,220

10,845

Cash flows from investing activities(9,481)(3,506)

3,440

5,520

(1,644)

Cash flows from financial activities(1,028)(4,152)(2,901)(1,826)(2,458)Cash and cash equivalents at end of fiscal year

40,36723,51023,66732,501

39,187* The revised Accounting Standard for Business Combination and other standards have been applied from the year ended March2016. Accordingly, “Profit (loss) attributable to owners of parent” as listed in the consolidated fiscal year under review, is equivalent
to “Net income” listed for the consolidated fiscal years between the year ended March 2013 and the year ended March 2015.
As of End of Fiscal Year under Review
Total assets

166,477

170,181

176,382

169,423

166,612

Total net assets

76,932

74,91784,86984,55785,961

165,800

154,658

168,295

173,398

171,496

179,598■ Orders received
183,270 178,901

185,880
168,512■ Net sales

180,000

2012

2013

2014

2016

2015

FY2016 results (year-on-year comparison)

(FY)
2017
Forecast(net sales)Book value per share (yen)Cash dividends per share (yen)38.30

1,106.32

1,142.74

1,334.65

15.00

15.00

20.00*

73.91

83.84

30.00*

2

Other Information
Equity ratio (%)

46.2

44.0

48.1

49.8

51.5

Return on assets (%)

1.6

1.9

2.2

4.7

4.1

Return on equity (%)

(6.4)

2.3

3.0

6.3

5.5

Year ended
March 31, 2013

Year ended
March 31, 2014

Year ended
March 31, 2015

Year ended
March 31, 2016

Year ended
March 31, 2017

In fiscal 2016, while public investment showedsigns of bottoming out, private capital investment
remained little changed due to the uncertain
outlook. The Sanki Engineering Group sought toactively increase orders by pursuing proposalbased sales while enforcing stringent cost control
and establishing systems for worksite support,
which raised the gross profit margin to a ten-year
high. Although net sales declined year-on-year,
the balance of orders carried forward surged,
enabling us to maintain the high levels of profit
achieved in the previous fiscal year.

• Profit Attributable to Owners of Parent(millions of yen)

5,327

8,135
6,880

7,500

4,698

1,763

2,680

3,146

2,246

2,283

2,282
Male: 2,002
Female: 280

2,309
Male: 2,022
Female: 287

2,339
Male: 2,041
Female: 298

8

7

0.74

0.69

(4,992)

Consolidated

Number of Lost Workday
Accidents*1

Construction sites of SankiEngineering

311Frequency of Accidents

Construction sites of SankiEngineering

0.29

0.98

Sanki Engineering Co., Ltd.

4,308

CO2 Emissions (t-CO2)

Waste Emissions (t)*3

Sanki Engineering Co., Ltd.*4

SANKI REPORT 2017

0.42

2013

FY2016 results (year-on-year comparison)−1,254 million yen (down 15.4%)−629 million yen (down 11.8%)

2014

2015

2016 (FY)Non-Financial Data
• Frequency of Accidents

2,339
2,246 2,283 2,282 2,309
Female
280

Male
2,002

Female287• CO Emissions (t-CO )
2

0.98

4,308

Female
298

0.74

Male
2,022

Male
2,041

2

4,571

4,235
3,711

3,902

0.69

0.50
0.29

8,961

4,571

13,333*1 Data shows the number of victims and serves as the basis of calculating the frequency of accidents.
*2 Data for the year ended March 31, 2015 have been retroactively revised.
*3 To enhance accuracy, data from the year ended March 31, 2013 onward have been recalculated.
*4 We began compiling consolidated data from the year ended March 31, 2017. (See data on page 68.)

06

6*2

2012

2012 2013 2014 2015 2016 2017 (FY)
Target
FY2016 results (year-on-year comparison)• Number of Employees

Number of Employees

2012 2013 2014 2015 2016 2017 (FY)
Target
FY2016 results (year-on-year comparison)• Ordinary Income (millions of yen)

30.00*3*1 Includes commemorative dividend of 5.0 yen for the 90th anniversary.
*2 Includes extra dividend of 12.0 yen. *3 Includes extra dividend of 10.0 yen.

Scope of Aggregation

2,818 2,951

1,350.08

1,328.60
16,012−497 million yen (down 7.6%)

2,461

26.46

7,000

Orders received: +2,609 million yen (up 1.4%) Net sales: −10,389 million yen (down 5.8%)

3,809(71.04)

6,509

2,391

Per Share Information
Earnings (loss) per share (yen)• Operating Income (millions of yen)

4,235

13,3803,711

14,424

3,902

15,904

2012

2013

2014

2015

2016 (FY)

2012

2013

2014

2015

2016 (year)

2012

2013

2014

2015

2016 (FY)FY2016 results (year-on-year comparison)

2016 results (year-on-year comparison)

FY2016 results (year-on-year comparison)

Ratio of Female Employees: up 2.5%

Down 0.05+191 t (up 5.1%)

We are carrying out various initiatives by setting
long-term goals for promoting the careerdevelopment of women. The number of womenin the workforce has continued to rise, in termsof both raw numbers and ratio to all employees.

We were able to reduce the frequency of
accidents by implementing various prevention
initiatives.

CO2 emissions rose slightly by 5.1% as a result ofactivities including energy conservation at offices.

SANKI REPORT 201707

History of Sanki Engineering
Sanki Engineering celebrated its 90th anniversary on April 22, 2015, representing nine decades of keeping pace with themodernization of Japanese industry. Under the Sanki Engineering Group Management Philosophy, “We create comfortableenvironments through engineering and widely contribute to social development,” the Company will continue to open neweras with the power of technology toward its 100th anniversary in 2025.

2025

Toward the 100th Anniversary• History of Sanki Engineering
1923

1925
1931
1933
1935
1941
1944
1945
1950

1958
1963

The Great Tokyo Earthquake strikes, and building
modernization drives up demand for building utilities, such asheating, ventilation and air conditioning, water supplies anddrainage, and electrical fixtures and fittings, and construction
technology advances.
On April 22, Sanki Engineering is established as a spinoff from the Machinery Department of the former Mitsui
Bussan, with capital of 500,000 yen and 12 employees.
Moves the head office to the Sanshin Building.
Opens a branch in Dalian, Manchuria.
Celebrates the 10th anniversary of its founding, with fivebranches, six field offices, three affiliates and around 300
employees.
The Pacific War begins; Sanki Engineering suffers a shortageof workers as well as materials due to tight control over the
distribution of goods.
Emergency metal collection campaigns start nationwide.
The Kawasaki and Tsurumi plants are designated militaryindustrial plants.
War ends.
The outbreak of the Korean War leads to a war-driven
economy, and the Japanese economy takes a favorable
turn. Expansion of demand for building constructionand equipment results in dramatic improvement in the
Company’s business performance.
Capital exceeds 1 billion yen.
Completes Sagami plant (currently the Yamato Engineering
Center), which tailors production equipment for conveyor
mass production.

1964
1971

1973
1980
1982
1990
1997
2000
2005
2011
2012
2015

2016

Participates in projects on the occasion of the 1964 Tokyo
Olympics, including the Yoyogi National Gymnasium and the
NHK Broadcasting Center.
The Environmental Agency is inaugurated. Sanki Engineeringdevelops a track record for waste incineration facilities andwater and sewerage treatment facilities and sets up theEnvironmental Administration office.
Spins off the sash business.
Establishes the Company Credos.
Builds the Technical Research Laboratory, equipped withbasic research facilities and large-scale experimental facilities
in Yamato City, Kanagawa Prefecture.
Bubble economy collapses.
COP3 conference in Kyoto adopts the Kyoto Protocol on
preventing global warming.
Opens the Shonan Training Center (Yokosuka City, Kanagawa
Prefecture) and strengthens human resource development.
Moves the head office to Nihonbashi.
Moves the head office to Tsukiji.
Launches the Smart Building Solution Business to provide
Smart Buildings with a focus on the energy-saving business.

1920s• Develops and installs a proprietaryincinerator for facilities in the Sanshin
Building.
• Establishes Toyo Carrier Industries together
with U.S.-based Carrier Engineering andlaunches the air conditioning business.
• Completes work on the Tokyo Office ofNippon Life Insurance Company (currently
Takashimaya Nihonbashi department store).

SANKI REPORT 2017

1980s
Opening the Way to a New Era with Advances inEnvironmental and Information Technology• Launches the information andcommunications business.
• Launches the facility systems
business to deal with officeintegration and moving.
• Develops environment-related
technology, including an
ice thermal storage system,
sewage advanced treatment
systems, and gasification andmelting furnaces.

1960s
A Manufacturer that Responds
to the Needs of the Times

Sanki’s Advanced Technology Bolsters a Construction Boom08

A Proactive Approach toTechnological Innovation• Completes work on Japan’s firstlarge-scale clean room at NEC’s
Sagamihara plant.
• Develops the world’s firstcompletely unmanned automatic
sorting system and airport baggage
handling system.
• Provides HVAC equipment forsatellite communication groundstations in the Middle East andother regions and builds automotive
testing equipment in Russia.

• Completes work on Japan’s first all-fluorescentlighting system in the Taisho Marine and Fire
Insurance Building.
• Becomes involved in night-soil treatment plantdisposal facilities in response to urban hygiene needs.
• Delivers a roller conveyor to the Japanese Antarctic
Research Expedition II.

1940s• Provides heating, plumbing, steel frame construction
and building materials for two major construction
projects: the Shiga manufacturing plant of Toyo Rayon(currently Toray Industries, Inc.) and the refrigerated
warehouse of Aomori Seihyo.
• Installs Japan’s first centralized air conditioning system
for an entire structure at Mitsui’s main building.

1950s

Established the Sanki Engineering Group Management
Philosophy.
Launched the long-term vision “Century 2025.”

Diversified and Expanded Businesses Leadto Greater Technological Competence

Laying the Base for TechnologicalCompetence by Meeting the Needs of the Era

Wide Range of Technological Innovations

90th Anniversary

1930s• Technological Progress

1970s• Starts manufacturing conveyors.
• Concludes sales contracts formachinery used in mining-related
chemistry with U.S.-based Dorr
Inc. and Oliver, Inc.
• Completes work on the mainbuilding of the Dai-ichi Life
Insurance Company, Japan’s firstbuilding with the special highvoltage power reception of 22 kV.

• Completes work on air conditioning, plumbing andelectrical systems for Japan’s first skyscraper, theKasumigaseki Building.
• Develops the standardized “6S sash” and gains the
top market share among steel sash manufacturers.

2000s
Toward Environmentally Friendly Technology• Develops a wide variety of energy-saving systems for various fields, including offices,
industrial plants, hospitals and data centers, to meet the increased needs for energy
saving and CO2 emission reduction.
• Begins to actively import technology from Europe and develops a number of major
technologies, including AEROWING and Trans Heat containers.

SANKI REPORT 201709

Sanki Engineering’s Value Creation
Guided by the “Sanki Standard” management philosophy, the Sanki Engineering Group strives to fulfill its mission ofrealizing all types of comfortable environments and contributing to the development of a sustainable society by creating
value at each step of the business process and in every business area.

Capital Resources

Business Activities

Value Created
Stakeholders

Broad Areas of Business
Natural Capital• Input such as energy and water
resources

Facilities Construction
Business

Machinery Systems
Business

Environmental Systems
Business

Social CapitalSocial Issues
Global environmental issues
Declining population
Limited resources and energy

SocialExpectations
and Needs
Energy conservation
Energy creation
Labor-saving solutions
Infrastructure maintenanceand upgrades• Orders received (consolidated):
185.8 billion yen• Reliability and a solid customer
base cultivated over 90 years• Members of subcontractor groups:
830 companies• Stable network of cooperation
with subcontractor groups
nurtured through longstanding
relationships of trust

Planning and
Basic Design

Renovation
and Renewal• Rich track record and highly
specialized technology nurtured
over a 90 years• 8 areas aligned with thecompany’s proprietary
technologies and businesses:
heating, ventilation andair conditioning; plumbing;electrical systems; ICT; control;
water and sewage treatment;
incineration and conveyance

DesignMaintenanceand Inspection

Financial Capital

Human Capital• Number of employees(consolidated): 2,339• Competent engineers andresearchers• Sales staff with close
relationships with customers

Construction

Medium-Term Management Plan
Compliance Declaration,
Code of Conduct and Action Guidelines
Management Philosophy Sanki Standard

Partners

Business
partners• Net sales (consolidated): 168.5
billion yen• Participation in PFI and DBO
projects• Support for customers resuming
business after the Great
East Japan Earthquake andKumamoto Earthquake

Shareholders
and investorsIntellectual Capital

Customers(clients)• Newly developed products andtechnologies• Registered patents (5 years):
180

Financial Capital• Cash dividends: 30.00 yen peryear• Enhanced profit margin: 3.4
points increase from fiscal 2014

Operation andManagement• Net assets (consolidated): 85.9
billion yen• Sound financial base

• CO2 reduction proposals: 345(consolidated)• CO2 reduction: 56,205 t-CO2₂(consolidated)• Contribution to achieving ZEB*

Social Capital

Human Resources
and Technology

Intellectual Capital

Natural Capital

Employees

A Better,
Sustainable
Society
Creation of
Comfortable
Environments

Localcommunities

Human Capital➡ Pages 20–22➡ Pages 46 and 47• Reinstatement after childcare
leave: 100% (non-consolidated)• Non-Japanese employees: 18(non-consolidated)• Project management technician(civil works, construction,
electrical construction, pipelaying work): 1,123 (nonconsolidated)➡ Page 4

Governments

NGOs andcitizen groups* ZEB: Net-zero energy buildings maintain comfortableenvironments while reducing annual energy
consumption to as close to zero as possible byenhancing energy saving performance using
solar power generation and other measures.

*1 Data on each capital resource are actual results for fiscal 2016
*2 Composed by referencing the International Integrated Reporting Framework of the International Integrated Reporting Council (IIRC)

10SANKI REPORT 2017

SANKI REPORT 201711

Overview of Our Businesses by Segment(Year ended March 2017)

Facilities Construction Business

Main Sales Items
HVAC Systems• HVAC systems• Industrial HVAC systems• Clean rooms• Environmental control facilities• Pharmaceutical and food
manufacturing facilities• Freezing and refrigeration• District heating and cooling plants• Nuclear power-related facilities

Plumbing and Drainage Systems• Plumbing system for water supply
and drainage• Kitchen systems• Disaster prevention systems

Electrical Systems• Electrical systems• Telecommunication systems• Communication-related facilities• Electrical civil engineering

Smart Building Solutions• Central monitoring and automatedcontrol systems• Crisis management (BCP) solutions• ICT systems• IP phone systems• Security systems

Net sales

141,567
million yen

Net Sales
Composition Ratio

84

Conveyance Systems• Lightweight conveyors• Distribution-related conveyors• Sorting devices• Automated warehouse

Facility Systems• Design for fit-out and relocation of
offices and workplaces• Consulting for project management

Social Issues and Value Provided
Issues• Global environmental issues• Energy resources• Aging facilities• Increased running costs• Securing human resources for
operations and management

Value• Comfortable spaces• Energy and resource conservation• Extended-life and longer-life facilities• Reduced life cycle costs• Improved asset value

Facilities Construction
Businessmillion yen

1%

Electrical
Systems
Business

13 %

29 %

Value
• Safe and secure product inspection• Labor-saving solutions• Response to declining birthrate andaging society• Comfortable work environment• Reduced running costs• Energy and resource conservation

Facility Systems
Business

168,512

million yen

Issues• Global warming• Energy resources• Aging facilities

Value• Energy and resource conservation• Extended-life and longer-life facilities• Improved asset value• Reduced running costs

8,192
million yen

Net Sales
Composition Ratio

6%

Net Sales*

5%

Machinery
Systems Business

Environmental
Systems
Business

36 %Main Sales Items

Social Issues and Value Provided

1,592

Issues• Eliminating product accidents• Improving productivity• Response to shortage of labor• Improving the work environment• Energy resources

Environmental Systems Business

Main Sales Items

Our real estate business includes operations in the areas of realestate leasing and building management. We are striving to expand
into higher value-added real estate while taking advantage of ourcurrent technology.

Net Sales
Composition Ratio

Social Issues and Value Provided

Industrial HVAC
Business

Building HVAC
and Plumbing
Business

Net sales

Material Handling Systems• FA systems• Clean conveyance systems• Material handling systems• Airport baggage and cargo handling systems• Medical handling systems• Handling information control systems

Net sales%

Real Estate Business

Machinery Systems Business

Main Sales Items

Real EstateBusiness

Waste Treatment• Waste incineration facilities• Landfill wastewater treatment
facilities• Sludge incineration facilities

Water Treatment• Water and sewage treatment facilities• General and industrial waste disposal andrecycling facilities• Sludge recycling facilities• Industrial wastewater and waste gas
treatment facilities• Plant facilities for the food and chemicalindustries

Social Issues and Value Provided
Issues• Global warming• Energy resources• Aging facilities• Constraints on final landfill sites• Water resources

Value• Energy and resource conservation• Extended-life and longer-life facilities• Appropriate waste disposal

Net sales

18,271
million yen

Net Sales
Composition Ratio

11%* Includes 499 million yen in other net sales and 1,611 million yen in elimination of inter-segment transactions.

12

SANKI REPORT 2017

SANKI REPORT 201713

Message from the President

We will enhance the quality of ourengineering to contribute to the creationof comfortable environments as thecompany of choice for tomorrow.
Tsutomu Hasegawa
President
Business Environment and Results for Fiscal 2016
Heading into a Gradual Recovery toward 2020
Sanki Engineering creates diverse benefits throughengineering, and its operations are broadly spread
across several social infrastructure domains, from the
Facilities Construction Business, which includes heating,ventilation and air conditioning, water supply anddrainage, plumbing, electrical systems, ICT and officerelocation, to the Machinery Systems Business, which
includes material handling systems and conveyors, tothe Environmental Systems Business, which includes
water and sewage treatment and waste incineration
facilities.
Meanwhile, engineering is a contract-driven
business, in which performance depends on the volume
of capital investments by clients in the manufacturing
and non-manufacturing sectors. Moreover, there are
the dual factors of foreign exchange fluctuations andeconomic trends, which present both opportunities andrisks. In terms of cost, fluctuations in the cost of laborand materials pose the greatest risk.
Looking back on the Japanese construction market
in fiscal 2016, while a sense of caution remained, capital
investment showed a gradual recovery. In construction
projects, public investment appeared to have bottomedout, and private investment showed little changed due
to an uncertain outlook. Demand for construction has
grown ahead of the Tokyo Olympic and Paralympic
Games in 2020 and is expected to gather speed fromfiscal 2017.
Under these circumstances, the Sanki EngineeringGroup launched the “Century 2025” long-term vision,

14

SANKI REPORT 2017

which covers the decade up to our 100th anniversary,and “Century 2025” Phase 1, our new three-year
medium-term management plan from fiscal 2016 to
fiscal 2018.
In fiscal 2016, orders received amounted to 185,880
million yen (up 1.4% year-on-year) and net sales were
168,512 million yen (down 5.8% year-on-year). We wereable to maintain profits at the high levels achieved in theprevious year, with an operating income of 6,012 million
yen (down 7.6% year-on-year), ordinary income of 6,880
million yen (down 15.4% year-on-year) and net incomeof 4,698 million yen (down 11.8% year-on-year).
Business Performance (Millions of Yen)
● Orders received■ Ordinary income● Net sales■ Profit (loss) attributable to owners of parent
179,598

165,800

171,496
168,295

173,398

183,270
178,901

8,135

154,658

3,146
1,763

168,512

6,880
5,327

2,680

185,880

3,809

4,698

2,461

△4,992
2012

2013

2014

2015

2016

(FY)

While net sales fell from fiscal 2015, we secured a steady level of stock projects
due to a significant increase in the balance carried forward. Our aggressive
efforts on thorough cost management and higher work efficiency led to aparticularly strong improvement in gross profit margin, enabling us to maintainprofits at the high levels achieved in fiscal 2015, despite the decline in sales.

SANKI REPORT 201715

Maintaining Profits at the High Levels Achieved in
Fiscal 2015
Although the Sanki Engineering Group reported declines
in profit items in fiscal 2016, we nevertheless enjoyeda considerable increase over fiscal 2014 and havemaintained high levels of profit. In particular, our grossprofit margin rose to its highest point in the past ten years.
Until fiscal 2014, profit margins tended to fall as net
sales rose. However, a change in our profit structure
became apparent in fiscal 2015 and has been sustained
through fiscal 2016.
Specifically, while we sought to win more orders by
aggressively pursuing proposal-based sales activities amid
improvements in the external environment, we also strived
to enforce thorough cost management and developmentof site support systems for onsite operations. As a result,Gross Profit Margins (%)
12.8 12.9

12.3

10.9
Average forthe past 10 years

12.8
11.4

13.4

10.7
10.0

3.9
1.8
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

(FY)

Under the strategy of enhancing quality regardless of project size, we
maintained a high level of performance despite year-on-year declines in net
sales and profit. Profitability improved, as evidenced by the rise in gross profit
margin to ten-year high levels.

we raised profitability and profit margins even as net
sales fell. Nevertheless, we are not adopting an overly
simplistic view that would label this an achievement. Yet
the fact that we were able to show high profit margins
while generally maintaining the same level of net sales
can be viewed as a sign of enhancing the quality of our
profit structure.
In fiscal 2016, we received a steady flow of orders
primarily for major projects, which led to a considerable
increase in the balance of orders carried forward.
Review of First Year of Medium-Term Management
Plan “Century 2025” Phase 1
Three Years to Refine Human Resources andTechnology to Enhance All Quality
Fiscal 2016 was the first year of the medium-term
management plan Phase 1, which corresponds to thethree-year period of raising quality under the longterm vision, “Century 2025.” The three key initiativesof Phase 1 are: (1) Strengthen Core Businesses, (2)Promote Growth Strategies and (3) Enhance the Sanki
Brand. By “quality,” we mean refining the quality of ourhuman resources and technology to enhance the qualityof management, which is then reflected in the level ofcustomer satisfaction, ultimately leading to “reliability,”
which is the theme of Phase 2.
In the first key initiative of strengthening our corebusinesses, we carried out site support initiatives for
cutting costs and raising operational efficiency in the
Facilities Construction Business. In concrete terms, wereduced costs by increasing the number of projects
handled by the Procurement Division, bolstered support

Long-Term Vision “Century 2025”

Phase 3 (FY2022–2025)4-year period to become thecompany of choice

The Company of Choice
The Sanki Engineering Group values
customers, not only the shareholders andcustomers from whom we directly receive
orders but all our stakeholders. They
include owners of facilities, end users,
subcontractors, suppliers and students,
all as customers. Over the next ten years,
we will strive to become the company ofchoice for all of them.

Increased reliability will encourage morecustomers to choose our company.

3-year period to enhance reliability
Superior quality generates customer
satisfaction, and customer satisfaction andconfidence leads to reliability.

Phase 1 (FY2016–2018)

Medium-Term Management Plan

3-year period to enhance quality

16

SANKI REPORT 2017

We will strive over the next ten
years to become the company ofchoice for customers by further
enhancing the quality andreliability we provide.

“Century 2025” Phase 1

We will enhance quality by refining our skills andwisdom and developing our human resources as afoundation for responding to change.
FY2016The Company
of ChoicePhase 2 (FY2019–2021)

Please refer to page 20 for more information.
FY2019FY2022

FY2025programs offered by the Site-Documentation Support
Center and invested in ICT for the site, which alleviatedsite manager workload. This enhanced the quality of
construction site management and consequently brought
about a positive cycle of fewer accidents and reworks.
In the Machinery Systems Business, we steadily
increased orders by developing “hybrid facilities” thatcombine robots with material handling technology suchas conveyors in response to labor-saving needs that havecontinued to expand in recent years. Looking ahead, theshrinking workforce associated with low birth rates and an
aging population will remain a persistent concern in Japanand is expected to broaden opportunities for businesses
that address labor shortages, such as conveyance systems
and robots.
Won First DBO Order for a Biomass Power Plant
Project
In Japan, public infrastructure such as water supply andsewage facilities and waste incineration facilities are aging
rapidly, and renewal and reform must be undertakenwith due consideration for the environment in line withthe future scale of the population and the budget. In thiscontext, we were able to win orders in our Environmental
Systems Business, including a DBO*1 waste incineration
facility project and a biomass power plant project. The
biomass power plant is particularly important, as it will
also serve as a test of our ability to maximize proprietary
technologies and expand into new business areas. Armedwith the latest achievement in stable operations, we
intend to seek orders for new projects and furnaces.
With respect to the second key initiative of promoting
growth strategies, we made steady progress, suchas winning orders and completing large-scale projects
that will contribute to our stock business as part of our
growth strategy for future business. Meanwhile, theLCE*2 business, in which we provide services throughout
the life cycle of a building, is a field that is expected togenerate stable demand, even as the population continues
to decline. In the years ahead, we will strive to achievesolid corporate growth by developing stock property
that corresponds to regional characteristics and industry
structure in our Facilities Construction Business, whileconsistently engaging in DBO and PFI*3 projects in ourEnvironmental Systems Business.

Changing Workstyles to Achieve Further Growth
The third key initiative of enhancing the Sanki Brand isdirectly connected with the theme of Phase 1, whichis to enhance quality by refining our technology andhuman resources. As a member of the Mitsui Group,
Sanki Engineering has been passing down the spirit ofplacing the utmost value in people for nearly 90 years.
This is the embodiment of the Sanki spirit of always
adopting the customer’s perspective, and enhancing
the Sanki spirit will lead to enhancing the Sanki Brand.
If all executive officers and employees share and renew
their awareness of the value of the Sanki Brand until it
becomes the very fiber of their being, we will be able toraise the quality of the actions and work undertaken byeach individual.
Meanwhile, we are seeking to foster a comfortableworking environment for diverse employees toward
becoming the company of choice, our long-term vision
for 2025. This is essential as we look ahead to a futurethat requires more efficient workstyles. We plan tocontinue reviewing our systems so that both employees
and the company can achieve further growth beyond
fiscal 2017.
Developing Programs for Creating a Comfortable
Working Environment (FY2016–2017)• Implemented the “Smile Project” for reducing long
working hours• Launched the “Sanki Smile Day” (our own “Premium
Friday” initiative for leaving work early)• Introduced tools for supporting overtime management• Implemented a telecommuting program• Introduced a Return to Work program• Enhanced childcare or elderly care leave program• Opened a “Women’s Hotline”• Held a Sanki Ladies’ Roundtable (exchange of views
between working mothers)*1 Design Build Operate: A process through which the design, building,operation and maintenance of a project is awarded to a private enterpriseas a bulk order.
*2 Life Cycle Engineering: A business concept of the Sanki EngineeringGroup. Throughout the life cycle of a building, we provide services fromnew construction, repair and maintenance to renewal and reconstruction.
*3 Private Finance Initiative: Private money and expertise are used in thedesign, construction, maintenance and management of public facilities toprovide public services.

SANKI REPORT 201717

We have already completed the design forreorganizing the production plants of the Machinery
Systems Business, which will be carried out to rebuild
aging facilities. The plan will free up 41,300 m2 of land,
which will be leased to Nippon Life Insurance Company
under an agreement to develop a large-scale logistics
facility. We expect to earn a stable flow of revenue fromthe effective long-term use of this asset.
Functions of the Sanki Techno Center
Enhancement
and successionof technology
and skills

Toward the Second Year of Medium-Term
Management Plan “Century 2025” Phase 1
Steadily Promoting the STeP Redevelopment Project
The Sanki Engineering Group is promoting the Sanki
Yamato Site Redevelopment Project, “STeP (Sanki
Techno Park) Project,” to build the foundation forachieving its long-term vision “Century 2025.” This
redevelopment project primarily targets land andbuildings owned by the Group in Yamato City, Kanagawa
Prefecture, toward constructing the Sanki Techno
Center, reorganizing the manufacturing plants for the
Machinery Systems Business, and effectively using
corporate assets. In fiscal 2017, the second year of themedium-term management plan Phase 1, the STeP
Project will accelerate toward its opening in the autumn
of 2018.
The Sanki Techno Center is being constructedwith the combined functions of education and training
and R&D to achieve the goal of the current mediumterm management plan to enhance the quality of ourtechnology and human resources. The center will beequipped with a variety of training rooms, including alarge underground space for training employees using
actual equipment and a room for conducting integrated
training on technologies, skills and safety. In addition,
the center will provide ample accommodations so it
can be used as a place where technology and skills
are improved and handed down to human resources
including staff at subcontractors. We will also overhaul
the Technical Research and Development Institute asa base for developing next generation technologies
and seek to establish it as an open site of research forconstruction sites around Japan and for people outside
the company to engage in open innovation. In addition,
the center is scheduled to be used as a base for regional
contribution under a cooperation agreement on disastermanagement with Yamato City.

18

SANKI REPORT 2017

Technology
training
facilities

Organic R&D + Open
Innovation

Safetyeducation
facilities

Technical
Research andDevelopment
Institute

Used bytrainees asaccommodation
during training Accommodation

Integrated training ontechnologies, skills
and safety

Showroom

Facilities tocontributeto the local
community

Publicity

Acceptance of evacuees
during a disaster

Promoting Globalization to Expand Business
Promoting overseas business development requires afocused effort beyond the current fiscal year. We havereorganized the Overseas Operations Control Office
into the International Business Division to establish asystem for bolstering our overseas businesses and will
also formulate a medium- to long-term plan to expand
our operations. We will develop a concrete strategy for
globalizing our business to maximize the strength of ourinvolvement across a broad range of social infrastructure
and provide solutions suitable for each region.
ESG Initiatives
To Become a Better Company through Our Core
Business
Under the medium-term management plan “Century
2025” Phase 1, the Sanki Engineering Group aspires tocontribute to a sustainable society through an organic
integration of its management and CSR by incorporating
the ESG Policy into its management strategy.
In E (environment), the Sanki Engineering Groupwill seek to protect the environment, conserve energy
and realize a low-carbon society through engineering,which represents fields that are being consistently
pursued by our three core businesses of Facilities
Construction, Machinery Systems, and Environmental
Systems. S (Social) calls on us to be aware that weare a member of society and act accordingly, as

expressed in our Management Philosophy, and it
embodies our initiatives for meeting various social
expectations including workstyle reform and diversity,and serving social needs such as a more comfortableenvironment. G (Governance) is the foundation thatsustains our business activities. We seek to strengthen
our systems to ensure the transparency, validity andagility of management with an emphasis on giving toppriority to the placing of significance on communicationand mutual respect, as declared in the Management
Philosophy.
In addition, to follow through on the Corporate
Governance Code we began applying in June 2015,
we established the Sanki Engineering Corporate
Governance Guidelines in December of the same
year. By practicing these guidelines we will continue
to strengthen our corporate governance systemand engagement with shareholders and investors toenhance the medium- to long-term corporate value of
the Group.
Appropriately Returning Profits to Shareholders
Maintaining Stable Dividend Payments
Sanki Engineering considers the appropriate return ofprofits to shareholders as a key management concern.
Realizing that dividends form the basis of our policy ofshareholder returns, we consider the balance between
sustainable corporate development and returns toshareholders, while consistently seeking to provide
stable dividends as the basis of our policy and toprovide additional dividends in accordance with ourfinancial performance. We will continue to adhere to
this policy and will examine comprehensive and stable
methods of shareholder returns, in light of demands
from shareholders, investors and society at large.
Furthermore, we retired 3 million shares of treasury
stock in May 2017 and plan to acquire another 3 million
shares, valued up to 4 billion yen, within fiscal 2017.

Looking Ahead to Our First Centenary
Broadly Contributing to Social Development
through the Power of Engineering
Enhancing the quality of our human resources andtechnology is vital if we are to become the companyof choice by the time we celebrate our first centenary
in 2025. We would also like to add that people nurturetechnology, and as we pursue further advances intechnology, people must grow as well. Therefore, thekey starting point for becoming the company of choice
is to consider human resources and technology as one
and to enhance the value of both at the same time.
We have been guided by our Management
Philosophy, “We create comfortable environment
through engineering and widely contribute to social
development.” It should be noted that the Paris
Agreement came into force in November 2016, andmany companies are beginning to respond to the callof the Sustainable Development Goals (SDGs) adopted
by the United Nations summit meeting, accelerating
the trend of resolving universal social issues, such as
reducing greenhouse gases. These developments havea lot in common with our Management Philosophy.
We have been continuously creating new social
value by facing social issues, including energy
conservation, energy creation, labor saving andautomation across broad business areas related tosocial infrastructure. We intend to steadily enhance thequality of our human resources and technology and earn
the trust of our customers for reliability by overcoming
each challenge through the power of engineering so
we can hold our heads high as we celebrate the coming
centenary as the company of choice.

Dividend Payments
FY2013

FY2014FY2015FY2016

Interim divided (yen)

7.5

7.5

9.0

10.0

Year-end dividend (yen)

7.5

12.5

21.0

20.0

Annual dividend (yen)

15.0

20.0

30.0

30.0

Consolidated payout
ratio (%)

56.7

52.2

35.8

40.6

Year-end dividend for FY2014 includes 7.5 yen in regular dividend and 5.0 yen
in commemorative dividend for the 90th anniversary.
Year-end dividend for FY2015 includes 9.0 yen in regular dividend and 12.0 yen
in extra dividend.
Year-end dividend for FY2016 includes 10.0 yen in regular dividend and 10.0 yen
in extra dividend.

