St. Luke’s Tower, 8-1 Akashi-cho,
Chuo-ku, Tokyo 104-8506 Japan
Corporate Communications Department, Administration Division
TEL: +81-3-6367-7041 FAX: +81-3-5565-5102
https://www.sanki.co.jp

We will continue to take on the challenges of creating newvalue for society with the power of engineering we have beencultivating for 90 years.
Sanki Engineering Co., Ltd. celebrated its 90th anniversary on April 22, 2015. We owe our gratitude to eachand every stakeholder of the Sanki Engineering Group, whose deep understanding and support made thatmilestone possible.
Sanki Engineering was established in 1925, a year and a half after the Great Kanto Earthquake, as a spinoff from the Machinery Department of the former Mitsui Bussan with twelve employees. In the decades
since, the Sanki Engineering Group has continued to take on the challenge of advancing multidimensional
technologies to meet the needs of Japanese society, from postwar reconstruction to the 1964 Tokyo
Olympics, through rapid economic growth, environmental decline and urbanization, the oil shock and the Great
East Japan Earthquake. In taking on these challenges, we always practiced our Company Credo: “We willcontribute to society through engineering.”
Today the businesses of the Sanki Engineering Group encompass a wide area of social infrastructure.
We create a broad range of comfortable environments throughout society and assist in the realization of asustainable society by harnessing the strengths of these businesses and our total engineering competency ofgenerating synergies by integrating these businesses across divisions. This is the social value we deliver as aGroup. With diverse capabilities cultivated over 90 years through business activities, executives and employeesof the Sanki Engineering Group unite to face the challenge of creating new value for society by looking ten
years ahead toward our 100th anniversary and beyond the foreseeable future.

Tsutomu Hasegawa
President

02

SANKI REPORT 2015

SANKI REPORT 201503

90 Years of Sanki Engineering
Sanki Engineering celebrated its 90th anniversary on April 22, 2015, after nine decades of keeping pace with themodernization of Japanese industry. Under the company credo “We will contribute to society through engineering,”
the Company will continue to open up new eras with the power of technology.

The

1920s

1923 Great Tokyo Earthquake strikes.
Building modernization drives up
demand for building utilities, such asheating, ventilation and air conditioning,water supplies and drainage, andelectrical fixtures and fittings, andconstruction technology advances.
1925 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.

The

1930s

1931 Moves head office to the Sanshin
Building.
1933 Opens a branch in Dalian, Manchuria.
1935 Celebrates its 10th anniversary andnow comprises five branches, six field
offices, three affiliates and around 300
staff.

The

1940s

1941 Pacific War begins. Sanki Engineeringsuffers a shortage of workers as wellas materials due to tight control overthe distribution of goods.
1944 Emergency metal collection campaigns
started nationwide. Kawasaki and
Tsurumi plants are designated militaryindustrial plants.
1945 War ends.

The

1950s

1950 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.
1958 Capital exceeds ¥1 billion.

The

1960s

1963 Completes Sagami plant (currently
Yamato Engineering Center), whichhas production equipment tailored forconveyor mass production.
1964 Participates in projects on the occasionof the 1964 Tokyo Olympics, including
the Yoyogi National Gymnasium andthe NHK Broadcasting Center.

04

SANKI REPORT 2015

Laying the base for technological competence by meeting the needs of the era

Wide range of technological innovations• Completes work on Japan’s first large-scaleclean room at NEC’s Sagamihara plant.
• Develops the world’s first completely unmanned
automatic sorting system and airport 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.

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

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).

Sanki’s advanced technology bolsters
a construction boom
• 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 building of theDai-ichi Life Insurance Company, Japan’s
first building with the special high-voltage
power reception of 22 kV.

Opening the way to a new era: advances in environmental
and information technology• Launches the information andcommunications business.
• Launches the facility systems
business to deal with officeintegration and moving.
• Develops environment-related
technology, including an
ice thermal storage system,
sewage advanced treatment
systems, and gasification andmelting furnaces.

The

1980s

1980 Establishes the Company Credos.
1982 Builds Technical Research Laboratory
equipped with basic research facilities
and large-scale experimental facilities
in Yamato City, Kanagawa Prefecture.

1990s1990 Bubble economy collapses.
1997 Adopts Kyoto Protocol at the COP3
conference on preventing global
warming held in Kyoto.

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

2000s

2000 Opens Shonan Training Center(Yokosuka City, Kanagawa Prefecture)and strengthens human resource
development.
2005 Moves head office to Nihonbashi.

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.

1970s1971 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.
1973 Spins off sash business.

The

Toward environmentally friendly technology

A proactive approach to technologicalinnovation

The

2010s

2011 Moves head office to Tsukiji.
2012 Launches the Smart Building Solution
Business to provide Smart Buildings
with a focus on the energy-saving
business.

2015 90th Anniversary

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

We will continue to address social needs and take on future challenges by harnessing thetotal engineering competency we have been cultivating throughout our 90-year history.

2025

Toward the 100th Anniversary
SANKI REPORT 201505

CONTENTS

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

02

Greetings from Sanki Engineering

04

90 Years of Sanki Engineering

06

Sanki Engineering Group Philosophy/Editorial Policy/Contents

08

Message from the President

Business Report
Local
Communities
NGOs,
NPOs,
and Citizens’GroupsValue Creation
throughBusiness Activities

Government
andAdministrative
Authorities

Employees
Business
Partners
Shareholders
and Investors

Customers

Sanki Engineering Group Compliance Declaration

Management Vision

Sanki Engineering Group Code of Conduct
and Action Guidelines

The Sanki Engineering Group will contribute toManagement Vision

realizing a comfortable society through total engineering.

Company Credos

Company Credos
We will contribute to society through engineering.
We will meet our customers’ needs by working with them in good faith.
We will act in a considered manner, and always in a spirit of good fellowship.

The Sanki Engineering Group upholds its corporate credo of “We will contribute to society
through our business activities,” and by promoting the Management Vision to help bringabout a sustainable society, we intend to achieve sustainable growth for the Group andenhance its corporate value over the medium to long term. Under the Sanki EngineeringGroup Compliance Declaration, which summarizes issues related to corporate ethics andlegal compliance, all Group executive officers and employees will strive to create value
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.

Sanki Engineering Group Code of Conduct
Reference and Action Guidelines

P. 41

06

SANKI REPORT 2015

Sanki Engineering Group Compliance Declaration
Reference and Behavioral Standards

P. 44

14

Financial and Non-Financial Highlights

16

Sanki Engineering’s Strengths—Total Engineering

18

Creating value through total engineering competency

Editorial Policy

20

Overview of Our Businesses

Aiming to produce a tool that further boosts understandingof 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 2015.

22

Facilities Construction Business

26

Machinery Systems Business

30

Environmental Systems Business

34

Real Estate Business35

Research and Development• Laying out the Sanki Engineering Group’s system of principles
and explaining its overall composition;• Summarizing the important themes and key initiatives foreach activity at the very beginning of the report;• Publishing the results of the awareness survey along withcomments from the responsible executive officer as ameans to confirm the effectiveness of our efforts to bolster
compliance;• Providing an overview of the value chain and identifying thestakeholders in each stage as well as the main themes; and• Enhancing the content of quantitative data and more clearly
defining the scope of aggregation.

38

Corporate Governance

42

Compliance45

Risk Management

47

CSR Management

48

Relationship with Customers

51

Relationship with Shareholders and Investors

52

Relationship with Business Partners

54

Health and Safety at Worksites

56

Relationship with Employees

59

Relationship with the Environment

64

Relationship with Local Communities

66

Third-Party Opinion

Reference guidelines• Ministry of the Environment “Environmental Reporting
Guidelines 2012”• GRI Sustainability Reporting Guidelines Ver. 4 (G4)• ISO 26000
Organizations covered by the report• Non-financial information concerns Sanki Engineering Co., Ltd.
alone.
• When the information concerns the Group (e.g., complianceinformation), the text specifies that this is Group information.
• Financial information shows consolidated Group figures.
Reporting period
April 2014–March 2015 (some information from outside thisperiod has been included with the period specified)

Precaution on performance outlooks, etc.
In addition to past and present information concerning the
Sanki Engineering Group, this report includes the targets, plans,
outlooks, strategies, forecasts of future performance and otherinformation drawn from our medium-term management plan
“SANKI VITAL PLAN 90th” and other sources. Please be awarethat these forecasts are the best estimates by Sanki Engineering
management and based on the information available at thetime, and actual performance may differ significantly from these
forecasts, owing to changes such as in economic conditions,market trends and exchange rates.

CSR Report

Financial Report
68

11-year Consolidated Financial Summary

70

Consolidated Balance Sheet

72

Consolidated Statement of Income and Comprehensive Income

73

Consolidated Statement of Changes in Net Assets

74

Consolidated Statement of Cash Flows75

Notes to Consolidated Financial Statements

96

Independent Auditor’s Report

97

Corporate Information and Share Information

98

List of Business Locations and Introduction to Group Companies

SANKI REPORT 201507

Message from the President

We are united and willcontinue to take on thechallenge of growing as abridge that links technicalcapability with society.

businesses and expand strategic growth businesses;” and“Develop and cultivate new businesses.”
The Group aims to achieve sustainable growth together
with society by realizing the Company credo: “We willcontribute to society through engineering.” Corporate
value for the Group is indivisible from contribution to
the creation of a sustainable society, and for this reason
we have integrated the execution of our business withthe execution of corporate social responsibility. We will
make the most of our “total engineering competency” tocontribute to the resolution of various social issues. Thisis a responsibility our Group must fulfill, and doing so willbring opportunities for competitiveness and growth.

• Promoting the Medium-Term Management Plan
(Fiscal 2011–2015)
The Sanki Engineering Group sees major
opportunities for future growth in contributing to
the resolution of various social issues through our“total engineering competency.”
The Sanki Engineering Group is working to achieve theobjectives of “SANKI VITAL PLAN 90th,” our mediumterm management plan scheduled to finish in fiscal
2015, the year of our 90th anniversary. We are pushingahead with various measures based on the basic
policies of: “Maintain a profitability focus and secureorders on an optimal scale;” “Further strengthen core

• Progress in the Medium-term Management Plan
We have been steadily strengthening our
foundations for developing our core businesses andare already seeing positive effects.
We have now completed the fourth year of the
projected period of the “SANKI VITAL PLAN 90th.”Since its formulation, we have encountered somedifficulty, such as a decline in public investment aswell as falling profits due to the termination of acontract period for a large rental property. Despite
these setbacks, our initiatives for each fiscal year
have enabled us to steadily build our base for seeking
medium- to long-term growth in our core engineeringbusiness, and the effects of these efforts have begun totake tangible form.
In fiscal 2014, we pursued our shared initiativesof enhancing information-gathering and reinforcing
construction capabilities. As a basic measure forenhancing information-gathering capabilities, wereformed the functions of the Sales Division to focus on

Fiscal 2014 results
FY2014
results

Year onyear change

FY2015targets

Consolidated net sales(unit: billion yen)Core Businesses

Tsutomu Hasegawa
President• Upon My Appointment as President
I will steadily steer the Company into its 100th
anniversary by holding fast to our past management
policies.
I assumed the helm of Sanki Engineering Co., Ltd. as
Representative Director and President in April 2015.
Having received the leadership baton in this milestone
year, the 90th anniversary of our founding, I see mymission as being to follow through with past policies
and lead the Sanki Engineering Group into its 100th
anniversary, steadily advancing beneath the bannerof our foundational commitment to “contribute to thecreation of a broad range of comfortable environments
for society.”• Business Environment and Results for Fiscal 2014
Construction and capital spending remained on
the path of recovery in Japan, and we reported
increases in both sales and profit as a result ofactive proposal-based sales.
In the fiscal year that ended March 31, 2015 (fiscal
2014), orders received amounted to ¥173,398 million(up 3.0% year on year) and sales were ¥179,598 million(up 4.7% year on year). In terms of profit, operating
income was ¥2,951 million (up 4.7% year on year),ordinary income totaled ¥3,809 million (up 21.1%

08

SANKI REPORT 2015

year on year) and net income was ¥2,461 million (up39.6% year on year) as sales rose in our core Facilities
Construction Business. Our equity ratio was 48.1%,
thereby maintaining a sound financial condition. ROE
continued to improve at 3.0% (up 0.7% year on year),
and we intend to further enhance capital efficiency.
While the Japanese economy experienced adownturn in the first half of fiscal 2014 due to theimpact of the higher consumption tax rate, it gradually
recovered in the latter half as the effect tapered off.
Construction investment generally held steady. Whilepublic investment remained steady at levels below
those of the previous year, private capital investment
continued to recover on the back of improved corporate
earnings.
Against this backdrop, the Sanki Engineering Groupsaw a partial rise in labor costs and equipment prices.
However, we proactively stepped up proposal-based
sales for energy conservation and power saving so as
not to miss any opportunity for orders, and we worked
to expand orders while emphasizing constructionrelated profits. Results for the Facilities Construction
Business remained steady, and we enjoyed significant
growth in the Environmental Systems Business due toa large-scale contract.

168.9

+5.2%

176.0

Facilities Construction

141.5

+6.0%

137.0

Machinery Systems

9.9

+1.1%

15.0

Environmental Systems

17.4

+1.8%

24.0

Strategic Growth Businesses

9.6(4.7)%

19.0

Unique New Businesses

0.0

–

2.0

Real Estate Business1.2+19.3%

3.0

Other

0.5

(16.4)%–

Adjustments

(0.8)

–

–

179.5

+4.7%

200.0

Overseas sales of above amount3.2+72.6%

8.0

Consolidated ordinary income

3.8+21.1%

10.0

Ratio of consolidated ordinary
income to consolidated sales

2.1%

Total

5.0%

SANKI VITAL PLAN 90th (Fiscal 2011–2015)
Management
Philosophy

Through its “total engineering,” the SankiEngineering Group shall promote the diffusionof energy saving and new-energy systems tohelp achieve a comfortable low-carbon society.

VisionWe shall strengthen core businesses, expand
strategic growth businesses and create unique
new businesses to ensure our long-term
development.

