Tsutomu Hasegawa
President

Guided by our newly established “Sanki Engineering GroupManagement Philosophy,” we will hone our technology and humanresources to create comfortable environments throughout society.
I would like to express our heartfelt gratitude to each and every stakeholder of the Sanki Engineering Groupfor their ongoing support and understanding.
Sanki Engineering was spun off as a small company with twelve employees from the Machinery02

water and sewage treatment facilities and waste treatment facilities.
Having celebrated our 90th anniversary last year, we are taking the first steps in 2016 toward our 100th
anniversary in 2025. In December 2015, the “Sanki Engineering Group Management Philosophy” was

Department of the former Mitsui & Co. in 1925, a year and a half after the Great Kanto Earthquake, toestablished based on the Company Credo set forth in 1980. Moving forward, our Management Philosophy will

engage in the reconstruction effort. In the decades that followed, the Sanki Engineering Group’s operations

guide us as we seek to provide engineering services that deliver satisfaction to our customers at all times.

have expanded to encompass a broad range of social infrastructure to meet the varied needs of JapaneseThis fiscal year also marks the launch of our new medium-term management plan “Century 2025”

society, and today the Group comprises the Facilities Construction Business including HVAC, plumbing andPhase 1 and the start of our three-year initiatives for enhancing quality. We are deeply committed to our mostdrainage, electrical systems, ICT facilities and office relocation, the Machinery Systems Business including

important mission of creating comfortable environments and contributing to the sustainable development ofmaterial handling systems and conveyance systems, and the Environmental Systems Business including

society as we strive to raise the medium- to long-term corporate value of the Sanki Engineering Group.

SANKI REPORT 2016

SANKI REPORT 201603

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.

▶The

1920s

1923

1925

▶The

1930s

1931
1933
1935

▶The

1944

1945

1958

The outbreak of the Korean War leads
to a war-driven economy and theJapanese economy takes a favorable
turn. Expansion of demand for building
construction and equipment results
in a dramatic improvement in the
Company’s business performance.
Capital exceeds ¥1 billion.

1960s

1963

1964

04

Pacific War begins. Sanki Engineeringsuffers a shortage of workers as well as
materials due to tight control over the
distribution of goods.
Emergency metal collection campaigns
started nationwide. Kawasaki and
Tsurumi plants are designated militaryindustrial plants.
War ends.

1950s

1950

▶The

Moves head office to the Sanshin
Building.
Opens a branch in Dalian, Manchuria.
Celebrates the 10th anniversary of its
founding, with five branches, six field
offices, three affiliates and around 300
staff.

1940s

1941

▶The

Great Tokyo Earthquake strikes. Building
modernization drives up demand forbuilding utilities, such as heating,ventilation and air conditioning, watersupplies and drainage, and electrical
fixtures and fittings, and construction
technology advances.
On April 22, Sanki Engineering wasestablished as a spin-off from the
Machinery Department of the former
Mitsui Bussan, with capital of ¥500,000
and 12 staff.

Completes Sagami plant (currently
Yamato Engineering Center), whichhas production equipment tailored forconveyor mass production.
Participates in projects on the occasionof the 1964 Tokyo Olympics, including
the Yoyogi National Gymnasium andthe NHK Broadcasting Center.

SANKI REPORT 2016

Laying the base for technological competence by meeting the needs of the era• Provides heating, plumbing, steel frame
construction and building materials fortwo major construction projects: theShiga manufacturing plant of Toyo Rayon(currently Toray Industries, Inc.) and therefrigerated warehouse of Aomori Seihyo.
• Installs Japan’s first centralized air
conditioning system for an entire
structure at Mitsui’s main building.

Diversified and expanded businesses lead to greater technological competence• Develops and installs a proprietary incinerator for facilities
in the Sanshin Building.
• Establishes Toyo Carrier Industries together with U.S.based Carrier Engineering and launches the air conditioning
business.
• Completes work on the Tokyo Office of Nippon Life
Insurance Company (currently Takashimaya Nihonbashi
department store).

▶The

1970s

1971

1973

▶The

• Starts manufacturing conveyors.
• Concludes sales contracts for machinery
used in mining-related chemistry with
U.S.-based Dorr Inc. and Oliver, Inc.
• Completes work on the main buildingof the Dai-ichi Life Insurance Company,
Japan’s first building with the special
high-voltage power reception of 22 kV.

▶The• Completes work on Japan’s first allfluorescent lighting system in the Taisho
Marine and Fire Insurance Building.
• Becomes involved in night-soil treatment
plant disposal facilities in response tourban hygiene needs.
• Delivers roller conveyor to the Japanese
Antarctic Research Expedition II.

2005

▶The

Bubble economy collapses.
COP3 conference in Kyoto adopts
Kyoto Protocol on preventing global
warming.

Opens Shonan Training Center(Yokosuka City, Kanagawa Prefecture)and strengthens human resource
development.
Moves head office to Nihonbashi.

2010s

2011
2012

2015

Feature as a manufacturer that responds to the needs of the times• Completes work on air conditioning,plumbing and electrical systems forJapan’s first skyscraper, the Kasumigaseki
Building.
• Develops the standardized “6S sash” andgains the top market share among steel
sash manufacturers.

Establishes the Company Credos.
Builds Technical Research Laboratory
equipped with basic research facilities
and large-scale experimental facilities in
Yamato City, Kanagawa Prefecture.

2000s

2000

A proactive approach totechnological innovation

Environmental Agency inaugurated.
Sanki Engineering develops a trackrecord for waste incineration facilities
and water and sewerage treatment
facilities and sets up the Environmental
Administration office.
Spins off sash business.

1990s

1990
1997

Sanki’s advanced technology
bolsters a construction boom

• Completes work on Japan’s first largescale clean room at NEC’s Sagamihara
plant.
• Develops the world’s first completely
unmanned automatic sorting system andairport baggage handling system.
• Provides HVAC equipment for satellite
communication ground stations in the
Middle East and other regions and builds
automotive testing equipment in Russia.

1980s

1980
1982

▶The

Wide range of technological innovations

Moves head office to Tsukiji.
Launches the Smart Building Solution
Business to provide Smart Buildings
with a focus on the energy-saving
business.

Opening the way to a new era: advances in environmental
and information technology• Launches the informationand communications
business.
• Launches the facility systems
business to deal with officeintegration and moving.
• Develops environmentrelated technology, including
an ice thermal storage
system, sewage advanced
treatment systems, andgasification and melting
furnaces.

Toward environmentally friendly technology• Develops a wide variety of energy-saving systems for various fields,
including offices, industrial plants, hospitals and data centers, to meetthe increased needs for energy saving and reducing CO2 emissions.
• Begins to actively import technology from Europe and develops a
number of major technologies, including AEROWING and Trans Heat
containers.

90th Anniversary
Established the Sanki Engineering GroupManagement Philosophy.

2016

Launched long-term vision “Century 2025.”

2025

Toward the 100th Anniversary
SANKI REPORT 201605

CONTENTS
Sa n k i E ngineering G rou p P h i l o s o p h y

LocalCommunities
NGOs,
NPOs,
and Citizens’GroupsGovernment
andAdministrative
Authorities

Value Creation
throughBusiness Activities

Business
Partners

Customers

Sanki Engineering Group Compliance Declaration
Sanki Engineering Group Code of Conduct
and Action Guidelines

Sanki Engineering GroupManagement Philosophy

Sanki Engineering GroupManagement Philosophy

We create comfortable environment
through engineering and widely contributeto 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.

The Sanki Engineering Group marked the start of its journey toward the centenary of its
founding in 2025 by formulating the Management Vision and the “Sanki Engineering GroupManagement 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 theseshared values and is contributing to the creation of a sustainable society. Under the “SankiEngineering Group Compliance Declaration,” which summarizes issues related to corporate
ethics and legal compliance, all Group executive officers and employees will strive to create
value for stakeholders and society at large by performing their daily job duties in accordancewith the “Sanki Engineering Group Code of Conduct,” which lays out the basic principles ofappropriate conduct, and the more specific “Sanki Engineering Group Action Guidelines.”

06

SANKI REPORT 2016

Greetings from Sanki Engineering

04

History of Sanki Engineering

06

Sanki Engineering Group Philosophy/Editorial Policy/Contents

08

Message from the President

12

New Long-Term Vision and Medium-Term Management Plan

Editorial Policy

Employees

Shareholders
and Investors

02

Aiming to produce a tool that further boosts
understanding of the GroupWe have positioned the “SANKI REPORT,” the annual reportof 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 2016.
• We reviewed the Sanki Engineering Group’s system of
principles in accordance with the establishment of the SankiEngineering Group Management Philosophy;• We created a section to provide an outline of our strategies
and explain our various measures in accordance with theformulation of our long-term vision and new medium-term
management plan;• We added an analysis of our business performance in the
Financial and Non-Financial Highlights section;• We created a list of key guidelines and results for fiscal 2015
and key guidelines for fiscal 2016 at the beginning of the CSR
report as a progress report on our activities;• We augmented the information concerning our corporate
governance and internal controls to provide a progress reporton ongoing initiatives aimed at further strengthening ourcorporate governance; and• We sought to enhance our quantitative data by newly
disclosing employee information on a consolidated andgender-segregated basis.

Business Report
16

Financial and Non-Financial Highlights

18

Sanki Engineering’s Strengths—Total Engineering

20

Creating Value through Total Engineering Competency

22

Overview of Our Businesses by Segments

24

Facilities Construction Business

28

Machinery Systems Business

32

Environmental Systems Business

36

Real Estate Business37

Research and Development

CSR Report
40

Corporate Governance

44

Compliance48

Risk Management

50

CSR Management

Reference guidelines• Ministry of the Environment “Environmental Reporting
Guidelines 2012”• GRI Sustainability Reporting Guidelines Ver. 4 (G4)• ISO 26000

52

Relationship with Customers

55

Relationship with Shareholders and Investors

56

Relationship with Business Partners

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.

58

Health and Safety at Worksites

60

Relationship with Employees

64

Relationship with the Environment

69

Relationship with Local Communities

Reporting period
April 2015–March 2016 (Some information from outside thisperiod has been included with the period specified.)

Financial Report andCorporate Information

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 medium-term management plan “SANKI VITALPLAN 90th,” long-term vision “Century 2025,” “FY2016-2018
Medium-term Management Plan Century 2025 Phase 1” 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.

72

Financial Report

102

Corporate Information, Business Locations and Group Companies

104

Share Information

105

Third-Party Opinion

SANKI REPORT 201607

Message from the President

We will strive to be the companyof choice by enhancing quality
and reliability as we approach
our first centenary.
Tsutomu Hasegawa
President

Business Environment and Results for Fiscal 2015
In the final year of our medium-term management
plan, we achieved significant gains in all profit
items.
In fiscal 2015, public investments in the Japaneseconstruction market continued to decline, while private
capital investments followed a gradual path to recovery.
Under these circumstances, the Sanki EngineeringGroup sought to put the finishing touches to our
medium-term management plan “SANKI VITAL PLAN
90th” (hereafter “VITAL PLAN”) covering fiscal years
2011 to 2015.
In fiscal 2015, orders received amounted to¥183,270 million (up 5.7% year on year) and net sales
were ¥178,901 million (down 0.4% year on year). In
terms of profit, we enjoyed favorable results in all items
and reported significant gains, with an operating incomeof ¥6,509 million (up 120.6% year on year), ordinary
income of ¥8,135 million (up 113.6% year on year) andnet income of ¥5,327 million (up 116.4% year on year).
Our equity ratio rose to 49.8%, thereby maintaining asound financial condition. ROE continued to improve at
6.3% (up 3.3 percentage points from the previous year),
and we sought to further enhance our capital efficiency.
Although we fell short of our final target under the08

SANKI REPORT 2016

VITAL PLAN of ¥200 billion in net sales and ¥10 billion in
ordinary income, we achieved a certain level of successthrough a vigorous effort bolstered at times by market
momentum.
Group Initiatives for Fiscal 2015
The rapid growth in our performance in fiscal 2015
was made possible by a company-wide effort.
In fiscal 2015, we pursued initiatives such as
strengthening divisional collaboration by revitalizing
communication, reducing the operational burden ofworksites by establishing the Procurement Divisionand maintaining the Site-Documentation Support
Center to bolster site support systems, stringently
managing costs, raising operational efficiency by having
technical experts conduct quality audits and forging
closer relationships with subcontractors. In particular,
higher worksite efficiency has proved remarkably
effective, as employees themselves have noted. As
for strengthening our management base, we launched
the “Smile Project,” which aims to promote initiatives
against long working hours in order to improve theworking environment. We will continue our efforts
related to these measures as the drivers of our new
medium-term management plan.

Formulation and Significance of Our Long-Term
Vision “Century 2025”
We will hone our technology and human resources
to realize our vision of becoming the company ofchoice.
This year, after reflecting on our achievements andshortfalls under the VITAL PLAN, we laid out our new
long-term vision, “Century 2025,” which consists ofthree phases.
This ten-year vision is based on two presuppositions.
First, while the Olympic and Paralympic Games,
scheduled to take place in Tokyo in 2020, have breathed
new life into the construction market, the outlook
beyond the Games remains uncertain. Therefore, we
divided the ten-year vision into three phases and will
review our initiatives every three years to respond tochanges in the market environment. Second, ten years
from now in 2025, the Sanki Engineering Group willcelebrate its first century.
Our goal for the next ten years, ending in 2025, isto become the company of choice by enhancing quality
and reliability. The key phrase “company of choice” wasderived from opinions expressed by employees whenformer President and current Chairman Takuichi Kajiura
asked them about the kind of company they wanted
Sanki Engineering to be during a series of Company
visits several years ago. I believe this vision is significant

because the medium-term management plan reflects
the shared aspirations of our employees across theCompany.
The facilities and systems sector is one area thatrarely undergoes a paradigm shift involving the challengeof differentiation. While human resources represent
an integral aspect of technology at every worksite, thequality of human resources in their interactions withcustomers is a decisive factor in winning orders. Honing
our superior technology and the quality of the humanresources who deliver it creates the twin pillars forbecoming the company of choice. Each employee who
is part of our workforce of over 2,000 represents the
Sanki Engineering Group and directly mirrors the qualityof management.
Launch of “Century 2025,” and Current Issues andInitiatives for Phase 1
We will enhance quality during Phase 1 throughthree initiatives.
We will strive to enhance quality during Phase 1 of our
new medium-term management plan “Century 2025,”
covering the fiscal years from 2016 to 2018. Enhancing
technology and human resources is a fundamental
corporate task, and I believe that the results of these
efforts will be seen in the level of customer satisfaction
and ultimately in other indicators, such as financial

Progress in SANKI VITAL PLAN 90th (FY2011–2015)(millions of yen)

Business performance (consolidated)■ Ordinary income● Orders received
175,291

179,598

171,496

165,800

8,135

154,658

2,680

2,268

3.6

183,270
178,901

173,398

168,295
147,994(%)

Ratio of operating income to net sales (consolidated)■ Profit (loss) attributable to owners of parent● Net sales

1.7
5,327

1.5

1.6

1.6

2012

2013

2014

3,809

3,146

2,461

1,763

176

2011

2015

(FY)

(4,992)
2011

2012

2013

2014

2015

(FY)

Targets and results in the final fiscal year
Targets

Results for the final year

Consolidated net sales:¥200 billion

Consolidated net sales:¥178.9 billion

Consolidated ordinary income:¥10 billion

Consolidated ordinary income:¥8.1 billion

Improvement in productivity
Effective initiatives raised productivity,
including the establishment of theSite-Documentation Support Centerand Procurement Division, and ICTbased operational improvements.

Operating income,which signifies theefficiency of corebusiness, improved
significantly infiscal 2015.

SANKI REPORT 201609

Message from the President

performance. This is a time-consuming effort precisely
because of its fundamental nature, and that is why wemust make it our top priority and work on it constantly.
The three key initiatives of Phase 1 are: (1)Strengthen Core Businesses, (2) Promote Growth
Strategies, and (3) Enhance the Sanki Brand.
(1) Strengthen Core Businesses: This set of
initiatives is carried forward from the VITAL PLAN
and centered on maintaining and achieving the stable
growth of our businesses. We will seek to resolve
the worker shortage in our Facilities Construction
Business by raising operational efficiency throughactions such as establishing the Procurement Division
and Site-Documentation Support Center and ICT-based
operational improvements. To increase profitability
for the Plant & Machinery Systems Business, we will
implement a market strategy that will leverage thestrengths of the Machinery Systems Business, suchas new product development, while also seeking toboost efficiency and reduce costs by reconstructing
the production system. In the Environmental Systems
Business, we will bolster the ability of the main
businesses to develop and expand sales of strategic
products while seeking to expand into the businessfields of energy saving and energy creation. Enhancing
the technical skills as well as the productivity andefficiency of each business is essential to reinforcing
our core businesses.
(2) Promote Growth Strategies: We will seek
growth for future technologies and domains. Our
Yamato site will be redeveloped to open the Sanki
Techno Center (tentative name), which will serve as
the flagship facility for promoting “Century 2025,” andrestructure the production facilities in an effort to createa platform upon which to meet the challenges of newtechnologies and domains that will lead us into Phase
2 and beyond. We consider the building stock-based
business as a growth strategy and important portfolio
strategy. While new construction and renovation of

10

SANKI REPORT 2016

facilities depend on the customer investment plans,
there is consistent demand for the LCE Business*¹,
in which we provide services throughout the life cycleof a building, encompassing new construction, repair
and maintenance, renewal and reconstruction. We will
endeavor to diversify our sources of profit by promoting
the building of stock-based businesses to offer a robust
response to emerging needs in the uncertain market
environment that lies beyond the Tokyo Olympic andParalympic Games.
(3) Enhance the Sanki Brand: I believe that the
Sanki spirit lying at the heart of our development of
human resources is rooted in the Mitsui spirit. SankiEngineering was born from the Machinery Departmentof the former Mitsui & Co., and we have always valued
the spirit of Mitsui. Founder Takatoshi Mitsui’s slogan,“cash only, no inflated pricing,” is the very basis ofcustomer satisfaction and means that we tell no lies
and that we engage in an honest business. Mitsui ispeople, and the same thing can be said about SankiEngineering. In a practice that in fiscal 2016 is marking
its fourth year, new employees during their first year
training visit the Shinnyo-do in Kyoto, a temple withclose ties to the Mitsui family and the site of Takatoshi
Mitsui’s tomb, to study the Mitsui way of thinking. This
thinking has been incorporated in the Sanki EngineeringGroup Management Philosophy, laid out in 2015. To
develop human resources with the Sanki spirit, wehave introduced an e-learning educational program toprovide universal education for the entire Group. The
pursuit of customer satisfaction leads to the bettermentof society as a whole and contributes to the creation ofa sustainable society. We will seek to raise the qualityof the actions and work undertaken by each individualby sharing this value among all executive officers andemployees.
Executing Our Fiduciary Responsibility
We seek to fulfill our responsibilities to society andshareholders by adhering to our ESG Policy andCorporate Governance Guidelines.
The ESG Policy incorporated into “Century 2025”
Phase 1 is intended to fulfill our responsibilities tosociety through the organic integration and strategic
deployment of management and CSR.
In E (environment), the Sanki Engineering Groupwill seek to protect the environment, conserve energy
and realize a low-carbon society through engineering,which represents both the core of our businessand an opportunity for growth. S (Social) calls on us
to be conscious of being a member of society andact accordingly, as expressed in our Management
Philosophy, and it embodies all of our initiatives

for meeting the various expectations of society.
G (Governance) is the foundation that sustains ourbusiness activities. We seek to strengthen our systems
to ensure the transparency, validity and agility ofmanagement with an emphasis on placing significanceon communication and respecting each other, asdeclared in the Management Philosophy.
In addition, in following through on the Corporate
Governance Code we began applying in June 2015, weestablished the Sanki Engineering Corporate Governance
Guidelines in December of the same year to clarify
the Group’s basic approach to corporate governanceand guidelines for our initiatives. We will continue
to strengthen our corporate governance system andengagement with shareholders and investors to enhance
the medium- to long-term corporate value of the Group.
Appropriate Profit Sharing
Sanki Engineering will examine comprehensive
methods of shareholder return while effectively
balancing business investments and returning profits
to shareholders.
Dividends form the basis of our policy of returning profit toshareholders, and while considering the balance between
sustainable corporate development and short-term returns
to shareholders, we have consistently sought to provide
stable dividends as the basis of our policy and to provide
additional dividends in accordance with our financial
performance. We will continue to adhere to this policy
and will examine comprehensive and stable methods ofshareholder return, in light of demands from shareholders,investors and society at large.
Dividend payments
FY2012FY2013

FY2014FY2015Interim dividend (¥)

7.5

7.5

7.5

9.0

Year-end dividend (¥)

7.5

7.5

12.5

21.0

Consolidated payout
ratio (%)

–

56.7

52.2

35.8

Year-end dividend for FY2014 includes ¥7.5 in regular dividend and ¥5.0 incommemorative dividend for the 90th anniversary.
Year-end dividend for FY2015 includes ¥9.0 in regular dividend and ¥12.0 in
extra dividend.

The Challenge ahead toward Our First Centenary
in 2025
The new Management Philosophy embodies ouraspirations for the future of Sanki Engineering.
In December 2015, we formulated the SankiEngineering Group Management Philosophy as the firststep toward our centenary. The philosophy of creating
a comfortable environment through engineering andwidely contribute to social development expresses thereason that the Sanki Engineering Group exists.
While manufacturing is referred to as monozukuri,
or the creation of objects, Sanki Engineering’s businessinvolves the creation of environments. Our Environmental
Systems Business creates better living environments
through water and sewage treatment facilities andwaste treatment facilities, while in our HVAC Businesswe create environments that raise productivity at workand also create special workplace environments suchas clean rooms. Moreover, as the Sanki EngineeringGroup continues to take on the challenge of realizing asustainable society, the comfortable environment weenvisage for society in 2025 encompasses an even wider
purpose and objective.
We are striving for a comfortable environment of
the future that is comfortable not only for the people
who live in it but also for the entire planet. Japan’s Basic
Energy Plan (approved by the cabinet in 2014), stipulates
the goal of making all new buildings ZEBs*² by 2030.
Also, in 2015, the Paris Agreement was adopted at
the COP21 conference. Amid the growing need forcountermeasures to global warming, contributing to theresolution of this issue through the power of technology
and creating a comfortable environment for people andthe Earth present both a mission and an opportunity toattain greater competitiveness for the Sanki EngineeringGroup.
Now, having taken the first steps toward ourcentenary, we are resolved to take on the challenges of
myriad possibilities by harnessing the unique strengthsof our Group in a renewed effort to become thecompany of choice.
*1 Life cycle engineering business: the Sanki Engineering Group’s businessconcept under which we provide services throughout the life cycle ofa building, encompassing new construction, repair and maintenance,
renewal and reconstruction.
*2 Zero-energy buildings: Buildings that reduce net annual energy
consumption to close to zero through improved energy efficiency and theintroduction of solar power while maintaining a comfortable environment.

SANKI REPORT 2016

11▲

New Long-Term Vision and Medium-Term Management Plan“Century 2025”—Long-Term Vision

for Our 100th Anniversary

The Sanki Engineering Group formulated “Century 2025” as a long-term vision to guide us toward our 100th anniversaryand enable us to continue providing customers with the value generated by the Group.
We will strive to enhance our medium- to long-term corporate value through initiatives based on this vision.

Long-Term Vision “Century 2025”

Phase 3 (FY2022–2025)

The company of choice
The Sanki Engineering Group values the customers from whom we directly receive orders, and we view all our stakeholders, including
owners of facilities, end users, shareholders, subcontractors, suppliers and students, as customers. Over the next ten years, we will
strive to become the company of choice for all our customers.

Three Phases

Phase 2 (FY2019–2021)

We have divided the ten-year period into threephases and will proceed by setting key goals
and formulating a medium-term management
plan for each phase.

Superior quality generates customer
satisfaction, and customer satisfaction
and confidence leads to reliability.

4-year period to become the companyof choice

Increased reliability will encourage morecustomers to choose our company.

3-year period to enhance reliability

We will strive over the next 10 years
to become the company of choicefor customers by further enhancing
the quality and reliability
we provide.

Phase 1 (FY2016–2018)

3-year period to enhance quality
We will enhance quality by refining our skills andwisdom and developing our human resources as afoundation for responding to change.

Medium-Term Management Plan “Century 2025”

FY2016FY2019The Company
of ChoicePhase 1 More information on the next page
FY2022

FY2025Current Status

1. Review of Previous Medium-Term Management Plan “SANKI VITAL PLAN 90th” (FY2011–2015)
Progress in Key Initiatives
Key initiatives

Strengthen corebusinesses

Promote growthstrategies

Target Achievement
Results

1. Facilities Construction Business: improved profitability due to site support
initiatives
2. Machinery Systems Business: introduced a new conveyor model to themarket and developed new markets in areas such as healthcare
3. Environmental Systems Business: introduced strategic products to themarket and gained new clients

Strengthen the
management base

Introduced a new personnel system and reviewed operational processes, theeffects of which have been gradually felt

Alliances, M&A

Acquired AEROSTRIP Corporation in FY2012 and strengthened acollaborative framework with AQUACONSULT Anlagenbau GmbH in the U.S.

SANKI REPORT 2016

Consolidated net sales:¥200 billion
Consolidated ordinary income:¥10 billion

1. LCE business: established a Group-wide understanding of the businessconcept
2. Renovation business and integrated networks business: restructured andabsorbed into a new organization

Develop Sanki’s uniqueCreated a framework for new businesses; consideration in process
new businesses

12Targets

Results for FY2015
Consolidated net sales:¥178.9 billion
Consolidated ordinary income:¥8.1 billion

2. Assessment of Business Environment and Tasks
Facilities Construction Business• Nationwide labor shortage resulting from a shrinking workforce• Proliferation of technological innovation, including robotics, IoT, and artificial
intelligence• Uncertain market outlook beyond the 2020 Tokyo Olympic and Paralympic
Games• Enhance construction systems and bolster worker
education in component technologies*¹• Establish in-house systems responsive to technologicalinnovations, including IoT• Reinforce the LCE business*² to prepare for future market
contraction

Machinery Systems Business• Labor shortage raising the need for labor saving by making full use of robots
and IoT• Increased private capital investment as manufacturers move plants back to Japan• Accurately understand customer needs and reinforce
technological responsiveness• Restructure the production system to improve
productivity

Environmental Systems Business• Declining social infrastructure investment in environment-related markets• Persistently strong energy saving and energy creation needs in both thegovernment and private sectors• Expand sales of strategic products• Develop new business areas• Increase the impetus for promoting the LCE business*1 Component technology: The basic unit of technologies that serve as the backbone of the Sanki Engineering Group, including heating, ventilation and air conditioning,water supply and drainage, plumbing, electrical systems, kitchen systems, conveyance, water treatment and waste treatment.
*2 Life Cycle Engineering Business: A business concept of the Sanki Engineering Group. Throughout the life cycle of a building, we provide services from new
construction, repair and maintenance to renewal and reconstruction.