SANKI REPORT 201719

Progress in the Medium-Term Management Plan
▶Medium-Term Management Plan “Century 2025” Phase 1 (FY2016–2018)
Key Initiatives
Strengthen Core Businesses
Improve component technologies
and achieve stable growth▶First Year Results (1) Progress in Business Performance

Phase 1 = Quality

Point

Refining Technical Skills and Human Resources
to Further Enhance Quality
Refining Technical Skills• Make further improvements in component technologies
to meet diverse needs

Enhancing Reliability
in Phase 2• Enhance productivity and efficiency to achievesustainable growth

Promote Growth Strategies
Pursue future growth in the areasof technology and business• Maintained a high level of performance despite year-on-year declines in net
sales and profit• Improved profitability profit margin at ten-year high➡ Achievement under the Medium-Term Management Plan “Century 2025”
Phase 1 goal of raising quality• Steady growth in Group companies• Maintained the labor force by focusing on hiring• Paid an ordinary dividend and extraordinary dividend

Refining Human Resources(Unit: billion yen)

• Continually cultivate human resources that possess the
Sanki spirit our customers value• Nurture a corporate culture that encourages employees
to act with a deep respect for social norms

Enhance the Sanki Brand
Develop human resources thatpossess the Sanki spirit

Summary of Business
Performance
Business results for fiscal 2016, the firstyear of the Medium-Term Management
Plan “Century 2025” Phase 1, are shownat right. In particular, all profit margins
exceeded the plan.

Priority Issues and Strategies

Indicator

FY2016 (plan)

FY2016 (actual results)

Difference (actual results–plan)

Net sales

185.0

168.5

−16.5

Gross profit(ratio)22.0 (11.9%)

22.5 (13.4%)+0.5 (+1.5pt)

Operatingincome (ratio)

6.5(3.5%)

6.0 (3.6%)−0.5 (+0.1pt)

Ordinary
income (ratio)

7.0(3.8%)

6.8 (4.1%)−0.2 (+0.3pt)

We will address our priority issues by promoting businesses and pursuing initiatives
based on effective strategies to establish a sound foundation for growth.

Issue Passing on technical skills
We will renovate the Sanki
Strategy Yamato Building (Yamato City,
Kanagawa Prefecture) and reopen it as
the Sanki Techno Center. This will be acomprehensive training facility that impartsand develops the technical skills at the
backbone of the Sanki Engineering Group.

Issue

Anticipating the age of
maintaining building stock

Developing next-generation
technologies

Issue

We will give a boost to the LCE
Strategy business, as described in SANKI
VITAL PLAN 90th. This will bolster ourbusiness foundation, allowing us tomaintain sound corporate management,even if the construction market
experiences a slowdown.

We will establish a new
Strategy R&D base inside the Sanki
Techno Center. Here we will develop
technologies for the next generation
while keeping up with advances in newtechnologies such as robotics, IoT, andartificial intelligence.

Key Initiatives—Fiscal 2016 Results and Fiscal 2017 Policies
Major results for fiscal 2016 and policies for fiscal 2017 regarding the key initiativesof the Medium-Term Management Plan “Century 2025” Phase 1 are as follows.

Fiscal 2016 Results

Fiscal 2017 Policies

Strengthen Core
Businesses• Facilities Construction- Increased number of projects handled by theProcurement Division- Expanded worksite support programs- Began Design & Engineering Support Center
operations• Machinery Systems- Hybrid facilities• Environmental Systems- New dehydrator, biomass power plant and DBO
projects for a waste disposal facility• Facility Systems- Projects related to reorganization of regionalbanks, redevelopment of Tokyo metropolitan area

• Facilities Construction- Review work styles of office workers,
expand worksite support operations• Machinery, Environment and Facility
Systems- Continue initiatives

Promote Growth
Strategies• Set up the International Business Division• Won large-scale orders to build
future stock• Developed a visualization system for stock
projects• Develop IoT systems• Develop stock properties• PFI and DBO projects

Enhance the Sanki
Brand• Developing programs for a more comfortableworkplace and welfare benefits• Held exchange of views with the president (30meetings, 240 participants)• Held the Sanki Ladies’ Roundtable (exchange ofviews between working mothers)• Reconfirm Sanki Brand values• Continue initiatives to enhancecommunication(Unit: billion yen)

Financial Performance Targets
By promoting the above initiatives, wewill seek to maintain steady financial
improvement and stable growth toward
substantially enhancing our corporate value.

ESG Policy
To practice management with asustainability mindset, we will uphold
our ESG Policy in efforts to enhance
our corporate value in the medium tolong term.

20

SANKI REPORT 2017

Indicator

FY2016 (results)

FY2017 (revised plan)

FY2018 (plan)

Net sales

168.5

180.0

195.0

22.5 (13.4%)

24.0 (13.3%)

24.0 (12.3%)

Operating income (ratio)

6.0(3.6%)

7.0(3.9%)

7.5(3.8%)

Ordinary income (ratio)

6.8(4.1%)

7.5(4.2%)

8.0(4.1%)

Gross profit (ratio)

Environment

SocialGovernance• Renew awareness of how
the Sanki Engineering Group’sbusinesses directly contributeto protecting the global
environment• Continue the “SANKI YOU EcoContribution Point” donation
activity• Implement the Sanki Engineering
Corporate Governance Guidelines• Develop systems and productsthat have less impact on theenvironment• Create better working
environments by addressing
long working hours andexpanding the role of womenand the elderly• Enhance the Group risk
management system• Maintain and develop a
corporate culture of ethicalconduct based on compliancewith rules of conduct

SANKI REPORT 201721

▶First Year Results (2) Progress in ESG Initiatives

Point• Develop products and technologies that contribute to reducing society’s impact
on the environment• Develop a working environment centered on work style reform• Bolster the workforce by promoting diversity• Formulate and announce management strategies• Further strengthen the governance system

ESG Initiatives—Fiscal 2016 Results and Fiscal 2017 Policies
Major results for fiscal 2016 and policies for fiscal 2017 regarding the ESG Policy of the Medium-Term Management Plan “Century
2025” Phase 1 are as follows. We strive to create value for society and to enhance our corporate value through our efforts on ESG.

Fiscal 2016 Results

Fiscal 2017 Policies• “SANKI YOU Eco Contribution Point” (Group)- Donations for fiscal 2016 totaled 3,532,900 yen- Cumulative total of donations since fiscal 2010 reached
13,378,500 yen, equivalent to CO2 reductions of 133,785 tons

E

22

• Development of Products and Technologies that Contribute to
Reducing Environmental Impact- Facilities Construction
1. ABENO HARUKAS building
55th Society of Heating, Air-Conditioning and SanitaryEngineers of Japan (SHASEJ) Award
2. Nippon Life Insurance Company East building
55th SHASEJ Award
27th Institute of Electrical Installation Engineers of Japan Award- Machinery Systems
Reduced electricity consumption of light-duty belt conveyor by
25% compared with conventional conveyors- Environmental Systems
Reduced CO2 emissions of strategic products by 50%, compared
to conventional products• Group- “SANKI YOU Eco Contribution Point”• Machinery Systems- Focus on marketing the S-CON®MINI
series• Environmental Systems- Expand marketing of the strategic
products

S• Promotion of the “Smile Project” for work style reform- Set overtime targets and launched “Sanki Smile Day” to reduce
long working hours• Enhanced programs for supporting work-life balance to create acomfortable workplace• Promoted diversity- Number of non-Japanese employees tripled on a nonconsolidated basis and increased by 70% on a consolidated basis
compared to fiscal 2011

• Continue to enhance programs• Confirm effectivenessG• Formulation and announcement of the Long-Term Vision andMedium-Term Management Plan
• Further strengthening of the governance system- Added one more outside director- Began a self-assessment by board members• Continue initiatives for ensuring better
governance

SANKI REPORT 2017

Business Report
SANKI REPORT 201723

Facilities Construction Business
Sanki Engineering is creating facilities construction that is friendly to both people and the environment through systems thatare convenient, comfortable and efficient and also save energy. We continue to aggressively pursue this business and its
global expansion while developing unique new technologies.

• Net Sales and Net Sales Composition Ratio for Fiscal 2016

• Orders Received (billions of yen)
136.1

million yen

141.5

128.6

A notable aspect of our business performance in fiscal
2016 was that we achieved significant growth in profit,
even as orders received and net sales declined. We
improved our profit margin by emphasizing profitability
in accepting orders and managing construction tostringently manage costs at each worksite, while
promoting initiatives to raise quality.
In fiscal 2016, orders received fell 3.8% year-onyear to 146,612 million yen, and net sales declined
5.6% year-on-year to 141,567 million yen. Althougheach profit item fell somewhat short of the high levelsof fiscal 2015, they rose significantly compared to fiscal
2014, thereby maintaining high levels of profit. We
have maintained the number of orders for large-scaleconstruction projects at the same level since fiscal 2014as a result of large-scale redevelopment projects, mainly
in metropolitan areas, and robust capital investments
by manufacturers. The surge in balance carried forward
Major Projects• Sumitomo Besshi Hospital building: HVAC systems (Niihama
City, Ehime Prefecture; completed in July 2016)• Ikedamohando Co., Ltd. second production plant: HVAC
systems (Nakaniikawa-gun, Toyama Prefecture; completed in
November 2016)• Yunohama Hot Spring Source Facilities Co., Ltd.: Large-scale
CO2 reduction project for the Yunohama area (Tsuruoka City,
Yamagata Prefecture; completed in February 2017)(numerical forecast at start of fiscal 2017)

Risks

Business Opportunities• Labor shortage, aging workforce• Fluctuations in foreign exchange and rise inmaterial prices caused by uncertain international
political environment• Expanded regional disparities• Need for global environmental action due to
growing climate change risks (execution of COP
21 Paris Agreement)• Strong response and technical expertise cultivated through a 90-year trackrecord in the Facilities Construction Business

2014

2015

2016 (FY)

2012

2013

2014

2015

2016 (FY)is expected to contribute to net sales and profit in andbeyond fiscal 2017.

Outline of the Medium-Term Management
Plan “Century 2025” Phase I
The market environment for the Japanese constructionindustry remains favorable amid a recovery in public
works projects related to the 2020 Tokyo Olympic andParalympic Games and Abenomics, and an increase incapital investment by manufacturers due to the weakyen. Demand for construction is expected to remainhigh beyond 2020 due to the need for equipment
upgrades in buildings dating from the construction
rush of the bubble economy days and replacementof buildings constructed during the period of rapid
economic growth. Meanwhile, the aging of engineers
and skilled workers has led to a serious labor shortage,
raising the need for labor saving measures such as
robotics technologies.
Given this business environment, we must secure
profit for our Facilities Construction Business bystrategically balancing our construction capabilities
against the orders we receive on the back of robust
demand and reliably completing the orders we receive.
In addition, we must accurately understand customer
needs while enhancing our construction abilities andstrengthening employee education on component
technologies in order to establish an internal structure
capable of responding to innovative technologies such

million yen

Basic Strategies for Fiscal 2017

Sanki Engineering’s • Total engineering that integrates a broad range of solutions across businessfieldsStrengths

2013

148,200

Sanki Engineering’s • Developing new technologies and construction methods to boost efficiency andproductivity
Challenges• Strengthen total engineering
competency• Bolster and expand areas for the Facility
Systems Business• Bolster overseas business• Improving the workplace environment and working conditions to retain our workforce

as IoT (Internet of Things). Moreover, we must promote
LCE (life cycle engineering) in anticipation of a future
market contraction. We intend to actively present
proposals for properties in addition to proposals for new
customers and new construction projects.
In our Facility Systems Business, we will strengthen
our sales and production systems to expand ourbusinesses, and formulate strategies for leveraging
our strengths in instrument and control engineeringand network systems engineering in anticipation ofredevelopment projects arising from a reorganizationin the regional banking sector and hosting of the Tokyo
Olympic and Paralympic Games.

Facilities Construction Business

Summary of Results for Fiscal 2016

SANKI REPORT 2017

143.6

151.1 149.9

84%
2012

24

150.0 152.4 146.6

Net Sales Target for Fiscal 2017Market Environment• Construction demand ahead of the 2020 Tokyo Olympic and Paralympic Games• Ongoing demand for construction, including replacement demand for buildings
constructed during Japan’s period of rapid economic growth• Nationwide labor shortage resulting from a shrinking workforce• Proliferation of technological innovation, including robotics, IoT and artificial intelligence

Business Report

141,567

143.8• Net Sales (billions of yen)In the Facilities Construction Business, wewill improve on the management methods andimprovement strategies that were effective under
the previous medium-term management plan whilefurther promoting the “Smile Project,” a Company-wide
initiative for reducing long working hours, with the goalof expanding business results by refining work styles.

Progress Report on Medium-Term
Management Plan “Century 2025” Phase I
In fiscal 2016, Phase 1’s first year, we actively
sought orders for large-scale projects and completed

Progress Report for Fiscal 2016 and Plans for Fiscal 2017
Key Initiatives

Progress Report for Fiscal 2016

Plans for Fiscal 2017

Strengthen Core
Businesses• Implemented measures for reinforcing sales capabilities, such as distributing a sales
manual, organizing training and enhancing sales information tools• Enhanced construction capabilities and profit margin by improving worksite support
operations• Promoted the building of a stock-based business through LCE-oriented proposals• Continue measures for reinforcing sales capabilities• Review the work styles of office workers and expand
worksite support operations

Promote Growth
Strategies• Promoted total engineering by strengthening internal collaboration• Created the International Business Division• Improved proposal-making capabilities, strengthened response and raised the
productivity of the Facility Systems Business• Take on the challenge of new areas and newtechnologies by further promoting internal
collaboration• Expand the scope of the facility systems business

Enhance the Sanki Brand• Established an understanding of the Sanki Engineering Group Management
Philosophy, Sanki Standard• Systematically trained younger employees• Promoted the acquisition of qualifications• Create a working environment to secure labor andfurther enhance working conditions

SANKI REPORT 201725

Focuscontrol engineering, we expanded the scope of our sales
activities from specific clients to property managementcompanies and architect offices, generating profit byactively presenting technical proposals and reviewing
costs.

Plans for Fiscal 2017

Reinforce the Total Engineering Functions
As of April 1, 2017, we created the Engineering
Integration Office by transferring and integrating theoperations of the Energy Solutions Center and the
Design Support Center of the Technical Administration
Division. Our aim is to strengthen our total engineeringfunctions based on internal collaboration and expand
worksite support to take on the challenges of new areas
and technologies.
Bolster and Expand Areas for the Facility Systems
Business
We will continue to focus on design planning andmanagement consulting related to the construction
and relocation of workplaces. In addition, we will seek
to expand our scope of business by emphasizing ouroverall competencies, including our instrument andcontrol capabilities for creating comfortable officeenvironments based on a centralized monitoring
system, as well as our network systems infrastructure
capabilities for raising productivity through the use of
ICT.
Strengthen the International Business
Led by the International Business Division, set up on
April 1, 2017, we will make the enhancement as well as
the company-wide unified deployment of the overseas
business through the integrated management of ouroverseas Group companies, including the Plant andMachinery Business.

26

SANKI REPORT 2017

GINZA PLACE
Value Provided
by SankiEngineering• A proprietary construction method that maintains the building’s design and allows it to blend into its surroundings• Service water operations that continue to operate even in the event of a breakdown• Highly reliable construction process in which quality is ensured through self-inspection

GINZA PLACE, which opened in September 2016
on a corner of the Ginza Yonchome intersection,
is a commercial complex that houses showrooms,
restaurants and coffee shops. Sanki Engineering
was responsible for setting up the building’s HVAC
and hygiene facilities.
The building boasts a beautifully designed
exterior that matches its surroundings. In
constructing the HVAC facility, we came up withcreative ideas to avoid affecting the planned design.
This involved making adjustments so that the air
supply and exhaust vents on the outer walls werecompletely hidden behind the exterior paneling.
With respect to the ventilation method, we used
type 1 ventilation based on a mechanical method of
air supply and exhaust, and type 3 ventilation basedon a mechanical method for exhaust and a natural
method for air supply, depending on the specificpurpose. For the air conditioning system, we
installed packaged energy-saving air conditioners
with heat pumps. A service water supply system
was constructed to provide a continuous supplyof water based on the pressurization water supply
method, in which three pumps operate in rotation.
The quality of the construction process was
safeguarded due to the creation of self-inspection
records to facilitate consistent inspections for thesame items and from the same perspective. The
construction work was highly reliable, thus ensuring
the security of business owners for many years
to come.

Water receiving tank installed in
the machinery room on the second
basement floor

Facilities Construction Business

Boost Sales Capabilities and Raise the Efficiency of
the Design Structure
We will utilize the Smile Project work reforms as anopportunity to review the work styles of office workers,
maintain initiatives for bolstering sales capabilities
and expand operations for supporting worksites. Also,
we will continue to strengthen the design support
system to provide nationwide branches with support
for their design operations, offer assistance and followup on specialized design needs, and develop humanresources.

HVAC and Hygiene Facilities that Ensure Safety and Comfort

Business Reportconstruction to build stock for the future while alsopresenting LCE proposals. In addition, we pursued
diversified measures to support worksites toward
reducing the burden of onsite operations and ensuring
reliable construction work.
Specifically, we increased support from theProcurement Division for purchasing operations,
expanded operations of the Site-Documentation Support
Center and distributed tablet devices to onsite staff toboost operational efficiency and overall work quality.
Meanwhile, the Design Support Center, established infiscal 2016, became fully operational, providing branch
and branch offices with support in the areas of sales,
design and pre-commissioning adjustments. In sales,
we distributed a sales manual, organized training toreinforce sales capabilities and enhanced informational
tools by upgrading our sales support system.
Furthermore, strategy meetings were held involving
the Facilities Construction, Machinery Systems andEnvironmental Systems business divisions to exchange
information on sales and technology and thereby bolster
total engineering capabilities across the Group.
With respect to the Facility Systems Business,
which offers planning and design for the construction
and relocation of workplaces, we received more orders,primarily from the financial sector, by adding risk control,
security and BCP features to our proposals. In network
systems engineering, we reinforced our consulting
operations mainly for major non-Japanese IT firms andother non-Japanese financial and services companies
by harnessing our strengths in responding to IT projects
and our information technology. In instrument andSprinkler pumps installed on the second
basement floor

Outdoor packaged air
conditioners installedon the roof

Building description• GINZA PLACE

Sanki Engineering’s role
• Construction of HVAC and hygiene facilities

SANKI REPORT 201727

Machinery Systems Business
Sanki Engineering provides material handling systems that correspond with customer needs and challenges in supply chain
management, and we also address issues facing society through the development of technology.

• Net Sales and Net Sales Composition Ratio for Fiscal 2016

• Orders Received (billions of yen)
10.8

5%

Major Projects• Production line for organic EL panels (completed in December
2016)• Production line for lithium batteries (delivered in March 2017)• Automatic assembly system for foldable containers (developedin March 2017)• Double speed chain conveyor (developed in March 2017)

Double speed chain conveyor

28

SANKI REPORT 2017

9.9
9.2

8.1

8.1

5.7

Risks

Business Opportunities• Delay in developing products for growthmarkets (logistics, online shopping, medicine,
pharmaceuticals, etc.) may lead to missed
opportunities for orders• Intensifying price competition for standard
equipment business• Focused effort to develop products with strong
market demand by leveraging the characteristic
strengths of the business division• Expanding demand for labor saving andautomation at non-manufacturing industries

multiple businesses• Stable, long-term relationships with valuable customers

2014

2015

2016 (FY)

2012

2013

2014

2015

2016 (FY)Sanki Engineering’s • Accurately understanding customer needs and strengthening technologicalresponse
Challenges• Expand sales of hybrid facilities• Reconstruct production system• Expand sales to non-manufacturingindustries• Reconstruct production system to improve productivity

Outline of the Medium-Term Management
Plan “Century 2025” Phase I

Progress Report on Medium-Term
Management Plan “Century 2025” Phase I

In the business environment surrounding machinery
systems, labor shortages caused by the economic
recovery and anticipation of a diminished future
workforce due to a declining birthrate have given rise to
the need for automation and labor savings, a trend thatis spreading from manufacturing to non-manufacturingindustries, and we are expected to quickly develop
proposals and deliver systems that incorporate robots.
To achieve continuous growth in this context, it
is essential that we accurately understand customer
needs and strengthen our technological responsivenesswhile also reconstructing our production system. We
are seeking to reform the structure of the Machinery
Systems Business to ensure stable and lasting profit byreplacing the corporate goal of enhancing quality over
the three-year period with establishing a solid foothold
under the following business strategies.

As an overall direction, we endeavored to strengthen
our core business by expanding sales of standard
conveyors to ensure steady future profit. To promote
our growth strategy, we continued to develop hybrid
facilities, a proven strategic product that combines
robots and conveyors, as a solution to the labor saving,
automation needs caused by the shortage of workers.
As a result, we were able to increase the numbers ofboth projects and orders received. The following is asummary of our progress in fiscal 2016.

(1) Capture a greater share of the market for standard conveyors(2) Expand sales of hybrid facilities that combine
robots and conveyors(3) Disseminate the Sanki brand and increase market
share in non-manufacturing industries(4) Develop innovative products and enhanceengineering capabilities(5) Improve productivity by creating an efficient
production system

million yen

Basic Strategies for Fiscal 2017

Sanki Engineering’s • Sales capability sustained by nationwide network of agent shops• Ability to respond to specialized needs based on technological capability andStrengths

2013

10,000Machinery Systems BusinessIn fiscal 2016, while the pace of capital investments
in industrial machinery remained steady, the delay in alarge-scale project of a major customer caused orders
received to fall 21.1% from the previous year to 8,130
million yen and net sales to decrease by 11.1% yearon-year to 8,192 million yen. However, net sales ofstandard equipment increased 10.0% on the year,
primarily due to robust demand for light-duty belt
conveyors.

9.8

6.5

2012

Summary of Results for Fiscal 2016

(numerical forecast at start of fiscal 2017)

Business Reportmillion yen

Net Sales Target for Fiscal 2017Market Environment• Labor shortage raising the need for labor savings by making full use of robots and IoT• Increased private capital investment as manufacturers move plants back to Japan

10.3
8.4

8,192

• Net Sales (billions of yen)

(1) We sought to expand our share in the market
for environmentally friendly standard conveyors
that reduce energy consumption by increasing
the number of sales bases and strengthening acommunity-based sales structure.
(2) We reviewed our sales organizational structureand established a dedicated group to provide a
rapid response focused on hybrid facilities thatcombine robots and conveyors, enabling us torespond to many business inquiries. Moreover, we
further enhanced the Industrial Robot Utilization
Center, set up at the Yamato site in fiscal 2014, torespond more promptly to customer needs for a

Progress Report for Fiscal 2016 and Plans for Fiscal 2017
Key Initiatives

Progress Report for Fiscal 2016

Plans for Fiscal 2017

Strengthen Core
Businesses• Expanded the market for standard products such as conveyors• Enhanced the efficiency of production by outsourcing operations to companies inJapan and overseas• Build a community-based sales structure• Develop products for logistics operations

Promote Growth
Strategies• Increased orders received for hybrid facilities by pursuing market strategies thatmaximize strengths• Formulated a reconstruction plan for production facilities and completed the design
for a new plant• Strengthen our alliance with external system
integrators• Facilitate the continuation of business during therelocation to a temporary production plant

Enhance the Sanki Brand• Promoted the division slogan “meeting the needs expressed by the customer”• Address customer needs through updated products
and new product development• Emphasize building relationships of trust withcustomers

SANKI REPORT 201729

FocusPromoting Total Engineering
We will develop closer internal and external collaboration
between sales information and technological expertise
to enhance our engineering capabilities.
Reconstructing Manufacturing Functions
We will reconstruct our manufacturing functions in linewith progress made in our STeP project, to select andconcentrate products in anticipation of an expandedbusinesses related to hybrid systems.

In fiscal 2017, the second year of “Century 2025” Phase
1, we will implement plans in line with the previously
mentioned business strategies, with an emphasis on
the following five points.
Promoting Community-Based Sales
We will bolster our sales base to promptly respondto customer needs and win more orders for standard
conveyors as well as other equipment.
Promoting the Hybrid Facilities Business
To handle hybrid facilities, we will train and increase
our system integrator (SI) sales force and reinforce
our alliances with external SI companies. We will also
engage in solution-based sales by effectively using
the Industrial Robot Utilization Center to conductconveyance experiments that will enable us to identify
problems and propose solutions. By doing so, wewill enhance the customer’s sense of security andsatisfaction toward wining more orders.
Enhance the Lineup and Bolster Products for
Logistics Operations
We will enhance the lineup of products for nonmanufacturing industries, such as new sorting systems
and high-speed roller conveyors, to expand business.

30

SANKI REPORT 2017

KIREI series wide-width
conveyor (developed in
March 2017)

Shuttle Conveyor
Value Provided
by SankiEngineering• Contribution to saving labor and energy and raising productivity at a food production plant• Capacity to handle hard and soft products (from canned food to cookie dough)• Superior structure for maintenance and hygiene

In food production plants, objects carried
by a single row of conveyors must be massprocessed in an oven or freezer, requiring
several rows of conveyors. To meet thediverse needs and requirements of customers,
we developed the Shuttle Conveyor, which
automatically expands to match the broader
width of the next conveyor onto which theobjects are transferred. Our concept was
to meet the needs of food production sites
with the following features: (1) the capacity
to handle soft objects that cannot be handled
by robots, (2) a stainless steel body that is
resistant to corrosion and can be washedusing water, and (3) a hygienic structure thatallows for the removal of the belt. Applications
include: (1) random settings for the transfer
pitch and count per array, (2) sorting to several
lines, (3) side-tracking of defective products,(4) securing a passage along the line, and (5)placement of products into cases.
Many inquiries for the Shuttle Conveyor
were received during the development stage,
and we are accumulating a steady trackrecord of delivery. In addition to the stainlesssteel version, we can also manufacture alightweight, compact aluminum version
compatible with our mainstay product, the
S-CON®MINI series. Looking ahead, we willseek to expand sales beyond food production
plants to a broader range of customers.

Machinery Systems Business

Plans for Fiscal 2017

Belt Conveyor with Automatic Telescopic Function

Business Report

workable solution. The knowledge we have been
accumulating through demonstration experiments
has begun to contribute to profit, and we intend
to develop this operation as an additional pillar of
business.
(3) We will develop new products targeting nonmanufacturing industries and begin sales in fiscal
2017 toward raising recognition of the Sanki brandand expanding market share.
(4) We are developing innovative products andenhancing our engineering capabilities incollaboration with our Technical Research &Development Institute and through alliances withbusiness partners and participation in industryacademia projects.
(5) As part of the Sanki Techno Park Project (STeP),
the redevelopment project for the Sanki Yamato
Site, a new production base utilizing the latest
IT technologies including IoT will be completed
in 2019. The new structure is expected todramatically improve our productivity andcustomer service.

Shuttle conveyor(stainless type)

Example of operation using the shuttle conveyor

Watch the video.

Major Developments and Projects• Shuttle conveyor (developed in September 2016,delivered in November to a food manufacturer)• KIREI series wide-width conveyor (developed in
March 2017)
Shuttle conveyor(aluminum type)

SANKI REPORT 201731

Environmental Systems Business
Sanki Engineering develops products and systems for water and sewage treatment and waste treatment facilities thatserve social needs such as conserving resources and lowering greenhouse gas emissions toward the creation of alow-carbon society.

• Net Sales and Net Sales Composition Ratio for Fiscal 2016

• Orders Received (billions of yen)

• Net Sales (billions of yen)

30.6

million yen

11%

Major Projects• Maintenance and operation of the Northern Wastewater
Treatment Plant in Yamato City (from October 2016 until
September 2021)• Renovation works on key facilities of the Sendai Clean Centerin Satsuma-Sendai City (to be completed in March 2020),
maintenance and operation (from April 2017 until March 2040)• Construction of the No. 4 sludge incineration facility, MinamiGamo Wastewater Treatment Plant, Sendai City (to becompleted in March 2020)

32

SANKI REPORT 2017

17.1

17.4

2013

2014

2015

2016 (FY)

2012

2013

2014

2015

2016 (FY)

Outline of the Medium-Term Management
Plan “Century 2025” Phase I
As dwindling public investment is expected to diminish
our primary market, the Environmental Systems
Business has entered a period of structural reform that
includes advancing into new business areas.
Although social infrastructure investments havebeen little changed in environment-related markets,
there are persistently strong energy saving and energy
creation needs in both the government and private
sectors. We believe that the key to expanding businessis to actively market strategic products that are suited
to the business environment, while simultaneously
exploring new business areas that maximize ourproprietary technologies, while seeking to further
develop our LCE Business.
To strengthen our core businesses, we will focus
on marketing strategic products for water and sewage
treatment facilities and waste treatment facilities, which
will reach their peak of the equipment renewal phasebetween 2020 and 2030 in Japan, thereby promoting
the building of stock-based businesses.
We will also actively develop our next strategic
products and accelerate their introduction to themarkets. Moreover, amid a contraction in the scale ofenvironment-related projects, we will strive to improve
profitability by increasing productivity.
In expanding our business areas, we will reinforce
our response to energy saving and creating needs,

Sanki Engineering’s • Expanding sales of new strategic products• Developing new business areas
Challenges

20,000
million yen

Basic Strategies for Fiscal 2017
• Promote building stock-based businessand LCE Business• Promote energy saving and energy
creation business• Further promoting the LCE Businessas well as our efforts in LCE Business, based on theaccumulated strengths of our customer channels,
products and technologies. We will seek to extend
the current scope of our business and explore new
possibilities for our proprietary technologies bycontinuing to conduct research, analysis and investment
in fields bordering our businesses, where we can expect
synergies. Also, we will actively engage in Japanese
government-industry collaborations, such as PPP*2,
PFI*3 and DBO projects, which are being promoted in
the face of a declining population.
*1 Design Build Operate: PPP method in which project design, construction,
operation and maintenance are awarded to a private enterprise as a bulk order.

Environmental Systems BusinessIn fiscal 2016, as we enjoyed a steady stream of orders
related to public works projects that constitute themainstay of the Environmental Systems Business,
we sought to leverage our proprietary technologies toexpand into new business areas, winning large orders,
including DBO*1 projects for renovation works on key
facilities at waste treatment facilities. We also bolstered
our core businesses and received orders for the new
decanter centrifuge, which is one of our strategic
products.
As a result, orders received was 30,626 million yen,which is 56.2% more than the previous fiscal year andshowed solid performance. And while net sales fell
2.5% to 18,271 million yen from last fiscal year, due to a
decline in delivery of completed construction contractsof large-scale projects, they remained at high levels
compared with fiscal 2014.

17.1

16.7

18.2

Business Opportunities• Expansion in demand for energy saving andenergy creation systems at water and sewage
facilities and waste treatment facilities• Need for extending the life of facilities• Japanese government policy on infrastructuredevelopment, PPP and PFISanki Engineering’s • Life Cycle Engineering (LCE) based on synergies among Group companies
Strengths

2012

Summary of Results for Fiscal 2016

15.0

18.7

Risks
• Contraction in project scale due to fiscal
restraint by municipal governments(numerical forecast at start of fiscal 2017)

Business Report

18,271

19.6
16.6

Net Sales Target for Fiscal 2017Market Environment• Social infrastructure investment in environment-related markets remains little changed• Persistently strong energy saving and energy creation needs in both the government and private
sectors*2 Public Private Partnership: Provides public services through public-private
sector collaboration.
*3 Private Finance Initiative: A major PPP method in which private capital andexpertise are used in the design, construction, maintenance and operationof public facilities to provide public services.

Progress Report on Medium-Term
Management Plan “Century 2025” Phase I
In fiscal 2016, we steadily increased the sales bybolstering proposal-based sales of strategic products
in our core businesses. We received a steady flow oforders for AEROWING II, an ultra-fine bubble air diffuserthat significantly reduces the electricity consumed byblowers at wastewater treatment facilities. Orders

Progress Report for Fiscal 2016 and Plans for Fiscal 2017
Key Initiatives

Progress Report for Fiscal 2016

Plans for Fiscal 2017

Strengthen Core
Businesses• Orders increasing for a new type of dehydrator, one of our strategic products• Expand sales of dehydrators• Develop an ultra-fine bubble air diffuser

Promote Growth
Strategies• Won first order for a biomass plant through closer collaboration with other divisions• Won first order for a DBO project• Expand sales of biomass power plants• Further expand business areas

Enhance the Sanki Brand• Implemented human resource development plans to enhance the level of technicalproposals and appropriately allocated engineers• Strengthen the development of enterprising
personnel capable of developing overseas businessand undertaking proposal-based sales

SANKI REPORT 201733

Focusorder to renovate key facilities of the Sendai Clean
Center in Satsuma-Sendai City, which was the Group’s
first DBO project. Another order was received for the
maintenance and operation of the Northern Wastewater
Treatment Plant in Yamato City. We will continue ourefforts through our Environmental Systems Business to
win orders for DBO and PFI projects and to bolster the
LCE Business.

Plans for Fiscal 2017

Expanding our Marketing Networks Overseas
We will continue to expand our marketing network
centered on AEROWING with AQUACONSULT
Anlagenbau GmbH. We will seek new agents andmarketing channels to meet the demand fromsubstantial upgrades in North America and Europe andto cultivate new demand from countries in Asia and the
Middle East.
Enhance the Sanki Brand
Due in part to the adoption of comprehensive bidding
evaluation methods by municipal governments, there
is now a greater need to enhance the level of technicalproposals and allocate engineers appropriately. As wework to reinforce and pass on technical skills, we will
also formulate plans for human resource developmentthat incorporate the attainment of qualifications to raise
the capabilities of each staff in charge. Furthermore, toaddress the pressing need to develop personnel who
can demonstrate their talents in new business domains,such as industrial plants and overseas business,
we will strengthen the development of enterprising
personnel who are capable of searching for emerging
business “seeds” and giving material to form products,
developing overseas business, and undertaking
proposal-based sales.