Financial
Performance
Targets

Fiscal 2015 consolidated sales: ¥200 billion
Consolidated ordinary income: ¥10 billion

Core Businesses• HVAC and plumbing for buildings• Industrial HVAC • Electrical systems• Facility systems • Machinery systems• Environmental systems

Unique New Businesses• Combine engineering from various
businesses• Energy saving • New energies

Strategic Growth Businesses• Renovation* • Integrated networks*• Life cycle engineering

Unique New Businesses

Strengthening the Management Base• Strengthening the customer base
• Cultivation and appropriate allocationof human resources• Reform of work processes• Practice of efficient management

Strategic GrowthBusinesses

Strategic GrowthBusinesses
Core
Businesses

Strengthening the Management Base* Integrated as Smart Building Solutions Business as of fiscal 2012

SANKI REPORT 201509

Message from the President

guidance. Under the new Technical Expert System,
Technical Experts have been integrated into the Chief
Engineer Office, promoting closer collaboration andcreating a system in which the Sanki EngineeringGroup can better demonstrate its total engineering
competency. We will apply this system to reinforce ourquality control capabilities and improve our profit ratio.

sales planning and sales development.
In doing that we have developed a system formobilizing the entire organization in support of thisdivision, primarily through market analysis, sales
development, customer management and sales activity
management, thus further boosting our proposalmaking capabilities and offering the best solutions to
the diversified needs and challenges of our customers.
We will strive to continuously demonstrate our total
engineering competency by seeking collaboration
between different segments and bringing together
different technologies and without being constrained byconventional frameworks.
As for reinforcing construction capabilities, we
reorganized our Technical Master System, which
involves having persons with high technical skills andexperience in management at a branch or branch
office conduct construction audits and provide on-site

SANKI VITAL PLAN 90th

• Business Environment and Strategy for Fiscal 2015
We will pursue our business plans under threemanagement policies during the final stage of our
Medium-Term Management Plan.
Fiscal 2015 marks the 90th anniversary of our founding
as well as the final fiscal year of the “SANKI VITALPLAN 90th,” our five-year medium-term management
plan. We are commemorating our 90th anniversary
under the slogan: “Unity – Thanks to the Past 90 Yearsand Building a Bridge to the 100th Year” and mobilizing
the entire Group toward achieving the medium-term
management plan.
Going forward, we expect a steady flow of
construction orders on the back of growing momentum
in reconstruction work following the Great East Japan
Earthquake, urban infrastructure development leading
up to the Tokyo Olympics and Paralympics in 2020, andrising demand for private construction accompanying
the economic recovery. In addition, there are signs that
manufacturers are returning to Japan in response to
the weaker yen. Moreover, while crude oil prices are
currently low, the yen is expected to remain weak overthe medium to long term, which in turn will result inhigher energy prices and stronger demand for energysaving renovations and the introduction of renewableenergy sources. On the other hand, construction

Key Initiatives for Fiscal 2014

Strategic GrowthBusinesses• Expand our growth strategy including life cycle engineering (LCE)• Establish a subsidiary site in the Chugoku region and strengthen LCE with enhanced Group coordination

Unique New Businesses• Strengthen “total engineering competency” and promote planning based on an action plan for measures in eachdivision

Strengthening theManagement Base

• Foster human resources that can take on the responsibility of developing business overseas• Enhance corporate value by bolstering risk management and corporate governance• Bolster compliance

SANKI VITAL PLAN 90th

Key Initiatives for Fiscal 2015

Core Businesses• Promote total engineering• Maintain a system of Group-wide cooperation by revitalizing divisional communication• Improve profitability by reducing the operational burden at site works
Support site operations by opening the new Site-Documentation Support Center
Support on-site purchasing operations by setting up the Procurement Division

Strategic GrowthBusinesses• Strengthen the management base of the Thai Sanki Engineering and Construction Company Co., Ltd.

Unique New Businesses • Promote planning based on an action plan for measures in each division

Strengthening theManagement Base

• Enhance corporate value by bolstering risk management and corporate governanceImprove governance by the Board of Directors in response to the Corporate Governance Code
Promote constructive dialog with shareholders and other stakeholders• Enhance compliance
Widely introduce a series of compliance programs based on the Sanki Engineering Group ComplianceDeclaration and the Sanki Engineering Group Behavioral Standards▲ ▲• Strengthen customer sales and proposal-based sales functions• Focus functions of the Sales Division on sales planning and sales development and work to gain customers• Continue promoting the Recovery Project and Hospital Project across the Company• Management Direction for Fiscal 2015
All Group divisions will unite in advancing towardsustainable growth.
(1) Our intention to strengthen divisional collaboration
is founded on the fact that the Sanki Engineering Grouppossesses and pursues multiple businesses based on
independent technologies. We seek to provide solutions
for diverse customer needs by integrating multiple
technologies to provide total life cycle engineeringsolutions encompassing construction, repair andmaintenance, and renovation to address aging structures.
This will only be possible by building on the technologicalcapabilities of each division and maintaining close
collaboration between them. We will develop a Groupwide system of cooperation by revitalizing employee
communication for stronger collaboration in supportof the strategic application of management resources,encompassing the areas in which we should apply ourbasic technologies, including hospitals, schools, factories
and automobile development.

(2) Measures for enhancing the profit ratio are
centered on maintaining the quality of our operations
as we expand the scope of our businesses while
also reinforcing our sales and purchasing capabilities.
Specifically, we will establish the Procurement Division
to enhance our negotiating capabilities and support
on-site purchasing operations through centralized
management in order to reduce the work burden ateach site. We will also establish an environment forconcentrating on mission critical operations by opening
a new Site-Documentation Support Center for on-site
operations.
(3) We emphasize revitalizing communication as
the foundation of all our business activities. Many of
our employees work at construction sites across thecountry, presenting the challenge of communicating
management intentions to on-site staff and bringing thevoice of on-site staff to management. On the occasionof our 90th anniversary, we have upheld “Unity” as▲ ▲Core Businesses

demand will be concentrated within a relatively shortperiod. This has led to concerns over potential work
delays due to a shortage of construction engineers andworkers as well as higher costs associated with further
increases in labor costs and equipment prices, leading
us to anticipate challenges in ensuring profitability.
Under these circumstances, we will pursue threemanagement policies in fiscal 2015: (1) promoting total
engineering by strengthening divisional collaboration, (2)improving the profit ratio by reducing the work burden
at each site and lowering procurement costs, and (3)improving the Group-wide system of cooperation byrevitalizing communication among employees.

▲

10

SANKI REPORT 2015

SANKI REPORT 201511

Message from the President

our creed for boosting organizational capabilities byrevitalizing lateral communication among staff, including
those at cooperative companies, to generate new added
value.
Recognizing compliance as the backbone of all ourbusiness activities, we will also conduct training in legal
compliance related to the Construction Industry Act,
Anti-Monopoly Act and other laws, as well as corporate
ethics, and all Group executive officers and employees
work to strictly and without compromise implement
compliance.
In addition, we will consider ways for enhancing ourgovernance system in response to Japan’s Corporate
Governance Code.
• Providing Comprehensive Returns to Our
Shareholders
Sanki Engineering will examine comprehensive
methods of shareholder return while effectively
balancing business investments and returning
profits to shareholders.
We view the return of profit to shareholders as a key
management issue. Dividends form the basis of ourpolicy of returning profit to shareholders, and whileconsidering 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 methods of shareholder return,including share buybacks, in light of demands fromshareholders, investors and society at large.
For fiscal 2014, we paid a total dividend per shareof ¥20.0, which included a regular dividend of ¥7.5 forthe interim period and a regular dividend of ¥7.5 with anadditional dividend of ¥5.0 to commemorate our 90th
anniversary, totaling ¥12.5 at the year-end. In addition,
we carried out a share buyback for the third consecutive
year since fiscal 2012.

• Looking toward Our 100th Anniversary
We will contribute to addressing social issues
through the power of technology and take on thechallenge of sustainable growth.
The Sanki Engineering Group’s business activities are
grounded in our relationship with stakeholders, including
shareholders and investors, customers, cooperative
companies, business partners, local communities
and employees. Constructive stakeholder dialogues
are convened to ensure transparent management
and accurate decision-making on key issues bystriving to understand and effectively incorporate intobusiness management the opinions and desires of our
stakeholders. In doing so, we fulfill our responsibilities
to society and identify new needs arising from changes
in the times and society to create new value based on
the Group’s management resources and strengths.
Sanki Engineering was founded in 1925, a year anda half after the Great Kanto Earthquake. At the time,reconstructing the capital city of Tokyo, devastatedby the disaster, constituted a major social challengein Japan. Sanki Engineering was founded to fulfill
the mission of reconstructing the city following thetremendous disaster. Since then, we have consistently
expanded our role in society, and to this day, in our
90th anniversary year, the contributions we make inaddressing issues through engineering have continued
to provide reasons for the existence of the SankiEngineering Group.
The Sanki Engineering Group will continue to takeon the challenge of achieving sound, sustainable growthwith society by harnessing the power of our diverse
technologies, which have been honed and passed downover nine decades, as a bridge to our 100th anniversary.

Dividend payments
FY2011 FY2012 FY2013 FY2014

FY2015(forecast)Interim dividend (¥)

7.5

7.5

7.5

7.5

9.0

Year-end dividend (¥)

7.5

7.5

7.5

12.5

9.0

Consolidated payout
ratio (%)

609.8

–

56.7

52.2

44.0

* Year-end dividend for FY2014 includes ¥7.5 in ordinary dividend and ¥5.0 incommemorative dividend.

12

SANKI REPORT 2015

Business Report
SANKI REPORT 201513

Financial and Non-Financial Highlights(Millions of yen)
Year ended
March 31, 2012

Year ended
March 31, 2013

Year ended
March 31, 2014

Year ended
March 31, 2015

Orders received

147,129

175,291

165,800

168,295

173,398

Sales

151,794

147,994

154,658

171,496

179,598

Selling, general and administrative expenses

15,763

15,712

15,19915,60415,015

Operating income

3,843

2,525

2,391

2,818

2,951

Ordinary income

4,239

2,268

2,680

3,146

3,809

Net income or loss

2,124

176

(4,992)

1,763

2,461

Cash flows from operating activities

11,554(2,697)

9,729(9,403)(139)

Cash flows from investing activities

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

3,440

Cash flows from financing activities(1,883)(280)(1,028)(4,152)(2,901)

Cash and cash equivalents at end of year

45,13541,09740,36723,51023,667

158,501

163,120

166,477

170,181

176,382• Orders received and sales (millions of yen)

Fiscal year

175,291
147,129

151,794

165,800
147,994■ Orders received
168,295

173,398

171,496■ Sales

179,598• Operating income (millions of yen)
3,843

Business Report

Year ended
March 31, 2011

154,658
2,818 2,951
2,525

2010

2011

2012

2013

2014

(FY)

2010

2,391

2011

2012

2013

2014 (FY)As of end of fiscal year under review
Total assets

79,833

Net assets

79,662

76,932

74,91784,869• Ordinary income (millions of yen)

• Net income (millions of yen)

• Number of employees
2,461

4,239
3,809

2,124

2,316 2,289
2,246 2,283 2,282
Female280

1,763

Per share information

3,146

Earnings per share (yen)Book-value per share (yen)Cash dividends (yen)

29.67

2.46

(71.04)

26.46

38.30

1,115.41

1,113.70

1,106.32

1,142.74

1,334.65

15.00

15.00

15.00

15.00

20.00*

2,680
2,268
Male
2,002

176

* Including the 90th anniversary commemorative dividend (5 yen per share)
Other information
Equity ratio (%)

50.3

48.8

46.2

44.0

48.1

Return on assets (%)

2.6

1.4

1.6

1.9

2.2

Return on equity (%)

2.7

0.2

(6.4)

2.3

3.0

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

2,316

2,289

2,246

2,283

2,282
Male: 2,002
Female: 280

Scope of aggregation
Number of employees

14

Sanki Engineering Group

Number of accidents

Construction sites of SankiEngineering

9

9

3

11

5

Frequency of accidents

Construction sites of SankiEngineering

0.83

0.85

0.29

0.98

0.42

CO2 emissions (t-CO2)

Sanki Engineering Co.,
Ltd.

4,162

3,770

4,308

4,571

4,235

Waste emissions (t)All Company construction
sites and Yamato
Engineering Center

12,034

12,07013,757

15,86916,479SANKI REPORT 2015

(4,992)
2010

2011

2012

2013

2010

2014 (FY)• Frequency of accidents

2011

2013

2014 (FY)• CO emissions (t-CO )
2

4,308

4,162

0.85

2010

2011

2012

2013

2014 (FY)• Waste emissions (t)

2

0.98
0.83

2012

4,571

15,8694,235

16,47913,7573,770

12,034 12,070

0.42
0.29

2010

2011

2012

2013

2014 (FY)

2010

2011

2012

2013

2014 (FY)

2010

2011

2012

2013

2014 (FY)SANKI REPORT 201515

Sanki Engineering’s Strengths

Total Engineering
Diverse business domains

Create synergies through total engineering

EconomyReduce costs
Increase asset value

Three elements comprising total engineering

ate synergies

Diversebusinessdomains

Facilities
construction

Providethe optimal
environment
Machinerysystems

Environmental
systems

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 2015

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 andsmart building solutions as well as facility systems. In addition, we are engaged
in the Machinery Systems Business, consisting mainly of logistics systems andtransportation equipment, and the Environmental Systems Business, comprisingwater 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

16creating 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

Provide an optimal environment utilizing wide-ranging business technologies

LCE

Exceptional technologicalcapabilities• 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

LCE

Respond to all needs throughout the life cycle
The comprehensive capabilities of the Sanki Engineering Group enable provisionof optimal solutions at every stage with a focus on the entire life cycle offacilities, up to and including response to aging equipment, from planning,
design and construction to maintenance, inspection, operation/management andrenewal.
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.
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

Planning・
Basic
DesignRepair・
RenewalDesign

LCE
Life Cycle Engineering
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 201517

Creating value through total engineering competency

Creating comfort during operations and ensuringsafety in times of emergency“The kindest office building for women in Japan”– New East Building, Nippon Life Insurance Company Headquarters

Electrical RoomIn January 2015, the New East Building of the Headquarters of the Nippon Life Insurance Company was completedin Yodoyabashi, one of Osaka’s leading business districts. The building houses their critical customer service
divisions, with women representing about 90% of the staff. Under the concept of being “the kindest office building
for women in Japan,” Sanki Engineering’s total engineering competency has been put to use to create a comfortableenvironment. At the same time, we also sought to ensure the security and safety of these female employees bycreating a “Non-down Building,” which does not stop functioning in the event of a large-scale disaster.
We installed as many as 100,000 newly developed lighting
fixtures on the office floors. By adopting a cutting-edge
system with individual digital lighting control, we wereable to realize significant energy savings.