SANKI REPORT 2016

13

▲New Long-Term Vision and Medium-Term Management Plan

Medium-Term Management Plan for Fiscal 2016–2018“Century 2025” Phase1
Key Initiatives

Phase 1 = Quality

Strengthen Core Businesses

Refining Technical Skills and Human Resources
to Further Enhance Quality

Improve component technologies
and achieve stable growth

Refining Technical Skills

Promote Growth Strategies• Make further improvements in component technologies
to meet diverse needs• Enhance productivity and efficiency to achievesustainable growth

Enhancing
Reliability inPhase 2

Pursue future growth in the areasof technology and business

Refining Human Resources
Enhance the Sanki Brand
Develop human resources thatpossess the Sanki spirit• 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

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

Priority Issue

Priority Issue

Passing on technical skills

Anticipating the age of
maintaining building stock

Developing next-generation
technologies

Strategy We will renovate the Sanki

Strategy We will give a boost to theStrategy We will establish a new R&D

Yamato Building (Yamato City,
Kanagawa Prefecture) and reopen it as the
Sanki Techno Center (tentative name). This
will be a comprehensive training facility that
imparts and develops the technical skills at
the backbone of the Sanki Engineering Group.

LCE business, as described in
SANKI VITAL PLAN 90th. This will bolster
our business foundation, allowing us tomaintain sound corporate management,even if the construction market experiencesa slowdown.

base inside the Sanki Techno
Center. Here we will develop technologies
for the next generation while keeping up
with advances in new technologies such as
robotics, IoT, and artificial intelligence.

(Unit: billion yen)

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

14

SANKI REPORT 2016

FY2016FY2017FY2018Net sales

Indicator

185.0

190.0

195.0

Gross profit (ratio)

22.0 (11.9%)

23.0 (12.1%)

24.0 (12.3%)

Operating income (ratio)

6.5(3.5%)

7.0(3.7%)

7.5(3.8%)

Ordinary income (ratio)

7.0(3.8%)

7.5(3.9%)

8.0(4.1%)

Environment

Social• Renew awareness of how the SankiEngineering Group’s businesses directly
contribute to protecting the global
environment• Continue the “SANKI YOU EcoContribution Point” donation activity• Implement the Sanki Engineering
Corporate Governance Guidelines• Create better working environmentsby addressing long working hours andexpanding the role of women and theelderly• Enhance the Group risk management
system• Develop systems and products thathave less impact on the environment

Governance• Maintain and develop a corporate
culture of ethical conduct based oncompliance with rules of conduct

Business Report
SANKI REPORT 201615

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

Orders received

175,291

165,800

168,295

173,398

183,270

Net sales

147,994

154,658

171,496

179,598

178,901

Selling, general and administrative expenses

15,712

15,19915,60415,015

16,419Operating income

2,525

2,391

2,818

2,951

6,509

Ordinary income

2,268

2,680

3,146

3,809

8,135

176

(4,992)

1,763

2,461

5,327

Cash flows from operating activities(2,697)

9,729(9,403)

(139)

5,220

Cash flows from investing activities(1,046)(9,481)(3,506)

3,440

5,520

Cash flows from financing activities(280)(1,028)(4,152)(2,901)(1,826)

41,09740,36723,51023,66732,501

Fiscal year

Financial Data
■ Orders received• Orders received and net sales (millions of yen)

Profit (loss) attributable to owners of parent*

Cash and cash equivalents at end of fiscal year

* 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 2012 and the year ended March 2015.
As of end of fiscal year under review
Total assets

163,120

166,477

170,181

176,382

169,423

Total net assets

79,662

76,932

74,91784,86984,557

175,291

165,800
147,994

168,295 171,496

154,658

173,398

179,598■ Net sales

2011

2012

2013

2014

2015

FY2015 results (year-on-year comparison)

6,509

(FY)
2018
Target(net sales)Book value per share (yen)Cash dividends per share (yen)26.46

1,113.70

1,106.32

1,142.74

15.00

15.00

15.00

38.30
1,334.65• Ordinary income (millions of yen)In fiscal 2015, the construction industry in Japan
continued to show signs of a decline in public
spending while there was a gradual recovery inprivate capital investment. Total orders receivedrose steadily by 5.7% on the year, as orders
received increased by 1.6% year-on-year in
our core Facilities Construction Business, by
80.4% in the Machinery Systems Business due
to large-scale projects, and by 17.0% in theEnvironmental Systems Business. Total net sales
remained little changed at 0.4% from fiscal 2014,
as declines in the Facilities Construction andMachinery Systems businesses were offset by
growth in the Environmental Systems Business.
We reported significant increases in all itemswith respect to profit, due to thorough cost
control and the establishment of a system tosupport worksite operations.

• Profit attributable to owners of parent

8,135 8,000

20.00*¹

83.84
1,328.60(millions of yen)

5,327

1,763

2,268

2,680

3,146
176

30.00*²*1 Includes ¥5.0 commemorative dividends for the 90th anniversary.
*2 Includes ¥12.0 extra dividends.
Other information
Equity ratio (%)

48.8

46.2

44.0

48.1

49.8

Return on assets (%)

1.4

1.6

1.9

2.2

4.7

Return on equity (%)

0.2

(6.4)

2.3

3.0

6.3

(4,992)
2011 2012 2013 2014 2015 2018 (FY)
Target
FY2015 results (year-on-year comparison)

FY2015 results (year-on-year comparison)

4,326 million yen (up 113.6%)

2,866 million yen (up 116.4%)

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

2,309
Male: 2,022
Female: 287
8

2,289

2,246

2,283

2,282
Male: 2,002
Female: 280

9

3

11

6

Number of employees

Consolidated

Number of lost workday
accidents*1

Construction sites of SankiEngineering

Frequency of accidents

Construction sites of SankiEngineering

0.85

0.29

0.98

0.42

0.74

CO2 emissions (t-CO2)

Sanki Engineering Co., Ltd.

3,770

4,308

4,571

4,235

3,711

2011

2012

2013

2014

2015 (FY)Non-Financial Data
• Number of employees

Scope of aggregation2011 2012 2013 2014 2015 2018 (FY)
Target
FY2015 results (year-on-year comparison)

3,558 million yen (up 120.6%)

2,461(71.04)

2,818 2,951

Orders received: 9,872 million yen (up 5.7%); Net sales: 697 million yen (down 0.4%)

3,809

2.46

7,500

195,000

183,270 178,901

2,525 2,391

Per share information
Earnings (loss) per share (yen)• Operating income (millions of yen)
Business Report

Year ended
March 31, 2012

• Frequency of accidents
Female
287

2

4,308

0.85
0.74

Male
2,002

2

0.98

2,289 2,246 2,283 2,282 2,309
Female280• CO emissions (t-CO )
4,571

4,235

3,770

3,711

Male
2,022

0.42

Waste emissions (t)*2Sites where Sanki Engineeringis the prime contractor and the
Yamato Engineering Center

12,0708,961

13,333

13,38014,424*1 Data for the year ended March 31, 2015 have been retroactively revised.
*2 To enhance accuracy, data from the year ended March 31, 2013 onward have been recalculated.

16

SANKI REPORT 2016

0.29

2011

2012

2013

2014

2015 (FY)

2011

2012

2013

2014

2015 (year)

2011

2012

2013

2014

2015 (FY)FY2015 results (year-on-year comparison)2015 results (year-on-year comparison)

FY2015 results (year-on-year comparison)

Ratio of female employees: up 2.5%

Up 0.32 percentage point

524 t-CO2 (down 12.3%)

The ratio of female employees in the workforce
increased from fiscal 2014. Promoting the
career development of women requires theaccumulation of long-term initiatives, which we
intend to continue.

There was a total of 12 accidents, of which 8 led
to lost workdays. Compared to 2014, when there
was a total of 22 accidents of which 6 involved lost
workdays, the number of serious accidents increased
in 2015. However, we were able to achieve asignificant decrease in the total number of accidents.

CO2 emissions declined by 12.3% as a result ofactivities including energy conservation at offices.

SANKI REPORT 201617

Sanki Engineering’s Strengths

Total Engineering
Diverse business domains

Create synergies through total engineering

Provide an optimal environment utilizing wide-ranging business technologies▲

Providethe optimal
environment
Machinerysystems

Environmental
systems▲• Respond to every need in terms of building facilities and deliver one-stop solutions• Propose optimal energy-saving measures from an all-round perspective• Supply one-of-a-kind systems by optimizing needs

▲

▲

▲

▲
▲

▲

Reduce costs
Increase asset value▲

EconomyThree elements comprising total engineering

ate synergies

Diversebusinessdomains

Facilities
construction

Provide the optimal environment

Use space efficiently
Operate business efficiently
Ensure information security
Create social infrastructure

Environment
Realize energy savings
Reduce usage of resources
Reduce CO2 emissions

Provide value to customers and society
SANKI REPORT 2016

The Sanki Engineering Group covers a wide range of business areas, beginningwith the Facilities Construction Business, which consists primarily of heating,ventilation and air conditioning, plumbing, electrical systems, kitchen systems
and smart building solutions as well as facility systems. In addition, we areengaged in the Machinery Systems Business, consisting mainly of logistics
systems and transportation equipment, and the Environmental Systems
Business, comprising water and sewage treatment facilities and waste
treatment facilities.
By effectively integrating these businesses, we can provide the optimal
environment for our customers. This is the key element of total engineering.

SocietyCre

18creating synergies through total engineering, we canfurther boost the value we provide to customers andsociety. The Sanki Engineering Group delivers systems
with optimum added value in response to diverse needs
related to the environment, society and economy.

Business Report“Total engineering” is one of the areas of comparativeadvantage of the Sanki Engineering Group. The
term refers to our ability to provide optimal solutions
throughout the overall life cycle of facilities in the
numerous business domains the Group operates in,backed up by exceptional technological capabilities. By

LCE

Respond to all needs throughout the life cycle
The comprehensive capabilities of the Sanki Engineering Group enable
provision of optimal solutions at every stage with a focus on the entire life cycleof facilities, from planning, design and construction to maintenance, inspection,
operation/management, renewal and reconstruction.
Life cycle engineering (LCE), into which we have been actively incorporatingstate-of-the-art technologies, as well as energy savings, is the second elementof total engineering.

Planning・
Basic
DesignRepair・
RenewalDesign

LCE
Life Cycle Engineering

LCE

Responding to customer needs through LCE• Integrate Group capabilities and provide optimal solutions in the life cycle of facilities• Make multiple-perspective proposals aiming to reduce life cycle costs• Provide steady support through professionals well-versed in customers’ facilities

Exceptional technologicalcapabilities

Maintenance・
Inspection

Construction
Operation
・Management

Exceptional technological capabilities

Definitive technology supporting total engineering
The third element is technological capability, which underpins our wide range of business domains and the creation ofsynergies through LCE.
The Sanki Engineering Group can provide optimal solutions in line with customer needs through its multiple, uniqueand highly specialized technologies. We will maximize synergistic effects by integrating various technologies from diverse
business domains and generating new value.

SANKI REPORT 201619

Fully leveraging our total engineering competency through information
sharing and in-house collaboration

Integrated network system—centralized
control of operations and alarms

Electric facilities—
a stable supply of electricity

Building A

Electricity is supplied from this building to the restof the campus. All lighting fixtures are LED, creating
a comfortable learning environment while savingenergy. Rooftop emergency power generators
combined with fuel stored in the compound can
supply about three days of electricity, and can deal
with the needfor a BCP powersource and fireloads.

The Sanki Engineering Group has overall responsibility for the campus facilities. As a result, wewere able to effectively apply our total engineering competency to many aspects of the worksite.
Emphasis on close collaboration within the Group integrated the technical skills and strengths related
to facilities. Frequent joint meetings laterally disseminated information. For specialized facilities suchas the research laboratories, we held detailed hearings with each professor and revised our designs as
required to meet their requests. We used shared folders to manage updated information, so that therevisions could be reflected in constrction in a timely manner.
We were able to provide an optimal system for the customer by facilitating communication between
the facilities and efficiently managing worksites. Because facilities prove their worth once customers
start using them, I hope to offer long-term support to sustain these comfortable environments.

A

B

Faculty of Health Sciences
West Building

The central monitoring room provides centralized control over theoperations and alarms of various facilities. A thorough security
management system utilizes central surveillance and lighting control
operable from the security room. In the event of a disaster, the PA
system is switched to the Center Building as the emergency response
headquarters.

Plumbing facilities—effective use of rainwaterand a stable supply of drinking water in times of disasterAir conditioning systems that can simultaneously supply
cold and hot water were installed in rooms that require24-hour air conditioning, such as animal experiment
facilities and radiation laboratories. Clean rooms foranimal experiments are consistently maintained athigh levels of cleanness through minutely adjusted
room pressure. With due consideration for the naturalenvironment, the air is filtered to eliminate bacteria andodors before being released externally.

Tap water and service water aresupplied to each building from themachine room of the water receivingtank. Rainwater stored in Buildings A
and C is filtered inside Building B before
being supplied as service water. In
the event of an earthquake, the water
receiving tank automatically shuts down
the valves to prevent leakage fromdamaged service pipes, securing up to
90 tonnes of drinking water.

Faculty of Health Sciences
East Building

Plumbing facilities—a safe wastewater treatment system
Bus terminal

C

Main Gate

East Gate

Center Building

Other features

Plumbing facilities—
securing lifelines during a disasterIn the event of drainage system failure during adisaster, manholes in the waste storage can beused as toilets.

D

Faculty of Social Sciences/
Faculty of Foreign Studies
West BuildingE

Faculty of Social Sciences/
Faculty of Foreign Studies
East Building

Group company Sanki Kako Kensetsu Co., Ltd. was responsible
for wastewater treatment and applied its technological expertiseto construction work. Through a system that can handle
specialized effluents, such as lab waste, wastewater isdischarged safely using unique pH adjustment and sterilization
technology.

F

Faculty of Medicine/Student Center Building

Kitchen systems—optimal designfor efficient working environments

Creating Value through Total Engineering Competency

Comfortable and always safe.
Construction in support of students.

The Inokashira Campus of Kyorin University

20

SANKI REPORT 2016

Chief Site Director,
Manager of Engineering 3,
The 1st Air-conditioning &Plumbing Field Engineering
Department, Tokyo Branch

Building B

Air conditioning facilities—thorough hygiene
care, from indoor environments to emissions

Building D

Kenji Miyamoto

Business Report

In January 2016, we completed construction of the Inokashira Campusof Kyorin University, a project commemorating the university’s 50th
anniversary. In response to the growing need to ease commuting andto encourage academic exchange between faculties, the university
relocated its Faculty of Health Sciences, Faculty of Social Sciences,
Faculty of Foreign Studies, and graduate schools from the Hachioji
Campus to the new site. With the idea that a good environment
nurtures good people, the new campus was designed to provide safe,
secure environments that allow students to focus on their academic
pursuits. Its buildings are all seismically isolated.
These comfortable learning environments are sustained by thecomprehensive engineering capabilities of Sanki Engineering, which
was responsible for construction of the entire campus. Having adetailed understanding of the facilities from years of undertaking
repairs and maintenance at the Hachioji Campus, the SankiEngineering Group was able to meet our customer’s needs by offering
unique advanced technologies and optimal solutions based on LCE.

Overview of the building
Site area: Approx. 3.47 ha
Total floor area: Approx. 46,500 m²
Site composition
A: Faculty of Health Sciences West Building: 5 floors above
ground (training and research)
B: Faculty of Health Sciences East Building: 5 floors above
ground (training and research)
C: Center Building: 5 floors above ground (lobby andacademic office, library, administrative functions)
D: Faculty of Social Sciences/Faculty of Foreign Studies
West Building: 5 floors above ground
E: Faculty of Social Sciences/Faculty of Foreign Studies East
Building: 5 floors above ground
F: Faculty of Medicine/Student Center Building: 5
floors above ground (student cafeteria, international
communication center, clubrooms)
Attached building: 1 floor above ground (security room,
garbage collection point, bicycle parking area, bus station)
Special features
HVAC and plumbing facilities• Air conditioning based on simultaneous cold/hot watersupply type air-cooled chiller• Clean room for animal experiments• Installation of silencers to reduce noise in theneighborhood• Exhaust filtering units with sterilization and deodorization
effects• Rainwater filtering facility• Automatic shutdown valves for water receiving tankduring an earthquake
Electrical facilities• Centrally controlled disaster prevention facilities for allbuildings• Whole building LED lighting (excludes machinery room)• Emergency power generators
Integrated network facility and ICT facility• Centralized control over operations and alarms offacilities from the central monitoring room
• Wireless LAN system based on an integrated distribution
system for phone and LAN lines• Placement of phones that are usable during power
outages as a BCP measure
Kitchen system• High-speed dishwasher system

Building F

We created a safe, secure working environment for serving
meals, taking into account the number of people eating, thefrequency of serving each menu item, and the traffic flowof kitchen workers, while also considering efficient kitchen
facilities for serving
a wide range ofmeals for a thousandpeople and hygienic
zoning.

ICT facility—a stable network environment
Server room measures were taken
to prevent contamination by metalwhiskering* that affects electronicequipment. The stable network
environment has an integrated
distribution system shared by
telephone lines and LAN, creatinga Wi-Fi environment. The building
also has phones that work during
power outages caused by natural
disaster.

* The natural forming of whisker-like crystal fibers on metal surfaces,
which can cause short circuits.

SANKI REPORT 201621

Overview of Our Businesses by Segments• Main Sales Items

Page

Facilities Construction Business

24

Electrical systems• Electrical systems• Telecommunication systems• Communication-related facilities• Electrical civil engineering• FY2015 Results
Net sales and net sales
composition ratio• Main Sales Items
Plumbing and drainage
systems• Water supply and drainage• Kitchen systems• Disaster prevention systems
Facility systems• Design for fit-out and relocationof offices and workplaces• Consulting for project
management
Smart building solutions• Central monitoring andautomated control systems• ICT systems• IP phone systems• Security systems

84%

149,952
million yen

Environmental Systems Business32• FY2015 Results

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

10%

Issues• Global warming• Energy resources• Aging facilities• Constraints on final landfill sites• Water resources

18,734

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

28• FY2015 Results

Net sales and net sales
composition ratio

Net sales and net sales
composition ratio• Social issues and value provided

%

9,217
million yen

SANKI REPORT 2016

Page

Real Estate Business• FY2015 Results

522• Main Sales Items
Material handling systems• FA systems• Clean conveyance systems• Material handling systems• Airport baggage and cargohandling systems• Medical handling systems• Handling information control
systems

Page

Machinery Systems Business

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

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

million yen• Main Sales Items
Conveyance systems• Lightweight conveyors• Distribution-related conveyors• Sorting devices• Automated warehouse

Water treatment• Water and sewage treatment
facilities• General and industrial waste
disposal and recycling facilities• Sludge recycling facilities• Industrial wastewater andwaste gas treatment facilities• Plant facilities for the food andchemical industries

Page

Net sales and net sales
composition ratio• Social issues and value provided
Issues• Global environmental issues• Energy resources• Equipment deterioration• Increased running costs• Securing human resources for
operations and management

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

Business Report

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

Value• Safe and secure productinspection• Labor-saving solutions• Response to declining birthrate
and aging society• Comfortable work environment• Reduced running costs• Energy and resource
conservation36• Social issues and value provided

1%

Issues• Global warming• Energy resources• Aging facilities

1,532

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

million yen

SANKI REPORT 2016

23

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 FY2015• Orders received (billions of yen)
143.8

150.0 152.4

143.6

151.1 149.9

128.6
115.0

149,952
million yen

84%

Fiscal 2015 marked the final year of our previous
medium-term management plan “SANKI VITAL PLAN
90th,” and we forged ahead to achieve our targets.
We enjoyed brisk business, particularly in industrial
HVAC for manufacturers led by the electronic, electricalmachinery and automobile industries. We took care,however, to not take the favorable market environment
for granted and sought to prepare for the future bydeveloping human resources and strengthening sales
and construction capabilities.
As a result, orders received were 1.6% higher thanin the previous fiscal year at ¥152,432 million, while net
sales fell slightly by 0.8% from the previous fiscal yearto ¥149,952 million due to an increase in balance carriedforward.
A notable aspect of our business performance infiscal 2015 was the fact that we achieved significant
growth in profit even as orders received and net sales
remained largely unchanged. The first reason behind the

Major Projects• Chukyo Television Broadcasting Company building: HVAC
systems (completed in November 2015)• DNP Ichigaya-Takajomachi Building: HVAC systems (completed
in December 2015)24

SANKI REPORT 2016

Net sales target for FY2016(Numerical forecast at start of FY2016)

Risks

Business opportunities• Labor shortage, aging workforce• Decline in capital investment by
manufacturers due to the stronger yen• Slowdown in global investments due
to cheaper resources, a slump in the
Chinese economy and other factors• Rise in the use of renewable energy
sources• Need for energy-saving solutions(adoption of the Paris agreement against
global warming at COP21)

154.9• Cut costs and raise operational efficiency, reform
sales and design organizations• Promote building stock-based business• Bolster and expand areas for the Facility Systems
Business• Strong response, technical expertise and reliability cultivatedthrough a 90-year track record

2012

2013

2014

2015 (FY)

2011

2012

2013

2014

2015 (FY)rise in profit is thorough cost control by each worksite.
By reinforcing process management, we were able
to increase the number of construction projects withimproved revenues and decrease the number of projects
with declining revenues such as reworks. We were alsoable to reduce the workload of onsite staff by setting up
the Procurement Division, which supports purchasing
operations through centralized purchasing and othermeans, and the Site-Documentation Support Center,
which supports the administrative work at each site.
These measures facilitated the creation of a working
environment that allowed staff to concentrate on highly
specialized tasks, such as process management andquality control, which contributed to strengthening theconstruction capabilities of our business as a whole andimproved the conditions for generating revenue.
Since fiscal 2015, we have been promoting the“Smile Project” to improve revenue by reducing theworkload of employees and thereby raise operational
efficiency, and we are gradually seeing the effects ofthe project. In addition, we have achieved the desired
results for each of the basic strategies we have been
pursuing in this business. As part of our efforts tobolster sales capabilities, we began by reforming thefunctions of the Sales Division and followed up bypromoting Company-wide information sharing, including
paying customer visits and holding sales strategy
meetings through the collaboration of sales staff at the

Sanki Engineering’s • Developing new technologies and construction methods toboost efficiency and productivity
challenges

billion yen

Basic strategies for FY2016

Sanki Engineering’s • Total technological capabilities that integrate a broad range ofsolutions across business fields
strengths

2011

Summary of Results for Fiscal 2015

Market environment• Nationwide labor shortage resulting from a shrinking workforce• Proliferation of technological innovation, including robotics, IoT and artificial intelligence• Uncertain market outlook beyond the 2020 Tokyo Olympic and Paralympic Games• Financial concerns stemming from Britain’s exit from the EU

Business Report

134.8 136.1• Net sales (billions of yen)

• Establishing an overseas business base and responding to country risks

Sales Division and each branch and branch office.
With respect to bolstering our solution proposal
capability, we reorganized the Smart Building Solutions
Business by integrating it into the Facility Systems
Business Division. We have thereby strengthened oursystem for conducting sales by offering integrated
project proposals for the construction and relocation of
workplaces and for smart building solutions.
Apart from these measures, we sought to conserve
resources at construction sites and reduce construction
costs by adopting a construction method usingaluminum coolant pipes. In the area of human resource
development, we supported employee efforts to obtain
qualifications and promoted education through on-thejob training.

Review of the Previous Medium-Term
Management Plan
In our efforts to strengthen core businesses, we
improved profitability by implementing thorough cost
control and enhanced measures for worksite support.
We will continue to focus on shifting our emphasis fromsales amount to profit margin and seek to strengthen
our core businesses as the basis of our management.
To expand strategic growth businesses, we havebeen pursuing life cycle engineering (LCE), in which
we provide services throughout the life cycle of a

facility, encompassing planning, design, construction,
management, maintenance, repair and renewal. We
have observed a steady increase in the number of
repair and renewal projects and will seek to secure
operation and management personnel responsible formanagement and maintenance to respond to growing
demand.
To create unique new businesses, we undertook
research, analysis and investment in domains within thescope of our core businesses, where we can expect a
synergistic effect, as well as other areas, and we plan
to maintain effective measures under the new mediumterm management plan.

Outline of the New Medium-Term
Management Plan
The market environment for the Japanese constructionindustry is on a recovery path that is expected tocontinue to 2018 or 2019. The outlook for the market
environment beyond the 2020 Tokyo Olympic andParalympic Games, however, is uncertain, and we may
experience a nationwide labor shortage caused by the
declining workforce, along with rising costs of labor,material and equipment.
To ensure continuous growth for the constructionindustry, we must adopt innovative technologies such

SANKI REPORT 2016

25

Strengthen Core Businesses
Reduce costs and raise operational efficiency
We will strengthen our procurement functions to
reduce costs and improve our profit margin. We willfurther enhance the Site-Documentation Support Centeras an entity that provides support for administrative
tasks such as site documentation, to raise operational
efficiency so that site managers can allocate moretime to process management and quality control. In
addition, we will actively deploy ICT and other means
for reconstructing onsite operational processes to raise
efficiency even further in an effort to boost productivity
while reducing the burden of site managers. With
respect to reducing construction costs, we will seek toraise our profit margin by horizontally deploying activities
for improving construction methods, such as thedevelopment of energy-saving equipment for installingdevices, and seek to reduce costs by addressing issues
that are unique to each worksite.
Review sales and design structures
We will forge closer relationships with our customers
by reviewing our sales system and promoting the use of
ICT. Also, we will seek to more promptly meet customer
needs with a higher level of technical competence
by reconstructing the design support system throughwhich the branch and branch offices receive assistancefrom headquarters for specialized design projects.
Promote Growth Strategies
Promote the building of stock-based businesses
We will provide LCE that caters to each stage of abuilding’s life cycle, from new construction, repairs andmaintenance to renewal and reconstruction, to prepare
for a decline in the construction market by diversifying
our revenue streams.
Strengthen and expand areas of the Facility
Systems BusinessWe will strengthen our sales and production systems

26

SANKI REPORT 2016

to expand our businesses, and formulate strategies
for leveraging our strengths in instrument and control
engineering and network systems engineering. We will
work toward our goal of expanding areas of the businessto property management and construction management.
We will also strengthen our solution-based sales in areas
such as risk management, BCP and security.

Equipped with the capacity to continue broadcasting for at least a week, even in theevent of a maximum-scale earthquake

The New Building for the Chukyo Television Broadcasting Company
Value provided by
Sanki Engineering

Key Strategies for Fiscal 2016

Strengthen and expand areas of the Facility Systems
Business
The Facility Systems Business Division provides
services for the construction and relocation of offices
and workplaces, such as design planning, management
and consulting, as well as offering proposals for smart
buildings that enhance energy conservation and comfort.
We will continue our efforts from fiscal 2015 andengage with a renewed vigor in proposal-based sales
for customers of Sanki Engineering technologies in theareas of instrument and control engineering and network
systems engineering. Our technological capabilities will
be bolstered by expanding opportunities for integrated
offerings that include LCE.