B-DASH Project
Value Provided
by SankiEngineering• Reduced life cycle costs through downsizing• Energy saving and stable effluent quality• Easy maintenance and operation

A reduction of wastewater inflow at sewage
treatment facilities is expected in Japan as aresult of the nation’s declining population. This
will lead to the need for a new wastewater
treatment technology that can efficiently
bring down costs and achieve downsizing.
To address this, a joint research group of
six members*, including Sanki Engineering,has been engaged in the “Breakthrough by
Dynamic Approach in Sewage High Technology(B-DASH) Project,” commissioned by Japan’s
Ministry of Land, Infrastructure, Transport andTourism.
The “Demonstration of Flow Fluctuation
Tracking Type Wastewater Treatment
Technology Using a DHS System” is currently
underway in Susaki City, Kochi Prefecture.
The DHS System is a wastewater treatment
technology that combines a DHS filter bed
filled with sponge carriers and a biologicalfiltration tank on a mobile bed. It is easy
to operate and manage compared to theconventional activated sludge process.
Moreover, it allows for efficient downsizing
in response to reduced inflow to the sewage
treatment facility, which is expected to result
in cost reductions and energy savings during
upgrades and operation. In future, we willcontinue to verify this technology.

Environmental Systems Business

Further Expanding our Business Areas
We will expand the areas in which we can maximize ourcomponent technologies, unrestrained by the current
scope of our businesses. In particular, we will seek todevelop proprietary technologies in the energy saving
and creation fields of our Environmental Systems
Business, especially biomass power generation,
by exploring opportunities in fields with promisingmarkets. Also, we will seek synergies with otherdivisions and Group companies to reinforce our efforts
to launch strategic products in fields such as medicine,
pharmaceuticals and food products.

Research into Downsizing Sewage Facilities Commissionedby the National Institute for Land and Infrastructure Management
Business Report

also grew for SANDEC G3, an energy-saving decanter
centrifuge. To further expand the sales of this new
decanter centrifuge, we base our sales activities on
solution proposals as we fully apply the data from ourongoing field demonstrations against various propertiesof sludge.
We won a new order to construct a sludge
incineration facility for the Minami-Gamo Purification
Center in Sendai City using our supercharged fluidized
bed incinerator system, which has been recognizedwith the Minister of Economy, Trade and Industry
Award in the 41st Excellent Environmental Equipment
Awards and the Grand Prize in the 17th Infrastructure
Technology Development Award, both representing thehighest awards.
We also promoted total engineering that maximizes
our component technologies to expand our businessareas. In the case of the woody biomass power
generation plant installed at the biomass power plant
constructed in Nagai City, Yamagata Prefecture, by NKC
Nagai Green Power, we undertook the entire project,from taking the order to construction, by generatingsynergies with other divisions.
And the challenges we have taken on to develop
new schemes for energy saving and energy creation
have begun to show results, as in our participation indemonstrations for the “Breakthrough by Dynamic
Approach in Sewage High Technology (B-DASH)
Project” commissioned by Japan’s Ministry of Land,
Infrastructure, Transport and Tourism.
Meanwhile, the Group companies have also madesteady progress in our LCE Business by winning an

Demonstration facility at the wastewater treatment plant in Susaki City, Kochi
Prefecture

Comparison of Water Treatment Flow between Conventional ActivatedSludge Process and DHS System (under Demonstration)
Activated Sludge Process
Influent

BlowerPrimary settling tankEffluent

Final settling tank
ReactorPump

DHS System
Influent* Sanki Engineering Co., Ltd.; Tohoku University; National
Institute of Technology, Kagawa College; National Instituteof Technology, Kochi College; Japan Sewage Works
Agency and Susaki City.

Effluent

Primary settling tankBlowerPump

DHS filter bed

Name of Demonstration• Demonstration of Flow Fluctuation Tracking Type
Wastewater Treatment Technology Using a DHS
SystemWastewater

Biological filtration tank

Compressor

Air

Demonstration Field• Susaki Wastewater Treatment Plant (Susaki City,
Kochi Prefecture)

Air
Effluent(1) Oxygen supply at the interface of air and DHS carriers(2) Oxygen supply on the surface of water drop travelingbetween DHS carriers

Woody biomass power generation plant of NKC Nagai Green Power34

SANKI REPORT 2017

SANKI REPORT 201735

Real Estate BusinessResearch and Development

Our Real Estate Business is engaged in leasing operations and building management while striving to increase the added
value of our properties.

Sanki Engineering conducts a variety of research and development activities to ensure our business operations meetcustomer needs and address issues faced by society.

• Net Sales and Net Sales Composition Ratio for Fiscal 2016

• Orders Received (billions of yen)

1.2
1.0

2012

Net sales rose 3.9% from the previous fiscal year
to 1,592 million yen. This was primarily due todevelopments related to the Sanki Yamato Building,which had been a pending issue for the Real EstateBusiness. We actively sought tenants for the buildingby constructing a negotiation room in the entrance hallon the first floor and creating an office environment
for greater tenant convenience. As a result, we signedon three tenants, two of which moved in during fiscal
2016, and the third in fiscal 2017.
In the office leasing market of the Japanese realestate sector, vacancy rates have continued to improvefor three consecutive years amid strong demandin the Tokyo metropolitan area. The growth rate for
office floor area remains high, and the office market
in Tokyo is expected to expand further as new officespace continues
to be supplied in
response to largescale development.
In addition, vacancy
rates in outlying
regions improved
remarkably due tothe limited supplyof new offices.
Meanwhile, inbuilding facilities

36

SANKI REPORT 2017

2013

2014

2015

1.0

1.0

• Redevelopment of the Sanki
Yamato area
• Maintenance and managementof portfolio assets• Raised revenues from building
stock-based business byaccumulating leasing operations• Disposal of non-performing
assets2016 (FY)

we continue to see a prominent need for energy andresource conservation, extending the life of aging
buildings and achieving longer life for facilities.
Under these circumstances, we began preparatory
construction work in the Sanki Yamato site for the Sanki
Techno Center, which will serve as a new research andtraining base for raising the technical capabilities of
the Sanki Engineering Group. We also plan to turn thesurplus land resulting from the reorganization of the site
into rental property and will lay the groundwork by theend of fiscal 2017.

Initiatives for Fiscal 2017
In fiscal 2017, we will apply Sanki Engineering’s
technologies and know-how to the maintenance andmanagement of portfolio assets while continuously
promoting energy conservation.
We will renovate the food court in the “Molive”
shopping mall in Moriyama City, Shiga Prefecture, forthe first time in 23 years. And we plan to differentiate
the shopping mall from rival facilities in the region by
maintaining and managing a shopping center that local
residents choose for its comfortable spaces.
Looking ahead, we will continue to actively seek
tenants for the Sanki Yamato Building and raise theoccupancy rate while striving to increase net sales andprofit for the Real Estate Business.

Plant Facilities• Promotion of waste to energy• Labor savings in material
handling and logistics

Intellectual Property Initiatives

2012 2013 2014 2015 2016 (FY)The Intellectual Property Department responsibly manages
intellectual property in accordance with our establishedrules. To strengthen our oversight and utilization of
intellectual property, a liaison is assigned to each businessdivision to identify intellectual property from activities
being undertaken and share information from meetings
with intellectual property officials across the Company.
Also, we address risks by maintaining and making available
Group-wide a database of Company intellectual property
as well as patent summaries and public notifications. In
addition to providing intellectual property training for new
recruits, we organize Group training on risk management
and e-learning for employees in their third and seventh
year. By sharing information and implementing regulartraining and education, we are working to enhanceawareness in order to protect our own technology andensure that we do not infringe upon the intellectual
property rights of other companies.

Basic Approach
We engage in research and development relevant to ourdiverse business activities toward our goal of providing
high-value-added solutions that contribute to the creation ofa sustainable society. We develop innovative technologies
by highly expert engineers; refine our proprietary
technologies to expand practical applications throughdemonstration experiments, analysis and evaluation; andconduct basic research and investigate new technologies.
In particular, we are striving to develop technologies withhigh added value by applying information communication
technology, AI and big data analysis.

Real Estate Business / Research and Development

Summary of Results for Fiscal 2016

1.5

1.0

• Labor and power savings inconstruction work
• Pursuit of energy conservation• Short construction period andcost reduction• Pursuit of comfort andconvenience

Business Report

1%

1.5

1.0

Using an open innovation platform of collaboration among
business divisions centered on our Technical Research& Development Institute, we conduct R&D for new
technologies, refine proprietary technologies, pursue
higher quality, conduct basic research and investigate newtechnologies. Plans are currently underway to construct
the Sanki Techno Center as our new R&D base. Looking
ahead, we will review and reorganize our R&D structure,
which includes updating the Technical Research &Development Institute, and foster personnel with theaim of generating more synergies.

Facilities Construction

1.1

Basic Strategies for
Fiscal 2017

million yen

R&D Activities(billions of yen)

2.7

1,592

R&D System• R&D Expenditures

Areas of Recent Research and Development
Energy-saving water
treatment technology

Energy-saving control

Heat recovery and reuse

Comfortable air
conditioning technology

Logistics and material
handling technology

Biomass technology

Thermal storage
technology

Central monitoring
technology

Information
communication technology

Material handlingtechnology

Waste heat power
generation technology

Heat source
control technology

Analysis anddiagnosis technology

Energy-saving water
treatment technology

Energy-saving water
treatment technology

Waste incineration
technology

Specialized environmental
technology

Clean technology

Labor-saving technology

Total engineering
AI/IoTBig data
Cost reduction
Energy conservation

Cloud

Machine learning
Resource
conservation

Product life extension

Shorter
construction period
Acceleration

ComfortSpace saving

Reliability
SafetySocial issues and needs

SANKI REPORT 201737

FocusDeveloped a New Construction Method that Reduces Work by 25%

Aluminum Refrigerant Piping and Mechanical Joints
Value Provided
by SankiEngineering• Enhanced transportability and workability through the use of lightweight aluminum piping• Easy-to-use mechanical joints that reduce variance in quality• Work reduction by about 25% to address labor shortage

In the construction industry, the dwindling workforce and agingof skilled workers have brought about the need for measures
to maintain and raise the quality of facilities construction witha smaller labor force. In this context, we collaborated with ajoint manufacturer to develop a new construction method in
preparation for the anticipated growth in demand for refrigerant
piping.
The new method involves aluminum pipes that are 50%
lighter than the copper pipes commonly used. Combinedwith our newly developed all-in-one mechanical joints, madeentirely of aluminum, the new pipes will help to reduce laborassociated with transport and handling. Specialized hand-heldtools are used during construction work, ensuring high quality
without depending on skilled workers, thus offering anothersolution to the labor shortage. Moreover, the construction work
becomes simpler and more reliable than using conventional
methods, resulting in a roughly 25% reduction in construction
time. This will allow for high-quality construction at renovationsites and projects with limited construction time.

❶ Insert ❷ Nut❺ Insert❶ ●●❷❸ Joint ❹ Nut

❸
●

❹ ●
●
❺

Conventional joint made of fivecomponents in cast iron or brass

All-aluminum preassembled
mechanical joint

Reduced Construction Time Based on New Method■ Piping ■ Insulation

(%)
100

about 20%80

about 25%

60
40
20
0

Conventional
fireless welding
methodPrevious
methodNew method

Providing the Customer’s Solution of Choice, from an Open R&D
Environment Integrating Knowledge and Technology
For its 100th anniversary, SankiEngineering set its sights on becoming
the company of choice. The challengeahead in our R&D, centered on theTechnical Research & Development
Institute, is to enhance the capabilitiesof each researcher while bolstering ourability to develop solutions for customers
by applying agile thinking. One of thepillars of our response is the Sanki
Techno Center, scheduled to open inautumn 2018 as our new center for
research and employee education.
The center will be equipped with thelatest facilities to conduct experiments
for considering and evaluating measuresthat point toward the optimal solution

38

SANKI REPORT 2017

for customer needs. Furthermore,
we will engage in open innovation byclosely communicating with customers,companies in other industries andsubcontractors to pursue researchthat delivers next-generation products.
Results will be shared with eachbusiness division at the frontlines ofworksites, where prompt feedback
should quickly result in solutions that will
earn customer trust.
Looking ahead, we intend to play a
key role as the company of choice, as
an organization with the wisdom andknowledge to meet the most challenging
of customer expectations and solve theirproblems.

Kazuaki Iijima
Executive Officer, General Manager ofTechnical Research & Development Institute

CSR Report
SANKI REPORT 201739

Management

Corporate Governance
Basic Philosophy

Corporate Governance Guidelines

WEB Sanki Engineering Corporate Governance Guidelines (in Japanese)
https://www.sanki.co.jp/corporate/governance/guideline.html

Corporate GovernanceCorporate Governance System
We adopted a Company with Board of Company
Auditors system with dedicated, full-time auditors
as our form of corporate governance. Under thisstructure, the auditors and the Board of Auditors
exercise oversight over the execution of duties bydirectors, the accounting auditors auditing the financial
statements and other documents, and the Board of
Directors responsible for making decisions on material
issues. In addition, we seek to increase management
efficiency and speed up the decision-making processby employing an executive officer system in which we
divide management functions between the Board of
Directors, which is responsible for decision-making andsupervision functions, and executive officers, who areresponsible for the execution of business affairs.

WEB Corporate Governance Report

http://www.sanki.co.jp/corporate/governance/report.html (in Japanese)40

SANKI REPORT 2017

Increasing the Number of External Directors
We increased the number of external directors from twoto three in fiscal 2016 to further strengthen management
oversight.
Independence Standards for External Officers
We have established our standards on the independence of
external officers to ensure further transparency, and we are
striving to strengthen objective oversight of management.
Standards for External Officers
WEB Independence(Appendix for the Sanki Engineering Corporate Governance Guidelines) (in Japanese)

https://www.sanki.co.jp/corporate/governance/guideline.html
Liaison Meeting of External Officers
A liaison meeting, comprising mainly of external directors
and auditors, is held once every quarter to openly exchange
views and necessary information and to develop a common
awareness of issues.
Training for Officers
When directors and auditors are appointed, we provide thenwith information on our corporate history, achievements
and future business plans as well as on legal, financial andaccounting issues. Following their appointment, we givethem opportunities for training related to the supervision andauditing of management and for acquiring knowledge.

Assessing the Effectiveness of the Board of Directors
To determine the effectiveness of the Board of
Directors, we conduct an annual assessment in which
the directors themselves verify their deliberation
process and identify possible improvements. This is
to enhance the board’s effectiveness and ensure thetransparency of management by disclosing the results.
During an assessment of board meetings heldin fiscal 2016, we conducted a questionnaire survey
to review issues identified in the previous year andreviewed the status of the Company’s response toactions required by the Corporate Governance Code.
In June 2017, the directors and auditors met for a freeexchange of opinions and a self-assessment based on
the results. The aim of these activities was to confirm
that our governance system was functioning effectively,
share outstanding issues and reach agreement on
continuing certain initiatives.

Elements and Procedures for Remuneration for Directors andAuditors
Category

Fixed
remuneration

Bonus

Stock options

Full-time
director◯◯◯

External
director◯––

Full-time
auditor◯◯–External
auditor

◯––Procedure
Determined by the
Board of Directors
following deliberationby the Advisory
Committee on
Nomination andRemuneration
Determined throughconsultation amongauditors

Remuneration for Directors and Auditors (Fiscal 2015)
Category

Persons receiving
payment

Total payment

Directors(external directors)

9(3)

360,818(29,700)

Auditors(external auditors)

5(2)

88,200(21,600)

Internal Controls
Basic Policy and Systems for Internal Controls
Basic Policy and Systems for Internal Controls Under
its Basic Policy on Internal Financial Control, SankiEngineering is developing and operating a system toensure the legality, soundness and transparency of its
operational execution. Particularly with respect to thewhistleblowing system, we set up dedicated internaland external contact points for reporting violations of
the Anti-Monopoly Act. And together with the reporting
system for corporate ethics in general, we are working
to raise the effectiveness of compliance.
In fiscal 2016, we established a system for reportingto the full-time auditor so that the whistleblowing
system can be operated independently of businessexecution divisions.
The Board of Directors makes decisions on issues
stipulated by laws, regulations and the Articles ofIncorporation, as well as on issues related to the
execution of operations. The Management Meeting isheld each week to ensure the effective execution ofduties in accordance with the rules for discussion andreporting. To further strengthen management oversight,
the Liaison Meeting of External Directors, consisting of
external directors, is convened to exchange necessary
information and share awareness of issues.
To ensure effective auditing, the auditors attend
meetings, offer their opinions as necessary, receive
reports from accounting auditors and the Internal Audit
Department, request that this department investigate
and report on its findings if needed, and discuss mattersas required. In addition, the full-time auditor regularly
exchanges opinions with the presidents and auditorsof Group companies to ascertain the status of internal
controls across the Group.

Corporate GovernanceWe established the Sanki Engineering Corporate
Governance Guidelines in December 2015 to clarify the
Sanki Engineering Group’s basic philosophy and policy
on corporate governance. Under the guidelines, we willfurther reinforce our corporate governance to achievesustainable growth for the Group and enhance its
corporate value over the medium to long term.

Main Measures to Strengthen Governance
System Effectiveness

Officer Remuneration
In fiscal 2015, Sanki Engineering established theAdvisory Committee on Nomination and Remuneration
under the Board of Directors, comprising the president,
external directors and others, to nominate candidates
for directors and auditors and to deliberate on matters
including the system and level of remuneration.
We decide on remuneration for directors andauditors within the limits adopted by our generalshareholders’ meeting, based on the three components
of fixed remuneration, bonus and stock options. Eachfiscal year, we decide the amount separately fordirectors and auditors depending on their full-time orpart-time status, with due consideration for balancing
each of the following elements and ensuring thatthe amount is aligned with the long-term interestsof shareholders and offers sufficient motivation for
maximizing corporate value.
• Fixed remuneration: rank and scope of
responsibilities• Bonus: portion linked to performance during theperiod• Stock options: granted according to rank as along-term incentive

CSR Report

Guided by its Management Philosophy, the SankiEngineering Group strives to achieve sustainablegrowth and enhance corporate value over the medium
to long term by engaging in dialogue with shareholders,investors, customers and other stakeholders. In
accordance with this basic governance policy, premisedon thorough compliance, we seek to make decisions in
a transparent, fair, timely and decisive manner and todevelop an efficient system of operational execution toenhance our business performance.

Strengthening the Effectiveness of the Governance
SystemWe are strengthening our system in line with the SankiEngineering Corporate Governance Guidelines to realize
effective corporate governance.

Ensuring the Reliability of Financial Reporting
The Internal Finance Control Committee meets four times
a year to conduct our financial reporting in accordance with
the internal control framework stipulated by the Financial
Instruments Exchange Act of Japan and is seeking
to bolster this system. Moreover, we are promoting
the establishment and appropriate management of aninternal control system to safeguard the reliability of our
financial reporting by having the committee deliberateon the assessment and response with respect to thefinancial risks within each department and subsidiary.
Under the system, a report is produced to ensure thatinternal controls related to financial reporting are being
exercised effectively. In the report for fiscal 2016, auditors
expressed their opinion that our financial reports havebeen presented in an appropriate manner in all material
aspects.

SANKI REPORT 201741

Executives of the Sanki Engineering Group (as of August 10, 2017)

Framework of the Corporate Governance System (as of June 27, 2017)
General Shareholders’ Meeting
Appointment/Dismissal

Appointment/Dismissal

Business auditing
Accounting auditing

Appointment/Dismissal
Accounting auditing

Board of Directors

Accounting Auditors

Of ten directors, three are external directors.

(Ernst & Young ShinNihon LLC)

One substitute auditor

Exchange of opinions,establishing common awarenessConsultation

Liaison Meeting of External Officers
Three external directors
Two external auditors

Discussion
and reporting

Internal Finance Control
Committee

Policy Meeting

Advisory Committee on
Nomination and Remuneration
ReportingPresident and Representative Director

Management Meeting
Discussion, andreporting onimportant matters
Executive officers (34 including the president
and representative director)
Leadership and supervision

Monitoring, guidance, support and education

ReportingInternal Audit Department

Auditing

Sections, headquarters, research institute, business division, businessdepartments, branches and branch offices, subsidiaries

Business Execution System
Board of Directors
The Board of Directors holds a meeting, led by the chairman, at least oncea month to deliberate on important matters and supervise the status ofexecution of business affairs. Of the 13 meetings convened by the board in
fiscal 2016, the average attendance of external directors was 100%, and thatfor external auditors was 77%.
Management Meeting
The meeting consists of directors and executive officers nominated by
the president and meets weekly as an advisory body to the president. It
deliberates on important matters, including those to be discussed by the Boardof Directors. Fifty-one meetings were convened in fiscal 2016.
Policy Meeting
Risk Management Committee: See page 48.

42

Internal Finance Control Committee
This committee is chaired by the president, consists of executive officers,
and meets four times a year. Its central role is Group-wide control,
including review and decision making concerning important mattersregarding internal controls for financial reporting.
Advisory Committee on Nomination and Remuneration
This committee consists mainly of the president and external directors
and is chaired by an external director. It deliberates on matters including
the nomination of candidates for directors and auditors and the system
for and level of remuneration. It meets as needed; four meetings wereconvened in fiscal 2016.

Auditing System

Executive Officer Committee
Consisting of executive officers, the committee meets roughly every threemonths to discuss the policies expressed by the president and executive
officers responsible for departments, report on the status of businessexecution by each executive officer and discuss initiatives for achieving the
medium-term management plan. Eight meetings were convened in fiscal 2016.

Board of Company Auditors
Meeting at least six times a year, this board monitors the status of governanceand audits the execution of duties by directors as an independent body
entrusted by shareholders. Members attend board and other important
meetings, review the status of operations and assets, and maintain close
contact with the accounting auditors, the Internal Audit Department and theinternal controls departments. A supplementary external auditor has been
appointed to fill any future external auditor vacancies. Nine meetings wereconvened in fiscal 2016.

Corporate Ethics Committee
The president serves as the chairperson and nominates executive officers as
officers responsible for corporate ethics, who oversee all matters related tocorporate ethics through this committee, which consists of executive officers.
The committee deliberates on action plans and other measures to achieve
further penetration and stricter observance of the Company’s Code of Conduct
and Action Guidelines at two regularly scheduled meetings per year.

Internal Audit Department
This department conducts internal audits of the execution of operations bybusiness divisions in accordance with the Auditing Plan for that fiscal year.
It verifies the internal management system including its appropriateness andefficiency. As necessary, the department exchanges opinions with or makes
proposals concerning the improvement or correction of a problem to the internal
controls departments, and reports the results of its audits to the president.

SANKI REPORT 2017

Corporate GovernanceCorporate Ethics Committee

ReportElection, dismissaland supervision

Leadership andsupervision

Risk Management Committee
Executive Officer Committee

Appointment to/removalfrom office

CSR Report

Board of Company Auditors
Of four auditors, two are external auditors

Full-time Auditor

Director

Representative
Director

Representative
Director

Director

Director

Full-time Auditor

Masato Komura

Takashi Motomatsu

Hidemi Fujii

Nobuo Kumura

Eiji Mitsuishi

Hirokazu Ishida

Hirotoshi Fukui

External Auditor

External Director

Representative
Director and President Director and Chairman

Takeo Inokuchi

Hiroki Nishio

Tsutomu Hasegawa

Takuichi Kajiura

External Director

External Director

External Auditor

Yukiteru Yamamoto

Makoto Nukaga

Mamoru Norisada

Director

ChairmanTakuichi Kajiura

Representative Director

President

Tsutomu Hasegawa

Vice President and Executive Officer

Nobuo Kumura

Vice President and Executive Officer

Hidemi Fujii

Senior Executive Office, and General Manager, Mechanical & Electrical Contracting Headquarters

Eiji Mitsuishi

Managing Executive Officer, and General Manager, Plants & Machinery Systems Headquarters

Takashi MotomatsuManaging Executive Officer, and General Manager, Sales Administration Division, Mechanical &Electrical Contracting Headquarters

Hirokazu Ishida

Director

External Director

Yukiteru Yamamoto*
Hiroki Nishio*
Makoto Nukaga*

Full-time Auditor

Masato Komura
Hirotoshi Fukui

External Auditor

Takeo Inokuchi
Mamoru Norisada** Independent directors have been appointed in accordance with the listing rules of the Tokyo Stock Exchange.

SANKI REPORT 201743

Management

Compliance
Basic Philosophy

Reference

Full-time
auditorBoard of Directors(president)
ReportOfficers responsible forcorporate ethics
ReportWhistleblowing System
We have set up corporate ethics hotlines forwhistleblowers, both within and outside the Company.
The internal hotline goes to the full-time auditor and the
CSR Promotion Division, while the external hotline goesto our consulting attorney’s office. We act swiftly toresolve the issues that are reported, with consideration
for the protection of anyone seeking consultation orproviding information in accordance with the Corporate
Ethics Regulations. All of the reported information ispresented to the executives responsible for corporate
ethics, and important information is reported to theBoard of Directors and the Management Meeting.
In fiscal 2016, there were 22 reported incidents (19internally and three externally), and all incidents havebeen appropriately handled. We are also distributing a
corporate ethics hotline card in order to raise awarenessof this system throughout the entire Group.
The names of individuals who report to thecorporate ethics hotlines will be handled in secrecy by
the executives responsible for corporate ethics andwill not be disclosed to others without the reporter’s
prior consent. The reporter will not be placed at a
disadvantage for consulting or reporting to the hotline.
In addition, we began operating the new Fair Trade
Hotline in January 2016 for reporting of violations of theAnti-Monopoly Act.

44

SANKI REPORT 2017

When a report
is required
Harassment
Consulting
Office(expertexternal
counsellor)

External
hotline(consulting
attorney)

Corporate Ethics Hotline
Fair Trade Hotline

Report andConsultation

Receipt of Compliance Confirmation Sheets from All
Executives and Employees
In order to refresh the awareness of all Group
executives and employees of the responsibilities thatthey must fulfill in their respective positions and roles,
compliance confirmation sheets covering items suchas observance of the Code of Conduct and Action
Guidelines, and eliminating criminal elements andgroups, are submitted at the beginning of each fiscal
year. There were no serious compliance violations, suchas illegal acts, unethical behavior or unfair practices, infiscal 2016.
Number of Persons Submitting Compliance
Confirmation Sheets (Fiscal 2017)

Compliance confirmation
sheets concerning
performance of duties
Compliance confirmation
sheetsSanki Engineering(relevant employees)

Subsidiaries(relevant employees)

35

47

(35)

1,997 (2,023)

Frequency andparticipation(attendance rate)

Theme

TargetCorporateethicstraining

Prevention of insider
trading, compliance with
the Anti-Monopoly Act andSubcontractors Act

Group
executive
officers andemployees

36 times
2,330
employees(97%)

Strengthening Anti-Monopoly Act
Compliance

Compliancetraining

Appropriate accounting
practice, management ofworking hours

Group
executive
officers andemployees

36 times
2,196
employees(92%)

Measures in an Ongoing Effort to Prevent
Recurrence
The following are major measures we undertook
between fiscal 2013 and fiscal 2016. Looking ahead, we
will continue our Group-wide effort to prevent violationsof the Anti-Monopoly Act in fiscal 2017.

Compliance Awareness Survey
We conduct an annual awareness survey on issues
such as compliance and CSR targeting all executive
officers and employees. Survey results are used tomonitor and improve the effectiveness of CSR activities.
We noted feedback and issues concerning harassmentin the results of the questionnaire and from the current
state of reports, and we are taking action to prevent andeliminate any harassment by consistently carrying out
preventive education through corporate ethics training
and division training.
Results of Questionnaire Regarding Compliance
Awareness for 2017
Survey period: May 2017
Participants: All Group executive officers and employees

Q Do you understand the Sanki Engineering Group
Code of Conduct and Action Guidelines?
I have an adequate understanding.

34%

I have a general idea.

54%

I do not have an adequate understanding.

12%

(47)

354 (358)• Compliance confirmation sheets concerning performance of duties are
submitted by directors and executive officers.
• Individuals who have not submitted compliance confirmation sheets are onmaternity leave, receiving medical treatment, etc.

Q Are you aware of the Corporate Ethics Hotline
and Fair Trade Hotline?
Yes

97%

No

3%

Q Do you known that business partners can also
report to the hotlines?
Yes

78%

No

22%

Compliance

Compliance Promotion Activities

CourseReportCompliance Promotion System
We have established a Corporate Ethics Committee,
chaired by the president, who nominates officers
responsible for corporate ethics to oversee thecommittee’s activities. In principle, the committee
meets twice a year to review, monitor and provide
guidance with respect to compliance guidelines andaction plans for the entire Group. In fiscal 2016, thecommittee convened twice.

Results of Corporate Ethics Training (Fiscal 2016)

Secretariat(CSR Promotion Division)

Compliance Reference Documents

PP. 46 and 47

ReportCompliance Audit
The Internal Audit Department conducts compliance
audits and seeks to strengthen compliance by providing
guidance on legal compliance and through monitoring.
In fiscal 2016, internal audits were carried out at 24
worksites including those of 7 subsidiaries. In addition,
to raise awareness at our construction sites, we
conduct onsite hearings with site managers to gain abetter understanding of the situation.

CSR Report

The Sanki Engineering Group strives to maintain legallycompliant behavior based on corporate ethics acrossall aspects of its operations by upholding the SankiEngineering Group Compliance Declaration, the SankiEngineering Group Code of Conduct and Action Guidelines
and the Sanki Engineering Group Behavioral Standards.

Corporate Ethics Training
Sanki Engineering conducts corporate ethics training
for all employees on a regular basis in order to ensure
thorough compliance with the Code of Conduct andAction Guidelines. We also hold training on the AntiMonopoly Act for newly assigned sales staff.

Whistleblowing System

Policies and Manuals• Formulated the Sanki Engineering Group Compliance.
Declaration and Sanki Engineering Group Behavioral
Standards.
• Distributed the Compliance Handbook.
• Issued an Anti-Monopoly Act Compliance Manual.
• Clearly stipulated breaches of laws such as the AntiMonopoly Act as grounds for disciplinary action.
Structural Reinforcements• Established a comprehensive, Group-wide Anti-Monopoly
Act Compliance Program at a meeting of the Board of
Directors, and implemented the program.
• Assigned a compliance manager in each department andbegan supervising the process for deciding on the bid
amount and operating a compulsory system of advanceapproval and reporting when attending a meeting with any
companies in the same industry.
• Introduced regular rotations for sales staff assignments.
• Established a Compliance Risk Subcommittee within the
Risk Management Committee.
• Reconsidered membership in outside groups.
• Began an in-house leniency system (voluntary reporting
system).
Training and Education• Submitted compliance confirmation sheets.
• Boosted awareness of compliance-related hotlines.
• Top management visited all business bases to hold special
corporate training sessions through direct exchange with all
Group executives and employees.
• Held training on the Anti-Monopoly Act for newly assigned
sales staff.

SANKI REPORT 201745

Sanki Engineering Group ComplianceDeclaration, Sanki Engineering Group
Behavioral Standards, and Code of
Conduct and Action

Sanki Engineering Group Compliance Declaration
Formulated: October 21, 2013

Sanki Engineering Group Behavioral Standards
Formulated on October 21, 2013
Revised on April 1, 2015
Revised again on January 1, 2016

1. No discussion, exchange of information, adjustment, or decision
upon the following between businesses shall take place.
(1) Method of selecting prospective candidates for a contract(2) Prospective contract candidates(3) Bidding price(4) Estimated price(5) Eagerness for contract, results of sales activities,
contract results, number of times nominated, etc.
(6) Order amount in stock, order reserve
2. Approval shall be gained from your superior before attending ameeting between businesses in the same industry. Following
the meeting, record of the content must be made and shall bereported to your superior.
3. Such meetings shall not be attended if knowledge has beenobtained in advance that the topic of the meeting between
businesses will concern a matter related to any of the items
in Provision 1 above. Furthermore, if the topic turns to sucha matter during the course of the proceedings, you must
immediately leave the meeting and the fact must be noted andreported to your superior.
4. Even when decisions on method of selecting prospective
contract candidates, prospective contract candidates, or bidding
price are made based on the guidance or at the request of the
public office offering the contract, you must not adhere to thissince it is a violation of the Anti-Monopoly Act.
5. When setting up a joint-venture group to participate in a tenderbid, you must not negotiate or exchange opinions regarding the46

SANKI REPORT 2017

formation of said group in a manner that includes persons aside
from those that may be involved as partners.
6. A subcontractor transaction or transaction that may be seen
as giving benefits must not be undertaken between the
successful tender bidder and another participating bidder for aproperty since this may lead to suspicions of bid-rigging in the
background.
7. Actions that in any way hinders or excludes participation in abid on the part of other businesses or force another business towithdraw from a bid shall not be taken.
8. These standards shall apply to the following cases as well.
(1) When a trade association acts as agent(2) When the public office offering the contract offers anagreement based on a method of estimate adjustment
9. In the case that you come into contact with a fact or informationthat suggests the existence of bid-rigging in the Company’sbusiness activities, you must report this to your superior or
via the reporting system (Fair Trade Hotline), irrespective ofwhether or not it concerns you.
10. In the case that a doubt arises over the application of thesestandards, you shall make judgment based on the “Guidelines
Concerning the Activities of Firms and Trade Associations with
Regard to Public Bids” (Public Bidding Guideline) issued by theJapan Fair Trade Commission on April 1, 2015.
Additional clause: These standards shall be implemented as ofJanuary 1, 2016.