Diverse business domains

Plumbing facilities – Providing a 72-hour supplyof water during a disasterThe office floor of this building has no outlets for air
conditioning. We selected a full-ceiling radiation panel
air conditioning system, through which air flows at 5
centimeters per second from the entire ceiling and gently
spreads throughout the room. Women who stay in theoffice all day can work in comfort without feeling chilled.

Emergency shutdown valves will be activated in theevent of a disasterto provide a 72-hour
supply of water.

We decided to use ambient lighting to efficiently control
LED lighting levels based on the human perception ofbrightness. By distributing light in a way that feels makes
the actual luminosity seem brighter, we have been able
to conserve energy.

Integrated network system – Controlling central
monitoring units with mobile tablets
We have constructed a system to facilitate control of
the integrated network system, which serves as theshared information infrastructure for the core functionsof building management, including central monitoring,lighting control and security. We have also introduced asystem by which the central monitoring environment canbe carried around the building on mobile tablets, raising
the efficiency of building management.
Originally appearedin “WAKUSUTA”
on March 26, 2015
(Nikkei Business
Publications, Inc.)

Demonstrating total engineering competency indesign and construction

Diverse business domains

Air conditioning facilities – Natural and soft flowof airElectric facilities – Lighting based on humanperception of brightness

The air slowly descends from the ceiling and is drawn in by the floor
suction chamber, thus controlling airflow and providing added comfort. By
introducing the floor suction chamber, we were able to reduce the need for
return air ducts by half as well as the amount of required construction work.

Ensuring Safety and Security inTimes of Disaster

Central monitoring room
responsible for the core functionsof building management

Business Report

Air flows slowly from small holes in the punched metal panels of the ceiling.
The use of punched metal saves energy through its radiation effect as it cools orheats. In addition, by using the space above the ceiling as an air passageway, wewere able to reduce the number of ducts.

Realizing a Comfortable
Environment

Elevated water tank thatcan supply service water
during an emergency

Plumbing facilities – Design for smooth postdisaster recovery
In addition to ensuring high quake resistance, we
fitted the pipework with flexible anti-seismic joints sopipeline functions will continue to function in the eventof a disaster and the burden of recovery work willsubsequently be reduced.

Electric facilities – Storage cells and solar power
generators activated during power outages
Along with emergency power generators that for 72
hours can supply a third of the electricity we normallyrequire, we also installed one of the largest capacity
lithium ion battery cell systems in Japan. The solar power
generator will switch to standalone operation to serve as
an independent powersource in the event of apower outage.

Emergency power
generators that are activatedduring a power outage

Diverse business domains
Overview of the building
14 floors above ground and 2 floors below ground (total floor area:
60,849.95 m²)
Special features
HVAC and plumbing facilities• Full-ceiling radiation panel air conditioning system• Gas absorption water chiller-heater system• Air-cooled heat pump module chiller• Cold water, cold/hot water 4-pipe air conditioning unit
• Rainwater filtering facility• Emergency shutdown valves for the water receiving tank and elevatedwater tank
• Heat pump electric water heaters • Pre-action sprinklers
Electrical facilities• Whole building LED lighting• Cutting-edge, individual digital lighting control system• Spatial illuminance design method • Motion sensors• Solar power generating system • Emergency power generators• Large-capacity lithium ion battery cell system
Integrated Network Facility• Integrated network system • Wireless LAN system• Mobile management system
Rated S-rank under CASBEE Osaka Mirai (Osaka City’s environmental
evaluation system for buildings)

18

SANKI REPORT 2015

Centralized coordination of facility arrangement
and management of construction progress
Space and time limitations must be factored into arranging
various types of facilities. Having responsibility for theentire facility allowed us to simultaneously undertake
complex construction work with ease.

Advanced technological capabilities
Best solution based on a combination oftechnological capabilities and experience
We select and combine facilities to achieve the bestarrangements. To generate high added value, the bestsolution is derived from our advanced technologicalcapabilities and experience accumulated over many years.

The Sanki Engineering Group with its diverse
business domains demonstrates total
engineering from design to construction.

Synergy effects of total engineering

Synergy effects of total engineering

Comfortable workplace for daily
operations“Non-down Building” ensures safety andsecurity even during a major disaster

Creating a comfortable environment

Providing safety and security for working women

We support women’s health and career development.

Contributing to higher productivity

A comfortable working environment also raises
operational efficiency.

Operations will continue to function in the event of adisaster.

Protecting the core functions of a life insurance company
Servers and other critical systems remain operational
during a disaster.

From disaster preparation to post-disaster recovery
Recovery factored into the design.

SANKI REPORT 201519

Overview of Our Businesses

Business Report

Page

Facilities Construction Business

22• Main Sales Items

Machinery Systems Business

Plumbing and drainage systems• Water supply and drainage• Kitchen systems• Disaster prevention systems
Facility systems• Dealing rooms• Office relocation• Financial institution branches
and offices

Page

Environmental Systems Business

30• Main Sales Items

Conveyance systems• Lightweight conveyers• Environment-related conveyers• Distribution-related conveyers• Sorting devices• Automated bucket warehouse

Material handling systems• Clean conveyance systems• Material handling systems• Airport baggage and cargohandling systems• FA systems• Control and information
systems

Page

34

Real Estate Business• Main Sales Items

Waste treatment• Waste incineration facilities• Landfill wastewater treatment
facilities

Water treatment• Water and sewage treatment
facilities• Industrial waste water
treatment facilities• Sludge treatment facilities• Sludge incineration facilities• Industrial plant facilities

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

Smart building solutions• Central monitoring andautomated control systems• IP solutions• Network solutions• FY2014 Results• FY2014 Results• FY2014 Results• FY2014 Results

Sales and sales composition ratio

Sales and sales composition ratio

Sales and sales composition ratio

Sales and sales composition ratio

84

%

5

151,169%

million yen• Social issues and value provided
Issues• Global warming• Energy resources• Equipment deterioration• Increased running costs• Securing human resources
for operations andmanagement

20

26• Main Sales Items

HVAC systems• HVAC systems• Clean rooms• Environmental control• Freezing and refrigeration• District heating and coolingplants• Nuclear power-related facilities
Electrical systems• Electrical systems• ICT facilities• Instrumentation• Electrical civil engineering

Page

SANKI REPORT 2015

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

10

9,953

%

million yen• Social issues and value provided
Issues• Eliminating product accidents• Improving productivity• Shortage of labor• Improving the work
environment• Energy resources

Value• Safe and secure productinspection• Labor-saving solution• Response to declining birthrate
and aging society• Comfortable work environment• Reduced running costs• Energy and resource
conservation

1%

17,485
million yen• Social issues and value provided
Issues• Global warming• Energy resources• Aging facilities• Constraints on final landfill
sites• Water resources

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

1,285
million yen• Social issues and value provided
Issues• Global warming• Energy resources• Aging facilities

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

SANKI REPORT 2015

21

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

• Sales and sales composition ratio for FY2014• Orders (billions of yen)
143.8

150.0

million yen

151.1

128.6
117.5 115.0

113.5

151,169

143.6

84%

Market environment for FY2014

Medium-term management plan

• Increase in public works projects and recovery of the real estate market• Turnaround in the industrial HVAC market due to decisions by somemanufacturers to relocate to Japan• Increased demand for building renovations and the expansion of
production facilities

Sales target
for FY2015

Risks

Business opportunities• Higher labor costs due tothe shortage of workers andrising prices of resources,
equipment and materials
in the construction andmanufacturing industries• Special demand for construction
facilities for the 2020 Tokyo
Olympics and Paralympics• Expansion of demand for energy
conservation in construction andproduction facilities

Sanki Engineering’s strengths
2010

Summary of Results for Fiscal 2014
Orders in the Facilities Construction Business were 4.3%
higher than the previous fiscal year at ¥150,032 million.
Industrial HVAC is on track for a recovery, while theElectrical and Facility Systems businesses are maintaining
steady performance. Sales rose 5.2% from the previous
fiscal year to ¥151,169 million due to an increase in thecompletion and handover of large-scale properties.
The market environment has turned around as“Abenomics” and the weaker yen have encouraged
Japanese manufacturers to bring their production
operations back to Japan. This has led to reconstruction
and renovation of buildings and new construction of
production facilities, which is providing a steady stream oforders. On the other hand, the construction industry as awhole has begun to feel the effects of higher labor costs
caused by the shortage of workers as well as the rising
prices of resources, equipment and materials; delayed or
prolonged construction periods; aging of workers at sites;
and lack of experienced engineers.

Major projects• Sendai City Hospital: HVAC systems (completed in July 2014)• New East Building, Nippon Life Insurance Company
Headquarters: HVAC, plumbing, electrical and integrated
network systems (completed in January 2015)

22

SANKI REPORT 2015

2011

2012

2013

2014 (FY)

2010

2011

2012

2013

2014 (FY)

Under these circumstances, we have been promoting life
cycle engineering (LCE), in which we offer comprehensive
proposals for entire facilities, encompassing building
design and construction, management and maintenance,and repairs and renovation. In fiscal 2014, we sought tofurther raise our profitability, primarily through enhanced
quality, and strengthened our worksite capabilities. In termsof skills, we expanded our training curriculum for every
skill level and position at the Technical Training Center. In
terms of operations, we constructed a support system that
reduced site management workload, enabling managers
to concentrate on construction management and othercritical tasks; strengthened collaboration between sites
and management and support divisions by improving
operational processes; and implemented labor-saving
projects to upgrade our construction methods. We alsocollected and analyzed Company-wide purchasing data tocorrect discrepancies among regions and suppliers toward
bolstering our purchasing power.

156.0

Business Report

134.8 136.1• Sales (billions of yen)billion yen

Basic strategy for FY2015• Strengthen sales capabilities• Enhance cost competitiveness and construction
capabilities• Strengthen solution proposal capability andpromote LCE• Total technological capabilities for realizing the optimal combinationof energy conservation and comfortable environments

Progress in the Medium-Term
Management Plan
Strengthen Core Businesses
Increasing orders for proposed improvement projects
The Energy Solution Center develops and proposes
diverse energy-saving technologies and offers proposals
for renovation projects.
Expanding orders in strategic fields
We are seeking to expand orders for information-related
facilities such as data centers and other facilities in nonmanufacturing fields. In fiscal 2014, we focused on
developing and introducing many new products andtechnologies related to medicine and pharmaceuticals.
Developing technology for next-generation energysaving and new energies
The Energy Solution Center and the Technical Research& Development Institute are collaborating in thedevelopment of new technologies.
Strengthening and enhancing our bases inSoutheast Asia
The Overseas Operations Control Office collaborates
with the branches and branch offices to strengthen ouroverseas subsidiaries and develop its track record of
construction projects.

Expand Strategic Growth Businesses
Life cycle engineering
We are collaborating with Group companies to expand
our businesses by demonstrating our engineering
competence based on advanced technologicalcapabilities in every stage of the facility construction
life cycle.
Renovation and integrated networks
The integration of two businesses into the Smart Building
Solutions Business in fiscal 2012 has generated several
benefits, such as enhancing the added value of buildings
through advanced central monitoring and management.
Create Unique New Businesses
We are striving to develop unique, high value-added
products through collaboration between our businesses
that demonstrate our total engineering competence. In
addition to providing safety for kitchen environments
and food, we offer comprehensive proposals to foodhandling environments at food production factories,
large-scale commercial complexes, and medical andwelfare facilities for HVAC, plumbing, and electricalsystems; material handling; water treatment and waste
treatment.

SANKI REPORT 201523

Initiatives for Mid- to Long-Term Growth

Strengthening our sales capability
We will strengthen our support to branches and branch
offices and promote Company-wide, cross-departmental
sales activities by reorganizing the functions of the Sales
Division. In order to bolster individual sales capability, wehold sales training sessions for each management level. In
terms of marketing, we will propose and expand sales ofour highly original products such as Front Air®, a high-heatgenerating server cooling system for data centers. In thefields of medicine and pharmaceuticals, where we wereparticularly successful in fiscal 2014, we will bolster salesof MEDIFORT™, a high-comfort HVAC, and the CPCube™
air flow improvement system for the regenerative
medicine industry.

Front Air® high-heat-generating server
cooling system for data centers

24

SANKI REPORT 2015

Strengthening our solution proposal capability andpromoting LCE
The main operations of our Facility Systems Business aredesign planning and project management services for theoffice or workplace, such as fitting-outs and relocation,and consulting services for workplaces. The Smart
Building Solutions Business provides smart buildings thatenhance energy-saving efficiency and comfort. Sinceboth businesses undertake project proposal-based sales,
we incorporated the Smart Building Solutions Business,
one of our strategic growth businesses, into the Facility
Systems Business in April 2015.
This action will expand opportunities for providing
customers with Sanki Engineering technologies in theareas of instrument and control engineering and electricaland network systems engineering, while simultaneously
strengthening the engineering capabilities of the Facility
Systems Business Division. In addition, we will seek toexpand the scope of our business and generate profit
by providing customers with LCE that encompasses theentire process from planning and design to aftersales
service, maintenance and management, representing astrength of the Sanki Engineering Group.

Focus 1
Building and facilities with seismic resistance and without city gas

Building A, Tamagawa Office, Canon Inc.

Business Report

This segment includes HVAC and plumbing systems
for buildings, industrial HVAC systems, electricalsystems, and the Smart Building Solutions and Facility
Systems businesses, which are involved in various social
infrastructure. To achieve mid- to long-term growth, wewill seek to generate profits while contributing to theresolution of social issues, such as global warming, energy
resources and aging facilities, mainly by pursuing ourcentral initiatives: strengthened sales capability, enhanced
cost competitiveness and construction capabilities, andstronger solution proposal capabilities, including thepromotion of LCE. We will also seek to improve theprofit ratio of our core businesses by boosting sales andpurchasing capabilities while simultaneously making site
improvements to reduce the site manager workload.