• Energy-saving facilities with hot and cold water directly supplied by district heating andcooling plants• HVAC operation that clears stringent building noise regulations, equivalent to recording
studios
Features

Review sales and design structures
The Design Support Center was established in April 2016.
We will reinforce our Company-wide system to provide
assistance for each branch office nationwide on designand specialized design needs as well as human resource
development. Also, we will bolster our sales capabilities byreorganizing the Planning Department of the Mechanical& Electrical Contracting Headquarters and the Sales
Division into the Sales Administration Division. ICT will beutilized to raise the efficiency of site operations and share
information on sales.
Promote the building of stock-based businesses
We will seek to expand areas of our business andgenerate profit through LCE by strengthening our
proposals for new customers and the properties we havealready completed, in addition to developing proposals forour existing customers and properties.
Since LCE requires highly specialized humanresources, we will consider adopting mid-career hiring
and the establishment of a training facility (tentatively
named Sanki Techno Center) for educating and training
younger employees to secure operation and management
personnel.

Focus 1Business Reportas robotics, IoT and artificial intelligence, adapt ourbusiness model and develop overseas markets. In the
Facilities Construction Business, we will improve on
the management methods and improvement strategies
that were effective under the previous medium-term
management plan, while further promoting the “Smile
Project” toward the goal of expanding business results
through enhanced quality.

• Company building with unique exterior• Various disaster-proof measures, including a base isolation structure
adopted for the first time by a Nagoya area broadcaster

The new building for the Chukyo Television Broadcasting Company was completed in November 2015as a landmark in the large-scale redevelopment district south of Nagoya Station. To ensure continuous
broadcasting capability in the event of a major disaster, the building was constructed with a baseisolation structure, emergency power generators and two separate systems for electricity and water.
Sanki Engineering was responsible for the HVAC system. The work involved dealing with pressure andtemperature limitations to enable direct supply and use of hot and cold water from district heating andcooling plants instead of using heat exchangers, stringent noise regulations for studios and announce
booths that are unique to a TV station, and installing facilities inside the limited ceiling space. Sanki
addressed these issued with advanced design and construction technologies.
Building description •New company building of Chukyo Television Broadcasting Co., Ltd. (broadcasting station)     Sanki Engineering’s role •Construction of HVAC facility

Balancing comfortable space with energy conservation through redevelopment focused onscenery, environment, and community

DNP Ichigaya-Takajomachi Building
Value provided by
Sanki Engineering

Focus 2

• Unit-based method to balance high quality and a significantly shorter construction periodwith consideration for the surrounding environment• Flexible response to client requests and changing circumstances by connecting all site
workers with tablet devices
Features• Sanki played a central role in the large-scale redevelopment project for
harmoniously combining scenery, the environment, and the community• Achieved a balance between comfortable space and energy conservation
through the use of motion sensors and heat pumps

The DNP Ichigaya-Takajomachi Building, comprising an office and plant complex, was built on
the former site of the Ichigaya Plant, the first plant of the Dai Nippon Printing Company that hadsustained Japan’s publishing culture since it was constructed in 1886. Sanki Engineering was
responsible for the construction of its HVAC system. By integrating air conditioners and otherfacilities into a single module, we were able to dramatically shorten the construction period while
paying due consideration for the neighboring residential area. We adopted floor vent air conditioning
for the employee cafeteria so that people would not feel the airflow, and we achieved a balance
between a comfortable space and energy conservation by automatically opening and closing ventsusing motion sensors and heat pumps.
Building description •DNP Ichigaya-Takajomachi Building (office and plant)     Sanki Engineering’s role •Construction of HVAC facility

SANKI REPORT 201627

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 FY2015• Orders received (billions of yen)
10.8

10.3

• Net sales (billions of yen)

Market environment

Sales target for FY2016(Numerical forecast at start of FY2016)

10.8• Labor shortage raising the need for labor saving by making full use of robots and IoT• Increased private capital investment as manufacturers move plants back to Japan
9.8

9.9
9.2

8.4

9,217
million yen

5%

6.5
5.7

In fiscal 2015, orders received rose by 80.4% fromthe previous fiscal year to ¥10,309 million due to thestable performance of the standard equipment businessand an increase in orders for major projects for plantfacilities such as large-scale material handling systems.
Net sales fell 7.4% from the previous fiscal year to¥9,217 million despite steady progress in construction,
due to a decrease in construction work carried forward
at the end of the previous fiscal year. In the market
environment, there was strong demand for labor saving
due to concerns over the workforce shortage, and also aneed for developing new products that incorporate newtechnologies such as robots. Under these conditions,
the Machinery Systems Business Division pursued thefollowing business strategies.
With respect to standard equipment, we sought
to promote sales of cost-competitive products and to
cut costs without allowing for exceptions. We worked
with other divisions to develop products with highadded value that met the needs of specialized markets,
while developing markets for priority products such as

2012

2013

2014

2015 (FY)

2011

2012

2013

2014

2015 (FY)conveyors by making improvements in collaboration with
the Technical Research and Development Institute.
Concrete results include the sales launch of ourcost-competitive new conveyor “Simple,” chilled foodconveyors that meet specialized needs with higher added
value generated through the joint efforts of the HVAC,
conveyance and food equipment and facilities sections,and the high-luminance multicolor LED conveyor. We alsosought to bolster our technology for integrating robots
into systems by setting up the Robot Utilization Centerin the Yamato Engineering Center as a facility capable ofconducting demonstrations and experiments for industrial
robots. Having thus established a system for responding
to customer inquiries, we pursued sales activities topromote systems incorporating industrial robots taking• Focused effort to develop products withstrong market demand by leveraging thecharacteristic strengths of the businessdivision• Expanding demand for labor saving
and automation at non-manufacturingindustries

S-CON®MINI Simple conveyor

9.5

billion yen

Basic strategy for FY2016• Reorganize SI sales force• Reconstruct production system• Expand sales to non-manufacturing industries

Sanki Engineering’s • Accurately understanding customer needs and strengthening
technological response
challenges• Reconstruct production system to improve productivity

full advantage of the center, identifying markets where
we have a technological advantage and working
aggressively to win orders.
Orders for high value-added products increased
owing to a number of major orders we received at
the start of the fiscal year for clean room conveyancesystems.
In our robot business, we are shifting our emphasis
from conventional use as assistants to human operators
to automated facilities for saving labor that address theworker shortage. We believe this trend will accelerate in
the coming years, and the Machinery Systems Business
Division intends to concentrate its resources into thisarea to seize the business opportunity.

Review of the Previous Medium-Term
Management Plan

• Yokota U.S. Air Base cargo handling system (completed inJune 2015)

SANKI REPORT 2016

• Delay in developing products for growthmarkets (logistics, online shopping,
medicine and pharmaceuticals, etc.) may
lead to missed opportunities for orders• Intensifying price competition forstandard equipment businesscapability and multiple businesses• Stable, long-term relationships with valuable customers

Major developments and projects

28

Business opportunities

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

2011

Summary of Results for Fiscal 2015

Risks

Business Report

9.3

In fiscal 2015, we reexamined the market environment
to conduct an overall review of the divisional mediumterm plan we formulated in fiscal 2013, and we createdthe Machinery Systems Business Division Group
Medium-Term Plan.
The plan, while moving in step with the wider
medium-term management plan for the entire Company,
is intended to reform the structure of the Machinery
Systems Business to ensure stable and lasting profit
based on three key elements: (1) clarifying the functionsof the division; (2) reconstructing manufacturingfunctions; and (3) strengthening development functions
through alliances.
Key Issues for the Division
1. Clarifying the functions of the division• Review production costs without allowing for
exceptions• Focus resources on systems incorporating robots• Build a community-based, customer-oriented sales
structure
2. Reconstructing manufacturing functions• Raise efficiency of the production base
• Review the production management system
encompassing ordering, production arrangement
and shipping• Strengthen design and product development
capabilities
3. Strengthening development functions throughalliances• Analyze market (customer and competition)
trends and reflect them in flexible selection andconcentration• Strengthen development capability by forging
technology alliances with partners in Japan andoverseas• Promote alliances (industry-academia-government
collaborations, sales alliances, etc.)

SANKI REPORT 201629

Outline of the New Medium-Term
Management Plan

Strengthen Core Businesses
Market strategies that maximize strengths
We will position material handling systems incorporating
robots to meet automation needs as our strategic
product and focus our resources on cultivating thesystem integrator (SI) and developing new products.
Promote Growth Strategies
Reconstruction of the production system
We will boost overall efficiency and reduce costsin our production base at the Yamato site plant by
fundamentally reconstructing the physical aspects,
including the production process, and production andinventory spaces, and reviewing the organic aspectsof our production management system, from order
receiving and production arrangement to shipping andinventory management.
Enhance the Sanki Brand
To clearly demonstrate our customer-first approach,
we will uphold “meeting the needs expressed by
the customer” as the division slogan and seek todisseminate it among our staff. We will continue to30

SANKI REPORT 2016

Focus

Fully-automated air cargo handling

U.S. Air Force Yokota Air Base Cargo Handling System
Business Report

Capital investment by private companies, which has amajor impact on the business condition of this division,
has shifted from a recovery based on export growth anda return to production in Japan reflecting the weakeningof the yen since fiscal 2013 to a standstill in the latter
half of fiscal 2015, as the shift toward a stronger yen
caused by concerns over the international situation andother issues applied the brakes on exports.
In particular, there are signs that small and midsized enterprises are beginning to postpone capital
investments, in a trend that is expected to become
more prominent after fiscal 2016.
On the other hand, labor shortages due to fewer
successors and an aging workforce have become aserious issue for Japanese industries, leading to thegrowing need for automation based on the introductionof robot technology.
Under these circumstances, ensuring continuous
growth for the Machinery Systems Business requires
accurately grasping customer needs and strengthening
our technological response while raising productivity byreconstructing our production system.

emphasize building relationships of trust with ourcustomers and strive to become “The Company
of Choice,” as laid out in our new medium-term
management plan.

Key Strategies for Fiscal 2016
Key elements of the medium-term plan for the division
are reflected in the division’s initiatives for fiscal 2016.
Organization and system that embody ourmarket strategy
Robot-related endeavors are being promoted in ajoint effort by industry, academia and government
under the government’s Japan Revitalization Strategy.
Accordingly, the Machinery Systems Business Division
has positioned material handling systems incorporating
robots as a strategic product and is striving to develop
and possess new products and systems.
The essential element for enhancing customer
satisfaction in this area is the SI, who is responsiblefor designing and operating systems that combine
material handling with robots. In the reorganization
undertaken by the division in April 2016, a team of robot
system integrators was set up in the sales section to
improve our response to customers in this area throughefforts that include alliances with other SI companies.
We are concurrently bolstering our sales capability byimplementing centralized management of robot-related
information and utilizing trading houses for developing
businesses centered on the area.
Reconstruction of manufacturing functions
The Machinery Systems Business Division is the only
division of Sanki Engineering with manufacturing
operations. Clearly, therefore, reducing division costs
begins with raising the efficiency of our manufacturing
operations. We will seek to develop businesses witha leading edge in cost competitiveness by steadily
implementing reconstruction, as laid out in the divisional
medium-term plan.

Value provided by
Sanki Engineering• Large volume, high-speed handling using large-scale stacker cranes• Advanced backup functions, redundancy and safety to ensure uninterrupted operation• System compliant with the extremely stringent security standards of the U.S. Forces
Features• Shortened cargo loading time to one fourth of the previous facility• Redundancy and safety cultivated through experience with aircargo handling facilities

Elevating transfer vehicle (ETV) used to transport cargo

Lift conveyor

The Yokota Air Base is the headquarters of the U.S. Air Forcein Japan. Sanki Engineering was responsible for construction
work for upgrading the air cargo handling facility at the base,which serves as the relay hub of air transport for the entire Far
East region.
In the latest upgrade, we improved the facility by fully
automating cargo handling, which had previously been done byhand, and shortened the time taken to load cargo from as longas 6 hours to an hour and a half. The main facility comprises twolarge-scale stacker cranes that can handle a maximum weight of
6.8 tons at a maximum speed of 122 meters per minute whentraveling and 18.3 meters per minute when hoisting cargo.
We take pride in holding the top share in Japan for airport
cargo handling facilities and believe our position is due tothe high recognition we have gained for the redundancy inour system, which ensures that flights are not delayed in theevent of mechanical or system failure. Due to its military role,
the latest facility required advanced backup functions andredundancy, which has allowed us to fully demonstrate ourtechnological capability.
Furthermore, since the computer system controlling fullyautomated operation was connected to the U.S. military
network, we developed the system under extremely highsecurity conditions compared to the past in order to guard
against hacking and other risks.

The facility• U.S. Air Force Yokota Air Base

Automated warehouse

Sanki Engineering’s role
• Upgrade of the air cargo handling facility

SANKI REPORT 201631

Environmental Systems Business
Sanki Engineering develops products and systems for water and sewage treatment facilities and waste treatment facilities
that conserve resources and lower greenhouse gas emissions toward creating a low-carbon society.

• Net sales and net sales composition ratio for FY2015• Orders received (billions of yen)

• Net sales (billions of yen)

28.8

million yen

10%

16.6

In fiscal 2015, orders received rose 17.0% from theprevious fiscal year to ¥19,610 million. Net sales were7.1% higher than in the previous fiscal year at ¥18,734
million.
We achieved the following concrete results in ourbusiness performance for fiscal 2015.
First, we were able to steadily increase sales of ourstrategic product AEROWING II, an ultra-fine bubble
air diffuser. We also received the second order for the
SANDEC G3, an energy-saving centrifugal dehydrator.
These two sewage treatment products have beencertified as standard models by the Japan Sewage
Works Agency and have now entered the stage of fullscale marketing, with steadily increasing orders.
In addition, we have completed the second unit ofour small-scale binary cycle power generating system,
which offers a highly efficient way of generating
electricity from unused waste heat at low to medium
temperatures.

Major projects• Improvement work for key facilities at the Clean Haramachi
Center of Minami Soma City (to be completed in March 2019)• Nomi City Beautification Center waste incineration facility
reform (to be completed in March 2019)32

SANKI REPORT 2016

17.1

16.7

17.1

17.4

18.7

(Numerical forecast at start of FY2016)

Risks

Business opportunities• Fluctuations in the mid- to long-term
supply of electricity• Contraction in project scale and decline incapital investment due to fiscal restraint
by municipal governments• Expanded demand for energy saving andenergy creation systems at water andsewage facilities and waste treatment
facilities• Need for extending the life of facilities• Japanese government’s bold policy on
infrastructure development, PPP and PFISanki Engineering’s • Life cycle engineering based on synergies withGroup companies
strengths

2011

Summary of Results for Fiscal 2015

15.0

19.8

Sales target for FY2016

2012

2013

2014

2015 (FY)

2011

2012

2013

2014

2015 (FY)

Our supercharged fluidized bed incinerator system
received a technology certification from the Tokyo
metropolitan government. It was recognized with the
Minister of Economy, Trade and Industry Award in the
41st Excellent Environmental Equipment Awards andthe Grand Prize in the 17th Infrastructure Technology
Development Award, both representing the highest
awards. We will seize this opportunity to further
expand sales. In fiscal 2015, we also completed two
restoration projects, installing a reaction tank and final
sedimentation tank at the Minami-Gamo Purification
Center in Miyagi Prefecture, which suffered extensive
damage from the Great East Japan Earthquake.
Our Group companies made steady progress in the
LCE business, which provides a full line of services
from facility planning to design, construction, aftersales service, maintenance and management. Sanki
Kako Kensetsu Co., Ltd. received orders for major
waste incineration projects, including reform at the
Clean Haramachi Center of Minami Soma City and theNomi City Beautification Center, and an order for a longterm upgrade and repairs at the Waste Disposal Centerof the Shuto Environmental and Hygiene Cooperative
Business Association. Sanki Kankyo Service Co., Ltd.
won a subcontracting contract for comprehensive
management of a sewage treatment facility.

19.0

Business Report

18,73419.6

Market environment• Declining social infrastructure investment in environment-related markets• Persistently strong energy saving and energy creation needs in both the government andprivate sectors

billion yen

Basic strategy for FY2016• Promote building stock-based business and
LCE business• Promote energy creation

Sanki Engineering’s • Expanding sales of strategic products• Developing new business areas
challenges• Further promoting LCE business

Review of the Previous Medium-Term
Management Plan
Strengthen Core Businesses
Expanding orders for strategic energy-saving
products for sewage treatment facilities
We pursued development and sales expansion ofstrategic products such as the AEROWING II and theenergy-saving centrifugal dehydrator, which contributeto reducing electricity consumption at sewage treatment
facilities, the energy-saving centrifugal dehydrator
and the chain flight sludge collector with anti-seismic
functions. We also focus our efforts on achieving ahigh score at biddings of the comprehensive evaluation
method and presenting technical proposals for largescale projects, which consequently have won us moreorders.

Energy-saving centrifugal dehydrator SANDEC G3Expanding our marketing networks overseas
AEROWING is our strategic product manufactured andsold by AQUACONSULT Anlagenbau GmbH (a wholly
owned subsidiary) based in Austria, which is at thecenter of our global marketing drive. We have been
enjoying solid demand for upgrades to AEROWING
in Europe and North America, and orders have grownsteadily in the North American market in particular,
where we have concluded a sales alliance with Ovivo
USA, LLC, a leading plant manufacturer.
Create Unique New Businesses
Developing technology for next-generation energy
saving and energy creation
We have been expanding the development and sales of
products that meet the growing needs for conserving
and creating energy. Since fiscal 2013, we havecommercialized a small-scale binary cycle electricity
generation system that can generate electricity using
unused waste heat at low to medium temperaturesdischarged from private-sector factories, geothermal
heat, and hot spring heat. While large-scale systems
have already been commissioned, the reduced scaleof our system is expected to fill applications in diverse
heat sources. The first system delivered by the SankiEngineering Group in fiscal 2013 has already begun
generating electricity at a private company, and we
delivered a second unit in fiscal 2015. Our systemboasts exceptional features such as high electricity
generation efficiency and ease of maintenance, and weare planning to further expand sales over the coming
years.

SANKI REPORT 201633

Outline of the New Medium-Term
Management Plan

Strengthen Core Businesses
Strengthening our key businesses
We will expand sales of strategic products while
accelerating the pace of development and market
launch of our next strategic products. We will alsoseek to improve profitability by raising productivity tomaintain our competitive edge amid the diminishing sizeof the environment-related markets.
Promote Growth Strategies
Expanding our business areas
In response to the growing need for conserving andcreating energy, we will reinforce our LCE businessinitiatives by building on the customer channels,
products and technologies we have cultivated over theyears.
We will continuously undertake research, analysis
and investments unrestrained by the current scopeof our businesses, targeting fields that lie on theboundaries of our existing businesses, where we can
expect a synergistic effect, in order to expand areas inwhich we can maximize our component technologies.
We will seek opportunities for developing new fields
that demonstrate an affinity with environmental
systems technology, which also represents an attractive
market.
Expanding our marketing networks overseas
We will continue to expand our marketing network
centered on AEROWING with AQUACONSULT
Anlagenbau GmbH. We will collaborate more closelywith leading agents in each region while also seeking
new agents and marketing channels to meet thedemand from substantial upgrades in North America
and Europe and to cultivate new demand from countries
in Asia and the Middle East.

34

SANKI REPORT 2016

Disaster restoration project for a sewage treatment facility

Minami-Gamo Purification Center
Value provided by
Sanki Engineering• Enhanced energy conservation, maintenance and management using the AEROWING ultrafine bubble air diffuser• System of solid long-term support based on our total engineering competency and LCE
Features• Future-oriented sewage treatment facility that can withstandearthquakes and tsunami while caring for the environment

Key Strategies for Fiscal 2016
Strengthening our LCE business and developing theenergy saving and energy creation fields
Water supply and sewage systems and waste treatment
facilities in Japan will collectively enter a renewal phasebetween 2020 and 2030, thereby accelerating demand
for system upgrades and life extensions. Meanwhile,
the volatility of electricity supply has led to a persistentneed to conserve and create energy.
In our water supply and sewage systems business,
we will continue to expand the sales of strategic products,
such as the AEROWING II, an energy-saving centrifugal
dehydrator, a supercharged fluidized bed incinerator,
and a small-scale binary cycle power generating system,
while also seeking to boost efficiency by strengthening
collaboration with Group companies. Moreover, we will
strive to meet the need for technologies that reduce
power consumption while maintaining processed water
quality by continuing to develop products and systems forsaving and generating energy.
In our waste business, to secure and increase business
opportunities, we will organize and reconstruct the Groupwide system to pursue proposal-based sales for new projects
and large-scale repair of projects implemented in the past.
In the private sector, we will seek synergies with otherdivisions and Group companies to reinforce our efforts tolaunch strategic products in fields such as energy creation,
medicine, pharmaceuticals and food products. In particular,
we will work on the development and market introductionof new strategic products, such as woody biomass power
generation plants, to address diverse needs.

Focus
Business Report

Among the target areas of social infrastructure
investment, investment in the environment-related
market is declining. Meanwhile, there is a strong
need for energy saving and energy creation in bothgovernment and private sectors.
To ensure continuous growth for the Environmental
Systems Business under these circumstances, wemust expand sales of strategic products, develop new
business areas and further promote the LCE business.

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 appropriately allocate engineers. 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 every employee. 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,
such as searching for emerging business “seeds” andgiving material form to products, developing overseas
business, and undertaking proposal-based sales.

AEROWING panels can be
uniformly laid out to fit the shapeof the tank.

Final sedimentation tank

The Minami-Gamo Purification Center in Sendai City, Miyagi
Prefecture treats about 70% of the city’s wastewater. SankiEngineering has undertaken construction of various facilities since1964, the year of the Tokyo Olympic Games. We were involved in
the immediate aftermath of the Great East Japan Earthquake in 2011,
when the center was damaged by the earthquake and tsunami.
Various creative ideas were incorporated into the disasterprevention design of this restoration project, such as elevation levels
that take tsunami heights into account, watertight doors and solar
power generation units to enable minimum water processing evenin the event of a power outage. Sanki Engineering was responsible
for constructing the reaction tank and final sedimentation tank. The
reaction tank is where organic matter in wastewater is decomposedby microorganisms. Installing the AEROWING allowed forsignificant reductions in electricity consumption as well as improved
performance in terms of intermittent operation and facility longevity.
The final sedimentation tank processes the sludge generated bytreating sewage. Here we adopted a monorail sludge collector,
offering high scraping capability and seismic resistance as well as
being easy to manage.
In addition to the machinery systems, we worked on theconstruction of HVAC and hygiene facilities and sought toachieve overall optimization by harnessing our total engineering
competency. Moreover, we will be responsible for the
maintenance, repair and operation management following
completion of the project, to provide long-term support toward
ensuring the plant’s stable operation.
Building description• Sewage treatment facility

Monorail sludge collector

Sanki Engineering’s role
• Construction of reaction tank, final sedimentation tank, water diversion,
disinfection and other facilities, HVAC and hygiene facilities• Maintenance, repair and operation management

SANKI REPORT 201635

Real Estate BusinessResearch and Development

Our Real Estate Business is engaged in leasing operations and building management and is 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 FY2015• Net sales (billions of yen)
2.8

1.1

1%

1.5
1.2
1.0

2011

Summary of Results for Fiscal 2015

SANKI REPORT 2016

2014

Initiatives in new fields• Meeting labor-saving needs
associated with the decline in
the working population while
maintaining and enhancing
construction quality• Applying our technologies
to the fields of medicine,
pharmaceuticals, automotives,and new technologies• Promoting open innovation

2015 (FY)seeking tenants for sections of the building toward
securing stable income.

Initiatives for Fiscal 2016
In fiscal 2016, we will apply Sanki Engineering’s
technologies and know-how to the maintenance andmanagement of portfolio assets while continuously
promoting energy conservation.
We will seek to maintain the stable business modelof leasing our Haneda property as a parking lot in fiscal
2016, building on the steady results already observed
since we started doing this in the first half of fiscal
2015.
As for the Sanki Yamato Building, after seeking
tenants for sections of the building since fiscal 2015,
tenants began to fill the property this fiscal year. We will
therefore continue to search for tenants and strive toraise the occupancy rate toward securing a stable flowof revenue.

2011

Intellectual Property Initiatives

2012 2013 2014 2015 (FY)

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 thecreation of a sustainable society. We develop innovativetechnologies by highly expert engineers; refine ourproprietary technologies to expand practical applications
through demonstration experiments, analysis andevaluation; and conduct basic research and investigate
new technologies.

The Intellectual Property Department responsibly manages
intellectual property in accordance with our established rules.
To strengthen our oversight and utilization of intellectual
property, a liaison person is assigned to each business division
to identify intellectual property from activities being undertaken
to improve construction methods and share informationfrom meetings with intellectual property officials across theCompany. We also 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
for employees in their third and seventh years. By sharing
information and implementing regular training and education,
we are working to enhance awareness in order to protect ourown technology and ensure that we do not infringe upon theintellectual property rights of other companies.

R&D technology map
Environmental Systems Business

Facilities Construction Business

Energy-saving control
Biological treatment without
aeration

Energy-saving aeration

Thermal storage technology

Machinery Systems Business

Snow engineering

Water atomizing technology

Resource-saving equipment

Heat recovery and reuse

Thermal stratification
technology

Energy-saving equipment

Labor-saving equipment

Material handling technology

Biomass technology
Waste heat power generation technology
Heat transfer technology

Waste incineration technology

Sludge concentration anddehydration

Individual lighting control

Measurement and analysis
technology

Localized air conditioning

FA systems technology

Sludge incineration technology

Heat source control technology

Central monitoring technology

Information communication
technology

AGV technology

Analysis and diagnosis technology
Higher functionality
and quality

36

2013

1.1
1.0

• Redevelopment of Yamato
Engineering Center area
• Maintenance and managementof portfolio assets• Raised revenues from building
stock-based business byaccumulating leasing operations• Disposal of non-performing
assetsEnergy conservation
and resource conservation

In the Real Estate Business, net sales rose 19.3% fromthe previous fiscal year to ¥1,532 million. The higher
net sales were due to a change in October 2014 in the
management structure of a commercial complex owned
by Sanki Engineering accompanied by a change in thename of the complex from “LaLaport Moriyama” to“Molive,” which boosted net sales throughout the year.
Also, we began leasing the former site of our dormitory
for unmarried employees in Haneda, Tokyo, as a parking
lot and renting out apartments that were formerly usedas employee housing on the open market, which also
had the effect of raising net sales.
In the office leasing market of the Japanese realestate sector, vacancy rates have continued to improveamid strong demand in the Tokyo metropolitan area andlimited supply of new space. Vacancy rates have also
remained comparatively steady in the outlying regions.
Meanwhile, in building facilities we continue to see a
prominent need for energy and resource conservation,
extending the life of aging buildings and achieving
longer life for facilities.
Under these circumstances, we enhanced the
comfort of visitors to our commercial complex in fiscal
2015 by making detailed repairs, upgrading the air
conditioning unit and fixing the parking lot pavement.
With regard to the Sanki Yamato Building, we began

2012

1.0

Using an open innovation platform of collaboration among
business divisions centered on our Technical Research& Development Institute, we conduct research anddevelopment for new technologies, refine proprietary
technologies, pursue higher quality, conduct basic
research and investigate new technologies. As part of
the Sanki Techno Center (tentative name) project, which
is proceeding under our medium-term management plan,we will update the Technical Research & Development
Institute to generate additional synergies.