Formulated on December 1, 2002
Revised on May 1, 2012
Revised again on June 2, 2014
Revised again on April 1, 2017
(Our Code of Conduct is expressed in clauses 1 to 8, each followed by Action Guidelines from ① to .)Contribution to society through business activities
1. Always taking our customers’ perspective, we will provide safe and usefulproducts and services that satisfy our customers and earn their trust, and wewill contribute to the development of society through Total Engineering.
① Taking our customers’ needs seriously, we will present solutions based on our superior
technological capacity as engineering professionals, enabling us to provide safe anduseful products and services.
② We will strictly manage confidential information belonging to our customers that wehave access to in the course of our work, and we will only use such information for
legitimate purposes.
③ In the course of our business activities, we will present accurate information concerning
our products and services, and we will not make any statements that might potentiallybe misunderstood by our customers.
Disclosure of company information
2. Recognizing our social responsibility as a listed corporation, we will
disclose the company information necessary to increasing our managementtransparency in an appropriate and timely manner, improving our level ofcommunication with our stakeholders and earning their trust.
④ We will disclose company information, including information concerning our businessactivities and our financial status, to our stakeholders in a timely and appropriatemanner.
⑤ We will prioritize communication with our stakeholders in order to live up to the trust
placed in us by society.
⑥ We will not engage in insider trading or any form of buying or selling of shares, etc., that
may arouse suspicions of insider trading.
Fair market competition and trading
3. In seeking to win contracts, we will observe the rules of fair market
competition, and in issuing contracts we will build fair, equal and transparent
business relationships with all of our business partners*, and we will conduct
honest transactions, in accordance with the stipulations of the related laws
and regulations and the relevant contracts.
* Business partners: Subcontractors and companies from which we purchase materials, etc.
⑦ We will pursue profits by means of free and fair competition, observing the stipulationsof the Anti-Monopoly Act and other relevant laws and regulations.
⑧ We will not make decisions based on discussion of prospective recipients of contracts or
the method of selection of prospective recipients of contracts with companies involvedin the contract bidding process, and we will not exchange information concerning the
granting of contracts.
⑨ We will always adopt a fair and unbiased viewpoint in our dealings with business
partners, and we will conduct honest transactions in accordance with the stipulations of
the related laws and regulations and the relevant contracts.
⑩ We will not exploit our position as the contracting party in order to coerce our business
partners to engage in any improper actions.
⑪ In negotiating the offering of contracts, etc., we will not pursue individual profit.
⑫ We will not accept any entertainment, gifts, or other economic benefits from ourbusiness partners that exceed the bounds of ordinary social etiquette.
Respect for human rights
4. In all of our business activities, we will respect the human rights of every
individual with whom we have dealings, and we will eliminate discrimination
and any actions that impair the dignity of the individual.
⑬ We will ensure that every individual is able to work safely and healthily at all of ourworksites, including construction sites.
⑭ We will not discriminate or perform any action that impairs the dignity of the individualon the basis of sex, age, place of birth, nationality, race, ethnicity, creed, religion,
physical characteristics, disabilities, etc.
⑮ We will not benefit from child labor or forced labor in our business activities.
⑯ In the course of our business activities, we will consider our impact on human rights, andwe will deal with any potential human rights violations.
⑰ We will eliminate harassment (including but not limited to sexual harassment, power
harassment, and harassment related to maternity leave and childcare or nursing leave)from the workplace, and we will prevent any deterioration in the working environment.
⑱ We will respect the privacy, individuality, and diversity of each person, and we will work
to harmonize work and life.

Management of company assets
5. We will work to manage and protect company rights and assets, both tangible
and intangible, and will not use these for inappropriate purposes such as
personal use; in addition, we will respect the rights and assets of others.
⑲ We will manage company assets appropriately and in accordance with the rules, and wewill not use them for other than business purposes.
⑳ We will secure and preserve company rights and assets, including intellectual property
rights, and we will also respect the rights and assets of others and avoid violating
those rights.
 We will manage information appropriately, based on our information systems use standards.
 In addition to protecting information provided by customers, we will treat all personal
information that we receive appropriately and manage it safely.
 We will strictly manage company confidential information; during their period of
employment our employees will ensure that there are no leaks or disclosures of
information, and will continue to do so after having left employment, without observing
fixed procedures. The same holds true for the confidential information of others.

Compliance

A policy of conducting business activities in compliance with laws and regulations and based on corporate ethics is the major premise behind theoperations undertaken by the Sanki Engineering Group, and is set forth in the Sanki Engineering Group Code of Conduct and Action Guidelines.
Activities related to the granting of contracts are also subject to this and the third provision of the Code of Conduct stipulates, “In seeking to win
contracts, we will observe the rules of fair market competition.”
Nonetheless, we have formulated the Sanki Engineering Group Behavioral Standards in order to clarify the above points in line with changes in theenvironment surrounding the Company in recent times.
Essential components of bidding for any contract include acting as an honest and fair competitor, or in other words, acting in accordance with theindependent judgments of the Company. Employees must strictly refrain from behavior swayed by the intentions of other companies or that impacts
the actions of another company. When bidding for a contract, it is unethical to talk with other bidders or take action to force an adjustment, actions
which breach the Company’s policy.
Accordingly, we declare as Company policy that all Sanki Engineering Group executive officers and employees shall comply faithfully with theitems stipulated in the Sanki Engineering Group Behavioral Standards.

Sanki Engineering Group’s Code of Conduct and Action Guidelines

CSR Report

To prevent violations of laws and regulations, weformulated the Sanki Engineering Group ComplianceDeclaration and the Sanki Engineering Group Behavioral
Standards to ensure that business activities adhere to
behavioral norms and guidelines based on compliancewith laws and regulations and corporate ethics,
throughout the Group and across all businesses.

Protection of the global environment
6. We will make active efforts for the protection of regional environments and theglobal environment.
 In our design of facilities, etc., we will contribute to the realization of a low-carbon
society by actively proposing means of conserving resources and energy.
 In our respective workplaces, we will strive to prevent pollution and environmental
contamination, and we will work to promote conservation of resources and energy,
reduction of industrial waste, recycling, and the preservation of biodiversity andecosystems.
 In our business activities, we will always consider our impact on the environment, andwe will respect environment-related laws and regulations and actively work toward theresolution of environmental problems.
Prevention of association with anti-social elements
7. We will resolutely reject advances from anti-social elements that threaten theorder and safety of civil society, and we will have no association with suchelements.
 If we receive improper requests or demands from anti-social elements or groups that
represent a threat to the order and safety of civil society, we will not yield to these requests
or demands but will resolutely reject them. In addition, we will not conduct any transaction
with anti-social elements or groups, or individuals associated with such elements or groups,
for any reason whatsoever, and will break off any contact with such elements or groups.
Respect for social rules
8. Maintaining a constant awareness that we are members of society, we will
follow social rules and actively contribute to society, working to win the trustof the community.
 In the performance of our work duties, we will observe the stipulations of theConstruction Industry Act and other relevant laws and regulations, our Code of Conduct
and Action Guidelines, and our company regulations, and we will follow social rules,
maintaining a constant awareness that we are members of society.
 When we stand to gain from such activities, we will not offer any favors such asentertainment or gifts to public officials or any equivalent person (including foreign
public officials), and even when we do not stand to gain we will not offer entertainment,
gifts, etc., to such persons that exceed the bounds of ordinary social intercourse. We
will not provide any economic benefits such as entertainment or gifts that exceed
the bounds of ordinary social common sense to the executives or employees of ourcustomers. In addition, when the company rules of our customers prohibit the provisionof entertainment, we will follow those rules.
 We will not perform any actions that damage the good name or prestige of our company.
 We will work to contribute to society as a good corporate citizen and member of society,seeking to contribute to the development of local communities.
 When we engage in business activities overseas, we will respect both the rules of thearea in which we are conducting business and the international code of conduct.
 We will make our business partners aware of this Code of Conduct and these Action
Guidelines, and we will request their observance of them.
 All personnel in managerial positions will actively practice the precepts of this Codeof Conduct and these Action Guidelines, and will provide instructions and engage insupervision to ensure that the personnel under their management also observe them.

SANKI REPORT 201747

Management

Risk Management
Risk Management Policy and System

Major Countermeasures in Fiscal 2016
Risk

Countermeasures

Customer credit• Reviewed our risk management structure and system(including consolidated subsidiaries)

Supplier credit• Expanded and reselected target companies, dispersed
suppliers

Operational

Risk Management Activities

Information
security

Each fiscal year, the Risk Management Committee
identifies risks that affect business activities andconducts a risk assessment based on frequencyof occurrence and impact on management. The

Overseas
Compliance• Ensured the effectiveness of our BCP• Promoted measures against long working hours,
including the Smile Project• Reinforced antivirus software• Held a simulation drill for handling targeted email
attacks (including subsidiaries)• Added measures on infectious diseases to theOverseas Crisis Management Manual and Overseas
Safety Measures Manual• Revised the reporting format in order to visualize thequarterly status report

The Sanki Engineering Group’s BCP aims to ensure
the safety of all related persons, including employees,
based on the integrated efforts of all divisions andemployees. The Company has also formulated aframework to contribute to customers and society
through swift business restoration in collaboration
with business partners. We continuously developinternal systems and procedures (system maintenancestarting under ordinary conditions and clarification of
behavioral standards and division of roles in a disaster)and conduct drills and e-learning with Group companies
so that restoration activities can be implemented more
promptly.
In fiscal 2016, we relocated the directors’ offices
from the upper floors to the lower floors to ensure thefunctionality of the emergency response headquarters,
which will be set up in the event of a disaster.
Furthermore, we conducted a drill on the assumptionthat the head office sustained damage and anotheroffice served as an alternative headquarters. Also, bymodifying the way our safety confirmation system
operates, we sought to raise the effectiveness of our
BCP by expanding the system’s coverage in terms ofdisaster type and region and conducted a drill.

Strengthening Risk Management inOverseas Operationsin the event of a terrorist attack or natural disaster,
the prevention of damage from crime and other risk,
compliance with anti-corruption laws, personnel/labor
management of locally employed staff, religion andother related matters to help overseas employees andother people reduce risk and respond to emergencies.

Initiatives to Ensure Information Security
The Group handles information provided by customers
in accordance with our Information Security Risk
Management Rules. We have established an
information security risk subcommittee within the Risk
Management Committee as a management system.
Through this system, we can control information
security measures Company-wide and manage risk
related to information security in an integrated manner.
As part of our activities to develop our management
system, we use checklists to confirm the status of
information security measures during onsite inspections
by supervisors at each branch.
In fiscal 2016, we held two subcommittee meetings.
To strengthen our countermeasures for information
security risks, we reinforced our antivirus software,
conducted a simulation drill for handling targeted email
attacks (including subsidiaries), constructed a cloudbased onsite data sharing system and carried out
regular audits.
Key Information Security Measures
Type

Framework of the risk management system
President and Representative Director
ReportManagement Meeting
Discussion on policy torespond to important risks

Internal Audit Department
Audit
ReportRisk Management Committee
Chairperson:
Members:
Roles:

MonitorConvenes:
Secretariat:

Divisions
Risk management division
All departments, divisions, research
institutes, business divisions, centers,
business departments, branches andbranch offices, subsidiaries

Report findings of deliberations

MonitorReport status

Risk management executive
Management meeting constituent members and persons
nominated by the chairperson
1. Monitor important risks and formulate a control plan
2. Monitor risks reported by subcommittees and divisions
Once a quarter in principle and additionally as requiredManagement Planning Office

Subcommittees

ReportMonitorCustomer credit risk

SANKI REPORT 2017

Committees and Management System
Central Disaster Countermeasures Committee

Supplier credit risk

Corporate Ethics Committee

Operational risk

Internal Finance Control Committee

Information security risk

Management review of EMS and QMS

Overseas risk

Central Safety and Health Committee

Compliance risk

48

MonitorConsistently efficient international business operations
require stronger measures for controlling a wide rangeof overseas risks in regard to both prevention andremediation. The Risk Management Committee issued
the Risk Management Manual for Overseas Operations(for the head office and overseas bases) and the Manual
to Ensure Safety in Foreign Countries (for overseas
employees, those traveling overseas on business, andtheir families) in 2014, which are revised each year.
The Risk Management Manual for Overseas
Operations stipulates the rules and response proceduresfor crises that could occur in foreign countries. The
manual was revised due to expansion of the scope of
the area covered, from preventing physical harm tooverseas employees and other people, to encompassing
steps to address violations of laws, responding to mass
media and dealing with matters concerning lawsuits.
The Manual to Ensure Safety in Foreign Countries
was compiled as a practical guide and includes actual
situations and checklists that cover actions required

Risk Management

Sanki Engineering has established a Company-wide risk
management system based on its Risk Management
Rules to comprehensively identify risks that pose an
obstacle to conducting normal business operations
and prevent such risks from materializing, and also tominimize loss in the case that it does occur.
We set up the Risk Management Committee,
chaired by a risk management officer, to centrally
manage Group-wide risk and implement an organizedresponse. In principle, the committee convenes once
every quarter to monitor important risk throughout
the Group, formulate control plans, and monitor risk
reported from subcommittees and divisions. To enhancethe effectiveness of our risk assessment and control,
we have set up risk management subcommittees toaddress specific risks under the Risk Management
Committee. In addition, the Internal Audit Department
conducts regular audits to check the status ofrisk management at each division and verify theappropriateness of risk management.

Responding to Disaster Risks throughthe BCPCSR Reportcommittee receives reports from the risk management
subcommittees to monitor risks and consider
necessary countermeasures, provides instructions andconfirms the status of progress. In particular, we arefocused on pursuing preventive measures, confirming
preventive measures and managing signs that precede
the occurrence of each risk. The Risk Management
Committee convened four times in fiscal 2016 toassess the impact of each risk in order to prevent theiroccurrence, discuss countermeasures and confirm
progress. Moreover, after the Kumamoto Earthquake in
April 2016, we took action in accordance with our BCP
manual and then verified our response and identified
improvements related to our BCP.

ActionDissemination ofrules• All Group executive officers and employees take an
e-Learning course• Corporate ethics training, submission of confirmation
forms• Training on preventing targeted email attacks was
conducted twice• Status review of information security
countermeasures during onsite inspections

Information device
management• Encryption of information terminals• Regular inventory reviews

Prevention ofunauthorized use• ID and password management, secure room
• Confirmation using asset management tools• Preventing non-Company owned PCs brought into
the office from being connected to the in-housenetwork

Prevention ofunauthorized use• Antivirus measures, automatic updating of security
patches• Web filtering, countermeasures against unsolicitedemails• Monitoring of illegal outbound data streams

Measures for social
media• Instill an understanding among Group employees
using guidelines• Improving the level of security regarding social media

SANKI REPORT 201749

Management

CSR Management
Response to ESG Issues in Value Chain

Major Action Policies and Results for Fiscal 2016 and Major Action Policies for Fiscal 2017
Fiscal 2016
Major Action Policies

Customers

The Sanki Engineering Group strives to attain the United Nations’ Sustainable
Development Goals (SDGs) through its business activities and is currently
reviewing its initiatives and considering ways to contribute further.

Value Chain and Stakeholders

Value chain

Key Stakeholders

Key Response Themes◦Customers ◦Partners/business partners ◦Employees

Partners

Planning,
design and
R&D◦◦Sophistication and diversity of needs◦◦Using technologies to solve social problems◦Development, possession and management oftechnologies, industry-university cooperation• Universities• Research institutions• Architect offices

Customers
Office buildings
Hospitals
Financial institutions

Procurement

Maintenanceandinspection• Material/machinery
manufacturers

HotelsCommercial facilities
Airports
Factories
Distribution centers
Data centers
Test/research centers
Schools
Water supply and drainage
disposal plants
Waste disposal facility sites

Repair andrenewalInformation disclosure/
Fiduciary responsibility◦◦Fair and transparent transaction on
an equal footing◦Supply-chain management

Business partners• General contractors• Sub-construction
company

Business partners• Building maintenancecompanies

Business partners• General contractors• Cooperating construction
company

Environmental preservation/
Participation in local community

Employees

Construction
andproduction

Business partners◦◦Reduction of life-cycle
cost◦◦Improvement ofenvironmental
efficiency◦◦Reduction ofenvironmental impact◦Energy saving◦Reduction of CO2
emissions◦Quality improvement◦Technical ability
improvement◦Safety first

Business
Partners
Recruitment◦Equal opportunity◦Securing of diversity
Fostering andevaluation◦Providing
opportunities◦Capacity building◦Fair evaluation◦Proper wage
Working environment◦Respect for humanrights◦Prevention ofharassment◦Support for active
participation by
women◦Promotion of worklife balance

Health and
Safety at
Worksites

Environment

Information disclosure/ComplianceDialog and collaboration

Local
Communities
Shareholders/Investors

Local community

Governments/Administrative organs

NGO/NPO and civic groups• 5 branch offices, 171 requests per year◎

• Nationwide
development ofSite-Documentation
Support Centers• Reduce the numberof problems andcomplaints during
construction per year

• Target for the number ofproblems and complaints
per year: reduce by 15%
from previous fiscal year

• Roughly the same number as in theprevious fiscal year△

• Reduce the numberof problems andcomplaints during
construction per year

• Reinforce training
for new employees
and for construction
management• Training for new employees: • Training for new employees: basic skills
period extended
training and safety training extended to• Training for construction
4.5 months
management: cumulative• Training for construction management:
number of participants: 430
cumulative number of participants: 443○• Strengthen guidance
for site managers• Expand opportunities
for dialogue withinstitutional investors
and individual investors• Revitalize the generalshareholders’ meeting• Expand opportunities for
IR meetings with domestic
and overseas investors○• Promote dialogue withshareholders• Enhance IR activities
for institutional
investors andindividual investors• Provide consistent,
steady returns toshareholders• Paid stable dividends in• Consolidated payout ratio for the year
principle and provided
ended March 31, 2017: 40.6%
special dividends depending• Special dividend of 10 yen per shareon profit○• Provide consistent,
steady returns toshareholders• Continue training forprocurement staff• Training for procurement
staff: 19 sessions• Trained procurement staff: 19 sessions○• Promote online
procurement• Strengthen cooperation
through subcontractor
groups• Expand the scope of• Increased participants to the nationwide
participation for the
Liaison Meeting: from 18 to 19
nationwide Liaison Meetingcompanies
Participants: 18 companies○• Strengthen
cooperation throughsubcontractor groups

SANKI REPORT 2017

• Increased shareholder attendance (1.5times the previous year) due to first
general shareholders’ meeting held
outside the company• Aggregate total of companies with which
individual meetings were held: 43• Strengthen
relationships through an • Enhance the Sanki Super
awards program aimed
Meister System and Sankiat enhancing quality and Best Partner Awardtechnology• Distinction under the Sanki Super Meister
System given to 14 individuals, and the
Sanki Best Partner Award given to 130
companies○• Strengthen
relationships with
subcontractors• Deploying preventive
measures to coincidewith the timing of past
accidents• Number of accidents in thefirst quarter: less than the
average (six incidents) forthe past three years• Decreased from six to three incidents◎• Deploy measuresagainst the threemajor categories ofaccidents• Deploying preventive
measures based on thetype of accident• Number of “caught/
pinched” type accidents:
less than the average(seven incidents) for the
past three years• Decreased from seven to two incidents◎• Elevate awarenesslevels• Enhancing knowledge
and capabilities through • Implementing education
education• Implemented onsite training, including
special training on scaffolding◎• Enhance knowledge
and capabilities related
to health and safety• Established a half-day off program and ananniversary leave program• Launched Sanki Smile Day• Implemented diversity training◎• Enhance training
programs to develop
human resources with
the Sanki spirit• Promote diversity• Review various programs(expand programs
supporting work-lifebalance)• Consider and promotemeasures to address
long working hours• Set goals for each division, assigned• Develop measures toleaders to promote measures
address long working hours • Held regular meetings and subcommittee
meetings at each division○• Implement measures
outlined in the Smile
Project• Providing products andservices to help reduce
CO2 emissions ofcustomers• Increase orders for
proposals to reduce CO2
emissions compared tofiscal 2016

• CO2 reductions (orders, nonconsolidated): 27,319 t-CO2 /year (up 39%
from FY2016)◯• Providing products
and services to help
reduce CO2 emissionsof customers• Properly dispose andreduce industrial waste• Determine the total
volume of industrial waste
generated by the SankiEngineering Group• Determined the consolidated volume ofindustrial waste◯• Properly dispose of
and reduce industrial
waste• Regional disasterprevention• Participate in regional
disaster prevention
activities• Carried out activities under the large-scaledisaster agreement between Yamato Cityand the Yamato Engineering Center◯• Regional disasterprevention• Conservation of thelocal environment• Participate in local cleanup
activities• Held Group-wide activities in over 30
locations○• Conservation of thelocal environment• Supporting thedevelopment of thenext generation• Provide educational
opportunities such asenvironmental seminars○• Support thedevelopment of thenext generation

Self-evaluation

50

Fiscal 2017
Selfevaluation Major Action Policies• Nationwide
development of Site• 5 branch offices, 150
Documentation Support requests per year
Centers

Employees

Safety and health◦Safety first◦Promotion of health

Major Results• Offered 9 social study tours for a total of
443 students◎ Achieved, and we exceeded the goal

◯ Almost achieved as planned

Report
Pages

52–54

55

CSR Management

Shareholders
and Investors

Primary Goals

CSR Report

The CSR Promotion Division is responsible forpromotion of CSR activities of the Group based on the
Code of Conduct and Action Guidelines. Deliberations
and review of important matters concerning CSR
are conducted by the Corporate Ethics Committee.
Under this system, while ensuring communication
with diverse stakeholders and reflecting societal
demands on business activities, we are addressing ESG(Environment, Society and Governance) challenges at
each stage of our value chain.

56 and 57

58 and 59

60–63

64–68

69 and 70△ Not achieved, and issues remain unresolved

SANKI REPORT 2017

51

Relationship with Customers

Fiscal 2016

Important Issues• More effectively
respond to increasingly
sophisticated anddiversified customer
needs• Enhance the accuracy ofquality management• Nationwide developmentof Site-Documentation
Support Centers• Reduce the numberof problems andcomplaints during
construction per year
• Reinforce training
for new employees
and for construction
management

Fiscal 2017
Results• 5 branch offices, 150 requests
per year• 5 branch offices, 171 requests
per year• Nationwide development ofSite-Documentation Support
Centers• Target for the number of problems
and complaints per year: reduceby 15% from previous fiscal year

• Roughly the same number as in
the previous fiscal year

• Reduce the number of problems
and complaints during
construction per year

• Training for new employees:
period extended• Training for construction
management: cumulative
number of participants: 430• Training for new employees:
basic skills training and safety
training extended to 4.5 months• Training for construction
management: cumulative numberof participants: 443• Strengthen guidance for sitemanagers

Responses to Sophisticated and Diverse
Customer Needs

Communication with Our Customers
Sanki Engineering actively participates in exhibitions sothat customers can become familiar with our unique
technology utilizing comprehensive engineering and inorder to open up new sales opportunities.

Major Action Policies

environmental systems divisions have obtained ISO
9001 and ISO 14001 certification, and we conduct
quality management by integrating these standards.
In the external audit conducted in fiscal 2016, wewere commended particularly for providing educational
programs for younger engineers and using iPads toefficiently coordinate between divisions, manage
schedules and share internal information. We willcontinue to advance quality management in accordancewith the 2015 edition of the ISO 9001 and ISO 14001
standards.
Framework for Promoting the Quality and Environmental
Management System
Top Management (President)
Company-wide management
reviews for QMS and EMS
Reports on Company-wide activities
and decisions on plans (twice per year)

General Manager of the Quality and Environmental Management Office

Exhibition Participation in Fiscal 2016
Exhibitions

Exhibited ProductsCompany-wide QMS and EMS Office

FOOD FACTORY 2016

Self-washing belt conveyor (bubbling type), chilled
food conveyor (with chilled stacker), high luminancemulticolor LED conveyor(Labor Safety, Quality Control &Environment Promotion Office)Regenerative Medicine
Japan 2016

CPCube®, open stage seminars (twice), panel
exhibits

Waterworks Exhibition
in Kyoto 2016 (50thReport on PFI Okubo, UV sterilizer
Waterworks Exhibition)
ENEX 2017

Energy saving proposals and case study
presentations, Eco Searcher, periloop, Trans Heat
containers, energy-saving belt conveyors forlogistics operations, AEROSTRIP, panel exhibits

3rd Interphex Osaka

CPCube®, Wide Area Clean System, MEDIFORT,
high luminance multicolor LED conveyor, AGV,
continuous heat sterilization apparatus, presentation
booths for medical facilities, panel exhibits

MACS 2017 MultiSystem Exhibition for
Smart Air Conditioning
and Sanitation

Aluminum refrigerant pipes and mechanical joints,
periloop

Initiatives to Ensure Quality
Philosophy on Quality and the Quality
Management System
Our facilities construction, machinery systems and

SANKI REPORT 2017

Eachdivision

Divisional Managers(Heads of sections, general managers of the headquarters, chief director of the research
institute, heads of business divisions, presidents of branches and branch offices)

Divisional management review
Reports on divisional activities andformulation of plans (twice per year)

Quality and Environmental Management Officer
Divisional QMS andEMS Office
Sales, Design, Production, Construction and Office duties

Quality Management Activities
To seek improvements closely linked to our operations,
we are promoting activities for raising construction quality
by returning to the basics of the ISO standards.
In fiscal 2016, we enhanced our site support basedon improved communication and promoted rapid,
constructive responses to problems and complaints. As
a result, we created a working environment that allows
onsite managers to focus more closely on their tasks,
which in turn has enhanced customer satisfaction.
In fiscal 2017, we will seek to raise the level ofcustomer satisfaction across the entire Group by
preventing the recurrence of problems and complaints andby establishing an objective scorecard as a new criteria forassessing customer satisfaction.
Providing Operational Support for Worksites
We are striving to improve operational efficiency bybolstering the Site-Documentation Support Center, whichhandles administrative tasks such as preparing documents
and making CAD drawings on behalf of site managers.
In fiscal 2016, we reviewed our operational processes
by reducing and digitizing onsite documentation andconsidering the construction of a new system to expand
the center’s operations. We received 171 requests forsupport from the five branch offices, exceeding our annual
target of 150 requests.
In fiscal 2017, we will disseminate information on thetypes of support the center offers and continue developing
its operational support system.
The Design Support Center was established in fiscal
2016 to provide technical support, cultivate humanresources and pass on technology, mainly throughspecialized design projects. We sought to improve thedesign capabilities of the five branch offices through onthe-job training while also supporting and coordinating a
total of 61 specialized design projects. In fiscal 2017, we
will incorporate the center into the Engineering Integration
Office with the aim of continuing to enhance and reinforce
our technical support.
Quality Management Activities by Technical Experts
Technical experts who have experience as branch or
branch office managers work under the direction of thequality assurance administrator and visit worksites to
conduct construction audits and quality reviews, as ameans of preventing problems and complaints, while also
mentoring junior employees.
To achieve our fiscal 2016 target of strengthening
our response to problems and complaints, we worked
on promptly dispatching staff to sites and thoroughly
disseminating information through the horizontal
distribution of technical memos for sharing information.
The superiority of our total engineering competency has
been more effectively exercised at the worksites by
establishing a consistent quality management system ledby the Quality Assurance Administrator Office.
Sharing Information and Preventing the Occurrenceof Problems and Complaints
We share our quality-related experiences across theCompany by means of technical documents in orderto prevent the occurrence of incidents and complaints
related to quality or, in the event that they do occur, toquickly and effectively handle them.
Information about problems and complaints are
distributed to construction engineers through a flash
bulletin, the “weekly bulletin” (a weekly meeting of
the Problems and Claims Evaluation Committee that is
also attended by Group companies), and the “monthly
bulletin,” along with updates on the causes of issues,corrective measures and preventive measures. In
January 2017, we began using posters at worksites toraise awareness of preventing problems and complaints.
With regard to the number of problems andcomplaints that occur during construction, we set themore challenging target of a 15% reduction for fiscal
2016. However, we were unable to attain the target,
as the number of such cases remained roughly thesame year-on-year. In fiscal 2017, we will continue topursue quantitative targets and focus on preventing andeffectively handling problems and complaints.

Relationship with Customers

Since April 2016, we have strengthened the functions of
our sales organization at the head office by integrating
operations to boost sales management, planning,development, support and sales capabilities related to theconstruction facilities business. By honing our proposalmaking capabilities based on our total engineering
competency, we will strive to continue responding toincreasingly sophisticated and diversified customer needs
and thereby continue to earn their trust and appreciation.

52

Assessment

Primary Goals

CSR Report• Improve construction
quality and pass ontechnologies

Major Action Policies

VOICE
My Focus Is on Accumulating
Technology and Passing Down
Worksite Capabilities
Seiji Katae
Quality Assurance Administrator,
Technical Administration Division

As the Quality Assurance Administrator responsible for theCompany’s construction facilities design and constructionengineering, I have been helping to enhance the worksite
capabilities of managers through such activities as design
reviews at all branches, meetings to review the start ofconstruction and to prevent problems, and construction audits.
In addition to reviewing construction quality and performanceand identifying improvements in construction methods
and operations, I have sought to give due recognition to
improvement efforts, thereby avoiding problems and additionalcosts to raise profits. Our research pursuits require constantcommitment, and we must build on the technologies wehave developed. Cultivating human resources skilled in bothtechnology and communication is also crucial. We are currently
planning the construction of the Sanki Techno Center with theutmost care to reflect the opinions of the worksite. I have highhopes that this facility will accelerate our search for a solution to
the propositions of accumulating technology and passing down
worksite capabilities to the next generation.

SANKI REPORT 201753

Relationship with Shareholders
and Investors

Changes in the Number of Personnel with Quality-Related
Qualifications (Totals as of April 1 for Each Fiscal Year)
Qualification

FY2016FY2017

95

97

1,127

1,123

42

44

Professional engineer
Project management technician (civil works/
construction/electrical construction/pipe-laying work)
Architect

207

208

Electrical engineer

164

157

Chief electrical engineer

3333First class instrument engineer

283

285

675

675

1,668

1,695

Fire protection engineer
Qualified managing engineer
Cumulative figures are shown for all qualifications.

Action Plans for Fiscal 2017
We designated reducing problems and complaints
during construction as our main action policy for fiscal
2017 and will strive to achieve a year-on-year reduction
target of 19%. In fiscal 2016, we sought to prevent
problems by more rapidly identifying their causes
and formulating preventive measures. We will further
accelerate this process in fiscal 2017 while spreading

Fostering Human Resources to Sustain
Our Technological Level
The Technical Training Center fosters human resourcesby helping employees acquire basic skills, brush up on
skills and attain qualifications. New employees receive
four and a half months of basic training and safety
training.
We provide a three-stage program for construction
management engineers based on the level of eachindividual’s skills in design, construction engineering,
construction management and other areas. These
programs are focused on practical applications anddrills for subjects such as design calculation, making
drawings, responding to problems and complaints, andcase studies.
To prepare for the opening of the Techno Center infiscal 2018, we will reinforce practical training in fiscal
2017 as well as hands-on practice and drills using actualmachinery to enhance our engineers’ skills.

Major Human Resources Development Activities for Fiscal 2016
Initiatives

Employee training(Technical Training
Center)Initiatives forpassing ontechnology

Initiatives forGroup companies
and subcontractors

54

Training

Details of Training

Results

Training for new employees• Education for new businesspersons, basic skills

51 participants

Correspondence course for attaining qualifications• Exam preparation for employees who want to be managing engineers and forbuilding, mechanical and electrical engineers

189 participants

Skill-based training
Step 1 training: for inexperienced workers and novices
Step 2 training: for workers with basic skills
Step 3 training: for workers with practical skills• Five-day training session for Steps 1 through 3 for improving skills• Optional program based on the amount of practical experience and skill level• Practical drills and practice by repetition to develop a sound grasp of skills

7 sessions
161 participants

Strengthen training on construction engineering andconstruction management• Strengthen practice to enhance skills for making and reading drawings• Strengthen practical drills on case study explanation, practice and presentation• Strengthen hands-on training using machinery and facilities

443 participants (cumulative total)On-the-job-training by technical experts• Practical on-the-job training offered by technical experts selected from all branches
who participate in onsite commencement discussions and construction audits

21 technical experts
2,510 site visits (cumulative total)

Conference on electrical construction quality for all branches• Test of practical skills for electrical technicians from subcontractors of all branches,
written exam based on past cases. Participants receive the internally certified
qualification, Sanki Engineering-certified Class A Electrical Engineer.

20 subcontractors
20 participating technicians

Explanation of problems and complaints

Number of sessions:Tokyo branch: 8,
Kansai branch: 2,• Introduce cases at briefings and liaison meetings held at branches and branch offices
Chubu branch: 12,
Hokkaido branch: office: 2,
Hokuriku branch office: 7

SANKI REPORT 2017

Fiscal 2016

Important Issues• Timely and appropriate
information disclosure• Shareholder returnPrimary Goals

Results• Expandopportunities
for dialogue
with institutional
investors andindividual investors• Revitalize the generalshareholders’ meeting• Expand opportunities
for IR meetings withdomestic and overseas
investors• Increased shareholder attendance (1.5times the previous year) due to first
general shareholders’ meeting held
outside the company• Aggregate total of companies with which
individual meetings were held: 43• Provide consistent,
steady returns toshareholders• Paid stable dividends inprinciple and provided
special dividends
depending on profit• Consolidated payout ratio for the year
ended March 31, 2017: 40.6%• Special dividend of 10 yen per share

Fulfilling our Responsibilities toShareholders and Investors
We clarified our basic approach to issues, including
ensuring the rights and equal treatment ofshareholders, appropriate disclosure of information andtransparency and dialogue with shareholders, in the
Sanki Engineering Corporate Governance Guidelines
established in December 2015. We are resolved to fulfill
our responsibilities to shareholders and investors byfollowing these guidelines.
Reference

Fiscal 2017

Major Action Policies

Sanki Engineering Corporate Governance Guidelines

P. 40

Timely and Appropriate Information Disclosure
Sanki Engineering strives to disclose required corporate
information in an easy-to-understand, fair, speedy,
timely and appropriate manner pursuant to the
stipulations of our Disclosure Policy. We also disclose
information beyond legal mandates when we deem
such information to be useful to shareholders andinvestors and to ensure management transparency. In
addition, we facilitate the effective exercise of voting
rights by shareholders through efforts such as releasing
the convocation notice of shareholders’ meetings wellin advance and posting information at an early date on
our corporate website.