Securing profits by raising cost competitivenessand construction capability, and developing humanresources
To strengthen our cost competitiveness, we will set
up the Procurement Division to bolster our negotiating
capability and support on-site purchasing operations
through centralized management. We will also promotecomprehensive cost reduction measures, including thereconstruction of our subcontracting system. Furthermore,
the Site-Documentation Support Center, which expands on
the work of our site support projects, will be establishedto support sites and enable managers to concentrateon construction work, consequently enhancing ourconstruction management capability. As for bolstering ourtechnological capability and developing human resources,
we will continue to implement Group training for every
skill level at the Technical Training Center and provide
personal guidance by technical experts. We will upgrade
the capabilities of our sales personnel by improving sales
manuals and providing training to strengthen marketing
capabilities in the Sales Division. With on-the-job training
at the core, we will develop personnel with skills in
information gathering and product development as well as
customer relationships that will generate profit and more
effectively respond to social needs.

Features• Saves space with a single-unit air-cooled heat pump
• Stronger seismic resistance based on design
Canon’s Tamagawa Office was completed in October 2014,
and Sanki Engineering was in charge of the heat source, HVAC
systems, water supply and drainage, fire extinguishing systems,
utility, water treatment and kitchen systems for Building A. Under
the basic concept of incorporating seismic resistance and notusing city gas, we utilized our diverse technologies in several key
ways, including a single-unit facility for supplying cold and hot
water to save space. Within a short actual construction periodof six months, we were also able to enhance post-operation
maintenance and reduce operating costs.

Value provided by Sanki Engineering• Space saved through advanced technology and a reduction in operating costs• Complex construction work completed within a short period

Focus 2Contributing to an advanced medical field with innovative HVAC technology

CPCube™ air flow improvement system for the regenerative medicine industry
Conventional system

System installed with CPCube™

A/C air outlet

A/C air outlet
CPCube™
No disturbancecaused by BSC Rectification
exhaustDisturbancecaused by BSC
exhaustBSC
Floor
surface

Updraft effect

BSC
Floor
surfaceClean air

CPCube™

BSC
Front opening

Feature• Contributes to maintaining clean air flow atregenerative medicine worksites
Regenerative medicine worksites require a consistently
clean air flow. Conventional biohazard safety cabinets(BSC) presented several challenges, including the risk ofcontamination from the opening sections and high costs tooperate the clean room’s HVAC system. In March 2015, SankiEngineering developed the CPCube™ as a unique technology
for rectifying air flow that achieves the same degree of
cleanliness as conventional systems with 20% less air flow.
The system has been introduced at Japan Tissue Engineering
Co., Ltd. (J-TEC), the only company offering commercial
regenerative medical services in Japan.

Value provided by Sanki Engineering• Higher efficiency in maintaining cleanliness with a unique technology for controlling air flow

SANKI REPORT 201525

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.

• Sales and sales composition ratio for FY2014• Orders (billions of yen)

• Sales (billions of yen)

Market environment for FY2014

10.8

10.8

9,953
million yen

9.8

9.4

9.3

9.9

8.4

5%

6.5
5.7

Risks

Business opportunities• Intensifying price competition
for standard equipment• Need to expand airport facilities
ahead of the 2020 Tokyo Olympics
and Paralympics• Rising demand for energy
conservation and automation in the
non-manufacturing industry fields

Sanki Engineering’s strengths
2010

Summary of Results for Fiscal 2014
Orders in the Machinery Systems Business fell 32.6%
from the previous fiscal year to ¥5,716 million, partly
because we were unable to win an order for a large-scalematerial handling system. Sales increased 1.1% from theprevious fiscal year to ¥9,953 million, maintaining levels
roughly equivalent to the previous year.
In terms of market conditions, the declining
birthrate and aging society have led to growing
demand for automated facilities using robots in fields
such as medicine, pharmaceuticals and nursing care.
Meanwhile, although construction investment is risingahead of the 2020 Tokyo Olympics and Paralympics,
the number of experienced engineers in construction
projects has continued to decline, creating a need forlabor-saving technologies using new materials and new
construction methods.
Under these circumstances, we have focusedon strengthening product appeal to expand profits instandard equipment businesses, expanding sales in

Major developments and projects• Chilled food conveyor (developed in October 2014)• High-luminance multicolor LED conveyor (developed in October
2014)• AGV meal delivery cart (developed in November 2014)

26

SANKI REPORT 2015

2011

2012

2013

2014 (FY)

2010

2011

2012

2013

2014 (FY)non-manufacturing industry fields such as medicine
and pharmaceuticals and logistics, and strengthening
our technological capabilities by incorporating robots.
In our efforts to strengthen product appeal, we sought
to meet customer needs by developing new foodhandling products in collaboration with other divisions.
To expand sales in non-manufacturing industry fields,
we developed and marketed new types of conveyors
targeting the food products market in addition to the
medical and logistics markets. As for strengthening
our technological capabilities by incorporating robots,
we opened the Industrial Robot Utilization Center in
the Yamato Engineering Center as a facility capableof conducting demonstrations and experiments in
response to customer requirements.

Automatic Guided Vehicle(AGV) meal delivery cart for
medical facilities

Medium-term management plan

Sales target
for FY2015

15.0

Business Report

11.8• Private sector capital investment set to recover• Rising need for automation due to decline in working population• Growing demand for large-scale distribution facilities due toglobalization of logistics and expansion in the online shopping market

billion yen

Basic strategy for FY2015• Strengthen product appeal to expand profits instandard equipment businesses• Expand sales in non-manufacturing fields• Maintain maintenance contracts and expand
renewal business• High value-added, one-of-a-kind technology that can meet theneeds of specific markets

Progress in the Medium-Term
Management Plan
Strengthen Core Businesses
Developing and marketing new-type conveyors for
specific markets
We developed and marketed our cost-competitive lightload handling conveyor called “Simple” as well as achilled food conveyor and the high-luminance multicolor
LED conveyor for the food products market. We plan
to continue developing unique, high value-added
products for specific markets to strengthen productappeal and differentiate our products from those of thecompetition.
Expanding Orders in Strategic Fields
System integrator for saving labor and energy
As the working population declines, we expect
increased demand for labor-saving, energy-saving
systems including industrial robots. To quickly address
customer needs, we opened the Industrial Robot
Utilization Center in the Yamato Engineering Centerto establish a system for conducting demonstration
experiments in 2014. Going forward, we intend to
become a labor-saving, energy-saving system integrator
and will hone our proprietary technologies and seek
collaborations with other companies.

Establishing a base targeting the non-manufacturingindustry fields
We will collaborate with other divisions to develop
facilities and equipment for the medical and logisticsrelated industries. In the medical field, we installeda large-scale material handling system at a general
hospital and followed up by developing an AGV mealdelivery cart. We are preparing additional proposals
for labor-saving systems in hospitals. In the logistics
field, we will develop new models while also seeking
to expand into overseas markets in collaboration withother companies.
Develop New Business Domains
Expanding into overseas markets
We have been delivering competitive products andtechnologies to countries such as Taiwan, South Korea
and China and will be considering overseas expansion
for our standard conveyors.

SANKI REPORT 201527

Initiatives for Mid- to Long-Term Growth

Strengthening product appeal to expand profits instandard equipment businesses
With regard to standard products, we will continue tointroduce cost-competitive products to the market,
while promoting a shift to lower cost models of existingcore products. We will also seek to expand the market
by aggressively marketing high value-added products
such as chilled food conveyors, conveyors that prevent
hair contamination, and high-luminance LED conveyors.
In addition, we will further strive to meet diversifying
needs by developing value-added equipment other thanconveyors and by expanding our product line-up throughaggressive alliances.
In factory automation, we will strengthen the shift
in our target markets from manufacturing to nonmanufacturing industry fields and expand sales of newly
developed products. In the area of airports, we willorganize a task force to conduct sales activities targeting
facility expansions at Haneda and Narita airports aheadof the 2020 Tokyo Olympics and Paralympics. In the
medical field, we will continue developing productsthat address the needs of the medical device market tomeet the demand for safe labor-saving devices, while
conducting sales visits to new customers and opening
new marketing channels. In the logistics market, we will
expand sales of newly developed products such as the
Cubic Sorter System and Cross-Belt Sorter.
As part of our efforts to open new marketing
channels, we will set up a Web-based sales platform.
We will also conduct market research and consult withoverseas partners to establish a competitive foundationfor expanding into overseas markets.
Identifying and concentrating on target markets
To meet the growing need for manpower and laborsavings, we will strive to create and establish unique
technologies that combine the material handlingtechnology we have developed over the years with the28

SANKI REPORT 2015

Strengthening planning and development
capabilities
To construct a system for accurately grasping andquickly responding to the rapidly changing needs ofour customers and markets, we are envisioning ourrole as a group of developers creating the future. Eachindividual will be aware of our shared concept that all
employees are developers in the course of our planningand development processes.
To create the next new technology, we will use allavailable means to grasp the needs of customers andmarkets and quickly develop products aligned with oursales plans to sharpen our competitiveness.
We are also seeking to clearly identify our coretechnologies from among the varied technologies wepossess in this business segment, including conveyancecontrol, robotic hand and sensing, as well as suitablecombinations, and are pursuing collaboration with theMaterial Handling Group at the Technical Research& Development Institute. In addition, we will strive
to meet the diversifying needs of our customers andmarkets by developing unique products that differentiate
us from the competition through participation in joint
projects involving industry-academia-government
collaboration.

Focus 1
Food serving line that places less stress on workers and the environment

Chilled food conveyor

Business Report

We intend to primarily focus on strengthening productappeal to expand profits in standard equipment
businesses, identifying and concentrating on target
markets, and strengthening planning and development
capabilities. We will build on technologies accumulated
over the years by adding technologies that are
required to address social issues and establish unique
technologies that will open pathways into the future.

handling technology of industrial robots. Furthermore,as a labor-saving system integrator, we will actively
use the Industrial Robot Utilization Center andpromote collaboration with the Technical Research &Development Institute to strengthen our technologicalcapabilities by incorporating robots. At the same time,
we will aggressively pursue collaboration with othercompanies and develop new markets such as logistics,
online shopping and the food industry.

Features• Frees employees from the discomfort of working
under Flow-temperature conditions• Simple structure contributes to HVAC energy saving
Serving lines for chilled food products primarily depend on
manual labor, and since the entire workroom must be kept at a
low temperature to maintain food quality, workers are subject
to significant physical discomfort. To address this challenge,
we integrated our proprietary HVAC technology and material
handling technology to limit the low-temperature zone to the
manufacturing line, saving energy used by the HVAC andensuring a comfortable working environment.

Value provided by Sanki Engineering• Simultaneously reduces worker discomfort and energy consumption through total engineering• Easier cleaning and maintenance

Focus 2
Contamination and quality inspection system using brightness and various colors that defy convention

High-luminance multicolor LED conveyor
Features• Impressively high LED luminance of the working
surface, up to 20,000 lux (as much as 13 times
brighter than a conventional unit)• Contamination inspection based on diverse colors aswell as brightness
We developed a conveyor with LED lighting that can be adjusted
for brightness and color. Given the growing importance ofensuring food product security and quality, the system canbe used to inspect contamination by alien substances, hair orparasites, and also detect flaws. The system eliminates the
flickering associated with conventional, fluorescent light systems,
thereby reducing stress on the eyes of workers.

Value provided by Sanki Engineering• High-luminance LED light facilitates highly accurate inspection• Reduces stress on the eyes of workers due to uniform lighting • Lower power consumption
Parallel link robot in operation at the Industrial Robot Utilization Center

SANKI REPORT 201529

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

• Sales and sales composition ratio for FY2014• Orders (billions of yen)

• Sales (billions of yen)

Market environment for FY2014

17,485
million yen

10%

20.7
16.6

15.0

19.8
17.1

16.7

17.1

17.4

Risks

Business opportunities• Fluctuations in the mid- tolong-term supply of electricity• Contraction in project scale anddecline in capital investment
due to fiscal restraint bymunicipal governments• Expanded demand for energysaving and energy creation
systems at sewage and waste
treatment facilities• Need for extending the life offacilities

Sales target
for FY2015

24.0

Business Report

28.8

17.7

Medium-term management plan

• Expanded demand for energy-saving and energy creation systems• Demand for facility life extension

billion yen

Basic strategy for FY2015• Strengthen proposal capability through collaboration
with Group companies• Installation and development of new strategic
products by the task force

Sanki Engineering’s strengths
2010

Summary of Results for Fiscal 2014
Orders in the Environmental Systems Business rose
11.6% from the previous fiscal year to ¥16,767 million,
based on a large-scale project. Sales were 1.8% higher
than the previous fiscal year at ¥17,485 million, roughly
the same level as the previous year.
In public works such as sewage treatment
and waste treatment facilities, key markets in theEnvironmental Systems Business, a marked decline in
new capital investment and a contraction in project scale
was observed as municipal governments exercised
fiscal restraint. Conversely, there is accelerated demand
for applying life extension measures to facilities thathave entered a period of mass upgrades, realizing
energy savings for entire treatment facilities andinstalling energy-generating facilities to ensure a stablesupply of electricity over the mid- to long-term. With
regard to private sector industrial plants, while capital
investment remained subdued due to the economic

Major projects• Chain flight sludge collector with anti-seismic functions(completed in February 2015)• Supercharged (turbocharged) fluidized bed incinerator(completed in March 2015)• Energy-saving centrifugal dehydrator (delivered in March 2015)30

SANKI REPORT 2015

2011

2012

2013

2014 (FY)

2010

2011

2012

2013

2014 (FY)slump and the shift to overseas production, there havebeen signs that the weakness of the yen is encouraging
some Japanese manufacturers to return their production
operations to Japan.
Under these circumstances, we focused on
developing and expanding sales of products that meetthe continuing needs for energy saving and energy
creation. We proposed the supercharged (turbocharged)
fluidized bed incinerator and the energy-saving
AEROWING air diffuser for sewage treatment facilities,
and the small-scale binary cycle and other types ofpower-generating systems for waste treatment facilities
and private-sector factories that generate exhaust heat.
In private-sector projects, we bolstered our overall
proposal for water and wastewater treatment systems
for the medical and pharmaceutical fields. With regard
to facility upgrades and life extension needs, weoffered optimal life cycle engineering to customers
by harnessing the synergies with Group companies.