• Refinement and application
development for proprietary
technologies• Promotion of higher quality• Pursuit of energy conservation• Investigation of newtechnologies and R&D

1.4

2.7

Business Report

1,532

R&D activities(billions of yen)

Basic strategy for FY2016

million yen

R&D System• R&D Expenditures

Simulation technology

High-efficiency aeration
Membrane processing
technology

Nitrogen and phosphorous
removal technology

Comfortable air conditioning
technology

Antibacterial and sterilization
technology

Pressure control technology

Air purifying technology

Air quality control

Specialized environmental
technology

Exhaust gas treatment technology

Robot utilization technology

High-speed sorting technology

Aging room technology
Special-purpose functional conveyors
Clean conveyance technology

SANKI REPORT 201637

Focus

HVAC heat source optimization system, real time, all the time®

EcoSearcher
Value provided by
Sanki Engineering• Saves about 10% more energy than conventional optimization systems through real-time
calculations based on actual measured values• Offers versatile connectivity including compatibility with existing systems and choice of
optimization range

Features• Real-time optimization through the simultaneous control of four units to minimize energy consumption• Highly accurate optimization based on measured values during operation instead of advance estimates (patent pending)• Energy management system for analyzing collected datafor use by the controller
EcoSearcher ®
S-Cloud®

Real-time
optimization
controller

EMS server
Surveillance

Data collection
deviceINV

INV

Primary chilledwater pump

INV

Chilled water supply
temperature
FM

VOICE

Nurturing resourceful personnel to take on challenges in pursuitof quality, and harnessing our total technological capabilities tocreate solutions for diverse needs
I began working as general manager of theTechnical Research & Development Institutein April 2016. I am resolved to fulfill my role,
making full use of the experiences I havegained as an engineer to further enhance ourdevelopment capabilities.
Our customers require responses that are
tailored to the different specifications they havefor each project. The “Sanki spirit” is embodiedin our total technological capabilities, whichallow us to meet diverse customer needs
by creating solutions through the synergies
of various fields, including construction,
electrical engineering, ICT, conveyance andenvironmental engineering. The nurturing ofresourceful personnel who can create better
solutions by combining knowledge withwisdom then becomes even more important.
For this reason, we will focus on honing thetechnical skills of each individual researcher
during the first three years of our new medium-

38

SANKI REPORT 2016

Visualization

User PC

INV

Cooling water pump

SanBACS® EMS (Sanki Engineering’s
BMS trademark)RouterRemote I/O

Cooling tower fan(Sanki Engineering’s
cloud trademark)INVIn January 2016, we announced the EcoSearcher forminimizing the overall energy consumption of HVAC
heat sources by calculating target values for each unit
in real time. Unlike conventional optimization methods
based on advance estimates, measured values are used
to calculate the optimal values at any given moment,
thereby enhancing the accuracy of calculations andexpanding control functions. Our test calculations showthat EcoSearcher® can save approximately 30% moreenergy compared to not using any optimization measuresand approximately 10% more energy compared toconventional optimization methods.

Optimization calculation

INV®

term management plan. We will boldly takeon the challenges posed by emerging needs
and technologies in pursuit of quality worthyof customer trust. To do this, we will seek tobolster our foundational research and broaden
our perspective by taking full advantage
of discussion forums such as conference
presentations and internal briefings as well as
proposals to customers that incorporate theconfirmation and improvement of results andeffects.
Our greatest mission as a company with astrength in facilities is to contribute to energy
conservation and a low-carbon society, amission that we have pursued for over 90 years
since our founding. In addition, we will employ
new technologies such as ICT, AI and robots,
which have recently attained commercial
applicability, to produce even better results forcustomers over the coming years.

Kazuaki Iijima
Executive Officer, General Manager
of Technical Research & Development
Institute

CSR Report
SANKI REPORT 201639

Management

Corporate Governance

Basic Philosophy

Establishment of the Corporate
Governance Guidelines
We 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.

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.

40

SANKI REPORT 2016

Main Measures for Strengthening theGovernance System
Self-evaluation by the Board of Directors
To enhance the effectiveness of the Board of Directors,
in fiscal 2016 we created an opportunity for the board
to verify its deliberation process and annually identify
areas of improvement, to analyze and evaluate the overall
effectiveness of the board and utilize the results to improve
future operations. We will disclose a summary of theevaluation results.
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 external officers is held once
every quarter to openly exchange views and necessary
information and to develop a common awareness of issues.
Training for Officers
We provide directors and auditors, when they are appointed,
with 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.

• 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 a longterm incentive

Elements and procedures for remuneration for directors and auditors
Category

Fixed
remuneration

Bonus

Stock options

Full-time
director◯◯◯

Part-time
director◯––

Full-time
auditor◯◯–

Part-time
auditor

◯Procedure
Decided by the Boardof Directors following
deliberation by theAdvisory Committee
on Nomination andRemuneration

Decided by consultation
among auditors––

Remuneration for directors and auditors (fiscal 2015)
Category

Number of persons
receiving payment

Total amount of
payment

Directors(external directors)

10(2)¥282,809,000(¥18,480,000)

Auditors(external auditors)

4(2)¥79,920,000(¥18,480,000)

Internal Controls
Basic policy and systems for internal controls
Sanki Engineering adopted its Basic Policy on Internal
Financial Control at a meeting of the Board of Directors
in May 2006 to set up a system of internal controls for
ensuring the legality, soundness and transparency of its
management. Since then, we have sought to establish
and manage the system in accordance with the policies
adopted by the Board of Directors by continuously revising
this policy as necessary.
In May 2015, we revised the Basic Policy on Internal
Financial Control in response to the revision in the
Companies Act to establish a system that enables SankiEngineering to supervise its subsidiaries and improve thefunctionality of the system of auditing conducted by its
auditors.
We strive to increase the effectiveness of our internal
controls by strengthening various systems. As a systemfor ensuring effective auditing by auditors, the auditors
exchange opinions with the president, accounting
auditors and the Internal Audit Department, and the fulltime auditors attend important meetings such as theManagement Meeting, Risk Management Committee
and meetings of executive officers to confirm theoperating status of the internal controls system. We alsoorganize exchanges of views between the auditors at
Sanki Engineering and the presidents of subsidiaries toreinforce effective control over subsidiaries. Furthermore,
the Internal Audit Department confirms the status of risk
management at each division through regular internal
audits to verify the adequacy of our risk management.

CSR Report

The Sanki Engineering Group conducts managementwith the goal of contributing to society throughengineering, communicating with our shareholders andother stakeholders, and engaging in business activities
that make us a company both valued and trusted by thecommunity. We believe the key management challenge
for attaining this goal is to build on a foundation ofthorough compliance in order to establish a corporate
structure that enhances our performance by raising
management efficiency.

Strengthening the Governance System
We are strengthening our system in line with the SankiEngineering Corporate Governance Guidelines to realize
effective corporate governance.

Ensuring the reliability of financial reporting
We have established an Internal Finance Control
Committee to conduct our financial reporting in accordancewith the internal control framework stipulated by the
Financial Services Agency standards and are seeking tobolster this system. Moreover, we are promoting theestablishment and appropriate management of an internal
control system to safeguard the reliability of our financial
reporting by having the committee deliberate on theassessment and response with respect to the financial
risks within each department and subsidiary. Under thesystem, a report is produced to ensure that internal
controls related to financial reporting are being exercised
effectively. In the report for fiscal 2015, auditors expressed
their opinion that our financial reports have been presented
in an appropriate manner in all material aspects.

SANKI REPORT 201641

Executives of the Sanki Engineering Group (As of June 29, 2016)

Framework of the Corporate Governance System (As of June 29, 2016)
General Shareholders’ Meeting
Appointment/Dismissal

Appointment/Dismissal

Business auditing
Accounting auditing

Appointment/Dismissal
Accounting auditing

Board of Directors

Accounting Auditors

Of eight directors, two 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

Corporate Ethics Committee
Internal Finance Control Committee

Policy Meeting

ReportAdvisory Committee on
Nomination and Remuneration
ReportingElection, dismissaland supervision

Leadership andsupervision

Risk Management Committee
Executive Officer Committee

Appointment to/removalfrom office

President and Representative Director

Management Meeting
Discussion, andreporting onimportant matters
Executive Officers (30 including the president
and representative director)
Leadership and supervision

Monitoring, guidance, support and education

Board of Directors
The Board of Directors meets at least once a month in order to deliberate on
important matters and supervise the status of execution of business affairs.
Thirteen meetings of the board were convened in fiscal 2015.
Management Meeting
The meeting consists of directors and executive officers nominated by the president
and meets weekly to deliberate on important matters, including those to be
discussed by the Board of Directors. Fifty meetings were convened in fiscal 2015.
Policy Meeting
Risk Management Committee: See page 48.
Executive Officer Committee
Made up of executive officers, the committee meets at least once every threemonths to discuss the policies expressed by the president and executive
officers responsible for departments and to report on the status of businessexecution by each executive officer.
Corporate Ethics Committee
The president serves as the chairperson and nominates executive officers
as officers responsible for corporate ethics, who oversee all matters related
to corporate ethics through this committee. The committee is made up of
executive officers, heads of divisions and the presidents of branches andbranch offices, and the CSR Promotion Division functions as the secretariat.
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.

SANKI REPORT 2016

ReportingInternal Audit Department

Auditing

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

Business Execution System

42

CSR Report

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

Internal Finance Control Committee
Chaired by the president, this committee’s central role is Group-wide
control, including review and decision-making concerning importantmatters regarding internal controls for financial reporting.
Advisory Committee on Nomination and Remuneration
The committee mainly consists of the president and external directors
and deliberates on matters including the nomination of candidates for
directors and auditors and system and level of remuneration.

Auditing System
Board of Company Auditors
Convening at least six times a year, the auditors attend board meetings andother important meetings and offer opinions as necessary. The board conducts
accounting auditing and business auditing activities in cooperation with theaccounting auditors, the Internal Audit Department, and the Internal Controls
Departments. In June 2012, a supplementary external auditor was appointed
to fill potential future vacancies in the board.

Full-time Auditor

Director

Director

Director

Director

Full-time Auditor

Masato Komura

Takashi Motomatsu

Nobuo Kumura

Hidemi Fujii

Yoshio Kawabe

Hirotoshi Fukui

External Auditor

External Director

Representative
Representative
Director and President Director and Chairman

Takeo Inokuchi

Hiroki Nishio

Tsutomu Hasegawa

Representative Director

Chairman

Director

Takuichi Kajiura

External Director

External Director

External Auditor

Yukiteru Yamamoto

Makoto Nukaga

Mamoru Norisada

Tsutomu Hasegawa

Senior Executive Officer, and General Manager, CSR Promotion DivisionNobuo Kumura

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

Hidemi Fujii

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

Takashi Motomatsu

Executive Officer, and General Manager, Administration Division

Yoshio Kawabe

External Director

Internal Audit Department
This department conducts internal audits of the operations of each of
the Company’s business divisions in accordance with the Auditing Planfor that fiscal year. It verifies the internal management system including
its appropriateness and efficiency. As necessary, the Internal Auditing
Department exchanges opinions with or makes proposals concerning theimprovement or correction of a problem to the internal controls departmentsof the Administration Division and other divisions. The department reports
the results of its audits to the president, responsible executive officers andauditors.

Takuichi Kajiura

President

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 201643

Management

Compliance

Basic Philosophy

Reference

Compliance Reference Documents

PP. 46 and 47

Compliance 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.

Compliance Promotion Activities
Corporate ethics hotlines (whistleblowing system)
We have set up corporate ethics hotlines both within
and outside the Company. The internal hotline goes to
the CSR Promotion Division, while the external hotline
goes to our consulting attorney’s office. We act withhaste to resolve the issues that are reported, withconsideration for the protection of anyone seeking
consultation or providing information. All of the reported
information is presented to the executives responsible
for corporate ethics, and important information isreported to the Management Meeting. In fiscal 2015,
there were nine reported incidents (seven internally andtwo externally), and all incidents have been appropriately
handled. We are also distributing a corporate ethics
hotline card in order to raise awareness of this systemthroughout the entire Group.
In addition, we began operating a new Fair Trade
Hotline in January 2016.

44

SANKI REPORT 2016

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 using the e-Learning method.
There were no serious compliance violations, suchas illegal acts, unethical behavior or unfair practices, infiscal 2015.
Number of persons submitting complianceconfirmation sheets (fiscal 2016)
Sanki Engineering(relevant employees)

Subsidiaries(relevant employees)

Compliance confirmation
sheets concerning
performance of duties

32

(32)

23

Compliance confirmation
sheets

1,895(1,933)(23)363 (369)• 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.

Corporate ethics training
Sanki Engineering conducts corporate ethics training ona regular basis in order to ensure thorough compliancewith the Code of Conduct and Action Guidelines.
Results of corporate ethics training (fiscal 2015)
CourseCorporateethicstraining

Theme
Respect for diversity—
Creating a working
environment in which
individuals can shine

TargetFrequency andparticipationGroupemployees

33 times
2,324 employees

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 eliminate
any harassment by consistently carrying out preventive
education through corporate ethics training and division
training.

Results of questionnaire regarding complianceawareness for 2016
Survey period: April and May, 2016
Participants: All Group executive officers and employees

Q. Do you think Company initiatives concerningcompliance are adequate?
Yes

Fiscal 2015

83.4%

Fiscal 2016

82.0%

Q. Do you know about the Fair Trade Hotline?
Yes

No

No response

97.1%

2.4%

0.5%

Compliance Audit
The Internal Audit Department conducts internal audits
and seeks to strengthen compliance by providing
guidance on legal compliance and through monitoring.
In fiscal 2015, internal audits were carried out at 25
worksites including those of 7 subsidiaries. In addition,
to raise awareness at our construction sites, we
conduct onsite hearings with site managers to gaina better understanding of the situation.

Strengthening Anti-Monopoly Act
Compliance
Breach of the Anti-Monopoly Act in the Hokuriku
Shinkansen construction project
Sanki Engineering breached the Anti-Monopoly Act
in bidding for the Hokuriku Shinkansen construction
project, for which the Company was subject to an onsite
inspection by the Japan Fair Trade Commission in 2013.
In order to regain society’s trust, we are steadfastly andthoroughly enforcing measures to prevent recurrence.
Measures taken in a continuing effort to prevent
recurrence
The following are major measures we have been
undertaking up to fiscal 2015.

Measures carried out in fiscal 2013
to prevent recurrence• Formulated the Sanki Engineering Group Compliance Declaration andSanki Engineering Group Behavioral Standards.
• Held special training on corporate ethics for all executive officers andemployees of the Group and submitted a pledge outlining compliancewith the act.
• Distributed the Compliance Handbook to all executive officers andemployees of the Group in order to boost awareness and informed
them again of the compliance whistleblowing system.
• Assigned a compliance manager to each operational department.

Measures carried out in fiscal 2014
to prevent recurrence• Established a comprehensive, Group-wide Anti-Monopoly Act
Compliance Program at a meeting of the Board of Directors, andimplemented the program.
• Assigned a compliance manager in each department and began
supervising the process for deciding on the bid amount and operating acompulsory system of advance approval and reporting when attendinga meeting with any companies in the same industry.
• Introduced regular rotations for sales staff assignments.
• Issued an Anti-Monopoly Act Compliance Manual.
• Established a Compliance Risk Subcommittee within the Risk
Management Committee to prevent risks from materializing.
• Clearly stipulated breaches of laws such as the Anti-Monopoly Act as
grounds for disciplinary action.
• Top management visited all business bases to hold special corporate
ethics training sessions using the Anti-Monopoly Act Compliance
Manual through direct exchange with all of the Group’s executives andemployees. A total of 2,098 participants attended 47 sessions from
November 2014 to February 2015.
• Reconsidered membership in outside groups.

CSR Report

The Sanki Engineering Group strives to maintainlegally compliant behavior based on corporate ethics
across all aspects of its operations by upholding the
Sanki Engineering Group Code of Conduct and Action
Guidelines, the Sanki Engineering Group ComplianceDeclaration and the Sanki Engineering Group Behavioral
Standards.

Receipt of Compliance Confirmation Sheetsfrom all Executives and Employees

Measures carried out in fiscal 2015
to prevent recurrence• Utilized e-learning to instill a thorough awareness of Anti-Monopoly
Act compliance.
• Ensured a thorough awareness of the content of cease and desist
orders among 2,023 Group employees of Sanki Engineering and 533
employees of subsidiaries.
• Conducted training for sales staff. A total of 3 sessions were held,
and all 199 targeted staff attended. New sales staff study this issue
through e-learning immediately they have been assigned.
• Began an in-house leniency system (voluntary reporting system).
Organized a system for voluntary reporting by officers and employees
using a dedicated hotline. Carried out the following measures toensure the effectiveness of system operation.
(1) Establishment of the Fair Trade Hotline(2) The Internal Audit Department of the CSR Promotion Division
conducts an annual audit of the reporting system and reports its
findings to the president, general manager of the CSR Promotion
Division and a full-time auditor.
(3) The CSR Promotion Division monitors the situation throughthe corporate ethics survey and submits a status report to theManagement Meeting.
(4) When the system is determined to not be functioning based on the
results of auditing and monitoring, the CSR Promotion Division willpromptly revise it.

We will continue to exert a Group-wide effort in
fiscal 2016 to prevent any recurrence in violationsof the Anti-Monopoly Act. At the same time, we will
move beyond simply implementing the measures toappropriately providing feedback in order to improve theactivities.

SANKI REPORT 201645

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

Sanki Engineering Group Compliance Declaration
Formulated: October 21, 2013

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 Behavioral Standards
Formulated: October 21, 2013

Sanki Engineering Group Behavioral Standards
Formulated: October 21, 2013
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.
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 2016

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 (corporate ethics 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 January 1, 2010.
Additional clause: These standards shall be implemented as of
October 21, 2013.

The Sanki Engineering Group’s Code of Conduct and Action Guidelines
Formulated on December 1, 2002
Revised on May 1, 2012
Revised again on June 2, 2014
(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 sexual harassment and power harassment from the workplace, andwe 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.

CSR Report

In order to never again cause reason for suspicion of abreach of compliance, we have formulated the SankiEngineering Group Compliance Declaration and the
Sanki Engineering Group Behavioral Standards to ensurethat business activities adhere to behavioral norms
and guidelines based on compliance with laws andregulations and corporate ethics, throughout the Groupand across all businesses.

Management of company finances
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.
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, and recycling.
 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 201647

Management

Risk Management

Risk Management Policy and System
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 achieving our business goals and prevent suchrisks from materializing, and also to minimize loss in thecase that it does occur.
We have set up a 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 theGroup, formulate control plans, and monitor risk reported
from subcommittees and divisions. To enhance theeffectiveness of our risk assessment and control, we
have set up risk management subcommittees to address
specific risks under the Risk Management Committee.
In addition, the Internal Audit Department conducts
regular audits to check the status of risk management
at each division and verify the appropriateness of risk
management.

Major countermeasures carried out in fiscal 2015

Risk Management Activities
Each fiscal year, the Risk Management Committee
identifies risks that affect business activities and conducts
a risk assessment based on frequency of occurrence and

Risk

Countermeasures

Information security• Revise the Guidelines for Information Security
Countermeasures in response to reinforcing
information security countermeasures• Bolster measures for employees of subcontractors• Hold a simulation drill for handling targeted email
attacks (including subsidiaries)

Credit• Monitor and controlled credit risks related tocustomers and suppliers

Business continuity
plan (BCP)• Integrate the BCPs of Group companies to establish
a BCP for the Sanki Engineering Group• Disaster prevention education through e-learning

Overseas• Expand the scope of risks to be addressed, andrevised and issued the Overseas Crisis Management
Manual and Overseas Safety Measures ManualCompliance• Hold corporate ethics training

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

48

SANKI REPORT 2016

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

ReportMonitorInformation security risk

MonitorCommittees and Management System
Central Disaster Countermeasures Committee

Credit risk

Corporate Ethics Committee

Operational risk

Internal Finance Control Committee

Overseas risk

Management review of EMS and QMS

Compliance risk

Central Safety and Health Committee

Responding to Disaster Risks throughthe BCPThe Sanki Engineering Group’s business continuity plan
(BCP) aims to ensure the safety of all related persons,
including employees, based on the integrated effortof all divisions and employees. The Company has also
formulated a framework to contribute to customers
and society through swift business restoration incollaboration with business partners. We continuously
conduct drills and develop internal systems andprocedures (system maintenance starting under ordinary
conditions and clarification of behavioral standards
and division of roles in a disaster) so that restoration
activities can be implemented more promptly.
In fiscal 2015, we created an action plan to enhancethe effectiveness of our BCP. We also organizede-learning courseware to raise employee awarenessof disaster prevention at Group companies. Looking
ahead, we will develop closer collaboration between
Sanki Engineering and its subsidiaries by constructing
an effective BCP and carrying out joint training as part ofGroup BCP activities.

Strengthening Risk Management inOverseas Operations
Consistently 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, overseas business trippers and theirfamilies) in 2014, which are revised each year.
The Risk Management Manual for Overseas
Operations stipulates rules and response procedures forcrises that could occur in foreign countries. The manualwas revised due to an expansion of the scope of area
covered, from preventing physical harm to overseas
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 requiredin 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

CSR Report

impact on management. The committee receives reports
from the risk management subcommittees to monitor
risks and consider necessary countermeasures, provides
instructions and confirms the status of progress. Since
fiscal 2015, we have been pursuing initiatives particularly
focused on preventive measures. We are specificallyemphasizing items on our risk management list related
to preventive management and confirming preventive
measures for addressing each risk.
The Risk Management Committee convened fourtimes in fiscal 2015 to assess the impact of eachrisk in order to prevent their occurrence, discusscountermeasures and confirm progress.

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.
In fiscal 2015, we held two subcommittee meetings toreinforce our countermeasures for information security
risks by implementing actions focused on stringently
managing information devices, such as clarifying
standards for installing security cables to external
HDDs, strengthening security passwords for PC logins
and conducting regular audits. As part of our activities
to develop our management system, we began using
checklists to confirm the status of information security
measures during internal audits and on-site inspections
by supervisors at each branch.
Key information security measures
Type

Actions

Dissemination 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 on-site 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 understanding among Group employees using
guidelines• Improving level of security regarding social media

SANKI REPORT 201649

Management

CSR Management

Response to ESG Issues in Value Chain

Major Action Policies and Results for Fiscal 2015 and Major Action Policies for Fiscal 2016
Fiscal 2015
Important Issues
Major Action Policies

Customers
Value chain and stakeholders

Value chain

Key stakeholders

Key response themes◦Customers ◦Partners/business partners ◦Employees• Universities• Research institutions• Architect offices

Customers (builders)
Procurement

Maintenanceandinspection

Business partners

factories
distribution centersdata centers
test/research facilities
schools
water supply anddrainage disposal plants
waste disposal facility sites

Repair andrenewalInformation disclosure/
Fiduciary responsibility◦◦Fair and transparent transaction on
an equal footing◦Supply-chain management• Material/machinery
manufacturers• General contractors• Sub-construction
company

Business partners• Building maintenancecompanies

Business partners

Employees

Construction
andproduction

Business partners

Office buildings
hospitals
financial institutions
hotelscommercial facilities
airports◦◦Reduction of life-cycle
cost◦◦Improvement ofenvironmental
efficiency◦◦Reduction ofenvironmental impact◦Energy saving◦Reduction of CO2
emissions◦Quality improvement◦Technical ability
improvement◦Safety first

Recruitment◦Equal opportunity◦Securing of diversity• Thoroughly ensure equal, fair andtransparent transactions

Health and Safety
at Worksites

Safety and health◦Safety first◦Promotion of health

Employees

Environment

Information disclosure/Compliance

Local community

Governments/Administrative organs• Promote diversity• Develop and appropriately allocate
human resources• Create a comfortable working
environment• Protect the global environmentby means of our exceptional
technological capability• Minimize the environmental impact
caused by our business activities

SANKI REPORT 2016

Problems and complaints during
construction: set annual target

Problems and complaints during
construction: accomplished target○

Problems and complaints during
construction: reduce number ofoccurrences per year○

Training for new employees: extend
duration to 4.5 months
Training for construction
management: increase number ofdays on which course is held

Strengthen training for construction
426 participants (cumulative total)management

Enhance two-way communication

Aggregate total of companies withwhich individual meetings were held:
25○

Expand opportunities for dialog withindividual investors

Provide consistent, steady returns toshareholders

Consolidated payout ratio for the year
ended March 31, 2016: 35.8%○

Provide consistent, steady returns toshareholders

Strengthen supervision over fair andproper transactions

Training for procurement staff:
4 sessions○

Continue training for procurement staff

Expanded scope of participation for
nationwide Liaison Meeting
Participants: 18 companies○

Strengthen cooperation throughsubcontractor groups◎

Strengthen relationships throughan awards program aimed atenhancing quality and technology○

Deploying preventive measures tocoincide with the timing of past
accidents

Strengthen cooperation throughDeploying measures against the two
major categories of accidents

Strengthened educational activities
such as distributing “Accident Case
Studies”○

Deploying preventive measures basedon the type of accident

Skill improvement through training

Implemented onsite training,
including special training on
scaffolding○

Enhancing knowledge andcapabilities through education

Promote diversity

Formulated the Action Plan basedon the Act of Promotion of Women’sParticipation and Advancement in the
Workplace, and carried out training
programs on diversity○

Enhance training programs to develop
human resources with the Sanki spirit

Consider and promote measures toaddress long working hours

Launched the “Smile Project” and held
subcommittee conferences◎

Implement measures outlined in the“Smile Project”

Actual orders for CO2 reductions: 200
Providing products and services to help
projects; CO2 reductions: 19,607 t-CO2/
reduce CO2 emissions of customers
year○

Providing products and services to help
reduce CO2 emissions of customers

Properly dispose and reduce industrial
waste

Began aggregating data on industrial
waste
Promoted onsite sorting activities○

Properly dispose industrial waste

Regional disaster prevention

Carried out activities under thelarge-scale disaster agreement
between Yamato City and the Yamato
Engineering Center◯

Regional disaster prevention

Group-wide activities carried out at
more than 30 locations○

Conservation of the local environment

Offered 9 social study tours for a
total of 443 students○

Supporting the development of thenext generation

Supporting the development of thenext generation

NGO/NPO and civic groups

Distinction under the Sanki Super
Meister System given to 13
individuals, and Sanki Best Partner
Award given to 124 companies
Two major categories of accidents
declined by half, with “caught/
pinched” accidents dropping slightly
from 7 to 5 incidents.