WEB Disclosure Policy

http://www.sanki.co.jp/en/ir/disclosure/

Communication with Shareholders and Investors
In June 2016, we held the 92nd annual general meetingof shareholders at a hotel in Tokyo, after shifting thevenue from the previous conference room at the head
office. As a result, about 1.5 times more shareholders
attended than in the previous year, and they offered
their opinions and asked questions.
For investors we hold events such as results
briefings for investment analysts and institutional
investors (twice a year; a total of 87 people participatedin fiscal 2016) and individual meetings as necessary inAssessment

Major Action Policies• Promote dialogue withshareholders• Enhance IR activities for
institutional investors andindividual investors• Provide consistent, steadyreturns to shareholders

response to requests. Feedback received from investors
through our IR activities is relayed to management
in an effort to maintain two-way communication.
Furthermore, we seek to enhance the content of
information disclosed in the investor relations sectionof our Japanese language website through featured
content, such as the Sanki for Beginners—Fast Facts
Index, an easy-to-understand outline of characteristics
of our business. And we disclose the same quarterly
financial data and supplementary materials on our
English language website for overseas investors.

Relationship with Shareholders and Investors

Facilities construction architect

awareness to reduce the number of problems. Also, wewill seek to enhance our support for site documentation
by reducing the volume of documents and constructing
a digital documentation system. In the area of technicalsupport and guidance, we plan to develop a system thatwill allow for technical information searches across theGroup. Moreover, we will coordinate between branches,branch offices and the Engineering Integration Office
to organize on-the-job training and provide technicalsupport from design to construction.

CSR Report

Construction Method Improvement Award and otherTechnical Awards
Each year, we commend innovative ideas from the worksite
as improvements in construction methods. In fiscal 2016,
we received a record 1,170 proposals and presented
Construction Method Improvement Awards for three
proposals, include one Contribution to Customers Award.

Our Basic Policy Concerning Returns toShareholders
At Sanki Engineering, dividends form the basis of ourpolicy to return profit to shareholders, and we view
this return of profit as a key management concern.
We strive to provide stable dividends and balancesustainable corporate development with returns toshareholders in accordance with our basic policy ofshareholder return. We invest internal retained earnings
into new businesses and technological development
to strengthen competitiveness and create a basis forbusiness development with the objective of continually
boosting corporate value. For the fiscal year ended
March 2017, we paid a total dividend per share of 30.0
yen, which included a regular dividend of 10.0 yen for
the interim period, and a regular dividend of 10.0 yen
and an extra dividend for the second consecutive yearof 10.0 yen, totaling 30.0 yen, for the full-year period.
Furthermore, in May 2017 we retired 3 million sharesof treasury stock and also decided to acquire another3 million shares (worth up to 4.0 billion yen) of treasury
stock during fiscal 2017 in an effort to improve capitalefficiency.

SANKI REPORT 201755

Relationship with Business Partners

Fiscal 2016

Important Issues
Major Action Policies

Primary Goals

Assessment

Major Action Policies• Continue training forprocurement staff• Training for procurement
staff: 19 sessions• Trained procurement staff: 19
sessions• Promote online procurement• Improve quality throughcooperation withbusiness partners• Strengthen cooperation
through subcontractor
groups• Expand the scope ofparticipation for thenationwide Liaison Meeting
Participants: 18 companies• Increased participants to thenationwide Liaison Meeting:from 18 to 19 companies• Strengthen cooperation throughsubcontractor groups• Strengthen relationships
through an awards program
aimed at enhancing quality
and technology• Enhance the Sanki Super
Meister System and SankiBest Partner Award• Distinction under the Sanki
Super Meister System given
to 14 individuals, and the
Sanki Best Partner Award
given to 130 companies• Strengthen relationships with
subcontractors

Building Fair, Equal and Transparent
Business Relationships
Thoroughly Ensuring Fair and Transparent
Transactions
Sanki Engineering is committed to building equal, fair
and transparent relationships with our business partners.
Our Code of Conduct clearly specifies the nature of ourrelationship with business partners, and we strive tokeep everyone informed through in-house training andthe distribution of contract procedure manuals, which
prohibit the abuse of a superior bargaining position.
Upon starting business with a new company, such asa construction subcontractor, materials manufacturer,
agent or expense-related business partner, we assign
a business partner code based on objective standards
covering various areas, including the registration statusof quality and environmental management systems,
financial conditions, procurement track records, delivery,
pricing, and response to problems and complaints.
Procurement System and Execution of Action Plans
Reducing costs and improving our profit ratio areimportant initiatives in our new medium-term
management plan, and to this end we have been
pursuing strategic procurement activities. We set up
the Procurement Division in April 2015 to undertake
centralized procurement and make price adjustments
based on surveys for all offices by negotiating prices

SANKI REPORT 2017

Seminars and Training for Procurement Staff
We organize seminars and training as needed to promote
appropriate procurement activities and enhance thepurchasing and negotiating skills of procurement staff.
In addition to company-wide training, an annual training
session is held within each section to ensure thoroughadherence to corporate ethics and enhance complianceawareness among procurement staff. In fiscal 2016, we
held a study group on information security to re-evaluate
related compliance issues. We also held 14 study groups
as a means of developing procurement and negotiatingskills, of which six were organized for the entire company.
Moreover, we encouraged procurement staff to obtainregistered qualifications such as instrument engineer andfacilities construction architect to enhance the skills andknowledge of procurement staff. And we sought to train
employees on electronic ordering procedures by holding
29 internal seminars for all offices, with a total attendanceof about 1,200 employees.
Handling Anti-social Forces
We avoid any involvement with anti-social forces in our
procurement activities. Consequently, we only conducttransactions with companies that have no involvementwith anti-social forces, and we request all of our business
partners to submit a letter pledging the avoidance of
involvement with anti-social forces. As of March 31, 2017,
we received pledge letters from 3,717 companies.
Operation of Whistleblowing Hotlines
We operate a Corporate Ethics Hotline to prevent any
improper transactions. Posters for the hotlines areStrengthening Cooperation with Business
Partners
Communication with Business Partners
We strive to enhance quality and improve operations
in a joint effort with our business partners. Under
this initiative, we maintain open communications forexchanging ideas for improvement.
Joint Improvement Activities with the Subcontractor
GroupsSanki Engineering has established a subcontractor groupat each division, branch and branch office as part of oureffort to enhance our construction capabilities. In addition
to monthly liaison meetings, we hold joint labor-saving
projects and sessions, providing yet another opportunity
for us to improve our technical skills and enhancesupervision of worksite safety and health. We also
review and guide group members on safety and healthissues through training or qualification courses led by our
employees, or by conducting joint patrols. We set up the
Liaison Meeting for Subcontractor Groups, which meets
twice a year to strengthen our cooperative relationship. In
fiscal 2016, members gathered to share information andexchange views on subjects such as long working hours.

Sanki Super Meister System
The Sanki Super Meister System certifies andcommends foremen of Group subcontractors whose
superior construction techniques have significantly
contributed to elevating the quality of our construction
work. In fiscal 2016, a total of 14 foremen werecertified. From fiscal 2015, we also began rewarding
the companies for their foremen who have consistently
contributed to enhancing worksite quality by granting
subsidies designed to encourage further quality
improvements.
Sanki Best Partner Award
The Sanki Best Partner Award was established in April
2016 to express both our gratitude to subcontractors
who have significantly contributed to the developmentof the Sanki Engineering Group and our hope for theircontinued success as valued partners. In fiscal 2016,
the Sanki Best Partner Award was presented to 130
companies during safety and quality conferences held
across the country.
Support System for the Acquisition of Qualifications
To support subcontractors in upgrading their technicalskills, we subsidize the acquisition of qualifications. In
fiscal 2016, we promoted the Central Safety and HealthCommittee’s system to encourage its use.

VOICE
Motivated by the Best Partner Award
to Maintain Our Zero Accident andZero Disaster Record
Noboru Tachibana
Chairman, Osaka Sanki Health and
Safety Cooperative Association
Representative Director, Fujio
Equipment Industry Co., Ltd.

Since 2001 we have been involved in many worksites
operated by Sanki Engineering, which I feel is at the top
level in the industry in terms of its safety measures andworking environments. We too have always worked hardwith the awareness that handing over a site without accident
or disaster is the best way to generate sales. And wewere delighted to receive the Best Partner Award for two
consecutive years, in fiscal 2015 and fiscal 2016.
The construction industry faces a number of issues,
including non-enrollment of social insurance, shortage of laborand deterioration of skills. In the years ahead we hope that
Sanki Engineering will guide us in addressing these issues.

Relationship with Business Partners

The Sanki Group Code of Conduct and Action Guidelines
stipulates the conduct of fair transactions with all
business partners. We therefore conduct businesswith our partners in order to promote free market
competition and in accordance with the relevant laws
and individual contracts.
Under this basic principle, we endeavor to build trustwith our business partners in order to jointly provide thehigh-quality systems as well as services to customers.

for all offices and sharing procurement-related information
across the company. In fiscal 2016, we focused on
digitizing the ordering process, and by April 2017 all offices
had begun operating under the new system, thereby
enhancing the operational efficiency of divisions related
to technology and procurement. Going forward, we willcontinue to digitize delivery requests and plan to start thesystem in November 2017.

displayed in places that catch the eyes of business
partners, such as on-site offices in an effort to promoteuse of the reporting system.

CSR Report• Thoroughly ensure equal,
fair and transparent
transactions

Basic Principle

56

Fiscal 2017
Results

VOICE
Placing a Top Priority on Safety
and Health to Bring the Worksite
Together as a Team Based on
Mutual Trust
Toshio Hayama
Representative Director,
Noumiko Co., Ltd.

For many years we have been involved in painting andscaffolding at worksites operated by Sanki Engineering’s
Chugoku branch office. And we serve as one of the executive
members of the Chugoku Sanki Health and Safety Cooperative
Association.
It is an honor to have been presented with the Sanki Best
Partner Award for fiscal 2016 from among so many companies.
Having been reminded anew that safety is the top priority, we
will strive to ensure zero accidents and zero disasters as we
continue our work far into the future. Also, we will maintainclose communication with Sanki Engineering staff, our own
staff and everyone involved in construction work so that we
can unite worksite as a single team based on mutual trust.

SANKI REPORT 201757

Health and Safety at Worksites

Fiscal 2016

Important Issues• Rising demand in theconstruction industry• Shortage of construction
workers, and the aging
and shrinking of theskilled workforce

Primary Goals

Results• Deploying preventive
measures to coincide withthe timing of past accidents• Number of accidents in thefirst quarter: less than the
average (six incidents) forthe past three years• Decreased from six to threeincidents• Deploy measures against thethree major categories ofaccidents• Deploying preventive
measures based on the typeof accident• Number of “caught/pinched”
type accidents: less than the
average (seven incidents) forthe past three years• Decreased from seven to two
incidents• Elevate awareness levels• Enhancing knowledge
and capabilities througheducation• Implementing education• Implemented onsite training,
including special training on
scaffolding• Enhance knowledge andcapabilities related to healthand safety

Health and Safety Environment of theConstruction Industry

Health and Safety Policy and Structure
The Sanki Engineering Group introduced an occupational
health and safety management system (Sanki OHSMS)
in 2001, one of the first in the construction facilities
industry, and it has since worked on it together withaffiliate companies. A Company-wide health and safety
activities plan is prepared based on the Health and
Safety Guidelines, which is established under the SankiEngineering Group Basic Health and Safety Principles
every year in order to increase transparency of our
PDCA cycles, including the analysis of risk factors andimplementation of remedial and preventive actions.

WEB

Sanki Engineering Group Basic Health and Safety Principles

https://www.sanki.co.jp/en/csr/safety/

Initiatives in Fiscal 2016
Key Items Implemented in Fiscal 2016
Our analysis of accidents that occurred in fiscal 2015
revealed frequent occurrences at the start of the year,
from April through June. As for our priority areas offocus, we found that while accidents in the “falls/
tumbles” category have declined, those in the “caught/
pinched” category continued to occur frequently.
Since the overall number of accidents is declining, we
designed our slogan and key actions to keep in mind
the importance of showing mutual respect amongcolleagues and cooperating to create a safe worksite.

Outline of Activities in Fiscal 2016
Policy of the Central Safety and Health Committee
Chairperson• Slogan“Everyone’s Safety Means Yours Too—Creating Safe Workplaces
Together”
Stay alert and never be too confident. Talk to each other as a means of
avoiding dangerous situations.
Key Actions
1. Deploying preventive measures to coincide with the timingof past accidents• Launched an Early Spring Safety Campaign from April to June. Issued
reminders on Fridays, since accidents most frequently occur on
Saturdays.
• Carried out special joint safety patrols to closely inspect worksites,
during the summer and before and after year-end.
2. Deploying preventive measures based on accident type
• Carried out focused inspections on caught/pinched, heat stroke, falls/
tumbles and other categories during special joint safety patrols, during
the summer and before and after year-end.
• Distributed “Accident Case Studies 2,” which covers a broader rangeof categories.
3. Increasing capabilities through education• Held special training on scaffolding following a regulatory revision andskill development training for foremen.
• Conducted 8 types of training on health and safety for 53 new
employees.
• Opened a health and safety portal site using iPad apps.
Stickers attached to helmets alerted
workers to preventive action in an effort
to reduce the number of accidents.

58

SANKI REPORT 2017

Safety and Quality Conventions and Safety Patrols
Every year in June, the preparatory month for National
Safety Week, Sanki Engineering holds safety and quality
conventions at each head office, branch and branch office.
In fiscal 2016, the president and Central Safety and HealthCommittee chairperson attended the convention for all
offices. We also conduct special joint safety patrols, during
which the president and directors tour 40 worksites in thesummer and around the end of the year.

Accidents during 2016
In 2016, 12 accidents occurred (4 lost workday
accidents, 8 with no lost workdays), the same number
as in 2015, although the accidents were less severe.
We were able to halve the number of accidents
during the first quarter (April to June) from a threeyear average of 6 incidents. Accidents in the “falls/
tumbles” category, however, which had been on the
decline, increased from 1 in 2015 to 3. And while thenumber of accidents has generally fallen, we are seeing
a greater variety of accidents, including minor incidents.
Therefore, handling dangers that cannot be predicted on
the basis of reviewing past developments will hold the
key to eliminating accidents.
Number of Accidents and Frequency Rate

Health and Safety at Worksites

The Tokyo 2020 Olympic Games will take place in three
years, and amid growing demand for construction,
the industry has faced issues such as securing laborand improving work efficiency. It is also pursuinggovernment-led initiatives to introduce ICT and cultivate
female engineers. Due to advances in safety equipment
and systems, the number of industrial accidents in fiscal
2016 continued to decrease in all industries, including
construction. The shortage of labor and skilled workers,
however, poses the potential risk of increasing workrelated accidents and requires continued attention.
Improving health is another issue faced by theconstruction industry. Long working hours have comeunder particular public scrutiny and require an industrywide response. Sanki Engineering has addressed thesechanges by taking action on health and safety, including
measures to support mental health based on the resultsof stress-related checkups of all employees.

Major Action Policies

CSR Report• Growing risk of work
accidents due tooverworked laborers orlack of experience

Fiscal 2017
Assessment

Major Action Policies● Frequency rate for Sanki Engineering● Average frequency rate for the general construction industry◆ Severity rate for Sanki Engineering◆ Average severity rate for the general construction industry■ Number of accidents
1.25
Worksite safety patrol accompanied by the president (at right)

0.98

0.83

0.91

0.92
0.69

Health and Safety Training
For our own employees and the staffs at affiliatecompanies, Sanki Engineering provides health and safety
training led by in-house instructors or at designatedtraining institutes. The instructors are dispatched by the
Branch Education Support Team of the Labor Safety,
Health, Quality Management & Environment Promotion
Office. For newcomers to the worksite, we provide a healthand safety orientation using health and safety handbooks
and joint training sessions with the Sanki Health and
Safety Cooperative Association.
Furthermore, as growing construction demand leads
to an increase in foreign workers, Sanki Engineering
spent twice as much time than its statutory obligation toprovide a safety seminar through an interpreter for three
Vietnamese technical interns at an affiliate company. We
will continue providing optimal education on health andsafety to meet the needs of each site’s workforce.
Number of Participants in Health and Safety Training (Fiscal 2016)*
Type
Special education, etc.

Number of Participants(from Subcontractors)
2,473 (1,902)

Health and safety training, including foremen

256 (178)

In-house health and safety training

119

Other client-focused training

223 (211)

Total

–

3,071 (2,291)* Limited to training by in-house instructors, not including training at
designated educational institutions.

0.74

0.73
0.26
0.29
0.05

0.23
11

2013

0.21

0.07
0.05

0.64
0.11
0.03

0.06
6

3
2012

0.50

2014

8

7

2015

2016

(year)

Scope: Sanki Engineering worksites (Sanki Engineering Co., Ltd. and business
partners)
Number of accidents: interrupted work for one day or longer (the number ofaccidents shown in the graph reflects the number of victims, which was used
to calculate accident frequency and therefore does not correlate with thenumber previously cited on this page)
Source for average frequency rate and severity rate for the general constructionindustry:
Survey on Industrial Accidents, Ministry of Health, Labor and Welfare• Frequency rate: calculated as the number of deaths and injuries caused by
accidents in the worksite per one million working hours; this figure indicatesthe frequency with which accidents occur.
• Severity rate: calculated as the number of lost workdays caused by accidents
in the worksite per one thousand working hours; this figure indicates theseverity of the accidents.
• The frequency rates for 2014 have been retroactively revised.

Activities Plans for Fiscal 2017
Considering the social and industry environment aswell as the number and nature of accidents in 2016,
we are focusing on the following key action areas
for safety in fiscal 2017: (1) deploying measuresagainst the three major categories of accidents, (2)sharpening awareness, and (3) enhancing knowledge
and capabilities, and on (4) boosting mental and physicalhealth, as our key action area for health.

SANKI REPORT 201759

Relationship with Employees

Fiscal 2016

Important Issues• Promote diversity• Develop andappropriately allocate
human resources

Major Action Policies• Promote diversity• Review various programs(expand programs
supporting work-lifebalance)• Established a half-day off
program and an anniversary
leave program• Launched Sanki Smile Day• Implemented diversity training• Enhance training programs todevelop human resources with
the Sanki spirit• Consider and promotemeasures to address long
working hours• Develop measures toaddress long working hours• Set goals for each division,
assigned leaders to promotemeasures• Held regular and subcommittee
meetings at each division• Implement measures outlined in
the Smile Project• Create a comfortableworking environment

Our Commitment to Employees

Promoting Diversity
The Sanki Engineering Group believes that creating
working environments in which various personnel areable to demonstrate their particular capabilities will raisethe value of our company. With this in mind, we arecultivating a corporate culture that respects the diversityof employees and establishing various programs toward
our goal of creating a working environment that is evenmore pleasant for employees.
Respecting Diversity in Employment
We seek to bring on board human resources thatdiffer in gender and nationality as well as in talentand personality. In our hiring process, staff from thesales, design and technology divisions join the humanresources department to ensure fairness based on
multiple perspectives. In fiscal 2017, we hired 92 new
graduates, of which 20 are women and 72 are men.
We are also actively hiring foreign nationals, and asof April 1, 2017, 18 people from China, Peru, South
Korea, Thailand, Vietnam and the U.K. are working withus, an increase of 4 from the previous year. Under our
medium-term management plan, we will continue toactively hire foreign nationals to steadily develop our60

SANKI REPORT 2017

overseas operations and promote diversity and develop
employees who can play an active role on the worldstage.
Promoting Women’s Careers
We believe that creating opportunities in which our
female employees can demonstrate their talents further
would lead to sustainable growth of our company and inturn boost our corporate value. We therefore continue
to upgrade our personnel system and introduce newprograms. The following are the major measures that
we have taken.

Creating an Even More
Comfortable Workplace by
Spreading the Word about
Work-Life Balance Programs
throughout the Company
Mina Yoshioka
1st Engineering Section
1st Project Management
Department
Facility Systems Business Division

Action Plan under the Act for Promoting
Women’s Careers

I’m raising two children while working full time in a careertrack position mainly involving project management for
constructing networks at financial institutions. In my division,
there were very few precedents for women in such positions
returning to work after giving birth, so when I returned to my
job I had to improvise a new workstyle with my supervisor.
Today the company has an established system and more
women are balancing work and family. Above all, we havethe understanding and cooperation of our coworkers, which
has been the key to continue working.
To foster an even more comfortable environment for
employees seeking to balance work and family, we mustwidely publicize our programs among employees and disclose
information through means such as roundtable discussions.
Most importantly we must speak up for ourselves to propose
better workstyles.

1. Period: from April 1, 2016 to March 31, 2021
2. Goals
Goal 1: Extend the average service years of female
employees by 20% from the current level.
Goal 2: Actively allocate women in career-track positions tothe sales division to double the current ratio.
Goal 3: Raise the ratio of female managers to theconstruction industry average of 1%.

Career Change System
Sanki Engineering introduced a system that allows
employees to change their career type from general
offices to main career-track positions. As of April 1,
2017, a total of 38 employees who have changed
their career type are succeeding in main career-track
positions nationwide. In fiscal 2015, we revised therequirements for switching career type to expand
opportunities for as many employees as possible todemonstrate their abilities.

FY2007 ◦Introduced a career change system that allows
female employees to change their career typefrom general office to main career-track positions.
FY2009 ◦Launched full-scale recruitment of new female
graduates as career-track employees.
FY2013 ◦Eliminated all general-office positions by shiftingthem into regional positions and conducted
special training for those in regional positions.
◦Acquired the Kurumin mark, a certificate granted
to companies that support childcare and based on
the Act on Advancement of Measures to Support
Raising Next-Generation Children.
FY2014 ◦Conducted Step Up training for employees who
moved into regional positions.
◦Joined the Action Plan on Women’s Active
Participation in the Workplace advocated by the
Keidanren (Japan Business Federation).
◦Published our voluntary actions related to thepreferment of female executives and managers.
FY2015 ◦Conducted diversity training (target: generalmanagers and department managers).
◦Continued conducting Step Up training for
employees who moved into regional positions.
FY2016 ◦Continued conducting our diversity training (target:
general managers and department managers).
◦Continued conducting Step Up training for
employees who moved into regional positions.
◦Held a roundtable discussion for working
mothers.

Relationship with Employees

The Sanki Engineering Group is guided by its
management philosophy: “We place significance oncommunication and mutual respect,” as it strives tocreate a working environment and a corporate culture inwhich all employees grow with the Company, respect
each other’s individuality, and are able to succeed andthrive. We know that all of the technical capabilities andskills of our employees are valuable assets and thateach of our employees is an invaluable human resource.
We are therefore creating an environment that fosters
the development of human resources based on our
unique Sanki spirit, which enables them to work to theirfull potential.

Major Action Policies

CSR Report

Results

To create an environment in which our female
employees can continuously develop their careers basedon the Act of Promotion of Women’s Participation andAdvancement in the Workplace—commonly referred toas the Act for Promoting Women’s Careers—we haveformulated the following Action Plan and are pursuing
various measures to promote women’s careers.

VOICE

Fiscal 2017
Assessment

Primary Goals

Employee Data (as of March 31 of Each Fiscal Year)

Consolidated
Number of employees*

Nonconsolidated
Nonconsolidated
Nonconsolidated

Average age
Average number of years of
employment
Number of new recruits

Employmentof people
withdisabilities

Number of employeeswith disabilities
Ratio of employeeswith disabilities (%)

1,908
(500)

Male
2,022
(637)
1,677
(550)

FY2015
Female
287
(5)
249
(3)

Total
2,309
(642)
1,926
(553)

Male
2,041
(653)
1,678
(572)

FY2016
Female
298
(5)
255
(3)

Total
2,339
(658)
1,933
(575)

35.8

42.6

43.7

36.1

42.7

43.8

36.5

42.8

12.7

18.2

18.8

12.9

18.1

19.0

13.3

18.2

FY2013

2,246

2,283

2,002

280

2,282

1,918

1,908

1,668
(497)

240
(3)

42.7

42.7

43.5

18.4

18.2

19.0

Male

Total

Consolidated

–

–

–

–

–

111

20

131

81

20

101

Nonconsolidated

55

92

78

17

95

75

18

93

60

16

76

Consolidated

Number of employed postretirement-age employees

FY2014
FemaleFY2012

Nonconsolidated
Nonconsolidated
Nonconsolidated

–

–

–

–

–

234

2

236

235

5

240

166

189

200

3

203

188

2

190

183

4

187

36

39

–

–

37

–

–

32

–

–

30

1.97

2.13

–

–

2.11

–

–

1.80

–

–

1.69

* Figures in parentheses signify the number of managers.

Employees by Age (as of March 31, 2017)
20s

30s

40s

50s

Consolidated

10s
0 (0)

408 (85)515 (95)

719 (80)424 (33)60s
269 (5)

70s
4 (0)

80s
0 (0)

2,339 (298)

Total

Non-consolidated

0 (0)378 (83)422 (79)569 (65)352 (24)

210 (4)

2 (0)

0 (0)

1,933 (255)* Figures in parentheses signify the number of women.

SANKI REPORT 201761

skills, technical skills and management skills and boost
personal growth. We also operate an overseas language
and job training program, designed to develop humanresources that are adaptable to diverse environments.

Major Programs Supporting Work-Life Balance(non-consolidated) (as of April 2017)
Area

ProgramRefresh leave

Consecutive leave
Three consecutive days of leave after
for onsite workers
staying at a worksite for more than six(construction site workers) months or before moving to anotherTraining System
Younger Employees

Management
Training

Mid-career Employees

New recruit training

Leadership position training

Education by mentors

Management training

Third-year training

Executives
Executive officer
training

Work

Department manager
training

Section chief training

Paid leave for half a day at a time

Anniversary leave

A planned paid leave on special
dates for employees or their families,
requested at the start of the fiscal year

Sanki Smile Day (new)Encouraging employees to take a fullor half day of paid leave on payday andavoid overtime

Return to Work program(new)

Employees who have left the company
for reasons such as childbirth,childcare, nursing care or a spouse’stransfer can apply for reinstatement

Nursing leave

Can be obtained five times for up to
180 days per person

Short-time working

The reduction of scheduled working
hours or the delay of starting/finishingtimes for childcare or elderly care; forchildcare, it is available until the childreaches the third grade of elementary
schoolReserved leave

The use of reserved days off as leave
for childcare or elderly care

Support for childcare
leave and reinstatement

An interview is held with the supervisor
before and after applying for childcare
leave

Fifth-year training

Personnel System Aimed at Making Our Company
Become a Workplace Where People Grow
In fiscal 2013, we introduced a new personnel system tobecome a company in which people grow. We instituted
the personnel system to ensure that every employee isequally provided with opportunities and the right to fairevaluation and treatment. As part of this, the early career
system for employees in their 20s was introduced toprovide them with experiences in different jobs early on in
their career development.
Once a year, all employees fill in a Career Development
Sheet and receive feedback on their career plan throughan interview with their supervisors. Another system allows
employees to bypass their superiors and speak directlywith the Human Resources Department. These measures
are offered separately from the evaluation system.
The key initiative of our new medium-term
management plan is to develop human resources thatpossess the Sanki spirit. Accordingly, we launched ourefforts to enhance employee education and working
conditions at Group companies in fiscal 2016, and we plan
to carry out additional initiatives in the future.
Education and Training System
We maintain training systems associated with each career
path, such as management training, technical training
and training by field in order to strengthen specialized

62

SANKI REPORT 2017

Safety Training

Qualification training
Career-positioned staff training
Corporate ethics training

Corporate Ethics
Training

Corporate ethics training
Qualification training

Facilities
Construction
Equipment
Division
Technical training

Developing and Evaluating Human
Resources

New recruit training

Childcareandnursingcare

Career-positioned staff training
Qualification training
Step 1 training
Step 2 training
Step 3 training

Plant &
Machinery
Systems
Divisions

Quality &Environment
System training

Qualification training
New recruit orientation
Inspector education

Training on our products and systems
ISO 9001/ISO 14001
New recruit orientation
Career-positioned
staff training

Smile Project

Education to developinternal auditors

Promoting Workstyle Reform
Promoting Work-Life Balance
We endeavor to provide our male and female
employees with systems that support their workand-life balance so that they can continue to work,
worry-free, as they experience various life events. We
have been expanding these systems in response toemployee requests, and we also began implementing achildcare and nursing care leave program that exceeds
the statutory requirement in April 1, 2017.

To address long working hours, we launched the Companywide Smile Project led by the president. Guided by slogans
for reducing long working hours, such as “Have the will totake leave,” “Create an environment conducive to taking
leave” and “Have the resolve to let workers take leave,”
we are seeking to improve our working environment bycarrying out wide-ranging measures. These include holding
regular meetings on the issue, convening subcommittee
meetings at each division to analyze issues and develop
basic guidelines, and conducting activities to raise awarenessamong employees. In fiscal 2017, we will continue our efforts
to create an even more comfortable workplace by reviewing
our internal programs andintroducing new
systems under the“Employee First”
slogan.

Number of Employees on Childcare Leave, Nursing Care Leave and Paid Leave
FY2012

FY2013

FY2014FY2015FY2016

Consolidated

–

–

–

10 (2)

16 (1)

Nonconsolidated

10

16

9 (0)

7 (1)

13 (1)

Consolidated

–

–

–

–

0 (0)

Nonconsolidated

–

–

–

–

0 (0)

Paid leave
Nonratio (%) consolidated–

Childcareleave

Nursingcare leave

34.7
35.6
41.8
50.5
Male 31.6 Male 32.6 Male 38.8 Male 47.6
Female 57.6 Female 56.4 Female 62.1 Female 69.5

Figures in parentheses signify the number of men.

Smile Project posters

Acquiring the Kurumin Mark and Recognition for
Supporting Childcare by the City of Nagoya
In 2015, we were granted an update for the Kuruminmark, a certificate granted by the Tokyo Labor Bureau of
the Ministry of Health, Labour and Welfare and based

The Kurumin mark for support ofraising next-generation children

City of Nagoya certification forcompanies supporting childcare

Respect for Human Rights
We declared our respect for human rights in the SankiGroup Code of Conduct and Action Guidelines, which
prohibits discrimination based on nationality, gender,
age and disability and endeavors to instill respect forhuman rights across the Company through various
means, such as educational programs. Guidelines forpreventing sexual harassment are stated and a system
offering consultation on sexual or power harassmentand other workplace issues is established at eachbranch and branch office. A counter staffed by qualified
external counselors has also been set up to make iteasy for employees to seek consultation.

Relationship with Employees

Half-day off

Seventh-year training

System for Reemploying Workers Following
Retirement
Seeking to provide employment opportunities forolder employees with advanced skills and expertise,
we led the industry by introducing a system for the
reemployment of employees following retirement.
In fiscal 2016, we reemployed 25 additional retired
employees on a consolidated basis, an increase from18 in the previous fiscal year.

Details
Five consecutive days of leave for eachfive-year period of employment using
employee’s reserved leaveon the Act on Advancement of Measures to Support
Raising Next-Generation Children, for meeting certain
criteria as a company supporting childcare. In 2014 the
Chubu Branch became the first construction equipment
company to be recognized by the City of Nagoya as acompany supporting childcare.

CSR ReportCreating Workplaces for People with Disabilities
We are working to create an environment in which
employees with disabilities can work comfortably overlong periods. In fiscal 2016, we began holding problemsolving seminars for employees who are hearingimpaired, during which we also exchanged views
reflected in workplace management. Moreover, we
prepared against disasters by installing lamps bearing
evacuation instructions to hearing-impaired employees
in an effort to establish a safe working environment.

Maintaining and Improving Employee Health
To ensure that our employees and their families are able
to work in good health, both mentally and physically,
we introduced a 24-hour telephone health consultation
service. The service was set up outside the Company
and enables employees and their families to receive
consultation on mental and physical concerns, as wellas medical-, nursing- and childcare-related issues, freeof charge. The privacy of callers is strictly protected.
We have also been working to prevent employees
from developing mental health issues by conducting
checkups for stress-related symptoms, even before
this became mandatory under Japan’s revised Japan’s
Industrial Safety and Health Act in 2014.
Sound Employer-Employee Relationships
The human resources department and the employees
union at Sanki Engineering meet monthly to discuss
improvements in the workplace environment and thedevelopment or operation of Company systems. We
also provide the employees union with opportunities topresent their proposals or requests to management.

SANKI REPORT 2017

63

Relationship with the Environment

Fiscal 2016

Important Issues• Protect the global
environment by meansof our exceptional
technological capability

Primary Goals

Results• Providing products andservices to help reduce CO2
emissions of customers• Increase orders for proposals
to reduce CO2 emissions
compared to fiscal 2016

• CO2 reductions (orders, nonconsolidated): 27,319 t-CO2 /year (up 39% from fiscal
2016)

Assessment

Major Action Policies• Providing products and services
to help reduce CO2 emissions ofcustomers

Number of Employees with Environment-related Qualifications(as of April 1, 2017)
Certified environmental measurer

Supervisor of management of industrial
waste subject to special control• Properly dispose and reduce
industrial waste• Determine the total volume
of industrial waste generated
by the Sanki EngineeringGroup• Determined the consolidated
volume of industrial waste• Properly dispose of and reduce
industrial waste

Pollution prevention manager*

Consolidated

8

Non-consolidated

7

Consolidated

174

Non-consolidated

153

Consolidated

71

Non-consolidated

48

One mission of our environmental management isto develop and introduce technologies and productsthat lead to energy conservation and the reductionof CO2 and lifecycle costs by improving functionality
and comfort through the technology of each of ourbusinesses. To that end, the Energy Solutions Center
is working to improve activities on an ongoing basis bycollecting energy-related information and supporting
technical development and proposals to customers.

CSR Report• Minimize theenvironmental impact
caused by our businessactivities

Fiscal 2017

Major Action Policies* When the same person holds several qualifications, it counts as one person.