Progress in the medium-term
management plan
Strengthen Core Businesses
Expanding orders for strategic energy-saving
products for sewage treatment facilities
We are pursuing development and sales expansion ofstrategic products such as the AEROWING II, which• Life cycle engineering based on synergies with Group companies

contributes to reducing power consumption at sewage
treatment facilities, the energy-saving centrifugal
dehydrator and the chain flight sludge collector with
anti-seismic functions. We are also striving to win moreorders by raising our score under the comprehensive
bidding evaluation method and presenting technicalproposals for large-scale projects.

Energy-saving air diffuser
AEROWING II

Expanding our marketing networks overseas
AEROWING is a strategic product manufactured by
AQUACONSULT Anlagenbau GmbH (a wholly owned
subsidiary) based in Austria, and we have concluded

a sales alliance for the North American market with
OVIVO USA, LLC, a leading plant manufacturer. We are
currently enjoying brisk sales in developed countries inNorth America and Europe and are planning to expand
our sales channels in emerging countries in Asia as wellas in untapped markets.

Create Unique New Businesses
Developing technology for next-generation energy
saving and new energies
We are expanding the development and sales of productsthat meet the growing needs for conserving and creatingenergy. Since fiscal 2013, we have commercialized asmall-scale binary cycle power generation system thatcan generate power using unused waste heat at low to
medium temperatures discharged from private-sector
factories, geothermal heat, and hot spring heat. Whilelarge-scale systems have already been commissioned, thereduced scale of our system is expected to fill applications
in diverse heat sources. The first system delivered by the
Sanki Engineering Group in fiscal 2013 has already begun
generating power at a private company. Our systemboasts exceptional features such as high power generation
efficiency and ease of maintenance, and we are planningto further expand sales over the coming years.

SANKI REPORT 201531

Initiatives for mid- to long-term growth

Strengthening the core engineering business
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 also led to an evergreater need to conserve and create energy.
Under these circumstances, we will continue toexpand the sales of strategic products, such as the
AEROWING II energy-saving centrifugal dehydrator
and small-scale binary cycle power generating systemin our water supply and sewage systems business,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
for saving and generating energy.
In our waste business, we will seek to secure andincrease business opportunities by establishing andreconstructing the systems for receiving orders. Also,
we will pursue proposal-based sales for new projects
and large-scale repair of projects implemented in the past.

Developing human resources
Due to 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.
We will seek to further strengthen our engineering
capabilities through three initiatives and continue tocontribute to realizing a low-carbon society.

Focus 1
Slim design for slim energy consumption

SANDEC G3 energy-saving centrifugal dehydrator

Business Report

In the Environmental Systems Business, we will
maintain our efforts to develop unique water treatment
and waste treatment facilities and systems to saveenergy and reduce emissions of greenhouse gases,
which will contribute to enhancing the quality of life andrealizing a low-carbon society.

Cultivating new markets
We will reinforce our efforts to launch strategic productsin the private sector, such as the fields of medicine
and pharmaceuticals as well as the food products field.
We will present total proposals on drainage systems
for hospitals and pharmaceutical companies to create
opportunities for new businesses and undertake rapid,
ongoing product development and market introduction.
To that end, we will organize a task force responsible
for the installation and development of new strategic
products that meet market needs. Using the synergies
with other divisions and subsidiaries, we will respondto diverse needs by demonstrating the strength of the
Sanki Engineering Group to provide customers withlife cycle engineering encompassing the entire processfrom facility planning to design, construction, follow-up
service, maintenance and management.

Features• Saving energy through energy recovery• Low moisture content of dehydrated cake madepossible by high centrifugal force
We developed an energy-saving centrifugal dehydrator with astructure based on an innovative concept. In April 2014, the firstsludge dehydrator system began operating at the Kachinishi
wastewater treatment plant in Kasugai City, Aichi Prefecture.
The system not only realizes low moisture content through thirdgeneration, high-centrifugal operation at 3,000 G but also has aremarkably slim design compared to conventional systems, asignificant contribution to saving energy and space.

Value provided by Sanki Engineering• Energy-saving operations and space-saving based on unique technologies• Facilitates maintenance and management through enhanced operability and workability

Focus 2Contributing to reliable water safety and security with robust anti-seismic functions

Chain flight sludge collector with Sanki anti-seismic features
Features• Robust anti-seismic function based on a new type ofwear shoe and chain• Suitable for the replacement of parts of systems
In February 2015, we delivered the chain flight sludge collector
with Sanki anti-seismic features to the Northern Kumamoto
Sanitation Center in Kumamoto Prefecture as the first such
system commissioned by a sewage treatment facility in Japan.
Following the Great East Japan Earthquake, there were many
reports of damaged sludge collectors at sewage treatment
facilities. In response, we developed a new type of sludge
collector that reduces the occurrence of derailing and damage
during an earthquake.

Value provided by Sanki Engineering
Small-scale binary cycle
power generating system

32

SANKI REPORT 2015

• Social infrastructure is preserved during large-scale disasters

SANKI REPORT 201533

Real Estate BusinessResearch and Development

Our Real Estate Business is engaged in leasing operations and building management and is striving to increase theadded 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.

• Sales and sales composition ratio for FY2014• Sales (billions of yen)

2.8

2.7

1.0

2010 2011

1.2

1.0

1.0

Initiatives in new fields

2012 2013 2014 (FY)2010 20112012 2013 2014 (FY)

• Meeting labor-saving
needs associated withthe decline in the working
population while maintaining
construction quality• Applying our technologies
to the fields of medicine,
pharmaceuticals,
automotives, and newtechnologies

Summary of Results for Fiscal 2014

Initiatives for fiscal 2015

Basic approach

In the Real Estate Business, sales rose 19.3% fromthe previous fiscal year to ¥1,285 million. The higher
sales were due to a change in October 2014 in the
management structure of a commercial complex owned
by Sanki Engineering. In an accompanying move, thename of the complex was changed from “LaLaportMoriyama” to “Molive.”
In the office leasing segment of Japan’s realestate sector, the recovery in corporate performancedue to “Abenomics” has lowered the vacancy rate
in metropolitan Tokyo to around 5%, with similar
decreases in outlying regions. Meanwhile, there is a
growing need in regard to real estate facilities, including
for energy- and resource-saving features, extending
the life of aging facilities, and the installation of longlife facilities. Under these circumstances, we increased
the added value of our commercial facilities in fiscal
2014 by renewing lighting fixtures with LED lighting,upgrading water heaters and coolers in HVAC systems,
and repairing external walls. We also sought to securestable revenues by restructuring our business, which
included utilizing idle assets.

In fiscal 2015, we will strive to offer real estate withhigh added value by undertaking the maintenanceand management of portfolio assets through the useof Sanki Engineering’s technologies and know-how,and thereby more effectively concentrate our leasing
operations to generate higher revenues from stock-typebusiness and bolster our business.
During the first half of the fiscal year, we will starta leased parking lot operation as a more effective
utilization of our properties in the Haneda area of Tokyo.
With regard to the Sanki Yamato Building, we areconsidering offering the entire building for rent or
seeking tenants for separate sections of the building
while we effectively use it as well. In addition, we will
review the current use of space in regard to our otherassets to consider more effective means of increasing
income from our leasing operations.

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.

Environmental Systems Business
Energy conservation
and resource conservation

The Intellectual Property Department responsibly manages
intellectual property in accordance with our establishedrules. To strengthen our oversight of intellectual property,
a liaison person is assigned to each business division
to identify intellectual property through activities toimprove construction methods and share informationfrom meetings with intellectual property officials acrossthe Company. We also address risks by maintaining andmaking available Group-wide a database of Company
intellectual property as well as patent summaries andpublic notifications. In addition to providing intellectual
property training for new recruits, we began organizing
Group training on risk management for employees intheir third and seventh years, starting in fiscal 2014. Bysharing information and implementing regular training
and education, we are working to enhance awarenessin order to protect our own technology and ensure that
we do not infringe upon the intellectual property rights
of other companies.

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
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

SANKI REPORT 2015

Intellectual property initiatives

R&D technology map

Waste incineration technology

Molive shopping center(Shiga Prefecture)

34

1.1

1.1

• Maintenance and management of
portfolio assets• Effective use of portfolio properties• Raised revenues from stock-based
business by accumulating leasing
operations• Disposal of non-performing assets

Centered on our Technical Research & Development Institute,
we conduct research and development for all businessdomains of the Sanki Engineering Group in collaboration
with the planning and development departments ofeach business division. In addition, we enhance crossdivisional collaboration by actively sharing information andexchanging views across business boundaries and fields
of expertise in order to create new value.

Business Report1%• Refinement and application
development for proprietary
technologies• Promotion of higher quality• Pursuit of energy conservation• Investigation of newtechnologies and R&D

1.4

Basic strategy for FY2015

million yen

R&D activities(billions of yen)

4.1

1,285

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 201535

Focus 1
Comfortable air conditioning system for hospitals that eases the effect of air currents

MEDIFORT™
Features• Provides the comfort of radiation air conditioning,with sufficient warming
and cooling
撮影予定• No drafts over the beds of patients• Quiet operation compared to convection air conditioning• Can be installed in both new and renovated buildings
Convection air conditioning in hospital heating and coolingsystems can cause uncomfortable drafts for patients. On theother hand, radiation air conditioning has not been able to provide
sufficient warming or cooling, and it also carries the risk of waterleakage and poor ventilation, besides being costly. In November
2014, we addressed these issues by developing MEDIFORT™,
a system that combines the advantages of convection andradiation air conditioning. Its proprietary nozzle creates a gentle,
quiet ambience for patients without directly exposing them to air
currents, and provides refreshing air circulation for medical staff.

Value provided by Sanki Engineering• Meets multiple needs, such as the differing sense of comfort expected by patients and medical staff,
quiet operation, sufficient warming and cooling, and cost efficiency• Suitable for both new and renovated buildings

We will create new value through continued evolution by passing ontechnological expertise as our corporate DNA
We have celebrated our 90th anniversary,and if we are to go on enhancing ourcorporate value into our centennial, we
must pass on the technological expertisethat our predecessors cultivated over many
decades while we also embrace new ideas
to facilitate continued evolution.
An effective way to do this is byhaving every engineer continuously
maintain an open mind, without being
constrained by their prejudices, positions
or backgrounds, and to share information,
opinions and ideas across their fields ofexpertise and departments as they strive
to maintain and pass on our technologicalexpertise. To create an environment
where communication is stimulated andbreakthroughs are encouraged, we have

36

SANKI REPORT 2015

been consolidating working spaces,
creating common areas for gathering andpromoting effective meetings. Thanks
to this initiative, we have observed
an increase in the number of productdevelopment efforts that leverage Group
strengths. We also provide opportunities
for reporting results, such as academic
conference presentations, and engage incollaborations in several fields, including
joint research with universities to develop
new technologies. Our active efforts tocommunicate outside the Company haveprovided a stimulus for engineers, leading
to new ideas and technologies.
We will further strengthen these initiatives
to create new value and contribute to thedevelopment of a sustainable society.

VOICE

Hirotoshi Fukui
Executive Officer, Chief Director ofTechnical Research & Development
Institute

CSR Report
SANKI REPORT 201537

Management

Corporate GovernanceInternal Controls

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.

Basic policy and system 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 April 2014, we revised the policy to further boost
our system for promoting business operations in aGroup-wide effort on legal compliance. In June of thatyear, we also revised the Sanki Engineering Group’s
Code of Conduct and Action Guidelines, which guide us
in practicing the Company Credos and accomplishing
our social responsibility as an organization.
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
the functionality of the system of auditing conducted byauditors.

Corporate Governance System
In order to increase management efficiency andspeed up the decision-making process, we are
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. We
also have a system by means of which the decisionmaking process of our Board of Directors and theexecution of business affairs by our executive officers
are subject to multifaceted monitoring and restraints
from external executive officers, a Board of Company
Auditors (including external auditors), the Internal Audit
Department, and an accounting auditor in order toensure the system of legality and appropriateness ofour business procedures.

WEB Basic Policy for Internal Financial Control

http://www.sanki.co.jp/en/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 with respect to the committee’s assessmentof and response to material risks within each department
and subsidiary. Under the system, a report is produced toensure that internal controls related to financial reportingare being exercised effectively. In the report for fiscal
2014, auditors confirmed that our financial reports havebeen presented in a reliable manner in all material aspects.

Framework of the corporate governance system(As of June 25, 2015)

General Shareholders’ Meeting
Appointment/Dismissal

Board of Company Auditors

Appointment/Dismissal

Business auditing
Accounting auditing

Of four auditors, two are external auditors

Board of Directors

Appointment/Dismissal
Accounting auditing

CSR Report

Basic Philosophy

Accounting Auditors(Ernst & Young ShinNihon LLC)

Of eight directors, two are external directors
ReportingElection, dismissaland supervision

Appointment to/removal from office
Risk Management Committee
Executive Officer Committee

Discussion
and reporting

President and Representative Director

Management Meeting

Corporate Ethics Committee
Internal Finance Control Committee

Policy Meeting

ReportingDiscussion, andreporting onimportant matters

Internal Audit Department

Executive officers
Leadership andsupervision

Monitoring, guidance, support and education

Leadership and supervision

Auditing

Sections, headquarters, research institute, business division, centers,
business departments, branches and branch offices, subsidiaries• Business execution system• Auditing and supervision system

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.

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.

Management Meeting
The meeting consists of directors and executive officers nominated by thepresident and meets weekly to deliberate on important matters, including
those to be discussed by the Board of Directors.
Policy Meeting
Risk Management Committee: See page 45
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.

Internal Audit Department
This department conducts internal audits of the operations of each of the Company’s business divisions in accordance with the Auditing Plan for that fiscal
year. It verifies the internal management system including its appropriatenessand efficiency. As necessary, the Internal Auditing Department exchanges
opinions with or makes proposals concerning the improvement or correction ofa problem to the internal controls departments of the Administration Divisionand other divisions. The department reports the results of its audits to thepresident, responsible executive officers and auditors.

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.
Internal Finance Control Committee
Chaired by the president, this committee’s central role is company-wide
control, including review and decision-making concerning important mattersregarding internal controls for financial reporting.