ReportPages

PP. 52–54

P. 55

Implementing preventive measuresagainst recurrent accidents• Coordination with local communities• Contribution to society as aConservation of the local environment
corporate citizen

Self-evaluation

50

Nationwide development of SiteDocumentation Support Centers

Dialog and collaboration

Local
Communities

Shareholders/Investors◎

Strengthen relationships throughan awards program aimed atenhancing quality and technology

Working environment◦Respect for humanrights◦Prevention ofharassment◦Support for active
participation by
women◦Promotion of worklife balance

Major Action Policies

Total number of requests: 1,379
Rate of utilization by targeted sites:over 70%

with business partners• Rising demand in the constructionindustry• Shortage of construction workers,
and the aging and shrinking of theskilled workforce• Growing risk of work accidents due
to overworked laborers or lack ofexperience

Fiscal 2016

Establish a site support systemthrough the Site-Documentation
Support Center

Business Partners • Improve quality through cooperation subcontractor groups

Fostering andevaluation◦Providing
opportunities◦Capacity building◦Fair evaluation◦Proper wage

• Cooperating construction
company

Environmental preservation/
Participation in local community

Shareholders andInvestors• Timely and appropriate information
disclosure• Shareholder return◦◦Sophistication and diversity of needs◦◦Using technologies to solve social problems◦Development, possession and management oftechnologies◦Industry-University cooperation

Partners

Planning,
design and
R&D• More effectively respond toincreasingly sophisticated anddiversified customer needs• Enhance the accuracy of quality
management• Improve construction quality andpass on technologies

Major Results

Selfevaluation

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.

PP. 56,57

PP. 58,59

PP. 60–63

PP. 64–68

PP. 69,70◎ Achieved, and we exceeded the goal ◯ Almost achieved as planned △ Not achieved, and issues remain unresolved

SANKI REPORT 2016

51

Relationship with Customers

Important Issues

Total number of requests: 1,379
Rate of utilization by targeted sites:over 70%

Nationwide development of SiteDocumentation Support Centers

Problems and complaints during
construction: set annual target

Problems and complaints during
construction: accomplished target

Problems and complaints during
construction: reduce number ofoccurrences per year

Strengthen training for construction
management426 participants (cumulative total)

Training for new employees: extend duration to 4.5 months
Training for construction management: increase
number of days on which course is held

In fiscal 2015, we narrowed down our target customers
to streamline operations. Since April 2016, we havestrengthened the functions of our sales organization
at the head office by integrating operations to boost
sales management, planning, development, supportand sales capabilities related to the construction
facilities business. By honing our proposal-making
capabilities based on our total engineering competency,
we will strive to continue responding to increasingly
sophisticated and diversified customer needs andthereby continue to earn their trust and appreciation.

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.
Exhibition participation in fiscal 2015

52

Exhibited productsInterphex Japan

CPCube, Wide Area Clean System, AGV, continuous
heat sterilization apparatus, presentation booths forpharmaceuticals and regenerative medicine

Sewage Works
Exhibition

Supercharged fluidized bed incinerator, AEROWING,
SANDEC G3, report on Antarctica

Health Ingredientsand Safety &Technology Japan

Self-washing belt conveyor, chilled food conveyor, highluminance multicolor LED conveyor

Data Center Expo

Front Air, white data center, L-LAC, Package Fog

HOSPEXMEDIFORT, AGV, continuous heat sterilization apparatus,presentation booths related to hospital facilities

ENEX

Proposals for energy-saving measures and presentationof case studies, Eco Searcher, periloop, Trans Heat
containers, energy-saving belt conveyors for logistics
operations, AEROSTRIPJFMA FORUM

SSOM, facility management

SANKI REPORT 2016

Major Action Policies for Fiscal 2016

Establish a site support systemthrough the Site-Documentation
Support Center

Responses to Sophisticated and Diverse
Customer Needs

Exhibition

Major Results for Fiscal 2015

Initiatives to Ensure Quality
Philosophy on quality and the quality management
system
Our facilities construction, machinery systems andenvironmental systems divisions have obtained
ISO 9001 certification, and we conduct quality
management on the basis of this standard. By
promoting effective quality management and continuous
operational improvements based on the specific quality
policies for each division, we have been able to ensure
the provision of high-quality products and technicalservices and deliver greater customer satisfaction.
In the external audit conducted in fiscal 2015, wewere particularly commended for our Company-wide
effort to enhance customer satisfaction, establish aworksite support structure and improve convenience inour workplace through the use of IT. We will continue
to advance quality management in accordance with the2015 edition of the ISO 9001 standard.
Quality management activities
To seek improvements that are closely linked to ouroperations, we are promoting activities for raising
construction quality by returning to the basics of the
ISO standards.
In fiscal 2015, we reduced the on-site workload bysimplifying the evaluation method for our subcontractors
and developing some unified documentation formats.
We created a working environment that allows on-sitemanagers to focus more closely on their tasks, which inturn has enhanced customer satisfaction.
In fiscal 2016, we reviewed the quality management
activities of the previous year and formulated theCompany-wide QMS Action Policy. We will strive toimprove communication as part of this policy, placing
particular emphasis on gathering opinions from theworksite through the internal quality audit and utilizing
the feedback to raise operational efficiency toward

more closely aligning our management system with ouroperations.
Providing operational support for worksites
In fiscal 2015, we established the Site-Documentation
Support Center, which processes administrative
tasks such as preparing documents and making CAD
drawings, to reduce the workload of site managers
and secure as much time as possible for construction
management and quality management. Also, webegan providing support for the worksites of the Tokyo
branch and received 1,379 requests with over 70%of the targeted sites making use of the center. We
publicized the center through activities such as visits
to each site, which resulted in increasing the numberof both first-time requests and repeat requests fromthe same worksite during the second half of the fiscal
year, thus further reducing on-site workload. We started
developing Site-Documentation Support Centers acrossthe country in April 2016 to give a further boost to the
support structure. Specifically, we have been directly
supporting five branch offices, while sharing informationon the content of support among support staff assigned
by each branch office in order to comprehensively
enhance operational efficiency across the Company.
Quality management activities by technical experts
We continue to manage a Technical Expert System,
in which persons with high technical skills and branchor branch office managers visit worksites to do suchwork as construction audits or quality reviews toprevent problems and complaints while also mentoring
junior employees. To achieve our fiscal 2015 target ofstrengthening our response to problems or complaints,
we worked on promptly dispatching staff to sites andthoroughly disseminating information through thehorizontal distribution of technical memos for sharing
information. As of April 1, 2016, 24 people, including
5 Quality Assurance Administrators and 19 technicalexperts, have been providing on-the-job training andmaking quality improvements at these sites. The
superiority of our total engineering competency has
been more effectively exercised at the worksites by
establishing a consistent quality management system
led by the Quality Assurance Administrator Office.
Sharing information and preventing the recurrenceof problems and complaints
We share our quality-related experiences across theCompany through technical documents (manuals,
information and memos) to prevent incidents orcomplaints related to quality from occurring or, in theevent that they do occur, quickly and effectively handle
them.
Information about problems and complaints are
distributed to construction engineers through a flash
bulletin, the “weekly bulletin” (a meeting held once aweek to evaluate problems and complaints), and the“monthly bulletin,” along with updates on the causes ofissues, corrective measures and preventive measures.
In fiscal 2015, we expanded the scope of the Problems
and Claims Evaluation Committee to include Group
companies.
We monitor the number of problems and complaints
that occur during construction as a key indicatorof quality control. In fiscal 2015, we set an annual
numerical target for such incidents and successfully
achieved the target. This improvement is attributed tothe enhanced audits and instructions at the key initiative
sites and to a more extensive, horizontal sharing of
information through the wider distribution of bulletins.

CSR Report• More effectively respond toincreasingly sophisticatedand diversified customer
needs• Enhance the accuracy ofquality management• Improve construction quality
and pass on technologies

Major Action Policies for Fiscal 2015

VOICE
My top priority for customer
satisfaction as someone
engaged in manufacturing
Kazuhiko Yokota
Quality Assurance
Administrator, Technical
Administration Division

As the Quality Assurance Administrator supervising
the Company’s construction facilities design andconstruction engineering, my work includes conducting
technical patrols and construction audits at ourconstruction sites. Each worksite undergoes at least
three construction audits. We start by identifying theissues and thoroughly checking construction quality andperformance. Our sites vary from locations that handle
specialized techniques to others that take on evengreater challenges, and junior employees are placed incharge depending on the circumstances. Therefore, myjob also involves following up on on-the-job training forthese employees. We hope to pass on our technologies
by working together with the goal of developing ourtechnological capabilities and on-site performance. As
someone engaged in manufacturing, my top priority iscustomer satisfaction, and I strive to consistently offer
reliable results by paying close attention to performanceas well as ease of operation and maintenance.

SANKI REPORT 2016

53

Relationship with Shareholders
and Investors
In fiscal 2015, we improved the speed with which
we disseminated information horizontally throughout theorganization once a problem or complaint occurred. In
fiscal 2016, we will seek to shorten the time it takes tosubmit a follow-up report on problems and complaints
by speeding up the process of identifying the causes
and planning preventive measures.

Changes in the number of personnel with quality-related qualifications(total number as of April 1 for each fiscal year)
Qualification

FY2015FY2016

89

95

1,126

1,127

Architect43

42

Facilities construction architect

210

207

Electrical engineer

165

164

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

Chief electrical engineer

3033First class instrument engineer

282

283

658

675

1,650

1,668

Fire protection engineer
Qualified managing engineer (total)
Data for FY2015 have been retroactively revised.

Action plans for fiscal 2016
We designated the enhancing of on-site support throughbetter communication as our main action policy forfiscal 2016, and we will work to develop even closer
communication between the head office and worksites while
also gathering opinions to expand the scope of support.

Fostering Human Resources to Sustain ourTechnological Level
The Technical Training Center fosters human resourcesby helping employees acquire basic skills, brush up on
their skills and attain qualifications. New employees
receive two and a half months of basic training and an
additional six months of extended on-the-job 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
and reading drawings, and responding to problems andcomplaints.
In fiscal 2016, we will extend the initial training for
new employees to four and a half months to provide a
program with enriched content. In the future, we plan toreinforce practical training as well as hands-on practiceand drills using actual machinery to enhance the skills of
our engineers.

Major human resources development activities for fiscal 2015
Initiatives

Employee training(Technical Training
Center)Initiatives forpassing ontechnology

Initiatives forGroup companies
and subcontractors

54

Training

Details of training

Results

Important Issues• Timely and appropriate
information disclosure• Shareholder return

Major Action Policies for Fiscal 2015

Major Results for Fiscal 2015

Major Action Policies for Fiscal 2016

Enhance two-way communication

Aggregate total of companies withwhich individual meetings were held:
25

Expand opportunities for dialog withindividual investors

Provide consistent, steady returns toshareholders

Consolidated payout ratio for the year
ended March 31, 2016: 35.8%

Provide consistent, steady returns toshareholders

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

Establishment of the Sanki Engineering Corporate Governance Guidelines

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.

• Education for new businesspersons, basic skills

57 participants

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

138 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 amount of practical experience and level of skills• Practical drills and practice by repetition to develop a sound grasp of skills

7 sessions
165 participants

WEB Disclosure Policy

426 participants (cumulative total)

Communication with shareholders and investors
We hold events such as results briefings for investment
analysts and institutional investors (twice a year; atotal of 84 people participated in fiscal 2015), individual
meetings as necessary in response to requests,
and tours of the Technical Research & Development
Institute. Feedback received from investors through our
IR activities is relayed to management in an effort tomaintain two-way communication.

On-the-job-training by Technical Experts• Practical on-the-job training offered by technical experts selected from all branches who
participate in on-site commencement discussions and construction audits

19 technical experts
1,749 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 internally certified qualification SankiEngineering-certified Class A Electrical Engineer.

19 subcontractors
20 participating technicians• Introduce cases at briefings and liaison meetings held at branches and branch offices

Number of sessions:Tokyo branch: 12,
Kansai branch: 3,
Chubu branch: 12,
Hokkaido branch: office: 1,
Hokuriku branch office: 7

Explanation of problems and complaints

SANKI REPORT 2016

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 on our English language website foroverseas investors.

P. 40

Training for new employees

Strengthen training on construction engineering and• Strengthen practice to enhance skills for making and reading drawings
construction management (specific components of skill- • Strengthen practical drills on case study explanation, practice and explanation
based training)• Strengthen hands-on training using machinery and facilities

CSR Report

Construction Method Improvement Award andother technical awards
We present the Construction Method Improvement
Award every year to commend our staff for theirinnovation in construction techniques at worksites.
In fiscal 2014, we had 1,161 proposals; 6 received
the Construction Method Improvement Award, and 3
received the Contribution to Customers Award.

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

Results
briefing

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 short-term
returns to shareholders in accordance with our basic
policy of shareholder return. We invest internal retained
earnings into new businesses and technologicaldevelopment to strengthen competitiveness and createa basis for business development with the objective ofcontinually boosting corporate value. For the fiscal year
ended March 2016, we paid a total dividend per shareof ¥30.0, which included a regular dividend of ¥9.0 for
the interim period, and a regular dividend of ¥9.0 and an
extra dividend of ¥12.0, totaling ¥21.0, for the full-year
period.

SANKI REPORT 2016

55

Relationship with Business Partners

Major Action Policies for Fiscal 2015

• Thoroughly ensure equal, fair
and transparent transactions• Improve quality throughcooperation with business
partners

Strengthen supervision over fair andproper transactions

Training for procurement staff:
4 sessions

Continue training for procurement
staff

Strengthen cooperation throughsubcontractor groups

Expanded scope of participation for
nationwide Liaison Meeting
Participants: 18 companies

Strengthen cooperation throughsubcontractor groups

Strengthen relationships throughan awards program aimed atenhancing quality and technology

Distinction under the Sanki Super Meister
System given to 13 individuals, and SankiBest Partner Award given to 124 companies

Strengthen relationships throughan awards program aimed atenhancing quality and technology

Basic Principle
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.

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.
Signed basic construction contracts are required
before any transactions take place. Once we havereached agreement on the conditions of an individual
contract, we scrupulously follow through on its
execution through the issuance of purchase orders
and order confirmation documents. Transactions are
based on a wide array of objective criteria, including theeffectiveness of quality and environmental management
systems, construction ability, management status,
quality, previous work performance, and cost. In fiscal
2015, contractors were the designated subject of credit
management. However, from fiscal 2016 the scope has
been expanded to include materials manufacturers andagents with the objective of constructing a sustainablesupply chain.

56

SANKI REPORT 2016

Major Results for Fiscal 2015

Major Action Policies for Fiscal 2016

Procurement system and execution of action plans
Cost reduction is an important initiative in our new
medium-term management plan, and to this end we havebeen pursuing strategic procurement activities. We set
up the Procurement Division in April 2015 to bolster our
procurement functions and are seeking to lower costs by
exercising centralized control over procurement toward
improving our profit ratio. In fiscal 2015, we achieved afurther 4.3% reduction in costs compared to our initialcost target for the technical department.
Training for procurement staff
To ensure that procurement is conducted appropriately,
we hold quarterly study groups for staff responsible for
procurement. In fiscal 2015, we sought to strengthen
their skills and knowledge through training coveringa broad range of subjects, including promoting CSR
procurement such as green procurement, and offering
practical guidance, including the use of estimate
software to reduce costs.
Handling anti-social forces
We avoid any involvement with anti-social forces inour procurement activities. Consequently, we only
conduct transactions with companies that have no
involvement with anti-social forces, and we request allof our business partners to submit a letter pledging the
avoidance of involvement with anti-social forces. As of
March 31, 2016, we received pledge letters from 3,624
companies.
Operation of whistleblowing hotlines
While we had operated a whistleblowing hotline forbusiness partners to prevent any improper transactions,
we are currently seeking to merge this into our betterknown system of corporate ethics hotlines. Posters forthe hotlines are displayed in places that catch the eyesof business partners, such as on-site offices in an effort
to promote use of the reporting system.

Strengthening Cooperation with Business
Partners

to strengthen cooperative relationships twice a year, inJune and November.

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.

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 2015, a total of 13 foremen werecertified. 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.

Joint improvement activities with the subcontractor
groupsSanki Engineering has established a subcontractor
group at each division, branch and branch office as partof our effort to enhance our construction capabilities.
In addition to monthly liaison meetings, we hold jointlabor-saving projects and sessions, providing yet
another opportunity for us to improve our technicalskills and enhance supervision of worksite safety andhealth. We also review and guide group members onsafety and health issues through training or qualification
courses led by our employees, or by conducting joint
patrols. In June 2015, we convened the second Liaison
Meeting for Subcontractor Groups. We expanded thescope of participation for this meeting to include branch
general managers and branch office general managers
in addition to representatives from the head office andregional offices. A total of 18 subcontractors gatheredfrom across the country to share information andexchange views on subjects such as worksite safety
and health. Since fiscal 2015, we have held the meeting

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 2015,
the Sanki Best Partner Award was presented to 124
companies during safety and quality conferences held
across the country starting in June 2016.
Support system for the acquisition of qualifications
To support subcontractors in upgrading their technicalskills, we subsidize the acquisition of qualifications. In
fiscal 2015, we promoted the Central Safety and HealthCommittee’s system to encourage its use.

VOICE

Creating safe worksites by combining the strengths of SankiEngineering and its subcontractors
The Sanki Health and Safety Cooperative
Association plays the vital role of conducting
activities for boosting the capabilities of
the Sanki Engineering Group as a whole.
These include raising the level of worksite
capabilities and promoting safety andhygiene. The upcoming Tokyo Olympic
and Paralympic Games present us with
opportunities for major projects, andI am convinced that in addition to theskills of Sanki employees, the capabilities
of subcontractors that constitute theoperational force on the ground will beessential in bringing the Group to a higher
level. There have been growing concerns
in recent years that the aging of artisans, a

CSR Report

Important Issues

decline in technical skills and the reduced
size of the operational force may increase
the risks of disasters and accidents related
to safety and hygiene. The association holds
seminars on safety and skills (32 sessions
are planned for fiscal 2016), making more
comfortable workplaces for young people,
and conducting safety patrols. I have worked
with Sanki Engineering since I was 18,
and through this long relationship I havegrown increasingly aware of how muchthe company values its contractors. I willcontinue working with Sanki for the thoroughmanagement of safety and to enhance
worksite capabilities through information
sharing and cooperation.

Kimio Abe
Chairman, Sanki Health and Safety
Cooperative Association
President, Kinoshita-setsubi Co., Ltd.

SANKI REPORT 201657

Health and Safety at Worksites

Major Action Policies for Fiscal 2015

Major Results for Fiscal 2015

• Rising demand in theconstruction industry• Shortage of construction
workers, and the aging
and shrinking of the skilledworkforce• Growing risk of work
accidents due to overworked
laborers or lack of experience

Deploying measures against the two
major categories of accidents

Two major categories of accidents declinedby half, with “caught/pinched” accidents
dropping slightly from 7 to 5 incidents.

Deploying preventive measures
to coincide with the timing of past
accidents

Implementing preventive measuresagainst recurrent accidents

Strengthened educational activities
such as distributing “Accident Case
Studies”

Deploying preventive measures
based on the type of accident

Skill improvement through training

Implemented onsite training,
including special training on
scaffolding

Enhancing knowledge andcapabilities through education

Health and Safety Environment of theConstruction Industry
Demand for construction in Japan has been growing
due to the economic boom fueled by Abenomics,
earthquake disaster reconstruction, and the needto address aging public and private infrastructure.
Meanwhile, the balance of labor supply and demandin this industry has been worsening because of theshrinking workforce and especially due to an aging
skilled workforce. Although a review of all industries
shows that the number of industrial work accidents inthe construction industry has remained little changed,a shortage of workers and experts can lead to a risk ofwork-related accidents. Meanwhile, a revision in Japan’s
Industrial Safety and Health Act has made it mandatory
for all workplaces employing 50 people or more to
conduct checkups of all employees for stress-related
symptoms as well as scaffolding training for employees
who handle its assembly. Sanki Engineering has been
engaged in health and safety activities that take into
account all of these changes surrounding the industry.

Health and Safety Policy and Structure
We introduced an occupational health and safety
management system (Sanki OHSMS) in 2001, one of
the first in the construction facilities industry, and havesince worked on it together with our affiliate companies.
A Company-wide health and safety activities plan isprepared based on the Health and Safety Guidelines,
which is established under the Sanki Engineering Group
Basic Health and Safety Principles every year in order toincrease transparency of our PDCA cycles, including theanalysis of risk factors and implementation of remedial
and preventive actions.

WEB Sanki Engineering Group Basic Health and Safety Principles
https://www.sanki.co.jp/csr/safety/

58

SANKI REPORT 2016

Major Action Policies for Fiscal 2016

Initiatives in Fiscal 2015

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 officewith the participation of top management. In fiscal 2015,
the president and Central Safety and Health Committee
chairperson attended the convention for all offices toraise safety awareness throughout the Company. We
also conduct special joint safety patrols during which thepresident and directors tour 40 worksites in the summer
and around the end of the year.

Key items implemented in fiscal 2015
An analysis of accidents occurring in 2014 found that
accidents in the “caught/pinched” and “falls/tumbles”
categories accounted for over 50% of all industrial
accidents, and that in addition to falls from mobile
scaffolding, recurrent accidents were still occurring
frequently. In fiscal 2015, we worked on three key
actions by upholding the below slogan to remain mindfulof seeking closer communication, applying the lessons
from past accidents and achieving zero industrial
accidents.

Accidents during 2015
In 2015, 12 accidents occurred (8 lost workday
accidents, and 4 with no lost workdays), representing
a significant decrease from 2014, during which 22
accidents occurred (6 lost workday accidents and16 with no lost workdays). Due to the heightenedawareness developed through initiatives for preventing
the two major categories of accidents and recurrent
accidents, and special training on scaffolding, falls andtumbles which frequently occur in the constructionindustry fell to 2 incidents from 6 in 2014. However, halfof the 12 accidents in 2015 involved more than 4 lost
workdays, which is a serious development. Moreover,the “caught/pinched” type accidents were still occurring
frequently (41.7% in 2015), and we believe that acontinuous effort to prevent these type of accidents isessential for eliminating work-related accidents.
Number of accidents andfrequency rate

0.87

0.83

Key actions
1. Measures against the two major categories of accidents(“caught/pinched” and “falls/tumbles”)• Carried out a campaign for preventing the two major types of accidents
to coincide with Safety Week events.
• Renewed our commitment to preventing the two major types ofaccidents during the period by emphasizing accident prevention
through the year-end and into the new year.
2. Implementing preventive measures against recurrent
accidents• Distributed the “Accident Case Studies” to all staff, including affiliatecompanies (85% satisfaction rating).
• Notified the whole Company about the more significant types ofaccidents that are excluded from the official count.
3. Increase capabilities through education• Distributed the “Emergency Response” leaflets, which are to be carriedat all times• Demonstrated an inspection method for mobile scaffolding duringsafety and quality conventions.
• Carried out special training on scaffolding
following regulatory revision.

Health and safety training
For our own employees and the staffs at affiliatecompanies, Sanki Engineering provides health andsafety training led by in-house instructors or atdesignated training institutes. The instructors aredispatched by the Branch Education Support Teamof the Labor Safety, Quality Control & Environment
Promotion Office. For newcomers to the worksite, we
provide a health and safety orientation using health andsafety handbooks and joint training sessions with the
Sanki Health and Safety Cooperative Association.
Number of participants in health and safety training (fiscal 2015)*
Type
Special education
Health and safety training,
including foremen
Total

Number of participants (fromsubcontractors)
2,813 (2,144)
120

(73)

2,933 (2,217)

0.29
9
2011

0.91

0.92

0.42

0.74

6

8

2014

2015

0.98

0.85

Policy of the Central Safety and Health Committee
Chairperson• Slogan“Apply the lessons of the past for a safe future”
Look back! Review past accidents! Follow proper work procedures!

■ Number of accidents● Frequency rate for Sanki Engineering● Average frequency rate for thegeneral construction industry
1.25

President (at right) accompanies special joint safety patrol at a worksite

Outline of activities in fiscal 2015

CSR Report

Important Issues

3
2012

11
2013

(year)

Scope: Sanki Engineering worksites (Sanki Engineering Co., Ltd. and business
partners)
Number of accidents: interrupted work for 1 day or longer
Source for average frequency rate for the general construction industry:
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.
• The number of accidents for 2014 has been retroactively revised.

Activities Plans for Fiscal 2016
Considering the social and industry environment aswell as the number and nature of accidents in 2015,
we are focusing on these key action areas in fiscal
2016: (1) deploying preventive measures to coincidewith the timing of past accidents, (2) deploying
preventive measures based on the type of accidents,and (3) enhancing knowledge and capabilities througheducation.

* Limited to training by in-house instructors, not including training at
designated educational institutions.

A well-received handbook case forconvenient carrying of the health andsafety handbook and qualifications.

SANKI REPORT 2016

59

Relationship with Employees

Important Issues• Promote diversity• Develop and appropriately
allocate human resources• Create a comfortableworking environment

Major Action Policies for Fiscal 2015

Major Results for Fiscal 2015
Formulated the Action Plan basedon the Act of Promotion of Women’sParticipation and Advancement in the
Workplace, and carried out training
programs on diversity

Enhance training programs todevelop human resources with the
Sanki spirit

Consider and promote measures toaddress long working hours

Launched the “Smile Project” andheld subcommittee conferences

Implement measures outlined in the“Smile Project”

The Sanki Engineering Group is guided by its management
philosophy: “We place significance on communicationand mutual respect,” as it strives to create a working
environment and a corporate culture in which all employees
grow with the Company, respect each other’s individuality,
and are able to succeed and thrive. We know that all of
the technical capabilities and skills of our employees arevaluable assets and that each of our employees is aninvaluable human resource. We are therefore creating
an environment that fosters the development of humanresources based on our unique Sanki spirit, which enables
them to work to their full potential.

our new medium-term management plan to steadily
develop our overseas operations and promote diversity.
Promoting women’s roles
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 new
systems. The following are the major measures that wehave taken.

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 2015, we hired 68 new
graduates, of which 14 are women and 54 are men.
Recruitment of foreign nationals had formed a part ofour previous mid-term plan, which included the goalof developing our employees who can play an activerole on the world stage. As of April 1, 2016, 14 people
from China, Peru, South Korea, Thailand and the U.K.
are working with us, an increase of 2 from the previous
year. We will actively hire foreign nationals under

SANKI REPORT 2016

VOICE

Creating systems for further
advancements in the careerdevelopment of women
Tomoko Kozawa
Manager of Personnel Section,
Human Resources Department,
Administration Division

As the manager of human resources, I am involved ina broad range of operations, from designing personnel
systems to pay structure and health management. The
construction industry, to which we belong, has long
been a male-oriented workplace. Due to this culture, weare dealing with some unique issues. We are promoting
diversity through measures primarily focused on
promoting women. However, instead of considering
this a women’s issue, we have sought to reform theworkstyles and mindset of all our employees, including
men, by launching the “Smile Project” in fiscal 2015 asa means of addressing long working hours. Meanwhile,
our training sessions for women in regional positions
are encouraging more female employees to seek careeradvancement. I intend to continue developing systems
that allow for diverse workstyles by incorporating
regulatory revisions and meeting employee needs inaccordance with our management philosophy.