Sanki Engineering Environmental Policy
Established: April 1, 2015
Revised: April 1, 2017

The Sanki Engineering Group recognizes environmental
issues as key management issues and will actively engage inprotecting the working environment, local environment andglobal environment as a corporate citizen.
We have established our environmental goals andframework of action in Japan as follows.
1. We will strive to prevent environmental pollution andwork further toward conserving resources and energy,
reducing industrial waste, promoting recycling, preserving
biodiversity and protecting ecosystems.
2. We will actively develop proposals on resource and energy
conservation when designing facilities.
3. We will comply with laws and regulations related to theenvironment and with external requirements agreed to by
the Sanki Engineering Group.

Environmental Management System
We have constructed a system for implementing
environmental management (ISO 14001) with ourpresident as the top manager. At management reviews,
conducted twice a year, each of our divisions reports
on its activities and we decide on future plans. The
entire Company has received ISO 14001 certification,
including our Group companies, Sanki Kakou KensetsuCo., Ltd. and Sanki Kankyo Service Co., Ltd. An external

64

SANKI REPORT 2017

Quality and Environmental Management System

P. 52

Major Activities in Fiscal 2016
In fiscal 2016, we organized employee training with anemphasis on the 2015 version of ISO standards, which
we will apply to our operations starting in April 2017.
We began by providing an e-learning programfor employees at all Group companies to develop anunderstanding of the new ISO standards. Meetings
were then held to explain the Environmental Manualand Standards that were revised in accordance with the2015 version. We also sought to enhance understandingof the revisions among employees through channels
such as the company-wide QMS and EMS management
reviews. Having trained employees, we are now fully
prepared to receive an external screening in fiscal 2017
for the transition to 2015 standards.
Beyond these activities, we addressed the issue ofmaterials containing asbestos, which are expected to bedischarged in greater volume during renovation work, byrevising our Basic Flow Chart of Procedures for HandlingAsbestos to list the legal requirements for each stage ofthe process, from preparation to completing disposal, inorder to ensure compliance. We also sought to prepare
for emergencies such as natural disasters, which havebeen occurring with increasing frequency, by conducting
drills to ensure that staff know how to use the itemsin the Emergency Supply Kit distributed to all Group
employees.
Developing Environmental Leaders
We encourage employees to acquire environmentrelated qualifications in response to regulatory changes.
In particular, we are planning to increase the number ofmanagers of special controlled wastes.

Number of Employees Qualified as Internal Auditors(as of March 31, 2017)
Internal auditing (QMS)

Internal auditing (EMS)

Internal auditing (QMS/EMS)

Consolidated

1,002

Non-consolidated

959

Consolidated

1,094

Non-consolidated

1,027

Consolidated

902

Non-consolidated

887

Environmental Education
In fiscal 2016, all Group employees took part in an
e-learning program aimed at preventing problems andcomplaints related to the environment. In fiscal 2017,
we will organize a lecture on the environment under
the theme of saving energy and resources and conduct
e-learning on preserving biodiversity and protecting
ecosystems, which were added to our Environmental
Policy.
Moreover, we will continue to improve ourcommunication by sharing information about theenvironment.

Proposals for CO2 Reduction and Outcomes(CO2 reduction unit: t-CO2/year)
FY2014FY2016CO2
reduction

NumbersCO2
reduction

NumbersCO2
reduction

Consolidated

–

–

418

36,147345

56,205

Nonconsolidated

430

50,449413

35,074313

54,877

Consolidated

–

–

205

20,680183

27,624

Nonconsolidated

213

21,059200

19,607

168

27,319Technological Developments that Have Contributed
to Conservation of the Global Environment

CPCube® Air Flow Optimization System
Contributes to Saving Energy at Advanced
Medical Sites
Regenerative medicine is attracting attention as a treatment
for recovering tissue and organ functions by using culture
technology. Cells are cultured in clean rooms, which requireparticularly high levels of cleanliness and stringent control
over temperature and humidity. However, many facilities arenecessary to create such an environment, including HVAC
systems, heat source equipment and filters that shut out
dust, which raises energy consumption.
CPCube® is a unique technology that rectifies air
flow and was developed by Sanki Engineering in 2015. It
achieves the same degree of cleanliness as conventional
cleanrooms for regenerative medicine with 20% less air
flow. Making regenerative medicine widely available in the
future will require creating environments in which cells canbe handled with greater ease and safety, and CPCube® hasgenerated interest in Japan and overseas as an energy-saving
technology that contributes to advanced medicine.

Initiatives to Prevent Global Warming andSave Energy and Resources
Contributing to Conservation of the Global
Environment with Our Exceptional Technological
Capabilities
In November 2016, the Paris Agreement came into
force as an international effort on climate change, andcompanies have been entrusted with a significant role
in reducing global greenhouse gases.

FY2015

Numbers

Relationship with the Environment

Promoting Environmental Management
Sanki Engineering believes that environmental problems
represent an important management issue, and wetherefore promote environmental management basedon the Sanki Engineering Environmental Policy. We willcontinue to engage in environmental activities with afirm vision of the future under the ESG policy laid out inour medium-term management plan. At the same time
we are making the necessary revisions in response toregulatory trends in Japan and overseas.

ReferenceWith respect to our environmental management
system, we provide introductory training on ISO every
year to new recruits as well as midcareer recruits. We
also offer training to develop internal environmental
auditors qualified to conduct simultaneous ISO 9001/
ISO 14001 audits.

Ordersreceived

audit conducted in fiscal 2016 found no issues of noncompliance.

Proposals

Environmental Management at SankiEngineering

A/C air outlet
CPCube®
No disturbancecaused by BSC
Rectification
exhaustBSC
Floor
surfaceClean air

SANKI REPORT 201765

SANKI YOU Eco Contribution Point System

1. Proposing
energysaving
solutions

Proposing energy-saving
solutions for equipment to
reduce CO2 emissions

2. Adopting the
proposal

Sanki Engineering
3. One ton of CO2 isconverted to 100 yen

4. Total donated annually

Environmental
conservation activity• Donations to Tree-planting Projects
Recipients of donations were selected from theframework of global environmental preservation
activities mainly handled by private non-profit
organizations. In fiscal 2016, we donated to two projects
and our employees participated in the activities.
Donation History for Tree-planting Project
Recipient

Project

Amount Donated

NPO Laboratory of Earth
Conscious Life

Tree planting to create abeech forest (Kijimadaira,
Nagano Prefecture)

1,068,000 yen in thesecond half of FY2015

Shinwa Gakuen

Tree planting to create
a forest within the
Shonan Village (Yokosuka,
Kanagawa Prefecture)

1,000,000 yen in thesecond half of FY2015
1,464,900 yen in thefirst half of FY2016

Initiatives in the Office• Energy Conservation Activities
Sanki Engineering promotes energy-saving activities
based on a Company-wide objective for its EMS
activities to reduce energy consumption by 6%

66

SANKI REPORT 2017

Waste Discharged at Sites where Sanki Engineering is the Prime
Contractor■ Industrial waste (t)● Ratio of mixed construction waste in industrial waste (%)
24.7

Proper Disposal of Waste
Current State of Industrial Waste
With respect to industrial waste discharged at ourconstruction sites, we seek to understand the current
status by compiling data on waste discharged at sites
where Sanki Engineering is the prime contractor. Also,
we began collecting data for Group companies, and as aresult, the consolidated volume of waste discharged infiscal 2016 totaled 17,909 tons.
Industrial waste discharged by Sanki Engineering
alone was 15,867 tons in fiscal 2016, an increase of
1,503 tons from fiscal 2015. This was due to a single
engineering project that generated a massive amountof rubble, which was transported to recycling facilities
for disposal under a recycling contract. Excluding
the rubble, industrial waste discharged by the SankiEngineering Group fell by 300 tons from fiscal 2015.
We will continue to monitor and analyze the status
of industrial waste discharged by the entire Group in
an effort to reduce our impact on the environment. In
addition, we have been introducing best practices for
reducing industrial waste through our corporate intranet.
As of April 2017, a total of 43 cases have been shared.

Rate of Introduction of Digital Manifests (%)

21.5
19.0

13,177

13,32914,364

15,867

68.5

68.6

2015

2016

47.2
28.8
2013

• Campaign to Reduce Copy Paper
To accurately grasp the state of copy paper
consumption, since fiscal 2015 we have been surveying
inventory and consumption at the end of each fiscal
year. We used around 19,489,000 sheets of copy paperin fiscal 2016, down 6.8% from the previous year. Also,
we began compiling data for Group companies in fiscal
2016, and consolidated consumption of copy paper
for the year was around 21,581,000. We will continue
to pursue initiatives for reducing paper use, including
paperless meetings, for the Sanki Engineering Group.

22.7

At the same time, we will review their management
toward constructing a system that will provide detailed
information on waste disposal.

2014

2015

2016

(FY)

Introduction of a Digital Manifest
With the aim of ensuring the proper disposal ofindustrial waste, we are pushing ahead with theintroduction of a digital manifest. As of April 2017, 8
departments, including 3 branches and 3 branch offices,
as well as two Group companies have introduced thedigital manifest system (including partial introduction.)
As a result, the rate of introduction of digital manifests
to the total number of manifests issued was 68.6% on
a consolidated basis and 67.9% on a non-consolidated
basis in fiscal 2016. We will continue to use digitalmanifests and promote proper disposal. In fiscal
2017, we will continue to engage in initiatives for
improving the rate of introduction of digital manifests.

2013

2014

(FY)

Dispatching Engineers to the Japanese Antarctic
Research Expedition
Sanki Engineering has been cooperating with
Antarctic research by dispatching engineers toensure environmental conservation at the Japanese
Antarctic Research Expedition since the Protocol on
Environmental Protection to the Antarctic Treaty was
adopted in 1991. We have dispatched a total of 12
engineers to the Antarctic Research Expedition andcontribute to conserving the Antarctic environment at
the Showa Station.

Relationship with the Environment

Customercompared to fiscal 2012 over a five-year period fromfiscal 2013 to fiscal 2017. In fiscal 2016, we achieved
a reduction of 8.5% from the 2012 level in energy
consumption Company-wide.
In fiscal 2016, we also began compiling energy
consumption data at offices of Group companies.
Consolidated energy consumption for fiscal 2016 wasequivalent to 1,800 kl of crude oil and CO2 emissions
generated by energy use was 3,589 t-CO2. Looking
ahead, we will continue to reduce energy use acrossthe Sanki Engineering Group.

CSR Report

SANKI YOU Eco Contribution Point System
We launched the SANKI YOU Eco Contribution Point
System in October 2010. Under the system, when we
propose an energy-saving solution that reduces CO2
emissions to a customer, and that proposal is adopted,
the amount of the achieved emissions reduction isconverted to Eco Contribution Points, which are used tosubsidize environmental conservation activities such as
those explained below. In the second half of fiscal 2015
and the first half of fiscal 2016, customers adopted
292 of our proposals, resulting in donations totaling
3,532,900 yen (equivalent to a 35,329 t-CO2 reduction),raising the overall total of donations since the start ofthe program in fiscal 2010 to 13,378,500 yen.

VOICE
New Wastewater Treatment Facility Begins Full-scale Operation to Protect the Antarctic Environment
I spent 14 months, starting in December 2015, with the 57th
overwintering expedition at Japan’s Showa Station in Antarctica,
where I worked on treating domestic wastewater and waste.
A new wastewater treatment facility based on the membrane
separation activated sludge process came online during the 56th
expedition, and I took over the responsibility of ensuring its roundthe-clock operation. During the winter, I was faced with various
problems related to the initial stage of operations, such as frozen
pipes and abnormalities in the sewage tank’s heating unit. Both day
and night, I tended the facility, which was located at some distancefrom the living quarters, and worked to solve the problems one
by one. I also created a maintenance and management manual. In
February 2017, with the new facility up and running, I completed
the disassembly of the old wastewater facility delivered by SankiEngineering, which had continued functioning for nearly 20 years.
Being able to join the expedition during the transition to the newwastewater treatment facilities has been an invaluable experience.
In the years ahead, I will offer my support so that the new facility
can continue to protect the Antarctic environment, just as the old
one had done.

Tomoya Iwatsuki
Environmental
Protection Staff
57th Japanese
Antarctic Research
Expedition

The new wastewater treatment facility

SANKI REPORT 2017

67

Relationship with Local Communities

Environmental Accounting
To enable us to proceed with our environmental protection initiatives efficiently and effectively, we determine andpublish the cost of environmental protection in our business activities and the outcomes of our environmental protection
initiatives.

• Coordination with local
communities• Contribution to society asa corporate citizen

Environmental Protection Costs (Aggregated Expenditures for Environmental Protection in Our Business Activities)
Details of Main Initiatives(Unit: 1,000 yen)

Environmental Protection Costs

Global environmental protection costs

Cost of disposal of waste CFCs and halons

40,281

Resource recycling costs

Cost of waste disposal (construction sites)

373,150

62

Cost of environment-related education
Cost of exhibiting in exhibitions/publishing materials

27,155

Cost of cutting back vegetation at Yamato Engineering
Center/Cost of maintaining Nature Park

3,656

R&D costs

Cost of environmental protection-related R&D

Social activities costs

Donations to environmental protection-relatedorganizations
Cost of participating in environmental protection activities
and supporting education

675,492
4,573
2,755

Effects of Environmental Protection (Annual Comparison of Resources Consumed, Emitted Gas, Green Purchasing Results and Waste Products)
Details

FY2013

Number of sheets of copy paper
purchased for offices (1,000 sheets)
Resources consumed

Energy consumed

CO2 emissions (t-CO2)

Volume of industrial waste

Number of sheets of copy paper used
(1,000 sheets)
Volume of water used at Yamato
Engineering Center (m3)Energy consumed by offices (crude oil
equivalent; kl)
As a result of energy consumption in
offices (t-CO2)
As a result of energy consumption atworksites (t-CO2)
Amount of industrial waste discharged
at sites under our direct management
as a prime contractor and the Yamato
Engineering Center (t)Green purchasing of stationery (1,000 yen)

FY2014FY2015FY2016–––

21,581

Non-consolidated

19,632

20,194

20,46819,443

Non-consolidated–

20,035

20,916

19,489Non-consolidated

17,187

22,94528,427

15,341

Consolidated

–

–

–

1,800

1,691

1,643

1,589

1,696

–

–

–

3,589

Non-consolidated

3,490

3,402

3,174

3,377

Non-consolidated

1,081

833

537

525

Consolidated
Non-consolidated
Consolidated

–

–

–

17,946

Non-consolidated

13,333

13,38014,424

15,904Non-consolidated

46,81038,713

46,56955,657

Consolidated

Related Departments

68(Unit: 1,000 yen)
Details

FY2013

FY2014FY2015FY2016

Construction sites

Profit from sale of scrap, etc.

143,463

138,042

107,62480,060

Yamato Engineering Center

Profit from sale of scrap, etc.

295

548

249

90

SANKI REPORT 2017

Fiscal 2017
Results

Assessment

Major Action Policies• Regional disasterprevention• Participate in regional
disaster prevention
activities• Carried out activities under thelarge-scale disaster agreement
between Yamato City and the
Yamato Engineering Center• Regional disaster prevention• Conservation of the local
environment• Participate in local cleanup
activities• Held Group-wide activities inover 30 locations• Conservation of the local
environment• Supporting the developmentof the next generation• Provide educational
opportunities such asenvironmental seminars• Offered 9 social study tours fora total of 443 students• Support the development of thenext generation

Our Approach to Local Communities

Coordination with Local Communities

As stated in the Sanki Group Code of Conduct andAction Guidelines, “We seek to contribute to society inorder to aid in the development of local communities asa good corporate citizen and member of society,” andour activities reflect this principle. Looking ahead, we
will continue to fulfill our corporate social responsibility
while maintaining active communication withstakeholders in the communities where we operate.

Agreement for the Provision of Facilities in Timesof DisasterIn fiscal 2013, as a means for preventing disasters andreducing damage, Yamato City in Kanagawa Prefecture
concluded an agreement with the Company (Yamato
Engineering Center), which maintains large-scale
facilities in the city. Under the terms of the agreement,
we will make the Yamato Engineering Center available
as temporary shelters for those unable to return homein the event of a disaster and provide water, toilets anda stockpile of emergency provisions. Each year, theYamato Engineering Center also offers space for the
Yamato City Fire Brigade to conduct fire drills. Also, SankiEngineering participates in the Yamato City Fire Prevention
Association’s fire prevention skills competition, and in
fiscal 2016 it won first place in the Type 2 Fire Hydrant
division.

Sanki Forest Commemorating Our 90th
Anniversary
In September 2016, we held a weeding event at
the Sanki Forest in Kai City, Yamanashi Prefecture,
where we had planted a thousand trees in October
2015 to commemorate the 90th anniversary of our
founding. With the help of staff from the local forestry
cooperative, 25 of our employees used sickles to clear
underbrush as volunteers.

Participants of the tree planting event

Economic Effects of Environmental Protection Measures

Primary Goals

Relationship with Local Communities

2,463

Cost of operating under ISO 14001

Major Action Policies

CSR Report

Scope of aggregation: Sanki Engineering Co., Ltd. (unconsolidated) or designated sections
Period: April 2015–March 2016
Guidelines for reference: (1) Environmental Accounting Guidelines, Ministry of the Environment (2005 edition),(2) Environmental Accounting Guidelines for the Construction Industry (2002 edition)

Management costs

Fiscal 2016

Important Issues

Letter of Appreciation from the Tokyo Fire
Department’s Kyobashi Fire Station
On Ambulance and Rescue Day on September 9,
2016, the Tokyo Sanki Health and Safety Cooperative
Association received a letter of appreciation from the headof the Kyobashi Fire Station of the Tokyo Fire Department
for its outstanding service in promoting emergency
administration by actively seeking to acquire knowledge
and skills related to emergency aid. The letter recognized
the educational program for preventing heat stroke andstandard first aid training, provided seven times since 2014.
Chubu Branch Receives Letter of Appreciation from
Aichi Prefecture
In recognition of its longstanding campaign against
violence, the Chubu Branch received a letter of appreciation
at a conference on safe town development on October18, 2016. Presenting the letter was Aichi Governor Hideaki
Omura, who is honorary chairman of the Public Interest
Incorporated Foundation Aichi People’s Council Against
Violence.

SANKI REPORT 201769

Cleanup and Environmental Beautification
Activities
Each branch, branch office and Group company
participates in cleanup activities in areas aroundtheir offices or worksites as well as environmental
beautification activities organized by local governments.
In fiscal 2016, we participated in cleanup activities
around our head office and the Yamato Engineering
Center, while the Hokkaido branch joined “Love Earth
Clean Up” in the Hokkaido campaign.
Also, Group company Sanki Kako Kensetsu cleaned
up its neighborhood and collected illegally dumped
waste. On a Group-wide basis, we carried out activities
in more than 30 local communities.
Left: Participants of the Hokkaido
campaign’s “Love Earth Clean Up”
Right: Cleanup activity in the
Agami area of Tsushima

Sanki Nature Park Visitors Exceed 10,000
On August 19, 2016, visitors to the Sanki Nature Park
biotope, at the Yamato Engineering Center, exceeded
10,000 for the first time since the park was opened tothe public in 2005. The 1,000-square-meter area includes
a large pond, smaller ponds, a marsh, a stream, walking
paths and other features that contribute to preserving
biodiversity by providing wildlife with space to rest andbreed. Spotbilled ducks have been migrating to the park
since it was opened and were observed breeding forthe fourth year in 2016. The adorable ducklings havebecome popular among visitors. We have also madethe park available to neighborhood nursery schools asa place for nurturing the community’s next generation.

Supporting the Development of the Next
Generation
Yamato Engineering Center
As part of its social contribution activities, the Yamato
Engineering Center participates in local cleanup activities
and events organized by Yamato City as well as parentchild seminars. In addition, it has been conducting social
study tours twice a year for local elementary schools.
On November 19, 2016, we held the environmental
seminar “Looking at the Earth Today from Antarctica”

70

SANKI REPORT 2017at a civic study center in response to a request from
Yamato City, Kanagawa Prefecture. We introduced tothe public the ways we are protecting the Antarctic
environment bytreating wastewaterand other waste at
the Showa Base.

Environmental seminar

Sanki Kankyo Service Welcomes Social Studies Tours
by Local Schools
Our Group company Sanki Kankyo Service Co., Ltd. hosts
field trips for elementary schoolchildren at its offices andwater purification plant. In May 2016, the Imakane Officein Hokkaido welcomed 36 students from Imakane andTanekawa elementary schools. In August, the Sea Clean
Suttsu and Suttsu Water Purification Center in Hokkaido
received 21 students from Suttsu Elementary School,
and in September, Sea Clean Suttsu welcomed 9 children
from Oshoro Elementary School. And in November, theOshamanbe Office in Hokkaido received 32 students from
Oshamanbe Elementary School and the Ryotsu Officein Niigata Prefecture welcomed 28 students from Kamo
Elementary School. The students learned about the role
and workings of the sewerage system.

Donating Blood
Our head office began encouraging employees todonate blood in 2013. Since blood for transfusions
cannot be artificially produced or stored for an extended
period, we will cooperate on an ongoing basis with thecorporate blood donation program. In fiscal 2016, 73
employees at the head office and 53 employees at the
Yamato Engineering Center donated blood in November
2016 and January 2017, respectively.

Donations and Contributions
In addition to making donations to universities andresearch institutes, we also supported culturalactivities through donations to the Japan Philharmonic
Orchestra, the Japan Chamber Music Foundation andother institutions. In addition, each of our branches andGroup companies take part in a variety of activities inwhich anyone can get involved, such as by donatingused stamps and cards and collecting bottle caps for
ecological and charitable purposes.

Financial Report andCorporate Information
SANKI REPORT 201771

Financial Report

Financial Report and Corporate Information

11-year Consolidated Financial Summary(Millions of yen)
Year ended
March 31, 2007

Year ended
March 31, 2008

Year ended
March 31, 2009

Year ended
March 31, 2010

Year ended
March 31, 2011

Year ended
March 31, 2012

Year ended
March 31, 2013

Year ended
March 31, 2014

Year ended
March 31, 2015

Year ended
March 31, 2016

Year ended
March 31, 2017

Fiscal year
Orders received

237,022

218,256

188,653

143,348

147,129

175,291

165,800

168,295

173,398

183,270

185,880

Balance carried forward

144,456

108,253

93,566

77,641

72,976100,272

111,414108,219

102,019

106,388

123,756

Net sales

246,159

254,460

203,340

159,273

151,794

147,994

154,658

171,496

179,598

178,901

168,512Selling, general and administrative expenses

13,994

13,962

14,97815,41915,763

15,712

15,19915,60415,015

16,41916,526

Operating income or loss

(9,502)(3,958)

7,125

5,027

3,843

2,525

2,391

2,818

2,951

6,509

6,012

Ordinary income or loss

(8,782)(3,307)

6,900

5,456

4,239

2,268

2,680

3,146

3,809

8,135

6,880

Profit (loss) attributable to owners of parent*(6,536)

3,134

3,283

3,141

2,124

176

(4,992)

1,763

2,461

5,327

4,698

Cash flows from operating activities(2,819)(4,097)

19,177

1,294

11,554(2,697)

9,729(9,403)

(139)

5,220

10,845

Cash flows from investing activities

2,833

11,511

1,726(1,664)2,610(1,046)(9,481)(3,506)

3,440

5,520

(1,644)

Cash flows from financing activities(2,697)(3,812)(4,377)(2,936)(1,883)(280)(1,028)(4,152)(2,901)(1,826)(2,458)Cash and cash equivalents at end of fiscal year

16,018

19,61736,14232,82545,13541,09740,36723,51023,66732,501

39,187

As of end of fiscal year under review
251,323

215,680

176,664

163,307

158,501

163,120

166,477

170,181

176,382

169,423

166,61288,94380,27678,78080,49879,833

79,662

76,932

74,91784,86984,55785,961

Number of employees

2,179

2,225

2,239

2,272

2,316

2,289

2,246

2,283

2,282

2,309

2,339

Financial Report

Total assets
Net assets

Per share information
Earnings per share (yen)(88.47)

42.42

44.45

42.86

29.67

2.46

(71.04)

26.46

38.30

83.84

73.91

Book-value per share (yen)1,203.57

1,086.02

1,065.77

1,119.40

1,115.41

1,113.70

1,106.32

1,142.74

1,334.65

1,328.60

1,350.08

15.00

15.00

15.00

15.00

15.00

15.00

15.00

15.00

20.00

30.00

30.00

Cash dividends (yen)Other information
Equity ratio (%)

35.4

37.2

44.6

49.3

50.3

48.8

46.2

44.0

48.1

49.8

51.5

Return on assets (%)

(3.5)

(1.4)

3.5

3.2

2.6

1.4

1.6

1.9

2.2

4.7

4.1

Return on equity (%)

(7.0)

3.7

4.1

3.9

2.7

0.2

(6.4)

2.3

3.0

6.3

5.5

* The revised Accounting Standard for Business Combination and other standards have been applied from the year ended March 2016.
Accordingly, “Profit (loss) attributable to owners of parent” as listed in the consolidated fiscal year under review, is equivalent to “Net
income” listed for the consolidated fiscal years between the year ended March 2007 and the year ended March 2015.

Orders received and sales(left axis) ● Orders received● Sales(right axis) ■ Operating income■ Ordinary income■ Profit (loss) attributableto owners of parent

300,000
250,000(Millions of yen)
Profit20,00015,000200,000
150,000

10,000100,000
5,000
50,00000-50,000-5,000-100,000-150,000

72

2006

SANKI REPORT 2017

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

(FY)

-10,000

SANKI REPORT 201773

Consolidated Balance Sheet(Millions of yen)
As of March 31, 2016

(Millions of yen)

As of March 31, 2017

Assets

As of March 31, 2016

As of March 31, 2017

¥ 51,460¥ 48,277

5,672

5,654

Liabilities and Net Assets

Current assets:

Liabilities:¥ 34,187

Notes and accounts receivable on completed construction contracts and other

71,246

58,168Notes and accounts payable on construction contracts and other

Electronically recorded monetary claims

4,267

8,570

Short-term loans payable

Securities

6,999

6,999

Lease obligations

Inventories:
Costs on uncompleted construction contracts (Note 4)
Raw materials and supplies

Current liabilities:

Income taxes payable
2,268

1,692

468

453

139

158

2,125

887

Advances received on uncompleted construction contracts

3,140

5,728

Provision for bonuses

2,861

2,285

Deferred tax assets

2,062

1,615

Provision for directors’ bonuses

120

143

Other

1,760

3,231

Provision for warranty costs

849

422

1,186

970

Allowance for doubtful accounts
Total current assets

(84)

(13)

115,491

114,906

Noncurrent assets:
Property, plant and equipment:

Provision for loss on construction contracts (Note 4)
Provision for loss on compensations

30–

Deferred tax liabilities

18

22

Other

5,258

4,223

Total current liabilities

72,863

68,77638,99839,364

Accumulated depreciation(35,112)(35,363)

Buildings and structures, net

3,885

4,001

Long-term loans payable

320

–

3,452

3,187

Lease obligations

506

452

(3,057)(2,789)

1,834

2,274

395

397

3,959

3,958

Buildings and structures

Machinery, equipment, vehicles, and tools, furniture and fixtures
Accumulated depreciation
Land

Noncurrent liabilities:

Liability for retirement benefits
Provision for directors’ retirement benefits
Deferred tax liabilities

79

79

4,742

4,187

636

676

Other

4,518

4,881

Accumulated depreciation

(170)

(205)

Total noncurrent liabilities

12,001

11,875

Lease assets, net

466

470

84,86580,651

8

21

8,715

8,849

533

542

Lease assets

Construction in progress
Total property, plant and equipment

Total liabilities

Financial Report

Machinery, equipment, vehicles, and tools, furniture and fixtures, net

Financial Report and Corporate Information¥ 26,501

Cash and deposits

Net assets:
Shareholders’ equity:

Intangible assets
Investments and other assets:
Investment securities (Note 1 and 2)
Long-term loans receivable

34,78932,497

169

145

Capital stock

8,105

8,105

Capital surplus

4,181

4,181
68,314Retained earnings

65,586

Treasury stock(2,258)(2,251)

Total shareholders’ equity

75,61478,34813,012

10,928Asset for retirement benefits

4,503

4,493

Lease and guarantee deposits

1,145

1,256

Insurance funds

419

486

Unrealized gains on available-for-sale securities

Deferred tax assets

206

237

Foreign currency translation adjustment

4,558

4,151

Other (Note 2)
Allowance for doubtful accounts(1,109)(955)

Total investments and other assets

44,682

42,314

Total noncurrent assets
Total assets

Accumulated other comprehensive income:
(53)

(125)

Retirement benefits asset and liability adjustments(4,135)(3,337)

Total accumulated other comprehensive income

8,822

7,465
126

53,931

51,705

Subscription right to shares90¥ 169,423¥ 166,612

Non-controlling interests30

1984,55785,961¥ 169,423¥ 166,612

Total net assets
Total liabilities and net assets
See notes to consolidated financial statements.

74

SANKI REPORT 2017

SANKI REPORT 201775

Consolidated Statement of Income and Comprehensive Income

Consolidated Statement of Changes in Net Assets(Millions of yen)

Year ended March 31, 2016

Year ended March 31, 2017[For the year ended March 31, 2016](Millions of yen)

Net sales:
Net sales of completed construction contracts
Net sales of real estate business and otherTotal net sales¥ 177,262¥ 166,817
1,694

178,901

168,512

154,706

144,632

Cost of sales on real estate business and otherTotal cost of sales

1,265

1,340

155,971

145,973

22,55622,184Gross profit:
Gross profit on completed construction contracts

373

353

22,92922,538

Employees’ salaries and allowances

6,392

6,303

Provision for bonuses

1,224

930

Provision for directors’ bonuses

120

144

Retirement benefit expenses

545

943

Depreciation

383

369

Other (Note 1)

7,752

7,834

Total selling, general and administrative expenses

16,41916,526

6,509

6,012

Gross profit on real estate business and otherTotal gross profit

Balance at the beginning of current period
Changes in items during the period
Dividends from surplus
Profit (loss) attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Transfer of loss on disposal of treasury stock
Change of scope of equity method
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balance at the end of current period

Capital stock¥ 8,105

Capital surplus¥ 4,181

Retained earnings¥ 61,659

Treasury stock
Total shareholders’ equity¥ (2,267)¥ 71,678(1,366)
5,327
(0)
8

(1,366)
5,327
(0)
7
–
(33)

8
¥ (2,258)

3,936¥ 75,614(1)
1–¥ 8,105

(1)
(33)

–
¥ 4,181

3,927¥ 65,586

Financial Report and Corporate Information

1,638

Cost of sales:
Cost of sales of completed construction contracts (Notes 1 and 2)

Shareholders’ equity

Selling, general and administrative expenses:

Operating income
Non-operating income:

31

20

Dividends income

675

684

Insurance income

653

247

Equity in earnings of affiliates

771

–

–

113

Reversal of allowance for doubtful accounts

234

177

2,365

1,243

Interest expense

86

84

Provision of allowance for doubtful accounts

255–

Repair expenses for construction contracts

205

67

Other

193

222

Total non-operating expenses

740

375

8,135

6,880

Other
Total non-operating income
Non-operating expenses:

Ordinary income

Unrealized gains on Foreign currency
available-for-saletranslation
securities
adjustment
Balance at the beginning of current period
Changes in items during the period
Dividends from surplus
Profit (loss) attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Transfer of loss on disposal of treasury stock
Change of scope of equity method
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balance at the end of current period¥ 15,332(2,319)(2,319)¥ 13,012

¥ 48

(102)
(102)
¥ (53)

Retirement
Total accumulated Subscription rights
benefits asset
otherto shares
and liability
comprehensive
adjustments
income¥ (2,253)¥ 13,127¥ 51(1,882)(1,882)¥ (4,135)(4,304)(4,304)¥ 8,822

Non-controllinginterests

Total net assets¥ 12¥ 84,869

17
17
¥ 30

(1,366)
5,327
(0)
7
–
(33)
(4,247)(311)¥ 84,557

38
38
¥ 90

Financial Report

Interest income

Accumulated other comprehensive income

Extraordinary income:Gain on sales of noncurrent assets

58–

Gain on sales of investment securities

155

650

Total extraordinary income

214

650

Impairment loss (Note 3)

423

17

Loss on retirement of noncurrent assets

36

419

Office transfer expenses–

44

Settlement package–

43[For the year ended March 31, 2017]

Extraordinary loss:

Loss on transfer of stock of affiliates

55–

Total extraordinary losses

514

525

7,834

7,004

2,413

1,833

Profit (loss) before income taxes
Income taxes:
Income taxes-current
Income taxes-deferred
Total income taxes
Profit (loss)

75

482

2,489

2,315

¥ 5,345¥ 4,688¥ 5,327¥ 4,698

¥ 17

¥ (9)

(Millions of yen)
Shareholders’ equity

Balance at the beginning of current period
Changes in items during the period
Dividends from surplus
Profit (loss) attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Transfer of loss on disposal of treasury stock
Change of scope of equity method
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balance at the end of current period

Capital stock¥ 8,105

Capital surplus¥ 4,181–¥ 8,105

Retained earnings¥ 65,586

Treasury stock
Total shareholders’ equity¥ (2,258)¥ 75,614(1,970)4,698(1,970)
4,698
–
6
–
–

(0)
0

(0)

6

–
¥ 4,181

2,727¥ 68,3146¥ (2,251)

2,734¥ 78,348

Profit (loss) attributable to:
Owners of parent
Non-controlling interests

Accumulated other comprehensive income
Unrealized gains on Foreign currency
available-for-saletranslation
securities
adjustment

Other comprehensive income (Note 4) :Unrealized gains on available-for-sale securities¥ (2,319)¥ (2,084)

Foreign currency translation adjustment

(102)

(71)

Remeasurements of defined benefit plans(1,882)

798

Total other comprehensive income(4,304)(1,357)¥ 1,041¥ 3,330¥ 1,023¥ 3,341¥ 17¥ (10)

Comprehensive income
Comprehensive income attributable to:
Owners of parent
Non-controlling interests
See notes to consolidated financial statements.