38

SANKI REPORT 2015

SANKI REPORT 201539

Executives of the Sanki Engineering Group (As of June 25, 2015)

The Sanki Engineering Group’s Code of Conduct and Action Guidelines
CSR Report

Formulated on December 1, 2002
Revised on May 1, 2012
Revised again on June 2, 2014
(The colored sentences (1–8) are our Code of Conduct; sentences in black print (①–�) are our Action Guidelines.)

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 disclosethe company information necessary to increasing our management transparency in an appropriate and timely manner, improving our level of communication
with our stakeholders and earning their trust.
④ We will disclose company information, including information concerning our business activities and our financial status, to our stakeholders in a timely and appropriate manner.
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.

Full-time Auditor

Director

Director

Director

Director

Full-time Auditor

Toshikatsu Yasunaga

Takashi Motomatsu

Nobuo Kumura

Hidemi Fujii

Yoshio Kawabe

Masato Komura

External Auditor

External Director

Representative Director

Representative Director

External Director

External Auditor

Takeo Inokuchi

Yukiteru Yamamoto

Takuichi Kajiura

Tsutomu Hasegawa

Hiroki Nishio

Mamoru Norisada

Representative Director

Director

ChairmanTakuichi Kajiura

President

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

Yukiteru Yamamoto*
Hiroki Nishio*

Full-time Auditor

Toshikatsu Yasunaga
Masato Komura

External Auditor

Takeo Inokuchi
Mamoru Norisada*

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 andregulations 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 our business 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.

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, andwill 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 the Construction 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 as entertainment 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 notprovide any economic benefits such as entertainment or gifts that exceed the bounds ofordinary social common sense to the executives or employees of our customers. In addition, when the company rules of our customers prohibit the provision of 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.

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

40

SANKI REPORT 2015

SANKI REPORT 201541

Management

Compliance

Basic Philosophy

Sanki Engineering Group Compliance Declaration and Sanki
Reference Engineering Group Behavioral Standards

P. 44

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 withrespect to compliance guidelines and action plans for theentire Group. The committee was convened twice in fiscal
2014.

Compliance Promotion Activities
Corporate ethics hotlines (whistleblowing system)
We have set up corporate ethics hotlines both within andoutside the Company. The internal hotline goes to the
CSR Promotion Division, while the external hotline goesto our consulting attorney’s office. We act with haste toresolve the issues that are reported, with consideration
for the protection of anyone seeking consultation orproviding information. All of the reported information ispresented to the executives responsible for corporate
ethics, and important information is reported to theManagement Meeting. In fiscal 2014, there were sevenreported incidents (six internally and one externally), andall incidents were appropriately handled.
We are also distributing a corporate ethics hotline cardin order to raise awareness of this system throughout theentire Group.
Receipt of compliance confirmation sheets from all
executives and employees
In order to refresh the awareness of all Group executives
and employees of the responsibilities that they must
fulfill in their respective positions and roles, complianceconfirmation sheets covering items such as observanceof the Code of Conduct and Action Guidelines, andeliminating criminal elements and groups, are submitted

42

SANKI REPORT 2015

Number of persons submitting compliance confirmation sheets (fiscal 2015)
Sanki Engineering(relevant employees)

Subsidiaries(relevant employees)

Compliance confirmation
sheets concerning
performance of duties

33 (33)25 (25)Compliance confirmation
sheets1,968 (1,997)

338（345)• 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 2014)
CourseTheme

TargetFrequency andparticipation

Corporateethicstraining

Anti-Monopoly Act
Compliance Program,prevention of association
with antisocial elements,
illegal drugs, labor
management

All employees

33 times/2,258
employees

Specialcorporateethicstraining

Compliance with the AntiMonopoly Act

All employees

47 times/2,098
employees

Compliance awareness survey
We conduct an annual awareness survey on issues suchas compliance and CSR targeting all executive officers
and employees. Survey results are used to monitor andimprove the effectiveness of CSR activities.
Results of questionnaire regarding complianceawareness for 2015
Survey period: April and May, 2015
Participants: All Group executive officers and employees

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

Fiscal 2014

80.6%

Fiscal 2015

83.4%

Q. Has your awareness on compliance changed sinceattending the special corporate ethics training?
I was aware of the issues before the training.

51.0%

My awareness changed after attending.

38.5%

Other

10.5%

Strengthening Anti-Monopoly Act Compliance
Concerning breach of the Anti-Monopoly Act in the
Hokuriku Shinkansen construction project
Sanki Engineering breached the Anti-Monopoly Act inbidding for the Hokuriku Shinkansen construction project.
In order to regain society’s trust, we are steadfastly andthoroughly enforcing measures to prevent recurrence.
Measures carried out in fiscal 2013 to prevent recurrence
We carried out the following measures in fiscal 2013 toprevent recurrence.

• Formulated the Sanki Engineering Group ComplianceDeclaration and Sanki Engineering Group Behavioral
Standards (October 2013).
• Held special training on corporate ethics for all executive
officers of the Group as a means to redouble efforts
concerning the Anti-Monopoly Act and submitted apledge outlining compliance with the act (Octoberthrough December 2013).
• Distributed the Compliance Handbook to all executive
officers of the Group in order to boost awareness andinformed them again of the compliance whistleblowing
system (November 2013).
• Assigned a compliance manager to each operational
department (February 2014).

Measures carried out in fiscal 2014 to prevent recurrence
To strengthen the effectiveness of our measures to prevent
recurrence, we established a comprehensive, Group-wide
Anti-Monopoly Act Compliance Program at a meeting of theBoard of Directors and carried out the following measures.
• Assigned a compliance manager in each department to ensurecompliance in public works projects, and we began supervising
the process for deciding on the bid amount and operating acompulsory system of advance approval and reporting whenattending a meeting with any companies in the same industry(April 2014).
• Introduced regular rotations for sales staff assignments (April2014).
• Issued an Anti-Monopoly Act Compliance Manual (June 2014).
• Established a Compliance Risk Subcommittee within the Risk
Management Committee to prevent risks from materializing(June 2014).
• Clearly stipulated breaches of laws such as the Anti-Monopoly
Act as grounds for disciplinary action (July 2014).
• 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 theGroup’s executives and employees. A total of 2,098 participants
attended 47 sessions (November 2014–February 2015).
• Reconsidered membership in outside groups (March 2015).

We will continue these efforts in fiscal 2015 to further
reinforce compliance and thoroughly implement measures
to prevent recurrence.

VOICE

Recognizing corporate ethics as the bedrock of our actions, we will
spare no effort in continuing to maintain the highest standards
Sustained by the trust of our customers
and the efforts of our forerunners, the SankiEngineering Group was able to celebrate
the 90th anniversary of its founding. As
the officer responsible for corporate ethics,
I believe that every executive officer andemployee must attain an even higher levelof awareness of corporate ethics if we areto retain the public’s trust. In view of thegravity of our breach of the Anti-Monopoly
Act in the Hokuriku Shinkansen construction
project, I am working to prevent recurrence
by recognizing compliance as a priority issue
in our management.
The relative superiority of ourtechnologies would be rendered absolutely
meaningless if we were to violate ourCompliance Declaration and codes ofconduct. To raise our awareness of corporate
ethics and to ensure we maintain ourstanding as a responsible corporate citizen, I
intend to advance our work on establishingrules and standards as the direction for all
Group executive officers and employees.
While this is no easy task, I am convinced we
can continue to merit the trust of customers
and remain a company needed by society
through a consistent effort.
For the Sanki Engineering Group to bea sustainable enterprise with top priority
on ethics, every Group member, including
executive officers, must deepen theirunderstanding of corporate ethics andtake action toward earning even deeper
trust from stakeholders as we pursue ourcorporate ethics initiatives into the future.

Nobuo Kumura
Director, Senior Executive Officer
General Manager, CSR Promotion
Division and officer responsible forcorporate ethics

SANKI REPORT 2015

43

CSR Report

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

at the beginning of each fiscal year using the e-Learning
method.

Management

Risk Management

Sanki Engineering Group ComplianceDeclaration and Sanki EngineeringGroup Behavioral Standards

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.

Risk Management Policy and System

Risk Management Activities

Sanki Engineering has established a Company-wide risk
management system based on its Risk Management
Rules to comprehensively identify and manage risk
relevant to the Group and prevent the risk event fromoccurring, and to minimize loss in the case 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
the Group, formulate control plans, and monitor risk
reported from subcommittees and divisions.
To enhance the effectiveness 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 audits on the status of risk
management as required.

Each fiscal year, the Risk Management Committee
identifies risks that affect business activities and conducts
a risk assessment based on frequency of occurrence andimpact 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. The Risk
Management Committee convened four times in fiscal
2014 to assess the impact of each risk in order to prevent
their occurrence, discuss countermeasures and confirm
progress.

CSR Report

In order to never again cause reason for suspicionof a breach of compliance, we 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.

Major countermeasures carried out in fiscal 2014
Risk

Countermeasures

Information
Security• Formulate Guidelines for Information Security
Countermeasures• Bolster measures for employees of subcontractors• Hold a simulation drill for handling Advanced
Persistent Threats

Credit• Monitor and controlled credit risks related tocustomers and suppliers

Business Continuity • Integrate the BCPs of Group companies toPlan (BCP)
establish a BCP for the Sanki Engineering GroupSanki Engineering Group Behavioral Standards

Overseas• Expand the scope of risks to be addressed, revised
and issued the Overseas Crisis Management
Manual and Overseas Safety Measures ManualCompliance• Issue the Anti-Monopoly Act Compliance Manual• Hold corporate ethics training

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 the

44

SANKI REPORT 2015

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 that hinders or excludes participation ina bid on the part of other businesses or force another businessto withdraw 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.

Framework of the risk management system
Management Meeting

ReportDiscussion on policy torespond to important risks

Internal Audit Department
Audit
ReportMonitorRisk Management Committee
Chairperson:
Members:
Roles:
Convenes:
Secretariat:

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 principal and additionally as requiredManagement Planning Office

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

Report findings of deliberations

MonitorSubcommittees
MonitorReport status

MonitorInformation security risk

Committees and Management System
Central Disaster Countermeasures Committee

Credit risk

Corporate Ethics Committee

Operational risk

Internal Finance Control Committee

Overseas risk

Quality management system

Compliance risk

Environmental management system, etc.

SANKI REPORT 201545

Management

CSR Management

Responses to Disaster Risk
(Formulating a BCP)

Strengthening Risk Management inOverseas Operations

46

SANKI REPORT 2015

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 thissystem, we can control information security measures
Company-wide and manage risk related to information
security in an integrated manner. Our activities in fiscal
2014 include developing the Information Security
Guidelines, strengthening measures for cooperatingcompanies, and conducting training simulations fortargeted mail attacks.

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

Value chain and stakeholders

Value chain

Key stakeholders

Actions

Dissemination ofrules• All Group executive officers and employees take an
e-Learning course

Information device• Encryption of information terminals
management

Prevention ofunauthorized use• ID and password management, secure room access• Confirmation using asset management tools• Corporate ethics training, submission ofconfirmation notes

Prevention ofunauthorized use• Antivirus measures, automatic updating of security
patches• Web filtering, countermeasures against unsolicitedemailsSocial Media Initiatives
Social media continues to grow rapidly in today’ssociety, and using it requires care due to the significant
social impact that it can have irrespective of the user’s
intentions. We formulated the Guidelines for Utilizationof Social Media for Group employees and have beenpromoting the understanding and adoption of theseguidelines while at the same time making efforts toenhance the level of information security, including that
related to social media.

Key response themes◦Customers ◦Partners/business partners ◦Employees

Key information security measuresTypeare 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.

◦◦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• Universities• Research institutions• Architect offices

Business partners
Procurement

Construction
andproduction

Maintenanceandinspection

Customers (builders)• Material/machinery
manufacturers(Office) buildings,
hospitals, financial
institutions, hotels,commercial facilities,
airports, factories,
distribution centers, data
centers, test/researchfacilities, schools, watersupply and drainage
disposal plants, waste
disposal facility sites• General contractors• Sub-construction
company

Business partners

Business partners• Building maintenancecompanies

Business partners
Repair andrenewal◦◦Fair and transparent transaction on
an equal footing◦Supply-chain management

Employees

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
and revised the “Risk Management Manual for Overseas
Operations (for the head office and overseas bases)” andthe “Manual to Ensure Safety in Foreign Countries (foroverseas employees, overseas business trippers and theirfamilies)” in 2014.
The “Risk Management Manual for Overseas
Operations” stipulates rules and response procedures forcrises that could occur in foreign countries. The manual was
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 practicalguide and includes actual situations and checklists thatcover actions required in the event of a terrorist attack or
natural disaster, the prevention of damage from crime andother 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.

Response to ESG Issues in Value Chain

CSR Report

Sanki Engineering’s business continuity plan (BCP) aims
to ensure the safety of all related persons, including
employees, based on the integrated effort of all divisions
and employees. The Company has also formulated aframework to contribute to customers and society throughswift business restoration in collaboration with business
partners. We continuously conduct drills and developinternal systems and procedures (system maintenancestarting 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 2014, we developed the Group BCP byintegrating the BCPs of subsidiaries and the Company inorder to further enhance effectiveness. We conducted
eight BCP drills in fiscal 2014, thereby completing drills
for all branches and branch offices.