Action Plan under the Act for Promoting
Women’s Careers
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%.

FY2007• Introduced a career change system that allows
female employees to change their career
type from general office to main career-track
positions.

FY2009• Launched full-scale recruitment of new female
graduates as career-track employees.

Scope ofaggregation

FY2011FY2012FY2013• Eliminated all general-office positions by shiftingthem into regional positions and conducted
special training programs for those in regional
positions.
• Acquired the Kurumin mark, a certificate
granted to companies that support childcare andbased on the Act on Advancement of Measures
to Support Raising Next-Generation Children.

Consolidated

2,289

2,246

2,283

2,002

280

2,282

Nonconsolidated

1,965

1,918

1,908

1,668
(497)

240
(3)

Average age

Nonconsolidated

42.8

42.7

42.7

43.5

Average number of years of
employment

Nonconsolidated

18.6

18.4

18.2

Consolidated––

Nonconsolidated

63

Consolidated
Nonconsolidated

Number of employeeswith disabilities

Nonconsolidated

Ratio of employeeswith disabilities (%)

Nonconsolidated

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 systems.

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.

FY2013

FY2014FY2015• Conducted the Step Up Program 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.
• Conducted a diversity training program (target:
general managers and department managers).
• Continued conducting the Step Up Program for
employees who moved into regional positions.

CSR Report

Promote diversity

Our Commitment to Employees

60

Major Action Policies for Fiscal 2016

Employee data (as of March 31 of each fiscal year)

Number of employees*

Number of new recruits

Number of employed post-retirementage employees
Employmentof people
withdisabilities

FY2014
Female

Male
2,022
(637)

FY2015
Female
287
(5)

Total
2,309
(642)

1,908
(500)

1,677
(550)

249
(3)

1,926
(553)

35.8

42.6

43.7

36.1

42.7

19.0

12.7

18.2

18.8

12.9

18.1

–

–

–

–

111

20

131

55

92

78

17

95

75

18

93

–

–

–

–

–

–

234

2

236

147

166

189

200

3

203

188

2

190

35

36

39

–

–

37

–

–

32

1.80

1.97

2.13

–

–

2.11

–

–

1.80

Male

Total

* Figures in parentheses signify the number of managers.

Employees by age (as of March 31, 2016)
20s

30s

40s

50s

Consolidated

10s
2 (2)

404 (85)509 (88)728 (80)392 (30)60s
273 (2)

70s
0(0)

80s
1(0)

2,309 (287)

Total

Nonconsolidated

2 (2)377 (82)412 (75)593 (66)324 (22)217 (2)

0(0)

1(0)

1,926 (249)

Figures in parentheses signify the number of women.

SANKI REPORT 2016

61

Creating workplaces for people with disabilities
We are working to create an environment in which
employees with disabilities can work comfortably overlong periods. To that end, we organize opportunities
for employees with disabilities to exchange views witheach other and incorporate their voice into workplace
management. We also prepared against disasters byinstalling lamps bearing evacuation instructions to hearingimpaired employees in an effort to establish a safe
working environment.

Education and training system
We maintain training systems associated with eachcareer path, such as management training, technicaltraining and training by field in order to strengthen
specialized skills, technical skills and management
skills and boost personal growth. We also operate anoverseas language and job training program, designed
to develop human resources that are adaptable
to diverse environments, and we dispatched one
employee under the program in fiscal 2015. Meanwhile,
to pass on our technological capabilities to overseas
Group companies, we invited two local employees froma Sanki Engineering subsidiary in Thailand to come to
Japan for technical training.

Major systems supporting work-life balanceTraining system

Number of employees on childcare leave
Younger employees
New recruit training

Management
training

Mid-career employees
Management training

Education by mentors

Section chief training

Third-year training

Executives
Executive officer
training
Department
manager training
Diversity training

Fifth-year training

Area

Work

SystemDetails

Refresh leave system

A system under which employees are able to takefive consecutive days of leave for each five years of
employment using their reserved leave

Consecutive leave for onsite
workers (construction site
workers)

Three consecutive days of leave after staying at aworksite for more than six months or before moving
to another worksite

Half-day off system (new)A system that allows employees to take paid leavehalf a day at a time

Anniversary leave system(new)

A system that allows employees to take a planned
paid leave by declaring special dates for themselves
or for their families at the start of the fiscal year
A system that allows for the use of reserved days
off as leave for childcare or elderly careChildcare Reserved leave system
andnursing
Short-time working systemcare

A system that allows for the reduction of scheduledworking hours or the delay of starting/finishingtimes for childcare or elderly care

FY2014
Scope of
FY2011 FY2012 FY2013
aggregation
Male Female Total

The Kurumin mark forsupport of raising nextgeneration children

FY2015

Consolidated

–

–

–

–

–

–

2

8

10

Nonconsolidated

15

10

16

0

9

9

1

6

7

Personnel system aimed at making our company
become a workplace in which people growIn fiscal 2013, we introduced a new personnel system
to become a company in which people grow. We
instituted the personnel system to ensure that every
employee is equally provided with opportunities and theright to fair evaluation and treatment. As part of this,the “early career system” for employees in their 20s
was introduced to provide them with experiences indifferent jobs early on in their career development. The
key initiative of our new medium-term management
plan is to develop human resources that possess the
Sanki spirit. Accordingly, we launched our efforts toenhance employee education and working conditions
at Group companies in fiscal 2016, and we plan to carryout additional initiatives in the future.

62

SANKI REPORT 2016

Qualification training
Career-positioned staff training

Corporate ethics
training

Corporate ethics training
Qualification training

Facilities
Construction
Equipment
Division
Technical training

Developing and Evaluating Human
Resources

New recruit training

Safety Training

Career staff training
New recruit orientation
Step 1 training
Step 2 training
Step 3 training

Plant &
Machinery
Systems
Divisions

Quality &Environment
System training

Qualification workshop
New recruit training
Inspector education

Training on our products and systems“Smile Project”
To address long working hours and resolve what has beena persistent management issue at Sanki Engineering, welaunched the Company-wide “Smile Project,” which is led by
the president, in July 2015. Guided by slogans for reducing
long working hours, such as “Have the will to take 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 by carrying out wideranging measures. These include holding regular meetings
on the issue, convening subcommittee meetings at eachdivision to analyze issues and develop basic guidelines, andconducting activities to raise awareness among employees.

ISO 9001/ISO 14001
New recruit training
Career staff
training

Education to developinternal auditors

内部監査員養成教育

Fostering a Comfortable Working
Environment
Promoting work-life balance
We endeavor to provide our male and female employeeswith systems that support their work-and-life balanceso that they can continue to work, worry-free, as theyexperience various life events. We conducted a survey
on workstyles in October 2015 and introduced a new
system for supporting work-life balance based on the
feedback that we received from employees.

City of Nagoya certification
for companies supportingchildcare

Male Female Total

Seventh-year training

System for reemploying workers following
retirement
Seeking to provide employment opportunities for older
employees with advanced skills and expertise, we led theindustry by introducing a system for the reemploymentof employees following retirement. In fiscal 2015,
we reemployed 18 additional retired employees on aconsolidated basis.

on 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 was recognized by the City of Nagoya
as a company supporting childcare, becoming thefirst construction equipment company to receive thiscertification.

CSR Report

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,
2016, a total of 36 employees who have changed theircareer type are succeeding in main career-track positions
nationwide. In fiscal 2015, we revised the requirements
for switching career type to expand opportunities for as
many employees as possible to demonstrate their abilities.

“Smile Project”
posters

Acquiring the Kurumin mark and recognition forsupporting 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

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.
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.
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 2016

63

Relationship with the Environment

Important Issues• Protect the global
environment by means of
our exceptional technologicalcapability• Minimize the environmental
impact caused by ourbusiness activities

Actual orders for CO2 reductions: 200
projects; CO2 reductions: 19,607 t-CO2/
year

Providing products and services
to help reduce CO2 emissions ofcustomers

Properly dispose and reduce
industrial waste

Began aggregating data on industrial
waste
Promoted onsite sorting activities

Properly dispose industrial waste

Number of employees with environment-related qualifications(As of April 1 of each year)

Major Results for Fiscal 2015

Major Action Policies for Fiscal 2016

FY2014FY2015FY2016

7

7

7

Supervisor of management of industrial
waste subject to special control

130

145

154

Pollution prevention manager

71

68

72

Certified environmental measurer

Environmental Management at SankiEngineering
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 new medium-term management plan.

environmental impact through EMS activities alignedwith our main business. In addition, we constructed asystem that integrates EMS with our quality management
system (ISO 9001), including actions such as integrating
the Environmental Conference we had been convening
on a standalone basis into a Company-wide conference,
and we are consistently and effectively managing thissystem. There were no incidents of legal violations by theCompany in fiscal 2015.
Framework for promoting the environmental management system
Top Manager (President)

Sanki Engineering Environmental Policy (Excerpt)
1. We will strive to prevent environmental pollution and work
further toward conserving resources and energy, reducing
industrial waste, and promoting recycling.
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.
4. We will set environmental goals and targets for each
workplace and strive to achieve and exceed them.
5. We will disseminate and deepen understanding of theEnvironmental Policy by implementing educational
activities on environmental preservation for employees of
the Sanki Engineering Group and cooperative companies.
6. This Environmental Policy will be disclosed to the general public.

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 Kensetsu Co., Ltd. andSanki Kankyo Service Co., Ltd. An external audit conductedin fiscal 2015 found no issues of non-compliance.
In February 2016, we formulated a new EMS Action
Policy while returning to our original goal of reducing our64

SANKI REPORT 2016

Company-wide management
reviews for QMS and EMS
Reports on Company-wide activities
and decisions on plans (twice per year)

General Manager of Quality and Environmental Management Office
Company-wide QMS and EMS Office(Labor Safety, Quality Control &Environment Promotion Office)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

Staff Responsible
for Design
Maximization of energy
efficiency

Target management

Staff Responsible
for Production andConstruction

Staff Responsible for
Office Duties

Manufacturing andconstruction with minimal
environmental impact

Reduction of environmental
impact through increased
productivity

Target management

Target management

Developing environmental leaders
We encourage employees to acquire environment-related

To strengthen our environmental management system,
we provide introductory training on ISO every year to
new recruits as well as midcareer recruits. In fiscal 2015,
34 employees received training to become internal
environmental auditors, bringing the total number ofpeople qualified to conduct internal environmental
audits to 1,080 on a non-consolidated basis and 1,104
on a consolidated basis. Since December 2015, wehave organized 19 additional sessions to educate
employees on conducting simultaneous ISO 9001/ISO
14001 audits. As a result, a total of 887 internal auditors
were qualified to conduct simultaneous audits as ofMarch 2016.
Environmental education
In order to gain basic environmental knowledge anddeepen understanding of environmental issues, we havebeen consistently communicating relevant information
through the intranet. Following a review in July 2016,
we narrowed down the content, made it easier to read,and selected topics that more closely reflected actual
operations, such as hazardous substance management.
In fiscal 2014, we set up the Hazardous SubstanceManagement Group within the Labor Safety, Quality
Control & Environment Promotion Office to address
the issue of materials containing asbestos, which are
expected to be discharged with increasing frequency
at construction sites. The Group is involved in activities
for ensuring appropriate procedures and disposal ofthis material. Specifically, the Group issued a Companywide directive to have on hand Sanki Engineering’s own
Basic Flow Chart of Procedures for Handling Asbestos
at designated sites. We have also responded to the
Fluorocarbon Emissions Control Law by investigating
the total volume of fluorocarbons in storage andreporting the results to the Company-wide Conference
and by promoting inspections of air conditioners.

Initiatives to Prevent Global Warming andSave Energy and Resources
Contributing to conservation of the global environment
with our exceptional technological capabilities
As evidenced by the adoption of the Paris Agreement
at COP21, the need to protect the global environment
through actions such as preventing global warming is
becoming increasingly urgent around the world. One
mission of our environmental management is to develop
and introduce technologies and products that leadto energy conservation and the reduction of CO2 andlifecycle costs by improving functionality and comfort
through the technology of each of our businesses. In
addition, the Energy Solutions Center is working to
improve activities on an ongoing basis by collecting
energy-related information and supporting technicaldevelopment and proposals to customers.

CSR Report

Providing products and services
to help reduce CO2 emissions ofcustomers

qualifications toward enhancing our response
capabilities for business. In particular, we are planning toincrease the number of managers of special controlledwastes.

Major Action Policies for Fiscal 2015

Proposals for CO2 reduction and outcomes
FY2013

FY2014FY2015CO2
CO2CO2
NumberNumberNumberreduction
reduction
reduction
Proposals

322

48,817430

50,449413

35,074

Receivedorders124

11,273

213

21,059200

19,607• CO2 reduction unit: t-CO2/year

Technological developments that havecontributed to conservation of the global
environment
EcoSearcher® real-time heat source optimization system
This real-time optimization system constantly minimizes total energy
consumption across the entire system by using actual measured values
for optimization calculations as required. It saves energy by 30% when no
optimization is involved and by 10% compared to a conventional method.
SANDEC G3 centrifugal dehydrator for
sewage treatment facilities
We significantly reduced electricity consumption by applying proprietary
technologies, such as effectively using kinetic energy during dehydration,
reducing power loss due to friction, and reducing the energy of effluent
discharge. As a result, the SANDEC G3 offers high performance while savingenergy and space. The first unit was installed at the Katsunishi Purification
Center in Kasugai City in 2015.
Energy-saving belt conveyor system for logistics sites
We were able to cut power consumption by approximately 40% compared toa conventional system by raising the efficiency of the conveyor mechanismand mounting a high-efficiency DD motor. Patents have been obtainedin 18 countries in recognition of superior performance, including ease ofmaintenance, fatigue strength, and long operating life. The product sustains
material handling sites around the world.

SANKI REPORT 2016

65

SANKI YOU Eco Contribution Point System
Customer
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

Donation history for tree-planting project
Project

Tree planting to create a
NPO Laboratory ofbeech forest (Kijimadaira,Earth Conscious Life
Nagano Prefecture)

NPO Environmental
Relation

Cultivation of fish-breeding
forests and tree planting in adisaster-affected area (Miyako
City, Iwate Prefecture)

Amount Donated613,000 yen in thesecond half of FY2014
888,800 yen in the firsthalf of FY2015
612,500 yen in thesecond half of FY2014

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 2016

• Energy conservation in the office and campaign toreduce copy paper
We changed all landline phones throughout theCompany to PHS in order to raise operational efficiency.
By doing so, we eliminated construction work for wiringand change of settings that had been necessary eachtime we had modified the office layout. As a result,
we were able to reduce annual energy consumption
for construction work on layout changes as well as theuse of resources such as cables and waste that would
have been generated. We also saved on the cost of
construction work.
To accurately grasp the state of copy paper
consumption, we have been surveying inventory
and consumption at the end of each fiscal year andcompiling results into data sets since fiscal 2015. The
number of sheets of copy paper used in fiscal 2015 wasaround 20,916,000. We will continue managing paper
consumption and efforts to reduce usage, including
paperless meetings.

have been published, and we plan to continuously
update this information.

The rate of introduction rose by 21.3 percentage points
to 68.5% in fiscal 2015. We will continue to use digitalmanifests and promote proper disposal.

Waste discharged at sites where Sanki Engineering is the prime
contractor■ Industrial waste (t)● Ratio of mixed constructionwaste in industrial waste (%)

26.2

24.7

13,17722.7

13,329Rate of introduction of digital manifests (%)
68.5
47.2

21.5
28.8

14,364
12.9

8,912

2012
2012

2013

2014

2015

2013

2014

2015

(FY)

(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 2016, 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 has been
improving each year from fiscal 2012 to fiscal 2015.

Dispatching engineers to the Japanese Antarctic
Research Expedition
Sanki Engineering has been cooperating with
Antarctic research by dispatching 11 engineers to
observe environmental conservation at the Japanese
Antarctic Research Expedition since the Protocol on
Environmental Protection to the Antarctic Treaty was
adopted in 1991. Sanki dispatched the twelfth engineer
to the 57th Antarctic Research Expedition team andcontributes to conserving the Antarctic environment at
the Showa Station.

Proper Disposal of Waste• 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 2015, we donated to two projects
and our employees participated in the activities.

Recipientcompared to fiscal 2012 over a five-year period fromfiscal 2013 to fiscal 2017. In fiscal 2015, we achieved
a reduction of 14.2% from the 2012 level in energy
consumption Company-wide.

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 2014
and the first half of fiscal 2015, customers adopted
251 of our proposals, resulting in donations totaling
2,114,300 yen (equivalent to a 21,143 t-CO2 reduction),raising the overall total of donations since the start ofthe program in fiscal 2010 to 9,845,600 yen.

Current state of industrial waste and proper
disposal
We took action to reduce industrial waste generated atconstruction sites as well as to ensure proper disposal.
To accurately grasp the current status of our dischargeof industrial waste, we have been aggregating thevolume of industrial waste discharged at sites under
our direct management as prime contractors. Over the
past four years, the volume of our industrial waste hasrisen. In particular, a recent comparison between fiscal
2014 and fiscal 2015 shows an increase of 1,035 tons.
This was mainly caused by an increase in the volume
of materials removed by repair work. Sorting, recycling,
and reducing the volume of their materials has beendifficult.
Given this situation, in fiscal 2015 we begancompiling suggestions from divisions, including ideas
and process improvements for reducing industrial
waste, and published them on the intranet in an effort
to horizontally deploy best practices throughout theCompany. As of April 2016, a total of 38 suggestions

New wastewater treatment facility contributes to preservationof the Antarctic environment
I spent 14 months, beginning in December 2014, withthe 56th overwintering expedition at Japan’s Showa
Station in Antarctica and worked on treating wastes anddomestic wastewater as a staff member responsible forenvironmental protection.
The greatest achievement during my term was to start
the full-time operation of a new wastewater treatment
facility, where the membrane separation activated sludge
process is used. Although the facility was installed at thestation in 2011, it took many years to transport equipment
there because the ice breaker, Shirase, was not able toaccess it. Finally, full-scale operation started in November
2015. There were tough moments during the launch phase,such as working outdoors with temperatures at 20 degrees
below zero and collaborating with staff in Japan acrossa six-hour time difference to solve problems, but I feel asense of satisfaction for having fulfilled my responsibility
as part of the expedition. My assignment to the Showa
Station ended in February 2016, and another employee hastaken over my work. From Japan, I will offer my support
so that Sanki Engineering can continuously contribute toenvironmental protection activities in Antarctica.

VOICE
Kotaro Shigematsu (at left)
2nd Engineering Section
2nd Water Engineering
Department
Environmental Systems
Administration Division

SANKI REPORT 2016

67

Relationship with Local Communities

Environmental Accounting

Important Issues• Coordination with local
communities• Contribution to society as acorporate citizen

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.

Details of Main Initiatives

Environmental Protection Costs

Cost of disposal of waste CFCs and halons

49,254

Resource recycling costs

Cost of waste disposal (construction sites)

403,032

Cost of operating under ISO 14001

2,873

Cost of environment-related education

189

Management costs

R&D costs

Social activities costs

Cost of exhibiting in exhibitions/publishing materials

45,217

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

3,919

Cost of environmental protection-related R&D

214,089

Donations to environmental protection-related organizations

6,654

Cost of participating in environmental protection activities and supporting
education

3,745

Effects of environmental protection (annual comparison of resources consumed, emitted gas, green purchasing results and waste products)
Details

Resources consumed

Energy consumed

FY2012

Regional disaster prevention

Conservation of the local environment

Group-wide activities carried out at
more than 30 locations

Conservation of the local environment

Supporting the development of thenext generation

Offered 9 social study tours for a
total of 443 students

Supporting the development of thenext generation(Unit: 1,000 yen)

Global environmental
protection costs

FY2013

FY2014FY2015

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

20,511

19,632

20,194

20,468

Number of sheets of copy paper used (1,000 sheets)––

20,035

20,916

Volume of water used at Yamato Engineering Center (m3)

15,506

17,187

22,94528,427

Energy consumed by offices (crude oil equivalent; kl)

1,853

1,691

1,643

1,589

As a result of energy consumption in offices (t-CO2)

3,419

3,490

3,402

3,174

As a result of energy consumption at worksites (t-CO2)

889

1,081

833

537

8,961

13,333

13,38014,42445,26946,81038,713

46,569

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.

Planting Trees to Commemorate our 90th
Anniversary
To commemorate the 90th anniversary of our founding,we took part in a tree planting event in Kai City,
Yamanashi Prefecture. The president along with 93
employees from across Japan who had gathered for the
event planted trees by hand. With the cooperation ofstaff at the local forestry cooperative, we planted a totalof 1,000 trees in the area, which we named the “Sanki
Forest.”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)

Notes: Volumes of industrial waste from fiscal 2012 to fiscal 2014 have been recalculated to enhance the accuracy of the data. Green purchasing results from fiscal 2012
to fiscal 2014 have been recalculated due to a change in the scope of aggregation.

68

Details

Each branch, branch office and Group company
participates in cleanup activities in areas around
Participants of the tree planting event
Cleanup near the
Shimanto Central Sewage
Management Center(Unit: 1,000 yen)
FY2012FY2013

FY2014FY2015Construction sites

Profit from sale of scrap, etc.

138,390

143,463

138,042

107,624

Yamato Engineering Center

Profit from sale of scrap, etc.

398

295

548

249

Other

Subsidy to introduce eco-cars (ended in FY2012)

2,700

–

–

–

SANKI REPORT 2016

Dispatching lecturers for community safety andhealth education
As a member of the Chuo-Chiyoda-Bunkyo Branch of
the Japan Construction Occupational Safety and Health
Association, the Company contributes to community
safety and health education by dispatching employees
as lecturers for courses on heat stroke prevention,
safety and other issues.

Coordination with Local Communities

Economic effects of environmental protection measures
Related departments

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. The Yamato City
council on emergency response for residents unable
to return home was established under the agreement,
and we participated in consultations and training withthe council in fiscal 2015. A separate agreement was
signed between Yamato City, Sanki Engineering andSanki Kankyo Service in fiscal 2013 for the recovery of
sewage treatment facilities in Yamato City following adisaster. Under the agreement, we will toward earlyrecovery in the event of a large-scale disaster.

Cleanup and Environmental Beautification
Activities

CO2 emissions (t-CO2)

Volume of industrial waste

Major Action Policies for Fiscal 2016

Regional disaster prevention

Our Approach to Local Communities

Environmental protection costs (aggregated expenditures for environmental protection in our business activities)

Major Results for Fiscal 2015
Carried out activities under the large-scaledisaster agreement between Yamato Cityand the Yamato Engineering Center

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)

Major Action Policies for Fiscal 2015

Agreement for the provision of facilities in times ofdisasterIn fiscal 2013, as a means for preventing disasters andreducing damage, Yamato City in Kanagawa Prefecture
concluded an agreement with the Company (Yamato

Cleanup on the beachnear the Minami-Gamo
Purification Center

SANKI REPORT 201669

their offices or worksites as well as environmental
beautification activities organized by local governments.
In fiscal 2015, we participated in cleanup activities
around our head office and the Yamato Engineering
Center, while the Hokkaido branch joined the Cleanup
Beach Walk event at Sansen-hama beach in Ishikari Bay.
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 morethan 30 local communities.

Sanki Kankyo Service
In October 2015, the Oshamanbe Office in Hokkaido
received 32 fourth-grade students from Oshamanbe
Elementary School, while the Ryotsu Office in Niigata
Prefecture offered tours for 12 fourth-grade students
from Ryotsu Elementary School in September and 37
fourth-grade students from Kamo Elementary Schoolin October. They learned about the workings of thesewerage system and the role of microorganisms.

Enriching the Public Experience and Valueof Sanki Nature ParkAt the Yamato Engineering Center, the Sanki Nature
Park biotope was opened to the public in 2005. This
1,000-square-meter park consists of a large pond, small
ponds, a marsh, a stream, walking paths and otherfeatures that contribute to preserving biodiversity byproviding wildlife with a resting and breeding place inthis area. Spotbilled ducks have been migrating to thepark since it was opened and were observed breeding
for the third year in 2015. The adorable ducklings havebecome popular among visitors. We have also madethe park available to neighborhood nursery schools as aplace for nurturing the community’s next generation.

Welcoming Social Studies Tours by Local
Schools
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
since fiscal 2008.
In 2015, we received 190 fifth-grade students from
Kitayamato Elementary School in July and 90 thirdgrade students from Chuorinkan Elementary School in
November. The students toured the factory inside thepremises and learned about conveyors that transport
luggage at airports. Also in November 2015, 10 students
in the first grade at the Tsuchiura 1st High School in
Ibaraki Prefecture visited the Sanki Global Environment
Plaza.

70

SANKI REPORT 2016

Elementary
school social
studies tour
(YamatoEngineering
Center)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 2015, 61
employees at the head office and 59 employees at the
Yamato Engineering Center donated blood in November
2015 and January 2016, respectively.