76

SANKI REPORT 2017

Balance at the beginning of current period
Changes in items during the period
Dividends from surplus
Profit (loss) attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Transfer of loss on disposal of treasury stock
Change of scope of equity method
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balance at the end of current period¥ 13,012(2,084)(2,084)¥ 10,928¥ (53)(71)(71)¥ (125)Retirement
Total accumulated Subscription rights
benefits asset
otherto shares
and liability
comprehensive
adjustments
income¥ (4,135)¥ 8,822
¥ 90

798
798
¥ (3,337)(1,356)(1,356)¥ 7,465

36
36
¥ 126

Non-controllinginterests

Total net assets¥ 30¥ 84,557

(10)
(10)
¥ 19

(1,970)
4,698
–
6
–
–
(1,330)1,403¥ 85,961

SANKI REPORT 201777

Consolidated Statement of Cash Flows

Notes to Consolidated Financial Statements(Millions of yen)
Year ended March 31, 2016

Year ended March 31, 2017

Cash flows from operating activities:¥ 7,004

723

718

Impairment loss

423

17

Loss on retirement of noncurrent assets

36

419

Office transfer expenses–

44

Increase (decrease) in allowance for doubtful accounts

445

(128)
1,606

Profit (loss) before income taxes(Decrease) increase in liability for retirement benefits(3,985)Decrease in provision for directors’ retirement benefits

(43)

–

Decrease in provision for loss on construction contracts

(128)

(215)

Decrease in provision for loss on compensations

(441)

(30)

Interest and dividends income

(706)

(705)

86

84

Interest expense
Equity in earnings of affiliates

(771)

–

(Gain) loss on sales of property, plant and equipment

(58)

2

Gain on sales of investment securities

(155)

(649)

Loss on transfer of stock of affiliates

55

–

1,940

8,808

Decrease in notes and accounts receivable on completed construction contracts and other
Decrease in costs on uncompleted construction contracts
Decrease in notes and accounts payable on construction contracts and other
Increase in advances received on uncompleted construction contracts

202

575

(4,666)(3,180)

503

2,588

2,244

(783)

Other

2,219

(2,705)

Subtotal

5,758

13,472711

707

Interest and dividends received
Interest paid
Income taxes paid
Income taxes refunded
Payments for office transfer expenses
Net cash provided by operating activities

(86)

(83)

(1,415)(3,205)

252

0

–

(44)

5,220

10,845

Cash flows from investing activities:–(29)

Proceeds from withdrawal of time deposits

5,600

333

Purchase of securities(1,500)(5,000)

Proceeds from redemption of securities

500

4,000

Purchase of property, plant and equipment

(120)

(452)

Payments into time deposits

Proceeds from sales of property, plant and equipment

75

9Purchase of investment securities(28)(1,328)

1,170

1,008

Proceeds from redemption of investment securities–

200

Execution of loan

(4)

(61)

Proceeds from sales of investment securities

Collection of loans receivable

98

27

Proceeds from maturity of insurance funds

33

57

Other

(303)

(408)

Net cash provided by (used in) investing activities

5,520(1,644)

2. Scope of consolidation(1) Number of consolidated subsidiaries: 7
Names of consolidated subsidiaries:
Sanki Techno Support Co., Ltd.
THAI SANKI ENGINEERING & CONSTRUCTION CO., LTD.
Sanki Sangyo Setsubi Co., Ltd.
Sanki Kako Kensetsu Co., Ltd.
Sanki Kankyo Services Co., Ltd.
AQUACONSULT Anlagenbau GmbH
Shin-yu Services Co., Ltd.
(2) Number of unconsolidated subsidiaries: 4Names of unconsolidated subsidiaries:
Tomakomai Netsu Services Co., Ltd.
Sanki Construction Engineering (Shanghai) Co., Ltd.
AEROSTRIP Corporation
Sendai Kankyohozen Co., Ltd.

Cash flows from financing activities:
Net (decrease) increase in short-term loans payable
Repayments of long-term loans payable

(0)

2

(340)

(340)

Purchase of treasury stock(0)–

Proceeds from exercise of stock options

0

0

(119)

(150)

Cash dividends paid

(1,366)(1,970)Net cash used in financing activities(1,826)(2,458)

Repayments of lease obligations

Effect of exchange rate changes on cash and cash equivalents
Net increase in cash and cash equivalents

(81)

(57)

8,833

6,686

Cash and cash equivalents at beginning of period

23,66732,501

Cash and cash equivalents at end of period (Note 1)¥ 32,501¥ 39,187(3) Reasons for exclusion of unconsolidated subsidiaries fromconsolidation
The four unconsolidated subsidiaries above were
excluded from consolidation because their total
assets and sales and the Company's equity in their
net income and retained earnings were not material
to the consolidated financial statements.

(2) Number of companies excluded from application of theequity method:
Unconsolidated subsidiaries: 4
Affiliates: 1
Names of unconsolidated subsidiaries and affiliates:
Tomakomai Netsu Services Co., Ltd.
Sanki Construction Engineering (Shanghai) Co., Ltd.
AEROSTRIP Corporation
Sendai Kankyohozen Co., Ltd.
PFI Okubo Techno Resource Co., Ltd.

Financial Report

Increase (decrease) in other current liabilities

1. Basis of Preparation
Sanki Engineering Co., Ltd. (the “Company”) and its
domestic subsidiaries maintain their books of accountin conformity with the financial accounting standards ofJapan, and its foreign subsidiaries maintain their booksof account in conformity with those of their countries of
domicile.
The accompanying consolidated financial statements
have been compiled from the consolidated financial
statements prepared by the Company as required under
the Financial Instruments and Exchange Law of Japan
and, therefore, have been prepared in accordance withaccounting principles generally accepted in Japan, which
are different in certain respects as to the applicationand disclosure requirements of International Financial
Reporting Standards.
Certain amounts in the prior year’s financial statements
have been reclassified to conform to the current year’s
presentation.
As permitted, amounts of less than one million yen
have been omitted. As a result, the totals shown in theaccompanying consolidated financial statements do
not necessarily agree with the sums of the individual
amounts.

3. Application of the equity method(1) Number of companies to which the equity method of
accounting has been applied:
Unconsolidated subsidiaries: –Affiliates: –* Ou clean Technology Co., Ltd., an affiliate which
had been accounted for by the equity method forthe year ended March 31, 2016, was excluded
from application of the equity method because theCompany transferred all shares of the affiliate inthis fiscal year.

Financial Report and Corporate Information¥ 7,834

Depreciation and amortization

Basis of Preparation of Consolidated
Financial Statements(3) Reasons for exclusion of unconsolidated subsidiaries andaffiliates from the equity method of accounting
The four unconsolidated subsidiaries and one
affiliate referred to above were excluded from being
accounted for by the equity method because theCompany's equity in their net income and retained
earnings were not material to the consolidated
financial statements.
4. Fiscal year end of the consolidated subsidiaries
Names and the fiscal year end of the consolidated
subsidiaries whose fiscal year end is different fromthat of the consolidated financial statements:
Name

Fiscal year end

AQUACONSULT
Anlagenbau GmbH

December 31

THAI SANKI ENGINEERING &CONSTRUCTION CO., LTD.

December 31

Financial statements of the above subsidiaries wereconsolidated on the basis of its own fiscal year end.
However, the necessary adjustments were madeto reflect any significant transactions from the fiscal
year end of the subsidiary to that of the consolidated
financial statements.

See notes to consolidated financial statements.

78

SANKI REPORT 2017

SANKI REPORT 201779

Derivatives
Derivatives are stated at fair value.

(2) Depreciation of significant assets
Property, plant and equipment (excluding leaseassets)Depreciation is calculated by the declining-balancemethod, except for property, plant and equipmentof the foreign consolidated subsidiaries which
are depreciated by the straight-line method. The
useful lives and the residual value are primarily inaccordance with those stipulated in the Corporation
Tax Law.
Intangible assets (excluding lease assets)
Depreciation is calculated by the straight-line
method. Depreciation of the software for internal
use is computed by the straight-line method overthe useful life of the software (principally 5 years).
Lease assets
Finance lease assets which transfer ownership title
to the lessee
Depreciation of finance lease assets whichtransfer ownership titles to the lessee is calculatedby the same method as that for property, plantand equipment owned.

80

SANKI REPORT 2017(3) Significant provisions and allowances
Allowance for doubtful accounts
Allowance for doubtful accounts is provided at
an amount sufficient to cover possible losses oncollection. The allowance consists of an estimateof the uncollectible amounts with respect tospecific receivables plus a percentage based on
historical losses on accounts receivable.
Provision for bonuses
Provision for bonuses is stated at an estimate of
the amounts to be paid by the Company and its
consolidated subsidiaries for services rendered by
the balance sheet date.
Provision for directors’ bonuses
Provision for directors’ bonuses is stated at an
estimate of the amounts to be paid by the Company
and its consolidated subsidiaries for services
rendered by the balance sheet date.
Provision for warranty costs
Provision for warranty costs is provided at an
estimated amount based on historical experienceand certain other factors.
Provision for loss on construction contracts
Provision for loss on construction contracts isprovided at an amount of estimated loss if asignificant amount of loss is expected to occur
for uncompleted construction contracts and theamount of the loss can be reasonably estimated.
Provision for loss on compensations
Provision for loss on compensations is provided
at an amount of estimated loss on acceptance ofclaims for damages.
Provision for directors’ retirement benefits
Provision for directors’ retirement benefits is stated
at 100% of the amount which would be required
to be paid if all directors and corporate auditors
resigned their positions at the balance sheet date.

At the meetings of board of directors of theCompany and its domestic consolidated
subsidiaries held in March 2012, it was resolvedthat their retirement benefit plans for directors
and corporate auditors be terminated on March
31, 2012. Subsequently, at the ordinary general
meeting of shareholders of each company held in
June 2012, it was resolved that retirement benefits
shall be paid to directors and corporate auditors,
who were incumbent as of the close of the said
shareholders’ meeting, for their individual service
periods to March 31, 2012. It was also resolved that
retirement benefits shall be paid at the time of theirindividual retirement and that the amount to be paid
and the payment method for directors would bedetermined at the meeting of the board of directors
and for corporate auditors by mutual agreement
among the corporate auditors.
As a result, the estimated amount of retirement
benefits to be paid to directors and corporate
auditors of those companies is included in accrued
directors’ retirement benefits on the consolidatedbalance sheet as of March 31, 2017.
(4) Accounting for retirement benefits
Method of attributing expected benefits to periodsof service
The retirement benefit obligation for employees
is attributed to each period by the benefit formula
method.
Method of amortization for actuarial gain or loss,
and prior service cost
Prior service cost is amortized by the straight-line
method over a period (10 years) within the average
estimated remaining years of service of the eligible
employees.
Actuarial gain or loss is amortized in the year
following the year in which the gain or loss isrecognized by the straight-line method over a period(10 years) within the average estimated remaining
years of service of the eligible employees.
Adoption of simplified method for small-scale
corporation
The liability for retirement benefits and the retirement
benefit expenses for each consolidated subsidiary arecalculated based on the retirement benefit obligation
which is stated at the amount that would be paid
if all eligible employees voluntarily terminated theiremployment at the end of the period.

(5) Recognition criteria for significant revenues and expenses
Recognition criteria for revenues and costs ofconstruction contracts
Construction contracts, of which the percentage ofcompletion can be reliably estimated:
Revenues and costs of construction contracts, ofwhich the percentage of completion can be reliably
estimated, are recognized by the percentage-ofcompletion method. The percentage of completionis calculated at the cost incurred as a percentage ofthe estimated total cost.
Other construction contracts:
Revenues and costs of construction contracts,of which the percentage of completion cannot
be reliably estimated, are recognized by thecompleted-contract method.
For the year ended March 31, 2017, net sales ofcompleted construction contracts of ¥94,389 million
was recognized by the percentage-of-completion
method.
(6) Foreign currency translation
Monetary assets and liabilities denominated inforeign currencies are translated into yen at theexchange rates prevailing at the year-end date of theconsolidated financial statements, with the resulting
translation gains and losses credited or charged toincome.
Receivables and payables denominated in foreign
currencies hedged by the forward exchange
contracts which qualify for the assigning methodof hedge accounting are translated into yen at theirrespective forward exchange contract rates.
The assets and liabilities and the revenue andexpense accounts of the foreign subsidiaries aretranslated into yen at the exchange rates prevailingat the fiscal year-end date of those respective
companies. The resulting translation adjustments areincluded in foreign currency translation adjustment
and minority interests in net assets.

SANKI REPORT 2017

Financial Report

Inventories
Costs on uncompleted construction contracts:
Costs on uncompleted construction contracts
are stated at cost by the individual identification
method.
Raw materials and supplies:
Raw materials and supplies are carried at cost
determined by the moving average method (in thecase that the net selling value falls below the costat the end of the period, the book value on thebalance sheet is carried at the net selling valueon the balance sheet, regarded as decreased
profitability of assets).

Finance lease assets which do not transfer
ownership title to the lessee
Depreciation of finance leases assets which
do not transfer ownership title to the lessee iscalculated by the straight-line method over therespective lease terms with a nil residual value.
Finance leases which do not transfer ownership
title to the lessee, entered into on or before March
31, 2008, are accounted for as operating leases.

Financial Report and Corporate Information

5. Accounting policies(1) Valuation policies for significant assets
Securities
Held-to-maturity securities:
Held-to-maturity securities are stated at cost andamortized by the straight-line method.
Available-for-sale securities:
Marketable securities are stated at fair value withany changes in unrealized gain or loss, net of theapplicable income taxes, included directly in net
assets. Cost of securities sold is determined by
the moving average method.
Nonmarketable securities are stated at cost
determined by the moving average method.

81

(7) Hedge accounting
Principally, deferral hedge accounting is applied forderivatives which qualify as hedges. For the forward
exchange contracts which meet certain criteria, theassigning method is applied.
Hedging instruments are the forward exchange
contracts, and hedged items are receivables,
payables and forecasted transactions denominatedin foreign currencies.
The Company uses the forward exchange contracts
for the purpose of mitigating risks arising fromfluctuations in foreign currency exchange rates. The
Company does not enter into derivative transactions
for speculation.
Hedge effectiveness is assessed quarterly bymatching changes in market prices/rates or cash
flows of hedged items with those of hedging
instruments. Hedge effective is not assessed if
the substantial terms and conditions of the forward
exchange contracts and the hedged items are thesame because their correlation in future fluctuationin exchange rates is ensured.

Changes in Presentation of Consolidated
Financial Statements(8) Scope of cash and cash equivalents in the consolidated
statement of cash flows
The scope of cash and cash equivalents in the
consolidated statement of cash flows covers cash on
hand, deposits which can be easily withdrawn at any
time, and highly liquid investments with a maturity of
three months or less when purchased.

Implementation Guidance on Recoverability of Deferred
Tax Assets(Note 1)
Investment securities included the following shares of unconsolidated subsidiaries and affiliates:(Millions of yen)

“Loss on retirement of noncurrent assets”, which
was included in “Cash flows from operating
activities-Other” in the prior fiscal year, has been
separately presented in the current fiscal year due
to its increased financial materiality.
To reflect this change in presentation, theconsolidated statement of cash flows has been
reclassified, and as a result, “Cash flows fromoperating activities -Other” of ¥2,255 million in theprior fiscal year has been divided into “Loss onretirement of noncurrent assets” of ¥36 million and“Cash flows from operating activities -Other” of¥2,219 million in the consolidated statement of cash
flows for the prior fiscal year provided herein.

Stock
Other equity securities

¥ 422

117

117

(Millions of yen)
Investment securities

FY2015FY2016¥5¥52) The following assets have been pledged as guarantees for the payment of trade payable by the
consolidated subsidiaries:(Millions of yen)
FY2015FY2016¥ 33¥ 29

Financial Report

The Company and its domestic consolidated
subsidiaries adopted “Revised Implementation
Guidance on Recoverability of Deferred Tax Assets”(ASBJ Guidance No.26, March 28, 2016) from the
beginning of the fiscal year ended March 31, 2017.

FY2016¥ 332(Note 2)
1) The following assets have been pledged as collateral for loans payable of the affiliates and others:

Investments and other assets (time deposits)

Additional Information

FY2015

Financial Report and Corporate Information(9) OtherConsumption taxes:
Transactions subject to consumption taxes arerecorded at amounts exclusive of consumption
taxes.
However, non-deductible consumption taxes
charged on assets are recognized as expenses
for the period when the related transactions haveoccurred.

Consolidated Statement of Cash Flows

Notes to Consolidated Balance Sheet

3) The following assets have been pledged as guarantees for losses regarding capital investments in the
consolidated subsidiaries:(Millions of yen)
Investments and other assets (time deposits)

FY2015FY2016¥ 10¥ 10(Note 3)
1) The following guarantees have been provided for the loans:(Millions of yen)
Guarantee for borrowings by Kokyuki Allergy Center ESCO Co., Ltd.

FY2015FY2016¥3¥–

The above amounts represent the Company’s share of the joint liability on the guarantee.
2) The following guarantees have been provided for losses regarding capital investments in the consolidated
subsidiaries:(Millions of yen)
Guarantee to capital investors of THAI SANKI ENGINEERING & CONSTRUCTION CO., LTD.

FY2015FY2016¥ 29¥ 30(Note 4)
Regarding the construction contracts which were expected to incur losses, costs on uncompleted construction
contracts were not offset with provision for loss on construction contracts but both of those balances were presented
at the gross amount on the consolidated balance sheet.
The balance of costs on uncompleted construction contracts corresponding to provision for loss on construction
contracts were as follows:(Millions of yen)82

SANKI REPORT 2017

FY2015FY2016¥ 575¥–

SANKI REPORT 201783

Notes to Consolidated Statement of Income and Comprehensive Income(Note 1)
Research and development expenses included in selling, general and administrative expenses and cost of sales for theyears ended March 31, 2016 and 2017 are as follows:(Note 4)
The following table presents reclassification adjustments and tax effects allocated to each component of othercomprehensive income for the years ended March 31, 2016 and 2017:(Millions of yen)

FY2016

Amount arising during the year

¥ 1,091¥ 1,084

Reclassification adjustments for gains and losses included in net income
Amount before tax effect(Note 2)
Provision for loss on construction contracts included in cost of sales for the years ended March 31, 2016 and 2017 are
as follows:(Millions of yen)
¥ (128)¥ (215)¥ (3,832)¥ (2,419)(638)(3,833)(3,057)

Tax effect

1,513

973

Unrealized gains on available-for-sale securities(2,319)(2,084)

(102)

(71)

Foreign currency translation adjustment:
Amount arising during the year
Remeasurements of defined benefit plans:
Amount arising during the year
Reclassification adjustments for gains and losses included in net income
Amount before tax effectTax effectRemeasurements of defined benefit plans(Note 3)
Impairment losses were recognized for the following assets for the year ended March 31, 2016:(0)

Financial Report and Corporate Information(Millions of yen)

FY2016FY2016

Unrealized gains on available-for-sale securities:

FY2015FY2015FY2015

Total other comprehensive income(3,078)

(239)

435

1,396

(2,643)

1,156

760

(357)

(1,882)798¥ (4,304)¥ (1,357)(Millions of yen)

Yamato-shi, Kanagawa

Use

Asset class

AmountBusiness-use assets

Buildings, Structures, Machinery and equipment,
Tools, furniture and fixtures¥ 423

The Company groups its business-use fixed assets based on the three business segments (facilities construction,
machinery systems and environmental systems) to perform assessments of impairment losses. For idle assets andassets used for the real estate business, the Company determines whether or not indications of impairment exist on
an individual asset basis. Fixed assets of its consolidated subsidiaries are grouped as one unit for each company.
The net book value of the business-use assets which were not expected to be used in the future was reduced to thememorandum value with estimated recoverable amounts of zero since the Company decided to carry out its plan toredevelop Yamato area. The reduction of ¥403 million for buildings, ¥14 million for structures, ¥4 million for machineryand equipment and ¥0 million for tools, furniture and fixtures have been recognized as the impairment loss in theextraordinary losses.
Impairment losses were recognized for the following assets for the year ended March 31, 2017:(Millions of yen)
Location
Yamato-shi, Kanagawa

Use

Asset class

AmountIdle assets

Machinery and equipment¥ 17

The Company groups its business-use fixed assets based on the three business segments (facilities construction,
machinery systems and environmental systems) to perform assessments of impairment losses. For idle assets andassets used for the real estate business, the Company determines whether or not indications of impairment exist on
an individual asset basis. Fixed assets of its consolidated subsidiaries are grouped as one unit for each company.
The net book value of the idle assets which were hardly expected to be used in the future was reduced to theestimated recoverable amount. The estimated recoverable amount was based on their net realizable value, which wasdeemed to be zero for the idle assets that were hard to be sold. The reduction was recognized as the impairment loss
in the extraordinary losses.

84

SANKI REPORT 2017

Financial Report

Location

Notes to Consolidated Statement of Changes in Net Assets[For the year ended March 31, 2016]
1. Types and total number of shares issued were as follows:(Shares)

Type of shares

As of April 1, 2015

Increase

Decrease

As of March 31, 2016

Common stock

66,661,156––

66,661,156

2. Types and number of treasury shares were as follows:(Shares)

Type of shares

As of April 1, 2015

Increase

Decrease

As of March 31, 2016

Common stock

3,119,468

23

12,0003,107,491(Note) Increase of 23 shares was due to repurchase of fractional shares. Decrease of 12,000 shares was due to disposalof treasury shares upon exercise of share subscription rights under the stock option plans.

3. Details of subscription rights to shares were as follows:

The Company(Parent company)
Total(Millions of yen)Type of subscription
rights to shares

Balance as ofMarch 31, 2016

Stock options

90
90

SANKI REPORT 201785

4. Dividends(1) Dividends paid by the Company were as follows:

Notes to Consolidated Statement of Cash Flows

Type of shares

Total dividends(Millions of yen)

Dividends per share(Yen)

Record date

Effective dateJune 25, 2015
Ordinary general meeting of shareholders

Common stock

794

12.50

March 31,2015

June 26,
2015

November 10 2015
Meeting of board of directors

Common stock

September 30,
2015

December 10,
2015

571

9.00

(Note 1)
Reconciliation of cash and deposits to cash and cash equivalents:(Millions of yen)

Cash and deposits(Note) Dividends of ¥12.50 per share as a resolution at the June 25, 2015 Ordinary general meeting of shareholders
included a commemorative dividend of ¥5.00 for the 90th anniversary of the Company’s foundation.

Short-term investments (securities) with a maturity within three months
after the acquisition dateCash and cash equivalents

FY2015FY2016¥ 26,501¥ 34,187

5,999

4,999

¥ 32,501¥ 39,187

Financial Report and Corporate Information

Resolution(2) Dividends with the record date within this fiscal year and the effective date after the end of this fiscal year wereas follows:
Resolution

Type of shares

June 29, 2016
Ordinary general meeting of shareholders

Total dividends(Millions of yen)

Common stock

Source of dividends

1,334

Retained earnings

Dividends per share(Yen)

Record date

Effective date

21.00

March 31,2016

June 30,
2016(Note) Dividends of ¥21.00 per share include an extra dividend of ¥12.00.

[For the year ended March 31, 2017](Shares)

Type of shares

As of April 1, 2016

Increase

Decrease

As of March 31, 2017

Common stock

66,661,156––

66,661,156

2. Types and number of treasury shares were as follows:(Shares)

Type of shares

As of April 1, 2016

Increase

Decrease

As of March 31, 2017

Common stock

3,107,491

–

9,000

3,098,491(Note) Decrease of 9,000 shares was due to disposal of treasury shares upon exercise of share subscription rights under
the stock option plans.
3. Details of subscription rights to shares were as follows:(Millions of yen)Type of subscription
rights to shares

Balance as ofMarch 31, 2017

Stock options

126

The Company(Parent company)
Total

126

4. Dividends(1) Dividends paid by the Company were as follows:
Resolution

Type of shares

Total dividends(Millions of yen)

Dividends per share(Yen)

Record date

Effective dateJune 30,
2016
December 9,
2016

June 29, 2016
Ordinary general meeting of shareholders

Common stock

1,334

21.00

March 31,2016

November 11 2016
Meeting of board of directors

Common stock

635

10.00

September 30,
2016(Note) Dividends of ¥21.00 per share as a resolution at the June 29, 2016 Ordinary general meeting of shareholders
included an extra dividend of ¥12.00.
(2) Dividends with the record date within this fiscal year and the effective date after the end of this fiscal year wereas follows:
Resolution

Type of shares

Total dividends(Millions of yen)

June 27, 2017
Ordinary general meeting of shareholders

Common stock

1,271

Dividends per share
Source of dividends(Yen)

Record date

Effective date

Retained earnings

March 31,2017

June 28,
2017

20.00

1. Overview
1) Policy for financial instruments
The Company and its consolidated subsidiaries (collectively, the “Group”) invest funds in financial instruments suchas debt securities with high credit ratings and with low risk for loss of principal. The Group raises funds throughborrowings from banks and life insurance companies.
The Group uses derivatives for the purpose of reducing the foreign currency exchange risk arising from the receivables
and payables denominated in foreign currencies and the interest rate fluctuation risk for borrowings. The Group does
not enter into derivative transactions for speculative purposes.

Financial Report

1. Types and total number of shares issued were as follows:

Financial Instruments2) Types of financial instruments and related risks, and risk management for financial instruments
Trade receivables - notes and accounts receivable on completed construction contracts and other, and electronicallyrecorded monetary claims - are exposed to credit risk in relation to customers. To manage credit risk arising from tradereceivables, each related division of the Group monitors due dates and outstanding balances by individual customer.
Further, it periodically monitors credit worthiness of the main customers.
Securities and investment securities are composed mainly of held-to-maturity debt securities and the shares ofcommon stock of other companies with which the Group has business relations. These investment securities are
exposed to market fluctuation risk. The Group periodically reviews the fair values of such investment securities andthe financial position of the issuers.
Most of the trade payables - notes and accounts payable on construction contracts and other - have payment due
dates within one year.
Regarding derivative transactions, the Group uses derivatives for the purpose of reducing the foreign currency
exchange risk arising from the receivables and payables denominated in foreign currencies and the interest rate
fluctuation risk for borrowing.
Those derivative transactions are entered into based on actual needs for hedging risks and not for speculative or
trading purposes.
In conducting derivative transactions, the Group follows the internal policies established by the financial division, which
set forth delegation of authority and maximum upper limit on position.
In addition, to mitigate the credit risk of derivatives, the Group transacts only with financial institutions which have ahigh credit rating.
Trade payables and borrowings are exposed to liquidity risk. Each company of the Group prepares and updates its cash
flow plans monthly to manage liquidity risk.
3) Supplementary explanation of the estimated fair value of financial instruments
The notional amounts of derivatives in “Derivatives” of “Notes to Consolidated Financial Statements” are notnecessarily indicative of the actual market risk involved in derivative transactions.
2. Estimated fair value of financial instruments
Carrying value of financial instruments on the consolidated balance sheet, estimated fair value and unrealized gain
(loss) are summarized in the following table. The following table does not include financial instruments for which it isextremely difficult to determine fair value. (Please refer to Note 2 below.)(Note) Dividends of ¥20.00 per share include an extra dividend of ¥10.00.

86

SANKI REPORT 2017

SANKI REPORT 201787

(Millions of yen)
FY2015Carrying value* Estimated fair value* Unrealized gain (loss)

FY2016
Carrying value* Estimated fair value* Unrealized gain (loss)(Note 3) Redemption schedule for receivables, claims and securities with maturities(Millions of yen)

Assets:

FY2015

1) Cash and deposits¥ 26,501¥–¥ 34,187¥ 34,187¥–

71,246

71,246–

58,16858,168

–

4,267

4,267

–

8,570

8,570

–

Held-to-maturity debt
securities

7,302

7,307

5

7,101

7,105

3

Available-for-sale securities

33,04733,047–

29,79029,790–142,366

142,3715

137,818

137,82234) Securities and investment
securities:

Total assets
Liabilities:

Due after five
years throughten years

Due after
ten years

Due within
one year

Due after one
year throughfive years

Due after five
years throughten years

Due after
ten years¥ 26,492

¥–

¥–

¥–

¥ 34,179

¥–

¥–

¥–

Notes and accounts receivable
on completed construction
contracts and other

71,246–––

58,168–––

Electronically recordedmonetary claims

4,267

–

–

–

8,570

–

–

–

Held-to-maturity securities(corporate bonds)

6,999

102

200

–

6,999

101

–

–

–

101

–

–

–

–

–

116

¥ 109,007

¥ 203

¥ 200

¥–

¥ 107,918

¥ 101

¥–

¥ 116

Securities andinvestment securities:(51,460)(51,460)–(48,277)(48,277)–

Available-for-sale securities
with maturity date
(corporate bonds)

Total liabilities(51,460)(51,460)–(48,277)(48,277)

–

Total

¥–

¥–

¥–

¥–

¥–

¥–

* The liabilities are indicated by parentheses.

Due after one
year throughfive years

Cash and deposits

Notes and accounts payable on
construction contracts and other

Derivative transactions

Due within
one year

Financial Report and Corporate Information

2) Notes and accounts receivable
on completed construction
contracts and other3) Electronically recorded monetaryclaims¥ 26,501

FY2016(Note 4) Redemption schedule for long-term loans payable, lease obligations and other interest-bearing debts(Note 1)
Methods to determine the estimated fair value of financial instruments and other matters related to securities andderivative transactions
Assets:1) Cash and deposits
Since all the deposits are short-term, their carrying value approximates the fair value.
2) Notes and accounts receivable on completed construction contracts and other, and 3) Electronically recordedmonetary claims
The fair value of these receivables and claims is based on the present value of the receivables categorized by age,
discounted by a discount rate that reflects the remaining term and the credit risk. It was determined that, as ofMarch 31, 2017, the fair value of these receivables and claims was almost equal to their carrying value.

Due within
one year

FY2016

Due after
Due after
Due after
one year two years three years
throughthroughthrough
two years three years four years

Due after
four years
throughfive years

Due after
five years

Due within
one year

Due after
one yearthrough
two years

Due after
two years
throughthree years

Due after
three years
throughfour years

Due after
four years
throughfive years

Due after
five years

Short-termloans payable¥ 5,332

¥–

¥–

¥–

¥–

¥–

¥ 5,334

¥–

¥–

¥–

¥–

¥–

Long-termloans payable

340

320

–

–

–

–

320

–

–

–

–

–

Lease
obligations

139

132

98

249

22

3

158

124

263

46

16

2

¥ 5,811

¥ 452

¥ 98

¥ 249

¥ 22

¥3

¥ 5,813

¥ 124

¥ 263

¥ 46

¥ 16

¥2

Total

Financial Report(Millions of yen)
FY2015

4) Securities and investment securities
The fair value of stocks is based on quoted market prices. The fair value of debt securities is based on either quoted
prices or prices provided by the financial institutions making markets in those securities. For information on securities
classified by holding purpose, please refer to “Securities” of “Notes to Consolidated Financial Statements.”
Liabilities:
Notes and accounts payable on construction contracts and other
Since these payables are settled in a short period of time, their carrying value approximates the fair value.
Derivatives:
Please refer to “Derivatives” of “Notes to Consolidated Financial Statements.”(Note 2) Carrying value of financial instruments for which it is extremely difficult to determine the fair value(Millions of yen)Type
Unlisted stocks

Carrying value
FY2015FY2016¥ 1,438¥ 2,605

Because no quoted market price is available and it is extremely difficult to determine the fair value, the above financial
instruments are not included in “Assets: 4) Securities and investment securities” of the above table.

88

SANKI REPORT 2017

SANKI REPORT 201789

Securities
1) Trading securities
Not applicable, because the Company and its consolidated subsidiaries had no trading securities both at March 31,
2016 and 2017.

(Millions of yen)Type

Carrying value

FY2015
Fair value

Difference

Carrying value

FY2016
Fair value

Difference

Securities whose fair value
exceeded their carrying value
Government bonds

¥–

¥–

¥–

¥–

¥–

¥–

Corporate bonds

1,302

1,308

5

101

105

3

–

–

–

–

–

–

1,302

1,308

5

101

105

3

Other
Subtotal
Securities whose carrying value
exceeded their fair value

–

–

–

–

–

–

Corporate bonds

4,999

4,999

(0)

4,999

4,999

(0)

Other

1,000

1,000

–

2,000

1,999

(0)

Subtotal

5,999

5,999

(0)

6,999

6,999

(0)

¥ 7,302¥ 7,307¥5¥ 7,101¥ 7,105¥3

Government bonds

Total

Financial Report and Corporate Information

2) Held-to-maturity debt securities

5) Impairment loss on securities
An impairment loss on investment securities of ¥4 million (available-for-sale securities for which it is deemed
extremely difficult to determine the fair value of ¥4 million) was recorded for the year ended March 31, 2016, and an
impairment loss on investment securities of ¥1 million (available-for-sale securities for which it is deemed extremely
difficult to determine the fair value of ¥1 million) was recorded for the year ended March 31, 2017.
For securities with market value, if the fair value of each security has declined by more than 30% from the acquisition
cost, the Company and its consolidated subsidiaries recognize an impairment loss after considering the potential
recoverability. For securities for which it is deemed extremely difficult to determine the fair value, if the net assets
per share of each security based on the issuer’s most recent financial statements available has declined by more than
50% from the acquisition cost, the Company and its consolidated subsidiaries recognize an impairment loss after
considering the potential recoverability.