Initiatives to Ensure Information Security◦◦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
Fostering andevaluation
Providingopportunities
Capacity building
Fair evaluation
Proper wage
Working environment
Respect for humanrightsPrevention ofharassment
Support for active
participation by
women
Promotion of worklife balance
Safety and health◦Safety first
Promotion of health• Cooperating construction
company

Information disclosure/
Fiduciary responsibility

Environmental preservation/
Participation in local community

Information disclosure/ComplianceDialog and collaboration

Shareholders/Investors

Local community

Governments/Administrative organs

NGO/NPO and civic groups

SANKI REPORT 201547

Relationship with Customers

Major Initiatives for Fiscal 2014
• Strengthen proposal-making capabilities through thereorganization of the Sales Division• Improve the efficiency of construction management skills
and reinforce supervision at key initiative sites• Promote on-the-job training and quality-improvement
activities by technical experts

Responses to Sophisticated andDiversified Customer Needs
In fiscal 2014, we focused the Sales Division functions
into sales planning and sales development functions toprovide customers with more effective solutions. Since
we have entered fiscal 2015, we have narrowed down
our target customers to further streamline operations.
By honing our proposal-making capabilities based on
our total engineering competency, we will be able tocontinue responding to increasingly sophisticated anddiversified customer needs and thereby continue toearn 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 andin order to open up new sales opportunities.
Exhibition participation in fiscal 2014
Exhibition

Exhibited products

Health Ingredients &Total engineering for food factories, total food
Safety and Technology factory design, chilled food conveyer, LEDJapan 2014
conveyer, chilled line booth48

Data Center Expo
(Autumn)

Data center solution, Front Air ®, high-density airconditioning system, performance evaluation ofdata center HVAC

Hospex Japan 2014

Total medical facility support, hospital food service
system, AGV meal cart system, MEDIFORT™,
energy-saving solution for medical facilities, BCP

Interphex Japan(Osaka)Solution utilizing a fusion of Sanki’s coretechnologies, clean units for the regenerative
medicine industry, AGV meal delivery cart

Sewage Works
Exhibition ’14

Energy-saving centrifugal dehydrator, membrane
panel-type air diffuser, supercharged fluidized
bed incinerator, sludge collector with anti-seismicfeatures

SANKI REPORT 2015

Initiatives to Ensure Quality
Philosophy on quality and the quality
management system
The corporate philosophy at Sanki Engineering, focusing
on quality, effective quality management and ongoing
operational improvements, is realized in accordancewith the specific quality policies for each division. As
a result, we have been able to ensure the provision ofhigh-quality products and technical services and deliver
greater customer satisfaction.
Our facilities construction, machinery, environmental
and facility systems have obtained ISO 9001
certification, and we conduct quality managementon the basis of these standards. The external audit
conducted in fiscal 2014 found no instances of noncompliance, and we were commended on ourconnection with customers, pre-examination processes(including a design review, assessment for thecommencement of work, and operation of the Healthand Safety Committee), tests and inspections. We are
striving to strengthen the practical application of ourmanagement system by further improving the efficiency
of operational controls by integrating ISO 14001 andISO 9001.

A meeting of the external audit team

Launch of preparations for a worksite support
structure
We learned from the on-site interviews on quality
control that the amount of documentation site
engineers were responsible for was impeding themfrom concentrating on areas of higher priority, suchas construction management, and was thus creating
a potential quality risk. Our Tokyo branch therefore
started a preliminary project in January 2015 to support
worksites and has since processed all documents on
their behalf. In addition, we plan to establish a SiteDocumentation Support Center in fiscal 2015 that will
provide even more support to our worksites.
Share information on problems and complaints andensure swift resolution
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.
Distribution of the weekly bulletin was extended infiscal 2014 to facilitate access to accurate information
for site managers.
We monitor the number of problems and complaints
during construction as a key indicator of quality control.
One of our fiscal 2014 goals was to reduce the total
number of incidents and complaints by 10 percent
compared to fiscal 2013, and we successfully achieved
the target despite the increase in construction orders.
This improvement is attributed to the enhanced audits
and instructions at the key initiative sites and to a more
extensive, horizontal sharing of information through thewider distribution of bulletins.

CSR Report

Important Issues• More effectively respond to increasingly sophisticated anddiversified customer needs• Enhance the accuracy of quality management• Improve construction quality and pass on technologies

Quality management activities
Fiscal 2014 represented a period for getting back tothe basics of ISO standards. In order to improve overall
operations, we began reducing workloads in favor ofachieving more efficient construction management.
First, we gathered feedback directly from theworksites to identify the issues of highest priority
and can be resolved within a short time. We thenanalyzed the causes of problems, with the related
divisions, to implement remedial actions. We haveeliminated redundant forms in multiple sections while
also simplifying and consolidating other required
documentation. Interviews were held a total of 94
times over the course of the year, resulting in about
133 specific responses. Consequently, documentation
procedures and controls have been improving, whichis leading to a more focused use of resources that willin turn raise quality. We intend to keep working on theissues that must be addressed over the medium term.

Quality management activities by technical experts
In fiscal 2014, we restructured the Technical Master
System into the Technical Expert System. In theearlier structure, persons with high technical skills
and management at a branch or branch office visited
worksites to do such work as construction audits or
quality reviews to prevent problems and complaints
while also mentoring junior employees. Under the
new system all technical experts belong to the Quality
Assurance Administrator Office, so activities are more
focused and cooperation is stronger. Consequently, thesuperiority of our Group’s comprehensive engineering
capacity can be more effectively exercised at theworksites. Moreover, as of April 1, 2015, there are
24 technical experts providing on-the-job training andmaking quality improvements at these sites.

Technical expert supervising construction work

SANKI REPORT 2015

49

Relationship with Shareholders
and Investors

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

Fostering human resources to sustain
our technological level
Sanki Engineering provides education at our TechnicalTraining Center to improve basic knowledge, enhanceconstruction management skills, and promote theattainment of qualifications. Participants in the skill
level training course, a hands-on program that focuseson practice, develop skills such as preparing working
drawings, responding in different ways to problems andclaims, and preventing problems through risk prediction.

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

90

92

89

1,170

1,154

1,126

Architect

40

41

43

Facilities construction architect

235

221

210

Electrical engineer

168

169

175

Chief electrical engineer

34

33

30

First class instrument engineer

284

299

309

Fire protection engineer

691

690

696

1,624

1,650

2,236

Qualified management engineer (total)

Timely and Appropriate Information
Disclosure

through our IR activities are relayed to management inan effort to maintain two-way communication.

Our disclosure policy
Sanki Engineering aims to disclose required corporate
information in an easy-to-understand, fair, speedy, timely
and appropriate manner pursuant to the stipulationsof our Disclosure Policy. We also disclose information
when not obliged to do so by law if we deem it usefulto shareholders and investors and in order to ensure
management transparency.

Enhancing information disclosure on the Web
The investor relations section of our Japanese
language website was redesigned in August 2014 toexpand disclosure of financial highlights and segment
information and introduce the new “Sanki for Beginners— Fast Facts Index,” an easy-to-understand outline andcharacteristics of our business. And we disclose thesame quarterly financial data on our English language
website for overseas investors.

WEB Disclosure Policy

http://www.sanki.co.jp/en/ir/disclosure/Technical Training at the Shonan Training Center

Major human resources development activities in fiscal 2014
Initiatives

Training

Details of training

Results

Workshop on acquiring qualification

Training sessions on test preparation for becoming a project
management technician or construction equipment engineer

125 participants

Step up workshop
1. Inexperienced, amateurs
2. Person with basic qualification
3. Person with actual qualification

Training according to the amount of actual experience or
technical level of the trainee

153 participants

Strengthen training for construction management• Strengthen training for design and facilities construction using
actual equipment in the Shonan Training Center• Strengthen training for facilities construction such as forconstruction drawings and supporting metallic materials• Establish training for automated control

Aggregate total of
303 participantsContinuation of technical expert system

Highly skilled engineers with managerial experience at branches
and branch offices pass on technological expertise to junior–engineers through on-the-job training.

Initiatives to passon technology

Introduce cases at briefings and liaison meetings held
Introduce cases of claims that have occurredat branches and branch offices
Enhance technology
at Group companies
and affiliates
Conference on electrical construction quality for all
stores (Shonan Training Center)

50

Major Initiatives for Fiscal 2014
• Renewal of investor relations section of our website• Dividend payment commemorating our 90th anniversary• Purchase and retirement of treasury stock

FY2013 FY2014 FY2015

Professional engineer

Initiatives at theTechnology
Research Institute

Important Issues• Timely and appropriate information disclosure• Shareholder return

CSR Report

Construction Method Improvement Award andother technical awards
We present the Construction Method Improvement
Award every year to commend innovations inconstruction techniques at worksites. In fiscal 2014, wereceived 1,038 proposals; 2 received the Construction
Method Improvement Special Award, 4 received theConstruction Method Improvement Award, and 2
received the Contribution to Customers Award.

SANKI REPORT 2015

Grant internally certified qualification Sanki Engineering-certified
Class A Electrical Engineer to participants who took part inpractical tests involving timed competition of skills and written
exams using materials on actual claims against the company.

Communication with shareholders and investors
We hold events including results briefings forinvestment analysts and institutional investors (twicea year; a total of 69 people participated in fiscal
2014), individual meetings as necessary in responseto requests, and tours of the Technical Research &Development Institute. So that more of our shareholders
can attend our general shareholders’ meeting, weschedule it for a date on which most other companies
will not be holding their meetings. We work to increase
convenience for our shareholders in other ways as well,such as by publishing notification of the meeting on
our website. The feedback we receive from investors

Tokyo:
12 times
Kansai:3 times
Hokkaido: 12 times
Chugoku: 1 time
Hokuriku: 6 times
19 affiliates and 19
electrical engineers
participated

Our Basic Policy Concerning Returns toShareholders
At Sanki Engineering, dividends form the basis of
our policy to return profit to shareholders and weview this return of profit as a key management issue.
We aim to provide stable dividends and balancesustainable corporate development with short-term
returns to shareholders in accordance with our basic
policy of shareholder return. In light of demands
from shareholders, investors and society at large, we
examine comprehensive methods of shareholder return,including purchase of treasury stock. Accordingly, we
purchased 2 million shares and retired 3 million shares.
We invest internal retained earnings in new businesses
and technological development in order to strengthen
competitiveness and create a basis for businessdevelopment with the objective of continually boosting
corporate value. For the fiscal year ended March 2015,
we paid a total dividend per share of ¥20.0, which
included a regular dividend of ¥7.5 for the interim
period and a regular dividend of ¥7.5 with an additional
dividend of ¥5.0 for our 90th anniversary, for a full-year
dividend of ¥12.5.

Resultbriefing

SANKI REPORT 2015

51

Relationship with Business Partners

Major Initiatives for Fiscal 2014
• Strengthen supervision over fair and proper transactions• Convene Liaison Meetings for Subcontractor Groups• Established Sanki Super Meister System

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 policy, we endeavor to build trustwith our business partners in order to jointly provide
high-quality equipment and services to customers.

Building Fair, Equal, and Transparent
Business Relationships
Full enforcement of fair and proper 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.

52

SANKI REPORT 2015

Handling of 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, 2015, we received pledge letters from 3,546
companies.
Whistleblowing hotline for business partners
Seeking to prevent any improper transactions, weoperate a whistleblowing hotline for business partners.
Posters for the hotline are displayed in places that catchthe eyes of suppliers such as on-site offices in an effort
to promote use of the reporting system.

Strengthening Cooperation with
Business Partners
Evaluation feedback to business partners
We strive to enhance quality and improve operations
throughout the supply chain by conducting annual
surveys on the status of dealings with business
partners. Under this initiative, we create a construction
results evaluation table that assesses items such as
quality, price, delivery and safety based on ISO 9001
quality management standards. We report the results tobusiness partners and exchange information on a timely
basis to make improvements.
Joint improvement activities with thesubcontractors groups
Sanki Engineering has established a subcontractors
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 technical

VOICE
CSR Report

Important Issues• Thoroughly enforce equal, fair and transparent transactions• Improve quality through cooperation with business partners

skills 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 October 2014, the first “Liaison Meetingfor Subcontractor Groups” was convened, with theparticipation of 17 subcontractors from across thecountry, who shared information or opinions about
worksite safety and health as well as the acceptanceand management of foreign workers.

Akihiro Igarashi(piping engineer),
Sankyo Co., Ltd. (left)

Masayuki Sano
(duct engineer),
Shinei Duct industry Co., Ltd.
(right)Orange helmets symbolize our pride
and responsibility for the ongoing
improvement of on-site performance.

Liaison Meeting for Subcontractor Groups

Sanki Super Meister System
The Sanki Super Meister System was created in fiscal
2014 to honor on an annual basis the foremen of Group
subcontractors whose superior construction techniques
have significantly contributed to elevating the quality of
our construction work. A selection committee nominates
those to be recognized based on ten criteria, including
technical skill, proposal-making capability, worksite safety
management and leadership. Fifteen foremen received
the award in fiscal 2014. We believe our Group’s technicalfoundation will be further strengthened by these certified
experts, who will pass on their outstanding skills andknowledge to coming generations.
Support system for the acquisition of qualifications
To support subcontractors in upgrading their technicalskills, we subsidize the acquisition of qualifications. In
fiscal 2014 we promoted the Central Safety and HealthCommittee’s system to encourage its use.

Igarashi: I always pay close attention to the continuing
evolution of piping and machinery equipment
technologies. Communication is vital at large-scale
worksites, where many different subcontractors arecarrying out their work at the same time. Labor-saving
efforts through integration of pipes and devices andmaterial sharing to conserve resources require solid
collaboration of subcontractors. I believe my mission isto place things where they don’t fit well. The harder thetask, the greater my motivation. Looking ahead, I would
also like to help foster the younger engineers of Sankyo
as well as Sanki Engineering, and I want to see Sankyo
become Sanki’s No. 1 subcontractor.
Sano: I see my customers as people who will be working
in the next stage, and I really care about their ability towork efficiently after I’ve played my role in preparing
their worksite. I try to keep my skills up-to-date bystudying or training for qualifications so I can be useful atworksites and contribute to improvements in quality andefficiency. Before every morning meeting, I walk aroundthe site to gauge its overall status and conduct my own
KY (danger prediction) activities. I intend to focus moreenergy on passing on my skills, and have the highest
hopes for the site workers of Sanki Engineering and its
subcontractors.

Helmet worn atworksites by Sanki
Super Meister

SANKI REPORT 201553

Health and Safety at Worksites

Major Initiatives for Fiscal 2014
• Implement accident prevention measures for operational
managers• Provide training for workers with less experience• Increase communication opportunities for passing on
expertise and skills(11 lost workday accidents and 12 with no lost workdays).
Of the 22 accidents in 2014, 6 involved falling or tumbling(compared to 6 in 2013) and 7 involved being caught ortrapped in machinery (11 in 2013). Since these two typesof accidents constituted the majority of all causes, we
believe that preventing these incidents is essential for
eliminating work-related accidents.
Number of accidents and frequency rate

Health and Safety Environment of theConstruction Industry

Initiatives in Fiscal 2014
Key items implemented in fiscal 2014
An analysis of accidents occurring in 2013 found thatneither falls nor tumbles were eliminated, that accidents
occurred consecutively in September and October, andthat year-long maintenance of awareness, knowledge,
experience and communication were insufficient. In
consideration of these findings, we worked on three
key actions in fiscal 2014.