Employees donating
blood

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 201671

Financial Report

Financial Report and Corporate Information

11-year Consolidated Financial Summary(Millions of yen)
Year ended
March 31, 2006

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

Fiscal year
Orders received

235,401

237,022

218,256

188,653

143,348

147,129

175,291

165,800

168,295

173,398

183,270

Balance carried forward

153,593

144,456

108,253

93,566

77,641

72,976100,272

111,414108,219

102,019

106,388

Net sales

237,684

246,159

254,460

203,340

159,273

151,794

147,994

154,658

171,496

179,598

178,901

Selling, general and administrative expenses

14,42613,994

13,962

14,97815,41915,763

15,712

15,19915,60415,015

16,419Operating income or loss

2,892

(9,502)(3,958)

7,125

5,027

3,843

2,525

2,391

2,818

2,951

6,509

Ordinary income or loss

3,319

(8,782)(3,307)

6,900

5,456

4,239

2,268

2,680

3,146

3,809

8,135

Profit (loss) attributable to owners of parent*

2,355(6,536)

3,134

3,283

3,141

2,124

176

(4,992)

1,763

2,461

5,327

Cash flows from operating activities(5,557)(2,819)(4,097)

19,177

1,294

11,554(2,697)

9,729(9,403)

(139)

5,220

Cash flows from investing activities(1,024)

2,833

11,511

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

3,440

5,520

Cash flows from financing activities(3,067)(2,697)(3,812)(4,377)(2,936)(1,883)(280)(1,028)(4,152)(2,901)(1,826)

Cash and cash equivalents at end of fiscal year

18,717

16,018

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

As of end of fiscal year under review
Total assets

245,367

251,323

215,680

176,664

163,307

158,501

163,120

166,477

170,181

176,382

169,423

Net assets

98,333

88,94380,27678,78080,49879,833

79,662

76,932

74,91784,86984,557

Number of employees

2,332

2,179

2,225

2,239

2,272

2,316

2,289

2,246

2,283

2,282

2,309

Per share information
Earnings per share (yen)31.46(88.47)

42.42

44.45

42.86

29.67

2.46

(71.04)

26.46

38.30

83.84

Book-value per share (yen)1,330.41

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

15.00

15.00

15.00

15.00

15.00

15.00

15.00

15.00

15.00

20.00

30.00

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

40.1

35.4

37.2

44.6

49.3

50.3

48.8

46.2

44.0

48.1

49.8

Return on assets (%)

1.4

(3.5)

(1.4)

3.5

3.2

2.6

1.4

1.6

1.9

2.2

4.7

Return on equity (%)

2.5

(7.0)

3.7

4.1

3.9

2.7

0.2

(6.4)

2.3

3.0

6.3

* 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 2006 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
50,00000-50,000-5,000-100,000-10,000-150,000
2005

72

SANKI REPORT 2016

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

(FY)

SANKI REPORT 201673

Consolidated Balance Sheet(Millions of yen)
As of March 31, 2015

(Millions of yen)

As of March 31, 2016

Assets

As of March 31, 2015

As of March 31, 2016

¥ 56,137¥ 51,460

5,672

5,672

Liabilities and Net Assets

Current assets:
Cash and deposits (Note 2)

Liabilities:¥ 29,267¥ 26,501

Notes and accounts receivable on completed construction contracts and other74,781

71,246

Notes and accounts payable on construction contracts and other

Electronically recorded monetary claims

2,607

4,267

Short-term loans payable

–

6,999

Lease obligations

80

139

Income taxes payable

806

2,125

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

2,471

2,268

476

468

Advances received on uncompleted construction contracts

2,636

3,140

Provision for bonuses

2,176

2,861

Deferred tax assets

1,965

2,062

Provision for directors’ bonuses

80

120

Other

4,754

1,760

Provision for warranty costs

459

849

1,314

1,186

Allowance for doubtful accounts
Total current assets

(99)

(84)

116,224

115,491

Noncurrent assets:
Property, plant and equipment:

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

30

Deferred tax liabilities

23

18

Other

2,717

5,258

Total current liabilities

72,106

72,86339,28938,998

Accumulated depreciation(34,846)(35,112)

Buildings and structures, net

4,442

3,885

Long-term loans payable

660

320

3,560

3,452

Lease obligations

424

506

(3,154)(3,057)

406

395

3,964

3,959

629

636

Accumulated depreciation

(176)

(170)

Deferred tax liabilities

6,843

4,742

Lease assets, net

453

466

Other

5,465

4,518

Total noncurrent liabilities

19,406

12,001

91,512

84,865

Buildings and structures

Machinery, equipment, vehicles, and tools, furniture and fixtures
Accumulated depreciation
Machinery, equipment, vehicles, and tools, furniture and fixtures, net
Land
Lease assets

Construction in progress
Total property, plant and equipment
Intangible assets

3

8

9,269

8,715

370

533

Financial Report and Corporate Information

Inventories:

Current liabilities:

Noncurrent liabilities:

5,384

1,834

Provision for directors’ retirement benefits

122

79

Provision for loss on guarantees

34–

Provision for loss on compensations

471–

Liability for retirement benefits

Total liabilities
Net assets:
Shareholders’ equity:

Investments and other assets:
Investment securities (Note 1 and 2)

39,70434,789

Capital stock

8,105

8,105

Capital surplus

4,181

4,181
65,586Long-term loans receivable

197

169

Retained earnings

61,659Asset for retirement benefits

6,709

4,503

Treasury stock(2,267)(2,258)

Lease and guarantee deposits

1,121

1,145

Total shareholders’ equity

71,67875,614

15,33213,012

Insurance funds

345

419

Deferred tax assets

206

206

Other (Note 2)

3,077

4,558

Unrealized gains on available-for-sale securities

Allowance for doubtful accounts(845)(1,109)Foreign currency translation adjustment

Total investments and other assets

50,51744,68260,15753,931¥ 176,382¥ 169,423

Total noncurrent assets
Total assets

Accumulated other comprehensive income:
48

(53)

Retirement benefits asset and liability adjustments(2,253)(4,135)

Total accumulated other comprehensive income

13,127

8,822

Subscription right to shares

51

90

Non-controlling interests

1230

84,86984,557¥ 176,382¥ 169,423

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

74

SANKI REPORT 2016

SANKI REPORT 201675

Consolidated Statement of Income and Comprehensive Income

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

Year ended March 31, 2015

Year ended March 31, 2016

[For the year ended March 31, 2015](Millions of yen)

Net sales:
Net sales of completed construction contracts
Net sales of real estate business and otherTotal net sales¥ 178,220¥ 177,262

1,378

1,638

179,598

178,901

160,572

154,706

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

1,265
155,971

17,64822,556318

373

17,96622,929

5,963

6,392

Provision for bonuses

926

1,224

Provision for directors’ bonuses

80

120

Retirement benefit expenses

588

545

Depreciation

371

383

Other (Note 1)

7,085

7,752

Total selling, general and administrative expenses

15,015

16,419

2,951

6,509

Total cost of sales
Gross profit:
Gross profit on completed construction contracts
Gross profit on real estate business and otherTotal gross profit
Selling, general and administrative expenses:
Employees’ salaries and allowances

Operating income
Non-operating income:Interest income

4331

Dividends income

592

675

Insurance income

169

653

–

771

Equity in earnings of affiliates
Reversal of allowance for doubtful accounts

273

–

Other

529

234

1,607

2,365

Interest expense

89

86

Equity in losses of affiliates

295

–

–

255

Repair expenses for construction contracts

59

205

Other

305

193

Total non-operating expenses

749

740

3,809

8,135

–

58

Gain on sales of investment securities

290

155

Total extraordinary income

290

214

189

423

Total non-operating income
Non-operating expenses:

Provision of allowance for doubtful accounts

Ordinary income

Balance at the beginning of current period
Cumulative effect of change in accounting principle
Restated 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
Retirement 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

Extraordinary loss:
Impairment loss (Note 3)
Loss on sales of noncurrent assets

51–

Loss on retirement of noncurrent assets

25

36

Loss on transfer of stock of affiliates–

55

Provision for loss on compensations

471–

Total extraordinary losses

737

514

3,362

7,834

Income taxes-current

1,245

2,413

Income taxes-deferred

(384)

75

861

2,489

¥ 2,501¥ 5,345¥ 2,461¥ 5,327

¥ 39

¥ 17

¥ 6,236¥ (2,319)

Profit (loss) before income taxes
Income taxes:

Total income taxes
Profit (loss)

Non-controlling interests
Other comprehensive income (Note 4) :Unrealized gains on available-for-sale securities
Foreign currency translation adjustment

(8)

(102)

Remeasurements of defined benefit plans

758(1,882)

Total other comprehensive income
Comprehensive income

6,986(4,304)¥ 9,487¥ 1,041¥ 9,474¥ 1,023

¥ 12

¥ 17

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

76

SANKI REPORT 2016

8,105

4,181

Retained earnings¥ 58,935
3,008
61,943

Treasury stock
Total shareholders’ equity¥ (2,444)¥ 68,777
3,008(2,444)71,785

(968)
2,461

(968)
2,461
(1,604)
3–––(1,604)3(0)
0–¥ 8,105–¥ 4,181

Unrealized gains on Foreign currency
available-for-saletranslation
securities
adjustment
Balance at the beginning of current period
Cumulative effect of change in accounting principle
Restated 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
Retirement 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(0)(1,778)

1,778

(284)
¥ 61,659

177¥ (2,267)(107)¥ 71,678¥ 9,095

¥ 29

9,095

29

6,236
6,236
¥ 15,332

18
18
¥ 48

Retirement
Total accumulated Subscription rights
benefits asset
otherto shares
and liability
comprehensive
adjustments
income¥ (3,011)¥ 6,114¥ 25(3,011)

6,114

758
758
¥ (2,253)

Non-controllinginterests
¥–

25

7,013
7,013
¥ 13,127

25
25
¥ 51

Total net assets–¥ 74,917
3,008
77,925

12
12
¥ 12

(968)
2,461
(1,604)
3
–
–
–
7,051
6,944
¥ 84,869[For the year ended March 31, 2016](Millions of yen)
Shareholders’ equity

Balance at the beginning of current period
Cumulative effect of change in accounting principle
Restated 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
Retirement 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

8,105

4,181

61,659Treasury stock
Total shareholders’ equity¥ (2,267)¥ 71,678–(2,267)
71,678(1,366)
5,327(1,366)
5,327
(0)
7
–
–
(33)

(0)
8

(1)
1

(1)
(33)

–
¥ 8,105–¥ 4,181

3,927¥ 65,5868¥ (2,258)

3,936¥ 75,614

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

Profit (loss) attributable to:
Owners of parent

Capital surplus¥ 4,181

Accumulated other comprehensive income

Extraordinary income:Gain on sales of noncurrent assets

Capital stock¥ 8,105

Financial Report and Corporate Information

1,059
161,632

Cost of sales on real estate business and other

Shareholders’ equity

Balance at the beginning of current period
Cumulative effect of change in accounting principle
Restated 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
Retirement 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¥ 48

15,33248(2,319)(2,319)¥ 13,012

(102)
(102)
¥ (53)

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

13,127(4,304)(4,304)¥ 8,822

51

38
38
¥ 90

Non-controllinginterests¥ 12

Total net assets

12¥ 84,869–
84,86917
17¥ 30(1,366)
5,327
(0)
7
–
–
(33)
(4,247)(311)¥ 84,557

SANKI REPORT 201677

Consolidated Statement of Cash Flows

Notes to Consolidated Financial Statements(Millions of yen)
Year ended March 31, 2015

Year ended March 31, 2016

¥ 3,362¥ 7,834

Cash flows from operating activities:
Profit (loss) before income taxes
Depreciation and amortization

723

723

Impairment loss

189

423

(Decrease) increase in allowance for doubtful accounts

(588)

445

Increase (decrease) in liability for retirement benefits

54(3,985)

(97)

(43)

Increase (decrease) in provision for loss on construction contracts

747

(128)

Increase (decrease) in provision for loss on compensations

471

(441)

Interest and dividends income

(635)

(706)

Interest expense

89

86

Equity in losses (earnings) of affiliates

295

(771)

Loss (gain) on sales of property, plant and equipment
Gain on sales of investment securities
Loss on transfer of stock of affiliates
Decrease in notes and accounts receivable on completed construction contracts and other(Increase) decrease in costs on uncompleted construction contracts
Decrease in notes and accounts payable on construction contracts and other

51

(58)

(290)

(155)

–

55

1,041

1,940

(607)

202

(1,766)(4,666)(Decrease) increase in advances received on uncompleted construction contracts(2,866)503(Decrease) increase in other current liabilities(1,607)

2,244

Other

1,091

2,255

Subtotal

(340)

5,758

Interest and dividends received

632

711

Interest paid

(89)

(86)

(1,135)(1,415)

Income taxes paid
Income taxes refunded

792

252

Net cash (used in) provided by operating activities

(139)

5,220

(1,100)–Cash flows from investing activities:
Payments into time deposits

500

5,600

Purchase of securities(6,997)(1,500)

Proceeds from redemption of securities

11,000500

Purchase of property, plant and equipment

(202)

(120)

Proceeds from withdrawal of time deposits

Proceeds from sales of property, plant and equipment

147

75

Purchase of investment securities

(133)

(28)
1,170

Proceeds from sales of investment securities

642

Execution of loan

(67)

(4)

Collection of loans receivable

59

98

Proceeds from maturity of insurance funds

8

33

Other

(416)

(303)

Net cash provided by investing activities

3,440

5,520

Net decrease in short-term loans payable

(924)

(0)

Proceeds from long-term loans payable

1,000

–

Repayments of long-term loans payable

(320)

(340)

(1,604)(0)Cash flows from financing activities:

Purchase of treasury stock
Proceeds from exercise of stock options
Repayments of lease obligations
Cash dividends paid
Net cash used in financing activities

0

0

(84)

(119)

(968)

(1,366)(2,901)(1,826)

Effect of exchange rate changes on cash and cash equivalents

(242)

(81)

Net increase in cash and cash equivalents

156

8,833

Cash and cash equivalents at beginning of period

23,51023,667

Cash and cash equivalents at end of period (Note 1)¥ 23,667¥ 32,501

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.
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: 3
Names of unconsolidated subsidiaries:
Tomakomai Netsu Services Co., Ltd.
Sanki Construction Engineering (Shanghai) Co., Ltd.
AEROSTRIP Corporation(3) Reasons for exclusion of unconsolidated subsidiaries fromconsolidation
The three 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.

3. Application of the equity method(1) Number of companies to which the equity method of
accounting has been applied:
Unconsolidated subsidiaries: –Affiliates: 1
Ou Clean Technology Co., Ltd.
* Akita Eco Plash Co., Ltd., an affiliate which had
been accounted for by the equity method forthe year ended March 31, 2015, was excluded
from application of the equity method because
the Company transferred a part of shares of theaffiliate in this fiscal year.

Financial Report and Corporate Information

Decrease in provision for directors’ retirement benefits

Basis of Preparation of Consolidated
Financial Statements(2) Number of companies excluded from application of theequity method:
Unconsolidated subsidiaries: 3
Affiliates: 1
Names of unconsolidated subsidiaries and affiliates:
Tomakomai Netsu Services Co., Ltd.
Sanki Construction Engineering (Shanghai) Co., Ltd.
AEROSTRIP Corporation
PFI Okubo Techno Resource Co., Ltd.
(3) Reasons for exclusion of unconsolidated subsidiaries andaffiliates from the equity method of accounting
The three 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 2016

SANKI REPORT 201679

Derivatives
Derivatives are stated at fair value.
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).
(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 2016

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.
(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, 2016.
Provision for loss on guarantees
Provision for loss on guarantees is provided at
an amount of estimated loss on fulfillment ofguarantee obligations. No provision for loss on
guarantees was recognized at March 31, 2016
because the loss estimate was null.
(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
are calculated based on the retirement benefit
obligation which is stated at the amount that would
be paid if all eligible employees voluntarily terminatedtheir employment 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, 2016, net sales ofcompleted construction contracts of ¥98,435 million
was recognized by the percentage-of-completion
method.

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.

(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.
(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 denominated inforeign 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 fluctuation in
exchange rates is ensured.

SANKI REPORT 201681

(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.

The Company and its domestic consolidated
subsidiaries adopted “Revised Accounting Standard
for Business Combinations” (ASBJ Statement No.
21), “Revised Accounting Standard for Consolidated
Financial Statements” (ASBJ Statement No. 22),
“Revised Accounting Standard for Business
Divestitures” (ASBJ Statement No. 7), “Revised
Accounting Standard for Earnings Per Share” (ASBJ
Statement No. 2), “Revised Guidance on AccountingStandard for Business Combinations and AccountingStandard for Business Divestitures” (ASBJ GuidanceNo. 10), and “Revised Guidance on AccountingStandard for Earnings Per Share” (ASBJ Guidance No.
4), effective from April 1, 2015. As a result, underthese revised accounting standards, the accounting
treatment for any changes in a parent’s ownershipinterest in a subsidiary when the parent retains
control over the subsidiary and the corresponding
accounting for acquisition-related costs were revised.
In addition, the presentation method of profit (loss)
attributable to owners of parent was amended, thereference to “minority interests” was changed to“non-controlling interests,” and accounting treatment
for adjustments to provisional amounts during
measurement period was also changed.
These revised accounting standards and guidancewere applied prospectively from the beginning of
the year ended march 31, 2016 in accordance withtransitional treatments stipulated in the accounting
standards.
On the consolidated statement of cash flows for theyear ended March 31, 2016, the presentation waschanged so that cash flows on acquisition and/orsale of stock of subsidiaries without change in scopeof consolidation were presented under “Cash flows
from financing activities” while expenses related tosuch transactions as well as acquisition-related costson acquisition of stock of subsidiaries with change inscope of consolidation were presented under “Cashflows from operating activities”.
Application of the revised accounting standards andguidance had no effect on the consolidated financial
statements or the per share data for the year ended
March 31, 2016.

Accounting Standards Issued
But Yet Effective

Changes in Presentation of Consolidated
Financial Statements

Implementation Guidance on Recoverability of Deferred
Tax Assets

Consolidated Statement of Income and Comprehensive
IncomeOn March 28, 2016, the ASBJ issued “Revised
Implementation Guidance on Recoverability ofDeferred Tax Assets” (ASBJ Guidance No. 26).
(1) Overview
Regarding the treatment of the recoverabilityof deferred tax assets, a review was conductedfollowing the framework of Japanese Institutionof Certified Public Accounting Audit Committee
Report No. 66 “Audit Treatment on Determining
the Recoverability of Deferred tax Assets,”
whereby companies are categorized into fivecategories and differed tax assets are calculated
based on each of these categories.
1. Treatment of companies that do not satisfy anyof the category requirements for (Category 1)
through (Category 5)
2. Category requirements for (Category 2) and(Category 3)
3. Treatment related to future deductible temporary
differences which cannot be scheduled incompanies that qualify as (Category 2)
4. Treatment related to the reasonable estimableperiod of future pre-adjusted taxable income incompanies that qualify as (Category 3)
5. Treatment in cases that companies that satisfy
the category requirements for (Category 4) but
qualify as (Category 2) or (Category 3)“Foreign exchange gains, net”, which was separately
presented in the prior fiscal year, has been included
in “Non-operating income-Other” in the current fiscal
year because the amount for the current fiscal year
was null.
To reflect this change in presentation, theconsolidated statement of income andcomprehensive income has been reclassified, andas a result, “Foreign exchange gains, net” of ¥143
million and “Non-operating income-Other” of ¥386
million that were separately presented under “Nonoperating income, in the prior fiscal year have been
reclassified into “Non-operating income-Other” of¥529 million in the consolidated statement of income
and comprehensive income for the prior fiscal year
provided herein.
In addition, “Foreign exchange losses, net” hasbeen included in “Non-operating expenses-Other”
in the consolidated statement of income andcomprehensive income for the current fiscal year due
to its financial immateriality.

(2) Scheduled date of adoption
The Company expects to adopt the revised
implementation guidance from the beginning of
the fiscal year ending March 31, 2017.
(3) Impact of adopting revised implementation guidance
The Company is currently evaluating the effect of
adopting these revised implementation guidanceon its consolidated financial statements.

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.

Accounting Changes“Repair expenses for construction contracts”, which
was included in “Non-operating expenses-Other” inthe 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 income andcomprehensive income has been reclassified, andas a result, “Non-operating expense-Other” of ¥364
million in the prior fiscal year has been reclassified
into “Repair expenses for construction contracts” of¥59 million and “Non-operating expenses-Other” of¥305 million in the consolidated statement of income
and comprehensive income for the prior fiscal year
provided herein.

Additional Information
Liability for retirement benefits
The Company made an additional contribution of¥4,500 million to the retirement benefit trust to
reinforce financial condition of its retirement benefit
plans. As a result, the liability for retirement benefits
decreased by the same amount at March 31, 2016.

82

SANKI REPORT 2016

SANKI REPORT 201683

Notes to Consolidated Balance Sheet

Notes to Consolidated Statement of Income and Comprehensive Income(Note 1)
Investment securities included the following shares of unconsolidated subsidiaries and affiliates:(Note 1)
Research and development expenses included in selling, general and administrative expenses and cost of sales for theyears ended March 31, 2015 and 2016 are as follows:(Millions of yen)Stock

FY2015

¥ 421

¥ 332

FY2014FY2015

117

117¥ 1,014¥ 1,091(Note 2)
1) The following assets have been pledged for opening the letter of credits:(Millions of yen)
FY2014
Cash and deposits (time deposits)(Note 2)
Provision for loss on construction contracts included in cost of sales for the years ended March 31, 2015 and 2016 are
as follows:(Millions of yen)

FY2015¥–¥ 5,300

Financial Report and Corporate Information

Other equity securities(Millions of yen)

FY2014FY2014FY2015¥ 747¥ (128)2) The following assets have been pledged as collateral for loans payable of the affiliates and others:(Millions of yen)
Investment securities

FY2014FY2015¥5¥5(Note 3)
Impairment losses were recognized for the following assets for the year ended March 31, 2015:(Millions of yen)3) The following assets have been pledged as guarantees for the payment of trade payable by the
consolidated subsidiaries:

Location
Ota-ku, Tokyo(Millions of yen)
Investments and other assets (time deposits)

FY2014FY2015¥ 33¥ 334) The following assets have been pledged as guarantees for losses regarding capital investments in the
consolidated subsidiaries:

Hatsukaichi-shi, Hiroshima, and others

Use

Asset class

AmountBusiness-use assets

Buildings, Structures, Tools, furniture and fixture¥ 102

Assets used for the real estate business

Land, Buildings

86

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.

(Millions of yen)
Investments and other assets (time deposits)

FY2014FY2015¥ 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.

FY2014FY2015¥6¥3

The net book value of the business-use assets was reduced to zero since the Company decided to dispose theseassets. The reduction of ¥60 million for buildings and the removal cost of ¥41 million have been recognized as theimpairment loss in the extraordinary losses.
The net book value of the assets used for the real estate business was reduced to their respective recoverable amount(i.e., estimated based on the real estate appraisal value) because the recoverable amount of these assets was loweredsignificantly due to changes of their usage. The reduction of ¥30 million for land and ¥56 million for buildings wererecognized as the impairment loss in the extraordinary losses.
Impairment losses were recognized for the following assets for the year ended March 31, 2016:

The above amounts represent the Company’s share of the joint liability on the guarantee.

(Millions of yen)
Location

2) The following guarantees have been provided for losses regarding capital investments in the consolidated
subsidiaries:

Yamato-shi, Kanagawa

Use

Asset class

AmountBusiness-use assets

Buildings,Structures, Machinery and equipment,
Tools, furniture and fixture¥ 423(Millions of yen)
Guarantee to capital investors of THAI SANKI ENGINEERING & CONSTRUCTION CO., LTD.

FY2014FY2015¥–¥ 29(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:

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, furnitures and fixture have been recognized as the impairment loss in theextraordinary losses.

(Millions of yen)84

SANKI REPORT 2016

FY2014FY2015

¥ 594

¥ 575

SANKI REPORT 201685

(Note 4)
The following table presents reclassification adjustments and tax effects allocated to each component of othercomprehensive income for the years ended March 31, 2015 and 2016:

4. Dividends(1) Dividends paid by the Company were as follows:
Resolution(Millions of yen)
FY2014FY2015¥ 8,851¥ (3,832)

Unrealized gains on available-for-sale securities:
Amount arising during the year

(288)

(0)

8,562

(3,833)Tax effect(2,326)

1,513

Unrealized gains on available-for-sale securities

6,236(2,319)

(8)

(102)

Amount arising during the year956

(3,078)

Reclassification adjustments for gains and losses included in net income

394

435
(2,643)Remeasurements of defined benefit plans:

Amount before tax effect

1,350

Tax effect

(592)

760

Remeasurements of defined benefit plans

758(1,882)¥ 6,986¥ (4,304)

Total other comprehensive income

Dividends per share(Yen)

Record date

Effective dateJune 27,2014
December 10,
2014

June 26, 2014
Ordinary general meeting of shareholders

Common stock

491

7.50

March 31,2014

November 10, 2014
Meeting of board of directors

Common stock

476

7.50

September 30,
2014(2) Dividends with the record date within this fiscal year and the effective date after the end of this fiscal year wereas follows:

Foreign currency translation adjustment:
Amount arising during the year

Total dividends(Millions of yen)

Resolution

Type of shares

Total dividends(Millions of yen)

Source of dividends

Dividends per share(Yen)

Record date

Effective dateJune 25, 2015
Ordinary general meeting of shareholders

Common stock

794

Retained earnings

12.50

March 31,2015

June 26,2015(Note) Dividends of ¥12.50 per share include a commemorative dividend of ¥5.00 for the 90th anniversary of theCompany’s foundation.

[For the year ended March 31, 2016]
1. Types and total number of shares issued were as follows:

Notes to Consolidated Statement of Changes in Net Assets(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:[For the year ended March 31, 2015]
1. Types and total number of shares issued were as follows:

Financial Report and Corporate Information

Reclassification adjustments for gains and losses included in net income
Amount before tax effectType of shares(Shares)

Type of shares

As of April 1, 2014

Increase

Decrease

As of March 31, 2015

Common stock

69,661,156–

3,000,000

66,661,156(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.

(Note) Decrease of 3,000,000 shares was due to retirement of treasury shares by resolution of the board of directors.
3. Details of subscription rights to shares were as follows:
2. Types and number of treasury shares were as follows:(Shares)

Type of shares

As of April 1, 2014

Increase

Decrease

As of March 31, 2015

Common stock

4,124,204

2,001,264

3,006,000

3,119,468(Note) Increase of 2,001,264 shares was due to purchase of treasury shares of 2,000,000 by resolution of the board of
directors and repurchase of fractional shares of 1,264. Decrease of 3,006,000 shares was due to retirement oftreasury shares of 3,000,000 by resolution of the board of directors and disposal of treasury shares of 6,000 upon
exercise of share subscription rights under the stock option plans.

Balance as ofMarch 31, 2016

Stock options

90

The Company(Parent company)
Total

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

Balance as ofMarch 31, 2015

Stock options

51
51

90

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

3. Details of subscription rights to shares were as follows:(Millions of yen)Type of subscription
rights to shares

Type of shares

Total dividends(Millions of yen)

Dividends per share(Yen)

Record date

Effective dateJune 26,
2015
December 10,
2015

June 25, 2015
Ordinary general meeting of shareholders

Common stock

794

12.50

March 31,2015

November 10, 2015
Meeting of board of directors

Common stock

571

9.00

September 30,
2015(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.
(2) Dividends with the record date within this fiscal year and the effective date after the end of this fiscal year were as
follows:
Resolution
June 29, 2016
Ordinary general meeting of shareholders

Type of shares
Common stock

Total dividends(Millions of yen)
1,334

Source of dividends
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.

86

SANKI REPORT 2016

SANKI REPORT 2016

87

(Millions of yen)

Notes to Consolidated Statement of Cash Flows

Carrying value

Cash and cash equivalents¥ 29,267¥–¥ 26,501¥ 26,501¥–

FY2014FY201574,78174,781–

71,246

71,246–¥ 29,267¥ 26,501(5,600)

–

2,607

2,607

–

4,267

4,267

–

–

5,999

303

310

7

7,302

7,307

5

¥ 23,667¥ 32,501

36,85836,858–33,04733,047–

143,818

143,825

7

142,366

142,371

5

Notes and accounts payable on
construction contracts and other(56,137)(56,137)–(51,460)(51,460)–

Total liabilities(56,137)(56,137)–(51,460)(51,460)

–

¥ (5)

¥ (5)

¥–

¥–

¥–

¥–

2) Notes and accounts receivable
on completed construction
contracts and other3) Electronically recorded monetaryclaimsFinancial Report and Corporate Information

Short-term investments (securities) with a maturity within three months
after the acquisition date

¥ 29,267

1) Cash and deposits(Millions of yen)Time deposits with a maturity of more than three months

FY2015Carrying value Estimated fair value Unrealized gain (loss)

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

Cash and deposits

FY2014
Estimated fair value Unrealized gain (loss)

4) Securities and investment
securities:
Held-to-maturity debt
securities
Available-for-sale securities
Total assets
Liabilities:

Financial Instruments
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.
2) 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 sheets, 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.)88

SANKI REPORT 2016

Derivative transactions** The value of assets and liabilities arising from derivatives is shown at net value, and with the amount in parentheses
representing net liability position.
(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, 2016, the fair value of these receivables and claims was almost equal to their carrying value.
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
FY2014FY2015¥ 2,542¥ 1,438

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.