Derivatives
1) Derivative transactions, to which hedge accounting is not applied
1. Currency-related transactions
Not applicable both for the years ended March 31, 2016 and 2017

3) Available-for-sale securities(Millions of yen)

Carrying value

FY2015Acquisition cost

DifferenceStock¥ 32,490¥ 13,883

Bonds

–

–

Other

–
32,490Type

Carrying value

FY2016
Acquisition cost

Difference¥ 18,606¥ 29,480¥ 13,958¥ 15,521

–

–

–

–

–

–

–

–

–

13,88318,60629,48013,95815,521

Securities whose carrying value
exceeded their acquisition cost

Subtotal

Financial Report

2. Interest-related transactions
Not applicable both for the years ended March 31, 2016 and 20172) Derivative transactions, to which hedge accounting is applied
1. Currency-related transactions
Not applicable both for the years ended March 31, 2016 and 2017
2. Interest-related transactions
Not applicable both for the years ended March 31, 2016 and 2017

Securities whose acquisition costexceeded their carrying value
Stock

456

508

(51)

193

216

(22)

Bonds

101

101

(0)

116

118

(1)

Other

–

–

–

–

–

–

Subtotal
Total

557

610

(52)

310

334

(24)

¥ 33,047¥ 14,493¥ 18,554¥ 29,790¥ 14,292¥ 15,497

4) Information regarding sales of securities classified as available-for-sale securities:
FY2015
Proceeds from sales Gross realized gain on sales Gross realized loss on sales(Millions of yen)

Proceeds from sales

FY2016Gross realized gain on sales

Stock¥ 1,164

¥ 154

¥–

¥ 892

¥ 638

¥–

Bonds

–

–

–

100

–

0

Other

5

0

–

16

11

0

Total

¥ 1,170¥ 155¥–¥ 1,009

¥ 650

¥0

Type

Gross realized loss on sales(Note) “Securities classified as available-for-sale securities” presented above include securities for which it is extremely
difficult to determine the fair value.

90

SANKI REPORT 2017Retirement Benefits
1) Summary of retirement benefit plans for employees
The Company has funded defined benefit plans as well as a defined contribution plan. Its consolidated subsidiaries
including foreign subsidiaries have unfunded defined benefit plans.
Under the defined-benefit corporate pension plan, which is a funded plan, covered employees are entitled to lump-sum
or annuity payments based on their basic rates of pay and length of service. For the defined-benefit corporate pension
plan, a retirement benefit trust has been established.
Under the lump-sum payment plans, covered employees are entitled to lump-sum payments based on their basic rates
of pay and length of service. The lump-sum payment plans are principally unfunded plans. However, the Company’s
lump-sum payment plan has funded status as a result of establishment of a retirement benefit trust.
The Company and its consolidated subsidiaries may pay additional retirement benefits under certain circumstances.
For the lump-sum payment plans of the consolidated subsidiaries, liabilities and expenses for retirement benefits arecalculated using the simplified method.

SANKI REPORT 201791

5. The components of retirement benefits asset and liability adjustments included in other comprehensive income (before
tax effect) for the years ended March 31, 2016 and 2017 are as follows:2) Defined benefit plans (including plans accounted for using the simplified method)
1. The changes in the retirement benefit obligation for the years ended March 31, 2016 and 2017 are as follows:(Millions of yen)
FY2015(Millions of yen)

FY2016¥ (43)¥–¥ 20,041¥ 22,153

Actuarial (loss) gain

(2,599)

1,156

998

1,177

¥ (2,643)¥ 1,156

Interest cost

235

78

Actuarial loss

2,070

50

Retirement benefit paid

(1,192)(1,066)FY2015
Balance at the beginning of the year
Service cost

Other
Balance at the end of the year

(0)

(0)

¥ 22,153¥ 22,393

Total

6. The components of retirement benefits liability adjustments included in accumulated other comprehensive income(before tax effect) as of March 31, 2016 and 2017 are as follows:(Millions of yen)
FY2015FY2016(Note) Retirement benefit expenses of the consolidated subsidiaries applying a simplified method have been includedin the service cost.

Unrecognized actuarial loss

¥ 5,971¥ 4,815

Total¥ 5,971¥ 4,815

2. The changes in the plan assets for the years ended March 31, 2016 and 2017 are as follows:

7. The fair value of plan assets, by major category, as a percentage of total plan assets at March 31, 2016 and 2017 are
as follows:(Millions of yen)
FY2016¥ 24,821

FY2015FY2016

545

566

Bonds

42 %

39 %

Actuarial loss

(1,007)(189)

Stocks19

26

Contributions by employers

4,500

–

Short-term funds

13

9

Retirement benefits paid

(582)

(587)

Life insurance general accounts

21

23¥ 24,821¥ 24,611

Expected return on plan assets

Balance at the end of the year

3. The following table sets forth the funded status of the plans and the amounts recognized in the consolidated balance
sheets at March 31, 2016 and 2017 for the Company’s and its consolidated subsidiaries’ defined benefit plans:(Millions of yen)
FY2015FY2016Retirement benefit obligation under the funded plans¥ 21,716¥ 21,886

Plan assets at fair value(24,821)(24,611)(3,105)(2,724)

Other

5

3

Total

100 %

100 %

(Note) The plan assets included the retirement benefit trust for the corporate pension plans, which comprised 12% and
8% of the total at March 31, 2016 and 2017, respectively, as well as the retirement benefit trust for the lump-sum
payment plans, which comprised 27% of the total both at March 31, 2016 and 2017.
The expected return on assets has been estimated based on the anticipated allocation to each asset class and the
expected long-term returns on assets held in each category.
8. The assumptions used in accounting for the above plans are as follows:

437

506

Net asset for retirement benefits(2,668)(2,218)

Liability for retirement benefits in the balance sheet

1,834

2,274

Discount rate (defined-benefit corporate pension plan)(4,503)(4,493)

Discount rate (lump-sum payment plans)¥ (2,668)¥ (2,218)

Retirement benefit obligation under the unfunded plans

Asset for retirement benefits in the balance sheet
Net asset for retirement benefits

Financial Report

FY2015¥ 21,366

Balance at the beginning of the year

Financial Report and Corporate Information

FY2016

Prior service cost

Expected long-term rate of return on plan assets

FY2015FY2016

0.408 %

0.408 %

0.279 %

0.279 %

2.0~2.5 %2.0~2.5 %4. The components of retirement benefit expenses for the years ended March 31, 2016 and 2017 are as follows:(Millions of yen)
FY2015FY2016

Service cost

¥ 998

¥ 1,177

Interest cost

235

78

Expected return on plan assets

(545)

(566)

Amortization of actuarial loss

478

1,396

Amortization of prior service cost

(43)

–

6

5

¥ 1,131¥ 2,090

Other
Retirement benefit expenses

3) Defined contribution plans
The amount contributed to the defined contribution plan by the Company for the years ended March 31, 2016 and2017 was ¥110 million and ¥114 million, respectively.

(Note) The consolidated subsidiaries’ retirement benefit expenses have been included in the service cost.

92

SANKI REPORT 2017

SANKI REPORT 2017933) Fair value at the grant date for stock options which were issued during the year ended March 31, 2017 was estimatedusing the Black-Scholes option pricing model with the following assumptions.

Stock Options
1) Stock option expenses were included in “Selling, general and administrative expenses” for the years ended March 31,
2016 and 2017 were ¥46 million and ¥42 million, respectively.

Stock option plans

2013 Stock option(Share subscription rights)

2014 Stock option(Share subscription rights)

2015 Stock option(Share subscription rights)

2016 Stock option(Share subscription rights)

Name of company

The Company

The Company

The Company

The Company

Resolution dateJune 26, 2013

June 26, 2014

June 25, 2015

June 29, 2016

Title and number of individuals covered by the plan:
Directors (except external directors)

8

6

6

6

20

20

25

25

Corporate officers (except persons concurrently
serving as a director)
Type and number of shares to be issued upon
exercise of the share subscription rights

Common stock
44,000 shares

Common stock
42,000 shares

Common stock
52,000 shares

Common stock
52,000 shares

Grant dateJuly 11, 2013

July 11, 2014

July 10, 2015

July 14, 2016

Conditions for being vested

None

None

None

None

Required service period

None

None

None

None

Exercise period (Note)

July 12, 2013
to July 11, 2043

July 12, 2014
to July 11, 2044

July 11, 2015
to July 10, 2045

July 15, 2016
to July 14, 2046

31.173%

Expected holding period (Note 2)

2.7 years

Expected dividend (Note 3)
Risk-free rate (Note 4)¥ 18 per share(0.355%)(Note 1) The volatility of the share price is estimated based on the market prices of the Company’s stock from November
1, 2013 to July 14, 2016.
(Note 2) The expected holding period is estimated based on the weighted average period of the grant date to the datewhen the share subscription rights become exercisable, that is the date of each Holder’s retirement from theposition of a director and/or corporate officer, assuming that each Holder exercises his rights as soon as therights become exercisable.
(Note 3) The expected dividend is based on the dividends paid (excluding an extra dividend of ¥12.00) for the year ended
March 31, 2016.
(Note 4) Risk-free interest rate is the yield on government bonds for the period that corresponds to the remaining life of
the option.

Financial Report(Note) An individual to whom the share subscription rights are granted (a “Holder”) can exercise the rights only for theperiod of 10 days following the date of his retirement from the position of a director and/or corporate officer. All
the share subscription rights of a Holder must be exercised at one time.
In the event that a Holder died, one of his heirs, spouse or one of first-degree family, can exercise the sharesubscription rights in place of the Holder. In that case, all the rights must be exercised at one time.

Expected volatility (Note 1)

Financial Report and Corporate Information

2) 1. Description of the stock option plans:

2016 Stock option(Share subscription rights)

4) Because it is difficult to reasonably estimate the number of options that will expire in the future, the number of vested
options is calculated only based on the number of options that have actually forfeited.

2. The following table summarizes stock option activity under the stock option plans referred to above during the year
ended March 31, 2017:2013 Stock option(Share subscription rights)

2014 Stock option(Share subscription rights)

2015 Stock option(Share subscription rights)

2016 Stock option(Share subscription rights)

Outstanding at March 31, 2016

–

–

–

–

Granted–––Forfeited–––

Vested–––Outstanding at March 31, 2017

–

–

–

Stock option activity
Share subscription rights which are not yet vested(Number of shares):

1) The significant components of deferred tax assets and liabilities at March 31, 2016 and 2017 were as follows:(Millions of yen)

52,000 shares–
52,000 shares–

Share subscription rights which have already been
vested(Number of shares):
Outstanding at March 31, 2016

Tax-effect Accounting

FY2016

1. Deferred tax assets
¥ 214

¥ 196

Provision for bonuses

898

721

Accrued business taxes

175

103

1,923

1,817

Provision for warranty costs

256

130

Provision for loss on construction contracts

366

300

2,184

2,051

Allowance for doubtful accounts

Impairment loss–

FY201532,000 shares

36,000 shares

52,000 shares

Vested–––Exercised

3,000 shares

3,000 shares

3,000 shares–

Provision for directors’ retirement benefits

29

28

Forfeited

–

–

–

–

Loss on devaluation of investment securities

440

240

29,000 shares

33,000 shares

49,000 shares

52,000 shares

Loss on devaluation of utility rights

134

128

¥1

¥1

¥1

¥1

Other

762

805

Weighted average exercise price (Yen)

¥ 863

¥ 863

¥ 863

–

Fair value per stock at the grant date (Yen)

¥ 579

¥ 695

¥ 896

¥ 822

Outstanding at March 31, 2017
Exercise price (Yen)

52,000 shares

Liability for retirement benefits

Subtotal
Valuation allowance for deferred tax assets

7,384

6,522

(2,219)(2,180)Total deferred tax assets

5,165

4,341

2. Deferred tax liabilities
(686)

(673)

Gain on valuation of investment securities(1,263)(1,263)

Unrealized gains on available-for-sale securities(5,541)(4,568)Deferred capital gains for tax purposes

(165)

(193)

Total deferred tax liabilities(7,657)(6,698)Net deferred tax liabilities¥ (2,492)¥ (2,356)

Other

94

SANKI REPORT 2017

SANKI REPORT 2017952) The reconciliation of the significant difference between the statutory tax rate and the effective tax rate reflected in the
consolidated statement of income and comprehensive income for the year ended March 31, 2017 is presented as follows:

Segment Information(Segment Information)

FY201630.9 %

Items permanently not deductible for tax purposes

2.1

Items permanently not taxable(0.6)

Inhabitants’ per capita taxes

1.4

Valuation allowance(2.5)

Research and development tax credit(1.0)

Donation not deductible for tax purposes

0.8

Difference of statutory tax rate between the Company and its consolidated subsidiaries

1.0

Other

1.0

Effective tax rate

33.1 %(Note) Disclosure of the reconciliation of the difference between the statutory tax rate and the effective tax rate reflectedin the consolidated statement of income and comprehensive income for the year ended March 31, 2016 is omitted
because the difference is immaterial.

The Company owns commercial facilities and housing for rent in Kanagawa Prefecture and other areas. Profit from
renting those real estate properties was ¥271 million and ¥276 million for the years ended March 31, 2016 and 2017,
respectively. Rental revenues were recorded as net sales of real estate business and other, and rental expenses as costof sales on real estate business and other.
Carrying value on the consolidated balance sheet and corresponding fair value of those rental real estate properties forthe years ended March 31, 2016 and 2017 were as follows:(Millions of yen)
FY2015FY2016¥ 3,868¥ 3,962

Carrying value
Net change during the year
At end of the year
Fair value at end of the year

94

(43)

3,962

3,918

¥ 14,159¥ 20,070

Notes:
1) The carrying value represents the acquisition cost less accumulated depreciation and impairment loss.
2) Increase in the carrying value included in the net change during the year was mainly due to acquisition of rental realestate properties of ¥307 million, and decrease in the carrying value mainly due to depreciation of ¥253 million, forthe year ended March 31, 2016. Increase in the carrying value included in the net change during the year was mainly
due to acquisition of rental real estate properties of ¥394 million, and decrease in the carrying value mainly due todepreciation of ¥250 million and transfer of properties of ¥177 million resulting from change of their usage, for the year
ended March 31, 2017.
3) The fair value is estimated for major rental properties based on the appraisal value obtained from outside real estateappraisers with reasonable adjustments for timing and for the other rental properties based on the assessed value for
fixed-asset taxes.

Financial Report

2. Calculation method for sales, profits or losses and other items by reportable segment
Accounting policies of the segments are substantially the same as those described in “Basis of Preparationof Consolidated Financial Statements.” Segment performance is evaluated based on ordinary income or loss.
Intersegment sales and transfers are recorded at the same prices used in transactions with third parties.
Segment assets and liabilities are not disclosed because they are not reviewed to make decisions on resource
allocation or to assess performance.

Investment and Rental Properties

At beginning of the year

1. Outline of reportable segments
The reportable segments of the Group are components for which discrete financial information is available and whose
operating results are regularly reviewed by the Executive Committee to make decisions on resource allocation and toassess performance.
The Group's business divisions are based on the activities of the Company. The consolidated subsidiaries of theCompany conduct their respective business operations in cooperation with the relevant business divisions of theparent.
Thus, the Group consists of the segments based on the Company’s business divisions. It has four reportablesegments: “Facilities construction” offers general facilities construction services, “Machinery systems” offers services
of industrial facilities such as FA systems, logistics systems and conveyor equipment, “Environmental systems” offers
services of environmental sanitation equipment such as equipment for cleaning sewers, and “Real estate” offers
services of rental and administration of real estate.

Financial Report and Corporate Information

Statutory tax rate

3. Sales, profits or losses and other items by reportable segment[For the year ended March 31, 2016](Millions of yen)
Reportable segments
Facilities
construction

Machinery Environmental
systems
systems

Real estate

Total

Other
(Note 1)

Total

Adjustments(Note 2)

Consolidated(Note 3)

¥ 1,530¥ 178,777¥ 117¥ 178,895¥6¥ 178,901

Sales:
Sales tothird parties
Inter-segment sales
and transfers¥ 149,349¥ 9,208¥ 18,689

602

8

45

2

659

424

1,083

(1,083)–－¥ 149,952¥ 9,217¥ 18,734¥ 1,532¥ 179,437¥ 542¥ 179,979¥ (1,077)¥ 178,901¥ 7,698¥ 275¥ (315)¥ 233¥ 7,891¥ 52¥ 7,943¥ 191¥ 8,135

Depreciation

¥ 330

¥ 52

¥ 79

¥ 253

¥ 714

¥0

¥ 714

¥8

¥ 723

Interest income

12

0

4

–

16

0

16

14

31

Interest expenses

45

0

4

–

49

–

49

36

86

Equity in earnings(losses) of affiliates

–

–

(180)

–

(180)

–

(180)

951

771

Total sales
Segment profit (loss)
Other items:(Note 1)
The category of “Other” includes business segments which are not reportable segments, such as leasing services,
insurance agency services and others.
(Note 2)Adjustments for segment profit or loss of ¥191 million for the year ended March 31, 2016 included corporate general lossof ¥1,120 million and equity in earnings of affiliates of ¥951 million which were not allocable to the reportable segments
and reversal of interest expenses of ¥360 million which had been allocated to each of the reportable segments foradministrative purpose. The corporate general loss consisted mainly of general and administrative expenses.
(Note 3)
Segment profit was adjusted to be equal to ordinary income in the consolidated financial statements.

96

SANKI REPORT 2017

SANKI REPORT 201797

3. Major customer information[For the year ended March 31, 2017](Millions of yen)
Reportable segments
Facilities
construction

Machinery Environmental
systems
systems

Real estate

Total

Other
(Note 1)

Total

Adjustments(Note 2)

Consolidated(Note 3)

(Information about impairment losses on tangible fixed assets by reportable segment)

Total sales¥ 140,722¥ 8,191¥ 17,862¥ 1,589¥ 168,366¥ 102¥ 168,468¥ 43¥168,512

845

0

409

2

1,258

396

1,655

(1,655)–¥141,567¥ 8,192¥ 18,271¥ 1,592¥169,624¥ 499¥170,123¥ (1,611)¥168,512¥ 6,404¥ (138)

¥ 671

¥ 189

¥ 7,127¥ 22¥ 7,150¥ (270)¥ 6,880[For the year ended March 31, 2016]

Impairment loss
Segment profit (loss)
Other items:
¥ 330

¥ 33

¥ 81

¥ 276

¥ 721

¥0

¥ 721

¥ (2)

¥ 718

Interest income

9

0

4

–

13

0

13

7

20

Interest expenses

47

0

3

–

51

–

51

33

84

Extraordinary Income

598

0

47

–

646

–

646

3

650

Depreciation

Gain on salesof investment
securities

598

Extraordinary loss

118

0
4

47
24

–
24

646
172

–
–

646
172

3
353

(Note 2)Adjustments for segment profit or loss of ¥270 million for the year ended March 31, 2017 included corporate general lossof ¥75 million which was not allocable to the reportable segments, reversal of interest expenses of ¥279 million which
had been allocated to each of the reportable segments for administrative purpose, and adjustments of ¥474 million forhaving recognized gain on sales of investment securities and others attributable to each of the reportable segments as
the extraordinary income. The corporate general profit and loss consisted mainly of general and administrative expenses,
interest income (expense), and dividends income.
(Note 3)
Segment profit was adjusted to be equal to ordinary income in the consolidated financial statements.

Machinerysystems

Environmental
systems

Real estate

Other

Total

Adjustments(Note)

Consolidated

¥–

¥–

¥–

¥–

¥–

¥–

¥ 423

¥ 423

[For the year ended March 31, 2017](Millions of yen)

Impairment loss

Facilities
construction

Machinerysystems

Environmental
systems

Real estate

Other

¥–

¥–

¥ 17

¥–

¥–

[For the years ended March 31, 2016 and 2017]
1. Product and service information
Disclosure of product and service information has been omitted because similar information was disclosed in“Segment information.”

Consolidated

¥ 17

¥–

¥ 17

(Information about amortization and balance of goodwill by reportable segment)[For the years ended March 31, 2016 and 2017]
Not applicable(Information about gain on negative goodwill by reportable segment)[For the years ended March 31, 2016 and 2017]
Not applicable

Per Share Data
FY2015FY2016¥ 1,328.60¥ 1,350.08

Basic¥ 83.84¥ 73.91

Diluted¥ 83.70¥ 73.74

Net assets per share(Other Information)

Total

Adjustments(Note)

Financial Report(Note 1)
The category of “Other” includes business segments which are not reportable segments, such as leasing services,
insurance agency services and others.

(Millions of yen)

Facilities
construction(Note)
Adjustments of ¥423 million were impairment loss resulting from the Company’s decision to carry out its plan toredevelop Yamato area.

650
525

Financial Report and Corporate Information

Sales:
Sales tothird parties
Inter-segment sales
and transfers

Disclosure of major customer information has been omitted because the sales to any specific customers of third parties
did not account for over 10% of the sales in the consolidated statements of income and comprehensive income.

Profit (loss) attributable to owners of parent per share:

Basis for the calculation of basic and diluted profit (loss) attributable to owners of parent per share is summarized
as follows:(Millions of yen)

2. Geographical information(1) Sales
Disclosure of geographical sales information has been omitted because the sales to third parties of the Japan
operation accounted for over 90% of the sales in the consolidated statements of income and comprehensive income.
(2) Property, plant and equipment
Disclosure of property, plant and equipment information has been omitted because property, plant and equipment
located in Japan accounted for over 90% of property, plant and equipment in the consolidated balance sheets.

SANKI REPORT 2017

FY2016¥ 5,327¥ 4,698

Basic:
Profit (loss) attributable to owners of parent
Amount not available to shareholders of common stock
Profit (loss) attributable to owners of parent available to shareholders of common stock
Average number of shares of common stock outstanding––¥ 5,327¥ 4,698

63,550 thousand shares

63,561 thousand shares

Diluted:Adjustments to profit (loss) attributable to owners of parent
Increase in shares of common stock(Of which, exercise of stock subscription rights)
Outline of dilutive potential which was not included in calculation of diluted profit (loss)
attributable to owners of parent per share due to non-dilutive effect98

FY2015––108 thousand shares(108 thousand shares)

148 thousand shares(148 thousand shares)––

SANKI REPORT 201799

Subsequent Events

Financial Report and Corporate Information

1. Acquisition of treasury stock
It was resolved at the meeting of its board of directors held on May 12, 2017 that the Company would acquire its
treasury stock in accordance with Article 156 as applied with relevant changes in interpretation pursuant to theprovision of Article 165, Section 3 of the Corporation Law.
(1) Purpose of acquisition
To exercise agile capital policies in response to changes in business environment and to conduct a return toshareholders(2) Outline of items related to acquisition
1) Type of stock:2) Total number of shares to be acquired:
3) Total amount of acquisition costs:
4) Period of acquisition:5) Acquisition method:

Common stock of the Company
3,000,000 shares (upper limit)¥4,000 million (upper limit)
From May 15, 2017 to March 31, 2018
Purchase on the Tokyo Stock Exchange

100

SANKI REPORT 2017

Financial Report

2. Retirement of treasury stock
According to the resolution at the meeting of its board of directors held on May 12, 2017, the Company has retired its
treasury stock in accordance with Article 178 of the Corporation Law as follows:
1) Type of stock:
Common stock of the Company
2) Total number of shares retired:
3,000,000 shares
3) Retirement date:
May 22, 20174) Total number of shares issued after retirement: 63,661,156 shares

SANKI REPORT 2017101

Corporate Information, Business Locations and Group Companies
The Sanki Engineering Group aims to build a comfortable environment for people and the Earth by leveraging “total
engineering competency” in a wide range of regions and business domains. Together with our customers, we will strive
as a group to contribute to the realization of a sustainable society. (as of March 31, 2017)

Domestic Business Locations

Financial Report and Corporate Information

Corporate Information

Representative Offices and Group Companies Overseas

Company nameSanki Engineering Co., Ltd.

● Representative officeGroup company

Date of establishment
April 22, 1925
Stated capital
8,105.18 million yen
Representative
Tsutomu Hasegawa, President

Hokuriku branch office

Salt Lake City Office

Corporate Information, Business Locations and Group Companies

Ibaraki branch office

Chugoku branch office

AEROSTRIP
Corporation
Sale of aeration systems

Chiba branch office

Kyushu branch office

Head office
Tokyo branch
Yokohama branch office

Shizuoka branch office
Mikawa branch office

Head office
8-1 Akashi-cho, Chuo-ku, Tokyo
Shikoku branch office

Sanki Shonan Training Center

Austria Office

Bangkok Office

Yamato Engineering Center
Technical Research &Development Institute

AQUACONSULT
Anlagenbau GmbH

THAI SANKI ENGINEERING &CONSTRUCTION CO., LTD.

Manufacture and saleof aeration systems

Facility design, construction,
maintenance and consulting

Kansai branch
Kobe branch office

Consolidated Subsidiaries
Sanki Techno Support Co., Ltd.
Established: April 1, 1980
Capital: 100 million yen
Business areas:• Design, construction, operation/management, repair and maintenance of
HVAC, plumbing and electricity work
• Energy saving diagnosis and consulting• Building IP phone systems, call center systems and networks
Sanki Sangyo Setsubi Co., Ltd.
Established: May 1, 1980
Capital: 20 million yen
Business areas:• Installation, relocation, removal and altering of general equipment (production,transportation, etc.)• Electrical wiring, instrumentation work and computer software changes
Sanki Kako Kensetsu Co., Ltd.
Established: September 1, 1980
Capital: 80 million yen
Business areas:• Design, construction, operation/management, maintenance, upgrading andimproving of waste treatment facilities• Manufacture, sale and installation of solid-liquid separators• Design, construction and maintenance/management of water/wastewater
treatment facilities

SANKI REPORT 2017

Facility design, construction,
maintenance and consulting

Kanto branch office

Offices
Branches: 3
Branch offices: 15
Laboratory: 1

102

Sanki Construction Engineering(Shanghai) Co., Ltd.

Tohoku branch office

Chubu branch
Kyoto branch office

Number of employees
Consolidated: 2,339
Non-consolidated: 1,933

Hokkaido branch office

Toyota branch officePrincipal lines of business
Facilities construction, plant andmachinery systems, real estate

Sanki Kankyo Service Co., Ltd.
Established: June 29, 1990
Capital: 50 million yen
Business areas:• Design, construction, management and work contracting of environmental
protection facilities, including water supply and sewage facilities and waste
treatment facilities, etc.
• Operation, maintenance and management, and sale of chemical products forthese facilities
Sanki Partners Co., Ltd.
Established: August 1, 1980
Capital: 10 million yen
Business areas: Insurance agency, leasing and temporary staffing(The company’s name was changed from Shin-yu Service Co., Ltd. in April 2017.)
AQUACONSULT Anlagenbau GmbH
Acquired a controlling interest in September 2006
Capital: 18 thousand euro
Business areas: Manufacture and sale of aeration systems

Non-consolidated Subsidiaries

Affiliate Not Accounted for by the Equity Method

Tomakomai Netsu Service Co., Ltd.
Established: July 20, 1971
Capital: 200 million yen
Business areas: Heat supply to multi-unit housing, and operation andmaintenance of cleaning center facilities

PFI Okubo Techno Resource Co., Ltd.
Established: December 3, 2004
Capital: 10 million yen
Business areas: Updating, maintenance, management and operation of		
wastewater treatment facilities and emergency generators		at the Okubo Water Purification Plant, Saitama Prefecture
Period of business: 3 years and 4 months for design and construction; 20 years
for operation, maintenance and management

Sanki Construction Engineering (Shanghai) Co., Ltd.
Established: July 20, 2005
Capital: 12.4 million U.S. dollars
Business areas: Facility design, construction, maintenance and consulting
AEROSTRIP Corporation
Became a wholly owned subsidiary in September 2006
Capital: 100 U.S. dollars
Business areas: Sale of aeration systems
Sendai Kankyo Hozen Co., Ltd.
Established: November 7, 2016
Capital: 100 million yen
Business areas: Management of operation and maintenance for the		renovation work for key facilities of the Sendai Clean Center

THAI SANKI ENGINEERING & CONSTRUCTION CO., LTD.
Established: May 6, 2008
Capital: 16 million baht
Business areas: Facility design, construction, maintenance and consulting

SANKI REPORT 2017103

Share Information

Third-Party Opinion

Share Information (as of March 31, 2017)
Fiscal year

April 1 to March 31 of the following year

Annual general meetingof shareholders

Late June each year

Trading unit

100 shares

Number of authorized shares

192,945,000

Number of issued shares

66,661,156

Number of shareholders

3,157

Transfer agent and special
account management institution

Ownership Statistics
Individuals and other: 2,798
10,610 thousand shares(15.92%)

Treasury stock: 1
3, 098 thousand shares(4.65%)

Sumitomo Mitsui Trust Bank, Limited
1- 4-1, Marunouchi, Chiyoda-ku, Tokyo

Stock exchange listing

Tokyo Stock Exchange

Securities code

1961

Foreign corporations and other: 162
17,354 thousand shares(26.03%)Financial institutions: 40
29,810 thousand shares(44.72%)Other corporations: 130
5,313 thousand shares(7.97%)

Securities companies: 26
474 thousand shares(0.71%)

Major Shareholders
Number of shares held
(thousand shares)

Shareholding ratio(%)

Mitsui Life Insurance Company, Limited

6,300

9.91

Meiji Yasuda Life Insurance Company

5,700

8.97

Nippon Life Insurance Company

4,672

7.35

Japan Trustee Services Bank, Ltd. (Trust account)

2,820

4.44

Sanki Kyoueikai

2,634

4.14

The Master Trust Bank of Japan, Ltd. (Trust account)

2,057

3.24

Name of shareholder

State Street Bank and Trust Company 505223

1,716

2.70

JP Morgan Chase Bank 380684

1,501

2.36

DFA International Small Cap Value Portfolio

1,296

2.04

Employee Shareholders Association

1,145

1.80

Notes
1. Although the Company holds 3,098 thousand shares of treasury stock, it is excluded from the list of major shareholders. Calculation of shareholding ratio excludes
treasury stock.
2. The list covers beneficial shareholders whose shareholdings as of the end of the fiscal year under review had been confirmed by the Company.

104

SANKI REPORT 2017

Yoshinao Kozuma
Professor,
Faculty of Economics,
Sophia University

1. Strengthening the Governance System
From a global perspective, many see
the organizational design of Japanese
corporations as structured in such a waythat governance is being hampered. But
this is not the case at Sanki Engineering,which has applied various concepts to avoid
that structure, reflecting its full awarenessof the need to enforce governance. While
Sanki Engineering’s current organizational
structure is a Company with Board ofCompany Auditors, as is true of mostJapanese companies, it has evidently
sought to overcome the weaknesses ofthis organizational design by various means.
For instance, it incorporated an executive
officer system into its management
organization to separate the functions ofdecision-making and supervision fromthose involving the execution of business.
Also, it stipulated the independence
standards for its external officers, threeof whom it assigned to the ten-member
Board of Directors. Moreover, the Company
started evaluating the effectiveness of its
Board of Directors in fiscal 2016, and theresults were published in this year’s SANKIREPORT. I highly commend these efforts
as strides forward in building a soundorganization for the long term.

2. Disclosing the Value Creation Process Model
A major achievement this fiscal year was
the formulation and disclosure of the value
creation process model. The Company
presented a new business model for
realizing a sustainable society, revealing amanagement policy based on integrated
thinking that was not previously seenin the diagram for the Total Engineering
concept. By so doing, it has declared its
shift to a business model compatible with asustainable society, taking an evolutionary
step that brings the SANKI REPORT closer
to its intended form as an integrated report.
I hope that this momentum will lead theCompany toward further integrating thevalue creation model into its management
strategy and beyond merely disclosing themodel diagram.
3. Progress Assessment of the Medium-Term
Management Plan
The Company is in the midst of Phase 1of its medium-term management plan
“Century 2025,” and disclosed theresults of its progress assessment fromthe plan’s first year in regard to financial
performance and ESG-related initiatives.
PDCA management is essential forindependent initiatives of any kind,
whether they be business activities or ESG
management. And this makes it necessary
for the Company to conduct an internal
assessment of its progress. Generally,assessment results are not disclosed andseeing what progress is being made under
the plan is often difficult for outsiders. In
this sense, Sanki Engineering has made an
excellent effort, and I hope it will continue
disclosing its assessments of progress.

4. Other Improvements
The Company responded to a point raisedin the previous fiscal year by disclosing thenumber of employees on elderly care leave.
It also disclosed the paid leave ratio, and thefact that this ratio is on the rise reflects wellon the Company.
5. Challenges Ahead
Several sets of data should be addressedamong the Company’s quantitative
targets. First is the ratio of employeeswith disabilities, which has been declining
over the past few years and fell below thestatutory requirement in the previous fiscal
year. Companies must make an effort tomaintain the ratio at legally required levels,
so prompt improvement is called for.
Second is the volume of industrial waste,
which has risen over the past several years.
While an explanation is offered for thehigher volume recorded this fiscal year, thegradual increase over the longer term may
require a review of the Company’s system
for managing waste. Similarly, the rise inCO2 emissions amid declining sales also
raises concern.
The challenge that lies ahead in themedium to long term is the deploymentof ESG management across the supply
chain. In his message at the beginningof this report, the president mentioned
promoting globalization as an issue in whicha focused effort will be made in the coming
years. Since concerns over human rights
and environmental risks in the overseas
supply chain are greater by several
magnitudes, the Company should establish
a management system for its domestic
supply chain as part of its effort to expand
its overseas business.

Response to Third-Party Opinion
Thank you very much for your valuable insights from various perspectives regarding the SANKI REPORT 2017.
This is the sixth fiscal year since we began compiling an integrated report, and we appreciate your commendations of our efforts tostrengthen our governance system, formulate and disclose our value creation process model, and disclose our assessment of progress
made in our medium-term management plan “Century 2025” Phase 1. We will continue striving to provide a useful and appealing reportfor all our stakeholders.
We will consider the ratio of employees with disabilities and volume of industrial waste and CO2 emissions, which were pointed out
this year, as challenges going forward, and we will strive for improvements and provide detailed explanations.
In addition, we will continue to work on our initiatives for constructing a robust supply chain management system.
By utilizing the SANKI REPORT to further advance our business activities, we will seek to continuously contribute to social
development by creating comfortable environments and operations.

Mikio Hirose
Managing Executive Officer, General Manager, CSR Promotion Division

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