SANKI REPORT 201689

(Note 3) Redemption schedule for receivables, claims and securities with maturities(Millions of yen)
FY2014FY2015Due after one
year throughfive years

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¥ 28,694

¥–

¥–

¥–

¥ 26,492

¥–

¥–

¥–

74,781–––

71,246–––

Cash and deposits
Notes and accounts receivable
on completed construction
contracts and other
Electronically recordedmonetary claims

2,607

–

–

–

4,267

–

–

1) Trading securities
Not applicable, because the Company and its consolidated subsidiaries had no trading securities both at March 31,
2015 and 2016.
2) Held-to-maturity debt securities(Millions of yen)Type–

Carrying value

FY2014
Fair value

Difference

Carrying value

FY2015
Fair value

Difference

Financial Report and Corporate Information

Due within
one year

Securities

Securities whose fair value
exceeded their carrying value

Securities andinvestment securities:
Held-to-maturity securities(corporate bonds)–

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

–

101

–

–

–

101

–

–

¥ 106,082

¥ 204

¥ 200

¥–

¥ 109,007

¥ 203

¥ 200

¥–

Total

103

200

–

6,999

102

200

–

(Note 4) Redemption schedule for long-term loans payable, lease obligations and other interest-bearing debts

Government bonds

¥–

¥–

¥–

¥–

¥–

¥–

Corporate bonds

303

310

7

1,302

1,308

5

Other

–

–

–

–

–

–

Subtotal

303

310

7

1,302

1,308

5

Government bonds

–

–

–

–

–

–

Corporate bonds

–

–

–

4,999

4,999

(0)

Other

–

–

–

1,000

1,000

–

Subtotal

–

–

–

5,999

5,999

(0)

¥ 303

¥ 310

¥7

¥ 7,302¥ 7,307¥5

Securities whose carrying value
exceeded their fair value

Total(Millions of yen)

FY2014
Due within
one year
Short-termloans payable
Long-termloans payable¥ 5,332

340

¥–

340

¥–

320

3) Available-for-sale securities

FY2015Due 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¥ 5,332340

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

¥–

¥–

¥–

¥–

¥–

320

–

–

–

–

Carrying value

DifferenceStock¥ 36,621¥ 14,230

Bonds

–

–

Other

5
36,626

Type

Total

80

62

55

48

247

10

139

132

98

249

22

3

¥ 5,752

¥ 402

¥ 375

¥ 48

¥ 247

¥ 10

¥ 5,811

¥ 452

¥ 98

¥ 249

¥ 22

¥3

Carrying value

FY2015Acquisition cost

Difference¥ 22,390¥ 32,490¥ 13,883¥ 18,606

–

–

–

–

4

1

–

–

–

14,234

22,39132,49013,88318,606

Securities whose carrying value
exceeded their acquisition cost

Subtotal
Leaseobligations(Millions of yen)
FY2014
Acquisition cost

Securities whose acquisition costexceeded their carrying value
Stock

130

132

(2)

456

508

(51)

Bonds

101

103

(1)

101

101

(0)

Other

–

–

–

–

–

–

Subtotal

232

235

(3)

557

610

(52)

¥ 36,858¥ 14,470¥ 22,388¥ 33,047¥ 14,493¥ 18,554

Total

4) Information regarding sales of securities classified as available–for-sale securities:(Millions of yen)

Proceeds from sales

FY2015Gross realized gain on sales

Stock

¥ 538

¥ 290

¥0

¥ 1,164

¥ 154

¥–

Bonds

105

–

2

–

–

–

Other

–

–

–

5

0

–

Total

¥ 643

¥ 290

¥2

¥ 1,170

¥ 155

¥–

Type

FY2014
Proceeds from sales Gross realized gain on sales Gross realized loss on sales

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 2016

SANKI REPORT 201691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, 2015 and 2016 are as follows:(Millions of yen)
Balance at the beginning of the year

FY2015¥ 25,316¥ 20,041

Cumulative effect of change in accounting policy(4,673)–

Restated balance at the beginning of the year

20,642

20,041Service cost

1,008

998

Interest cost

243

235

Actuarial loss

170

2,070

(2,023)(1,192)Retirement benefit paid
Other
Balance at the end of the year

0(0)

¥ 20,041¥ 22,153(Note) Retirement benefit expenses of the consolidated subsidiaries applying a simplified method have been included in
the service cost.

Derivatives
1) Derivative transactions, to which hedge accounting is not applied

2. The changes in the plan assets for the years ended March 31, 2015 and 2016 are as follows:

1. Currency-related transactions(Millions of yen)[For the year ended March 31, 2015]
Type of transactions
Transactions outside of market

FY2014

Financial Report and Corporate Information

5) Impairment loss on securities
An impairment loss on investment securities of ¥0 million (available-for-sale securities for which it is deemed
extremely difficult to determine the fair value of ¥0 million) was recorded for the year ended March 31, 2015, and 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.
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.

(Millions of yen)Type of derivatives

Forward exchange contracts
Sell: U.S.Dollars

Notional amounts(total)(over one year)

¥ 954

–

Fair value¥ (5)(Note)

Unrealized gain (loss)

Balance at the beginning of the year

(Note) Fair value was estimated based on the price information provided by the financial institutions.
[For the year ended March 31, 2016]
Not applicable¥ 21,366410

545(1,007)

Contributions by employers

–

4,500

Retirement benefits paid

(842)

(582)

¥ 21,366¥ 24,821

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, 2015 and 2016 for the Company’s and its consolidated subsidiaries’ defined benefit plans:

2. Interest-related transactions
Not applicable both for the years ended March 31, 2015 and 2016
2) Derivative transactions, to which hedge accounting is applied

FY2015¥ 20,672
1,126

Expected return on plan assets
Actuarial gain

¥ (5)FY2014(Millions of yen)
FY2014FY2015Retirement benefit obligation under the funded plans¥ 19,647¥ 21,716

Plan assets at fair value(21,366)(24,821)(1,719)(3,105)

1. Currency-related transactions
Not applicable both for the years ended March 31, 2015 and 2016Retirement benefit obligation under the unfunded plans

2. Interest-related transactions
Not applicable both for the years ended March 31, 2015 and 2016

Liability for retirement benefits in the balance sheet

5,384

1,834

Asset for retirement benefits in the balance sheet(6,709)(4,503)¥ (1,325)¥ (2,668)

Net liability for retirement benefits

Net liability for retirement benefits

393

437

(1,325)(2,668)

4. The components of retirement benefit expenses for the years ended March 31, 2015 and 2016 are as follows:(Millions of yen)

Retirement 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.

92

SANKI REPORT 2016

FY2014FY2015Service cost

¥ 1,008¥ 998

Interest cost

243

235

Expected return on plan assets

(410)

(545)

Amortization of actuarial loss

583

478

Amortization of prior service cost

(188)

(43)

Other
Retirement benefit expenses

19

6¥ 1,255¥ 1,131(Note) The consolidated subsidiaries’ retirement benefit expenses have been included in the service cost.

SANKI REPORT 201693

5. The components of retirement benefits asset and liability adjustments included in other comprehensive income (before
tax effect) for the years ended March 31, 2015 and 2016 are as follows:(Millions of yen)
FY2014FY2015

Prior service cost

¥ (188)¥ 43

Actuarial loss

1,539

2,599

¥ 1,350¥ 2,643

Total

Stock Options
1) Stock option expenses were included in “Selling, general and administrative expenses” for the years ended March 31,
2015 and 2016 were ¥29 million and ¥46 million, respectively.
2) 1. Description of the stock option plans:

6. The components of retirement benefits liability adjustments included in accumulated other comprehensive income(before tax effect) as of March 31, 2015 and 2016 are as follows:(Millions of yen)
Unrecognized prior service cost
Unrecognized actuarial loss
Total

FY2014FY2015¥ (43)

¥–

3,371

5,971

¥ 3,328¥ 5,971

7. The fair value of plan assets, by major category, as a percentage of total plan assets at March 31, 2015 and 2016 are as
follows:
FY2014FY2015

Bonds

37 %

42 %

Stocks22

19

Short-term funds

713Life insurance general accounts

22

21

Other

12

5

Total

100 %

100 %

(Note) The plan assets included the retirement benefit trust for the corporate pension plans, which comprised 18% and
12% of the total at March 31, 2015 and 2016, respectively, as well as the retirement benefit trust for the lumpsum payment plans, which comprised 11% and 27% of the total at March 31, 2015 and 2016, respectively.
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:
FY2014FY2015

Discount rate (defined-benefit corporate pension plan)

1.200 %

0.408 %

Discount rate (lump-sum payment plans)

1.200 %

0.279 %

2.5 %(principally)

2.0~2.5 %Expected long-term rate of return on plan assets(Note) The discount rate used at the beginning of the year ended March 31, 2016 was 1.200%. However, it wasreviewed at the end of the year and, as a result, was changed to 0.408% and 0.279% for the defined-benefit
corporate pension plan and for the lump-sum payment plans, respectively, because the change in the discountrates had significant effects on the retirement benefit obligations.

94

SANKI REPORT 20162014 Stock option(Share subscription rights)

2015 Stock option(Share subscription rights)

Name of company

The Company

The Company

The Company

Resolution dateJune 26, 2013

June 26, 2014

June 25, 2015

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

8

6

6

Corporate officers (except persons concurrently serving as a director)

20

20

25

Type and number of shares to be issued upon exercise of the sharesubscription rights

Common stock
44,000 shares

Common stock
42,000 shares

Common stock
52,000 shares

Grant dateJuly 11, 2013

July 11, 2014

July 10, 2015

Conditions for being vested

None

None

None

Required service period

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

(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.
2. The following table summarizes stock option activity under the stock option plans referred to above during the year
ended March 31, 2016:
Stock option activity

2013 Stock option(Share subscription rights)

2014 Stock option(Share subscription rights)

2015 Stock option(Share subscription rights)

Share subscription rights which are not yet vested(Number of shares):
Outstanding at March 31, 2015

–

–

–

Granted––52,000 shares

Forfeited–––

Vested––52,000 shares

Outstanding at March 31, 2016

–

–

–

Share subscription rights which have already been vested(Number of shares):38,000 shares

42,000 shares–

Vested––52,000 shares

Exercised

6,000 shares

6,000 shares–

Forfeited–––

32,000 shares

36,000 shares

52,000 shares

¥1

¥1

¥1

Weighted average exercise price (Yen)

¥ 985

¥ 985

－–

Fair value per stock at the grant date (Yen)

¥ 579

¥ 695

¥ 896

Outstanding at March 31, 2015

Outstanding at March 31, 2016
Exercise price (Yen)3) Defined contribution plans
The amount contributed to the defined contribution plan by the Company for the years ended March 31, 2015 and2016 was ¥106 million and ¥110 million, respectively.

2013 Stock option(Share subscription rights)

Financial Report and Corporate Information

Stock option plans

SANKI REPORT 201695

3) Fair value at the grant date for stock options which were issued during the year ended March 31, 2016 was estimatedusing the Black-Scholes option pricing model with the following assumptions.

FY20142015 Stock option(Share subscription rights)

Statutory tax rate

35.6 %

Expected volatility (Note 1)

28.839 %Items permanently not deductible for tax purposes

3.8

Expected holding period (Note 2)

3.0 years

Items permanently not taxable(6.6)¥ 15 per share

Inhabitants’ per capita taxes

Risk-free rate (Note 4)

0.028 %

Valuation allowance

2.8(12.2)(Note 1) The volatility of the share price is estimated based on the market prices of the Company’s stock from July 11,2012 to July 10, 2015.

Effect of changes in effective statutory tax rate

(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.

Other

(1.0)

Effective tax rate

25.6 %(Note 3) The expected dividend is based on the dividends paid (excluding a commemorative dividend of ¥5.00 for the90th anniversary of the Company’s foundation) for the year ended March 31, 2015.

2.0

Equity in losses of affiliates

3.1

Research and development tax credit(1.9)(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.

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 .

3) The “Act for Partial Amendment of the Income Tax Act, etc.” and the “Act for Partial Amendment of the Local Tax Act,etc.” were enacted on March 29, 2016. As a result, the statutory tax rate used for calculating deferred tax assets andliabilities has been changed from 32.3% for the prior fiscal year to 30.9% and 30.6% for the temporary differences
expected to be realized or settled in the fiscal years beginning on April 1, 2016 and 2017, and for those expected to berealized or settled in the fiscal years beginning on or after April 1, 2018, respectively.
These tax rate changes resulted in a decrease of ¥175 million in deferred tax liabilities (after deducting deferred
tax assets), an increase of ¥35 million in income taxes-deferred, an increase of ¥304 million in unrealized gains onavailable-for-sale securities and a decrease of ¥93 million in remeasurements of defined benefit plans.

Tax-effect Accounting

Investment and Rental Properties(Note 4) Risk-free interest rate is the yield on government bonds for the period that corresponds to the remaining life of
the option.

1) The significant components of deferred tax assets and liabilities at March 31, 2015 and 2016 were as follows:(Millions of yen)
FY2014FY2015

1. Deferred tax assets
¥ 178

¥ 214

Provision for bonuses

722

898

Accrued business taxes

85

175

2,013

1,923

Provision for warranty costs

149

256

Provision for loss on construction contracts

430

366

Allowance for doubtful accounts

Impairment loss

The Company owns commercial facilities and housing for rent in Kanagawa Prefecture and other areas. Profit from
renting those real estate properties was ¥230 million and ¥271 million for the years ended March 31, 2015 and 2016,
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. In addition, impairment loss on rental real estate properties of ¥86 million wasrecorded as extraordinary loss for the year ended March 31, 2015.
Carrying value on the consolidated balance sheet and corresponding fair value of those rental real estate properties forthe years ended March 31, 2015 and 2016 were as follows:(Millions of yen)

1,545

2,184

At beginning of the year45

29

Net change during the year

Loss on devaluation of investment securities

468

440

At end of the year

Loss on devaluation of utility rights
Other¥ 3,868

308

94

3,868

3,962

¥ 13,518¥ 14,159

134

Fair value at end of the year762

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 ¥114 million, and transfer of properties of ¥534 million resulting from changes of their usage,
and decrease in the carrying value mainly due to impairment loss of ¥86 million and depreciation of ¥250 million, forthe year ended March 31, 2015. Increase in the carrying value included in the net change during the year was mainly
due to acquisition of rental real estate properties of ¥307 million, and decrease in the carrying value mainly due todepreciation of ¥253 million, for the year ended March 31, 2016.
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.

7,384(2,517)(2,219)Total deferred tax assets

4,506

5,165

2. Deferred tax liabilities
(739)

(686)

Gain on valuation of investment securities(1,332)(1,263)

Unrealized gains on available-for-sale securities(7,055)(5,541)

(73)

(165)

Total deferred tax liabilities(9,201)(7,657)

Net deferred tax liabilities¥ (4,695)¥ (2,492)

SANKI REPORT 2016

¥ 3,559

141
7,023

Other

FY2015

1,241

Subtotal
Valuation allowance for deferred tax assets

Deferred capital gains for tax purposes

FY2014
Carrying value

Provision for directors’ retirement benefits

Liability for retirement benefits

Financial Report and Corporate Information

Expected dividend (Note 3)

962) 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, 2015 is presented as follows:

SANKI REPORT 201697

[For the year ended March 31, 2016]

Segment Information(Millions of yen)

(Segment Information)

Reportable segments

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.

(Millions of yen)
Machinery Environmental
systems
systems

Real estate

Total

Other
(Note 1)

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
Total sales¥ 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

Segment profit (loss)
Other items:
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

(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.

[For the year ended March 31, 2015]

Facilities
construction

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

3. Sales, profits or losses and other items by reportable segment

Reportable segments

Machinery Environmental
systems
systems

Financial Report and Corporate Information

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.

Facilities
construction

Total

Adjustments(Note 2)

Consolidated(Note 3)(Note 3)
Segment profit was adjusted to be equal to ordinary income in the consolidated financial statements.

Sales :
Sales tothird parties
Inter-segment sales
and transfers¥ 150,838¥ 9,953¥ 17,387¥ 1,285¥ 179,464¥ 124¥ 179,588¥9¥ 179,598

330

0

98

–

429

383

813

(813)

–

¥ 151,169¥ 9,953¥ 17,485¥ 1,285¥ 179,893¥ 508¥ 180,402¥ (803)¥ 179,598¥ 2,943

¥ 105

¥ 24

¥ 207

¥ 3,281¥ 48¥ 3,330¥ 479¥ 3,809

Depreciation

¥ 322

¥ 51

¥ 79

¥ 251

¥ 705

¥0

¥ 705

¥ 18

¥ 723

Interest income

17

0

5

–

22

0

22

20

43

Interest expenses

47

0

5

–

53

–

53

36

89

Equity in earnings(losses) of affiliates

–

–

(35)

–

(35)

–

(35)

(259)

(295)

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 ¥479 million for the year ended March 31, 2015 included corporate generalprofit of ¥229 million which were not allocable to the reportable segments such as interest income and dividends income
and reversal of interest expenses of ¥249 million which had been allocated to each of the reportable segments foradministrative purpose.

(Other Information)[For the years ended March 31, 2015 and 2016]
1. Product and service information
Disclosure of product and service information has been omitted because similar information was disclosed in “Segment
information.”
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.

(Note 3)
Segment profit was adjusted to be equal to ordinary income in the consolidated financial statements.

98

SANKI REPORT 2016

SANKI REPORT 201699

3. Major customer information

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.

(Information about impairment losses on tangible fixed assets by reportable segment)[For the year ended March 31, 2015]
Machinerysystems

Environmental
systems

Real estate

Other

Total

Adjustments(Note)

Consolidated

¥–

¥–

¥–

¥–

¥–

¥–

¥ 189

¥ 189

Impairment loss

Financial Report and Corporate Information(Millions of yen)

Facilities
construction(Note)
Adjustments of ¥189 million were impairment loss on welfare facilities of ¥102 million to be disposed of and impairment
loss on rental properties of ¥86 million.
[For the year ended March 31, 2016](Millions of yen)
Facilities
construction

Machinerysystems

Environmental
systems

Real estate

Other

¥–

¥–

¥–

¥–

¥–

Impairment loss

Total

Adjustments(Note)

Consolidated

¥–

¥ 423

¥ 423

(Note)
Adjustments of ¥423 million were impairment loss resulting from the Company’s decision to carry out its plan toredevelop Yamato area.
(Information about amortization and balance of goodwill by reportable segment)[For the years ended March 31, 2015 and 2016]
Not applicable(Information about gain on negative goodwill by reportable segment)[For the years ended March 31, 2015 and 2016]
Not applicable

Per Share Data
FY2014FY2015¥ 1,334.65¥ 1,328.60

Basic¥ 38.30¥ 83.84

Diluted¥ 38.26¥ 83.70

Net assets per share
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)
FY2014FY2015¥ 2,461¥ 5,327

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––¥ 2,461¥ 5,327

64,275 thousand shares

63,550 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 effect100

SANKI REPORT 2016––

69 thousand shares(69 thousand shares)

108 thousand shares(108 thousand shares)––

SANKI REPORT 2016101

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 asa group to contribute to the realization of a sustainable society.
(As of March 31, 2016)

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

AEROSTRIP
Corporation

Ibaraki branch office

Chugoku branch office

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 sale of 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.
EstablishedMay 1, 1980
Capital20 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 2016

Salt Lake City Office

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: 2,309
Non-consolidated: 1,926

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
Capital50 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
Shin-yu Service Co., Ltd.
Established
August 1, 1980
Capital10 million yen
Business areas
Insurance agency and leasing
AQUACONSULT Anlagenbau GmbH
Acquired a controlling interest in September 2006
Capital18 thousand euro
Business areas
Manufacture and sale of aeration systems
THAI SANKI ENGINEERING & CONSTRUCTION CO., LTD.
Established
June 2008
Capital16 million baht
Business areas
Facility design, construction, maintenance and consulting

Non-consolidated subsidiaries

Affiliate 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

Ou Clean Technology Co., Ltd.
EstablishedFebruary 1, 2005
Capital494.825 million yen
Business areas
Treatment and incineration of industrial and general waste
and supply of heat

Sanki Construction Engineering (Shanghai) Co., Ltd.
Established
July 2005
Capital12.4 million U.S. dollars
Business areas
Facility design, construction, maintenance and consulting
AEROSTRIP Corporation
Became a wholly owned subsidiary in September 2006
Capital100 U.S. dollars
Business areas
Sale of aeration systems

Affiliate not accounted for by the equity method
PFI Okubo Techno Resource Co., Ltd.
Established
December 3, 2004
Capital10 million yen
Business areas
Updating, maintenance, management and operation ofwastewater 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 REPORT 2016103

Share Information

Third-Party Opinion

Share information (as of March 31, 2016)
Fiscal year

April 1 to March 31 of the following year

Ownership statistics

Annual general meetingof shareholders

Late June each year

Trading unit

100 shares

Individuals and other: 3,041
10,796 thousand shares(16.20%)

Number of authorized shares

192,945,000

Number of issued shares

66,661,156

Number of shareholders

3,397Transfer agent and special
account management institution

Treasury stock: 1
3,107 thousand shares(4.66%)

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

Stock exchange listing

Tokyo Stock Exchange

Securities code

1961

Foreign corporations andother: 151
16,831 thousand shares(25.25%)

Financial institutions: 41
30,282 thousand shares(45.43%)

Other corporations: 134
5,305 thousand shares(7.96%)

Securities companies: 29
337 thousand shares(0.51%)

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)

3,063

4.82

Sanki Kyoueikai

2,563

4.03

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

1,878

2.96

State Street Bank and Trust Company 505223

1,710

2.69

JP Morgan Chase Bank 385093

1,561

2.46

State Street Bank and Trust Company 505103

1,350

2.12

CBNY DFA International Small Cap Value Portfolio

1,299

2.05

Name of shareholder

Notes
1. Although the Company holds 3,107 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 2016

Yoshinao Kozuma
Professor,
Faculty of Economics,
Sophia University

1. Formulation of the Group Management
Philosophy and Long-term VisionThis fiscal year the Company began workon innovating its management system,
which will significantly impact the futureof its CSR management. One of its efforts
was to codify the basic concept of Groupmanagement, expressed in the past through the“Management Vision” and “Company Credos,”
into the “Sanki Engineering Group Management
Philosophy.” By doing this, the Company hasreconfirmed its aspiration of contributing to thedevelopment of a sustainable society while
striving to achieve sustainable growth for theGroup itself and has declared its resolve topromote corporate management based on thecreation of shared value.
The Company has also formulated the“Century 2025” long-term vision toward its
100th anniversary in 2025, incorporating thethree-phase Medium-Term Management
Plan into the vision to clarify the directionof Group management over the mid to longterm. Particularly noteworthy is the inclusionof the “ESG Policy” for “Phase 1,” whichstarts in fiscal 2016, with specific targets
for action clearly stated for each area ofESG. These factors will enhance the qualityof CSR management and represent highly
commendable aspects of this fiscal year.
2. Evolution of the Compliance System
The Company has continued to implement
preventive measures in the wake of its breachof the Anti-Monopoly Act that occurred in
2013. In addition to the series of measuresthat were launched in fiscal 2013 and fiscal
2014, the Company has rigorously soughtto establish awareness of compliance byhaving all Group employees confirm thesignificance of the cease and desist order andby providing an e-learning program to train
employees, including all sales personnel. It
also launched the “in-house leniency system(whistleblowing system).” While the breachitself was deplorable, the consistent efforts tostrengthen and promote preventive measuresdemonstrate Sanki Engineering’s earnest
reflection on the incident and its strong
commitment to preventing a recurrence. I
highly commend the Company’s stance andhope it will continue these activities going
forward.
3. Monitoring CSR Management
Guidelines and Achievements
In response to past recommendations, theCompany has begun to disclose a list ofaction guidelines and achievements thatallow us to visualize the overall progressof its CSR management. This is anothercommendable aspect of this fiscal year.
Presenting guidelines for the next fiscal year
alongside the guidelines and results of thisfiscal year raises the significance of assessing
the achievements in the coming fiscal year.
Unfortunately, the lack of specific targets
makes it impossible to understand theprocess and reasoning behind the Company’s
self-evaluation based on the actual results.
I recommend that the Company consider
disclosing specific targets in order toimplement stringent PDCA management
and improve the transparency of information
disclosure.
4. Other Improvements
There were many other improvements. For

example, the Company has disclosed thenumber of employees on childcare leave on
a consolidated basis and by gender and thenumber of re-employed post-retirement-age
employees on a consolidated basis. It has
also retroactively disclosed past figures for“change in company-wide waste discharged
at sites where Sanki Engineering is the prime
contractor,” which is valuable in assessing
the state of waste management. It has thussought to improve its information disclosureof various items. In addition, it has formulated
an action plan, complete with specific targets,in accordance with the Act of Promotion of
Women’s Participation and Advancement in
the Workplace.
As the Company improves its disclosure,
however, attention is also drawn to the factthat its ratio of employees with disabilities
is provided on a non-consolidated basis andthat no information has been provided on thenumber of employees on elderly care leave,
which has become standard practice among
listed companies.
5. Development in Initiatives for the
Supply Chain
In business sectors such as construction,
where operational efficiency depends
on building favorable relationships
with cooperative companies, initiatives
encompassing the supply chain have aconsiderable influence on CSR management.
CSR procurement along with environmental
measures and respect for human rights ataffiliated companies represent issues ofparticular importance, and the Company must
focus on these areas in the years ahead. I
hope it will construct a robust supply chain
through quality CSR management while
avoiding any interruptions in its operations
and build upon this foundation to achieve
long-term growth for the Sanki EngineeringGroup.

Response to Third-Party Opinion
Thank you very much for your valuable insights from various perspectives regarding the SANKI REPORT 2016.
This is the fifth fiscal year since we began compiling an integrated report, and we appreciate your commendations of our efforts to innovate
our management system through the establishment of the Sanki Engineering Group Management Philosophy and “Century 2025” long-term
vision, as well as our disclosure of information about our CSR management initiatives, including compliance. We will continue striving to provide
a useful and appealing report for all our stakeholders.
With respect to the recommendation of setting targets for each item of our CSR management and implementing PDCA cycles based on
those targets, we intend to proceed with due consideration for developing an evaluation system with greater transparency. We will also seek toimprove our disclosure of information regarding our employment of people with disabilities and elderly care leaves.
In addition, we will continue to work on our initiatives for constructing a robust supply chain.
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.

Nobuo Kumura

Director, Senior Executive Officer, and General Manager, CSR Promotion Division

SANKI REPORT 2016105