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. A shortage of workers and experts
can lead to a risk of work-related accidents, and in fact,
the number of industrial work accidents has risen. In
addition, natural disasters believed to be the result ofclimate change, including those caused by heat waves
in summer, typhoons and localized heavy rainfall, areoccurring more frequently. Sanki Engineering has been
engaged in health and safety activities that take into
account all of these changes surrounding the industry.

Health and safety training
For employees and business partners, SankiEngineering provides health and safety training led byin-house instructors or at designated training institutes.
The in-house instructors are dispatched by the Branch
Education Support Team of the Labor Safety, Quality
Control & Environment Promotion Office. Our initiatives
also include a health and safety orientation using healthand safety handbooks and, at our worksites, joint
training sessions for new workers with the Sanki Healthand Safety Cooperative Association.
Number of participants in health and safety training (fiscal 2014)

Outline of activities in fiscal 2014
Policy of the Central Safety and Health Committee
Chairperson• Slogan“Work Procedures: Discuss Thoroughly. Colleagues’
Opinions: Listen Carefully”• Subtitle“Communicate! Experience, Technique and Onsite Risk”
Key actions
1. Eliminate risk that leads to accidents from falling or
tumbling• Conducted scaffolding-related education including
experiential training in order to boost the capabilities ofsite managers and employees with less experience.
• Launched a Company-wide campaign to prevent falls
and tumbles.
2. Take steps to prevent accidents in the summer andautumn• Launched a “seasonal leaflet” campaign in the autumn
to prevent accidents.
3. Increase capabilities through education• Presented an e-Learning lecture on asbestos (with100% attendance by target staff).
• Distributed material on the handling of PCBs, CFCs,
halons, etc.
• Trained all branch safety managers on dealing withdangerous situations.

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 business partners.
A Company-wide health and safety activities plan isprepared based on the Health and Safety Guidelines,
which is established under the Health and Safety
Principles every year in order to increase transparencyof our PDCA cycles, including the identification of risk
factors and implementation of remedial and preventive
actions.

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

わら

其の三

が

かど

お

ふ

福来 たる

し ょ く ばく

き

笑う門には福ふ く き
来たるえ

笑顔 の職場 に

The “Kotowaza” booklet, a collection ofsafety advice with proverbs, was produced
to raise awareness of health and safety andpromote intergenerational communication.

Number of participants(from subcontractors)

Special education
Health and safety training, including foremen
Total

1,295

(1,122)

166

(131)

1,461

(1,253)

Limited to training by in-house instructors of Sanki Engineering and training
provided by the Sanki Health and Safety Cooperative Associations, and it does
not include training at designated educational institutions.

Accidents during 2014
In 2014, 22 accidents occurred (5 lost workday accidents,
and 17 with no lost workdays), representing a slightdecrease from 2013, during which 23 accidents occurred

1.25
0.83

0.87

0.91

0.83
0.98

0.85
9

9

0.29

0.42

11

5

3
2010

2011

2012

2013

2014

Scope: Sanki Engineering worksites
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• The period for the data was changed from the fiscal year to the calendar
year. Accordingly, data for previous years have been retroactively revised.
• 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.

Activities Plans for Fiscal 2015
Considering the social and industry environment as wellas the number and nature of accidents in 2014, we arefocusing on these key action areas in fiscal 2015: (1)deploying measures against the two major categories
of accidents (caught/trapped and falls/tumbles); (2)implementing preventive measures against recurrent
accidents; and (3) skill improvement through training.

I have high expectations for Sanki’s approach to tackling accidents through its
commitment to the “Never give up on our goal of zero accidents” campaign
Various approaches have been adopted for
different types of work involving the socalled KY (or danger prediction) activities,
part of an essential industrial accident
prevention initiative. It must be said,
however, that recent trends in industrial
accidents indicate that these activities havelost substance and are thus an indirectcause of many, if not all, accidents; action
for the sake of action without regard for theultimate goal cannot bring about a desired
result, in this case a safe and sound worksite.

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

The other problem I can see is that KY
activities are not being used by colleagues
at worksites to share awareness of dangers,which is presumably the result of insufficient
communication.
Sanki Engineering and its business
partners have been swift to address theseissues, implement various measures andachieve solid results. Please continue toexercise your ingenuity to promote evenfurther the “Never give up on our goal ofzero accidents” campaign.

VOICE

Yasumasa Murata
Former head of the Central Labor
Standards Inspection Office

解 説
10

月 日 月 か( )ら

忙しい時はどうしても黙って作業に集中しが ち で す。 しかし職場に笑顔がないと入り込
めないものです。
忙しいと思う時こそ笑顔で声掛けをする
こ と で、 結 束
力を高め
良い仕事 成･ 果にしましょう！

ゼロ災で行こう
ヨシ！
い

え が お

さい

あいさつ

え が お

安全唱和

しょくば

ふ く き
笑顔の職場に福
来たる！

（全員）

だれ

で

な か ま

みな

かお

「ことわざ」（リーダー）
え が お

誰にでも笑顔で挨拶できるか
？

しょくば

職場場
場の仲間は
皆、笑顔か？

イライラ、ムカムカ
顔に出ていな
いか？

励行の要所

Type

1.56

CSR Report

Important Issues• Rising demand in the construction industry• Shortage of construction workers, and the aging andshrinking of the skilled workforce• Growing risk of work accidents due to overworked laborers
or lack of experience

Safety conventions and safety patrols
Every year in June – the preparatory month for National
Safety Week – Sanki Engineering holds safety conventions
at each branch and branch office with the participationof top management. We also conduct a variety of safety
patrols to raise safety awareness. All directors, including
the president, participate in joint summer and year-end
patrols, visiting approximately 100 worksites.

6

8

54

SANKI REPORT 2015

7

SANKI REPORT 2015

55

Relationship with Employees

Major Initiatives for Fiscal 2014
• Respect diversity in recruitment• Implement personnel measures based on the new personnel
systemOur Commitment to Employees
Our Company Credo contains the phrase “Act in aconsidered manner, and always in a spirit of good
fellowship,” and on the basis of this concept we strive tocreate a working environment and a corporate culture inwhich all employees grow together with the Company,
respect each other’s individuality, and are able to succeed
and thrive. The technical capabilities and skills of each
employee are precious assets of the Company and webelieve that human resources are indispensable to anorganization. We are therefore creating an environmentthat fosters the development of human resources so that
employees can work to their full potential.

to upgrade our personnel system and introduce new
systems, and have taken the following major measures.

FY2007

FY2009FY2013

FY2014Introduced a career change system that allows female employees
to change their career type from general office to major career
track.
Launched a full-scale recruitment of new female graduates as
career-track employees.
Eliminated all general-office positions by shifting them into
regional positions and conducted special training for those inregional positions.
Acquired the Kurumin mark, a certificate granted to companies
that support childcare and based on the Act on Advancement of
Measures to Support Raising Next-Generation Children.
Conducted a skill improvement program for employees who
moved into regional positions.

Promoting Diversity
We believe that creating working environments inwhich diverse personnel are able to demonstrate their
particular talents leads to increased company value, andwe are therefore promoting diversity in regard to theways employees work and think, and actively working toestablish a variety of systems to make this a reality.
Respecting diversity in recruitment
We seek to bring on board human resources that differ ingender and nationality as well as in talent and personality.
Of the 95 new graduates hired in fiscal 2014, 17 are
women and 78 are men. The recruitment of foreign
nationals is part of our mid-term plan, which includes
the goal of cultivating human resources who can play anactive role on the world stage. Twelve people from China,
Peru, South Korea, Thailand and the U.K. are working forus as of April 1, 2015.
Promoting women’s roles
We believe that creating working environments in which
our female employees can exercise their abilities to thefullest improves corporate value. We therefore continue

56

SANKI REPORT 2015

VOICE
My current goal is tobecome indispensable atconstruction sites
Aya Suzuki
The 3rd Air-conditioning & Plumbing Field
Engineering Department, Tokyo Branch

I am currently working as an on-site manager on a
new construction project. I meet with the generalcontractor and other project partners every day andthen discuss these meetings with our subcontractors tocoordinate work or provide instruction and guidance.
It’s always thrilling to see the hard work that went into
our drawings transformed into something real at thehands of the workers. But things don’t always go wellat construction sites, so I try to benefit from each failure
with the faith that my skills will improve through trial
and error. My goal now is to become indispensable atworksites. There aren’t many women working in theseplaces. I’m trying to communicate as much as possible
with the workers of other contractors and participate in
the activities or events of the foremen’s association. I
intend to keep working hard until the day I can take on
the role of onsite representative.

Voluntary Action on the Appointment of
Female Executives and Managers(1) Establish a working environment for female engineers employed atconstruction sites.
(2) Create a framework under which the work of female office employees canbe recognized as contributing to construction sites.
(3) Enhance the system to more effectively support female employees returningfrom childcare leave.
(4) Conduct training program workshops for promoting the appointment offemale executives and the full use of female resources.
(5) Cultivate awareness among female employees of proactively participating inmanagement.

Changes in employee data

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. Forty-one employees
used this system in fiscal 2014.

FY2014
Male Female Total
2,316 2,289 2,246 2,283 2,002
280 2,282
FY
2011

FY
2012

FY
2013

2,001 1,965 1,918 1,908 1,668
–

–

–

–

240 1,908

497

3

500

42.5

42.8

42.7

42.7

43.5

35.8

42.6

18.5

18.6

18.4

18.2

19.0

12.7

18.2

98

63

55

92

78

17

95

12

15

10

16

0

9

9

43

53

55

38

–

–

41

37

35

36

39

–

–

37

1.98

1.80

1.97

2.13

–

–

2.11

Number of new recruits
Number of employees onchildcare leave
Number of reemployed postretirement-age employees
Number of
Employment employees withdisabilitiesof people
withRatio ofdisabilities employees withdisabilities (%)

Employing people with disabilities
We are working to create an environment in which
employees with disabilities can work comfortably overlong periods.
In July 2014, we held the 2nd Exchange Meeting for
the Hearing-impaired Employees. Participants gathered
to talk about recent workplace improvements and to raise
additional issues or proposals through discussion withcolleagues who do not have a disability.

(As of March 31, 2015)

FY
2010
Consolidated
NonNumber of consolidated
Number of
employees
manageriallevel
employees
Average age
Average number of years of
employmenta total of 35 employees who have changed their career
type are successfully working nationwide in major
career-track positions.
CSR Report

Important Issues• Promote diversity• Develop and appropriately allocate human resources

We take part in the Action Plan on Women’s Active
Participation in the Workforce of the Keidanren (Japan
Business Federation) so that we can continue to identify
issues that need to be addressed and establish a structure
for addressing them. Our voluntary actions related tothe appointment of female executives and managers is
published on the federation’s website.

Scope of aggregation: Sanki Engineering Co., Ltd., except for the consolidated
number of employees.

Employees by age (non-consolidated)

Developing and Evaluating Human Resources
Implementing personnel measures based on a new
personnel system
In fiscal 2013, we introduced a new personnel system
to become a company in which people grow in line withthe key theme of our medium-term management plan to“develop and appropriately allocate human resources.”
The personnel system was instituted to ensure thatevery employee is equally provided with opportunities
and the right to fair evaluation and treatment. As part ofthis, the “early career system” for employees in their
20s was introduced to provide them with experiences indifferent jobs early on in their career development. We
intend to continue implementing personnel measures asan organization in which the Company and its employees
grow together.

(As of March 31, 2015)

10s

20s

30s

40s

50s

60s

70s

80s

Total

Male

0

301

332

524

286

224

0

1

1,668

Female

3

83

69

66

15

4

0

0

240

Total

3

384

401

590

301

228

0

1

1,908

Career change system
Sanki Engineering introduced a career change system
to increase opportunities for employees in regional
positions so they can demonstrate their abilities andexpand their scope of responsibility. As of April 1, 2015,

Fostering human resources
We maintain training systems associated with each career
path, such as management training, technical training andtraining by field in order to strengthen specialized skills,
technical skills and management skills and boost personal
growth. We also operate an overseas language and jobtraining program, designed to develop human resourcesthat are adaptable to diverse environments. Through thisprogram, two employees were dispatched to locations
outside Japan in fiscal 2014.

SANKI REPORT 2015

57

Relationship with the Environment

Training system
Younger employees
New recruit training

Mid-career employees
Management training

Education by mentors

Department
manager training

Section chief training

Third-year training
Training for mentors
Seventh-year training
New recruit training

Safety Trainingof Health, Labour and Welfare and based on the Act on
Advancement of Measures to Support Raising NextGeneration Children, for meeting certain criteria as acompany supporting childcare. In 2014 the Chubu Branch
was recognized by the City of Nagoya as a company
supporting childcare, becoming the first construction
equipment company to receive this certification.

Important Issues

Major Initiatives for Fiscal 2014

• Protect the global environment by means of our exceptional
technological capability• Minimize the environmental burden caused by our businessactivities• Review our environmental education program• Properly dispose and reduce industrial waste

CSR ReportManagement
training

Executives

Qualification training
Career-positioned staff training

Disaster training

Disaster drill, cardiopulmonary resuscitation training

Environmental Management at SankiEngineering

Qualification training
Career staff training

Facilities
Construction
Equipment
Division

Step 1 training
Step 2 training

Technical training

The Kurumin mark forsupport of raising nextgeneration children

Qualification workshop

Plant &
Machinery
Systems
Division

New recruit training

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

Education to developinternal auditors

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.
Major systems supporting work-life balance (non-consolidated)
SystemDetails

Refresh leave system

A system under which employees are able totake five consecutive days of leave for eachfive years of employment using their reserved
leaveConsecutive leave for onsite workers (construction
site workers)

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

Reserved leave system

A system that allows for the use of reserveddays off as leave for childcare or elderly care

Short-time working system

A system that allows for the reduction ofscheduled working hours or the delay ofstarting/finishing times for childcare or elderly
care

Work

Acquiring the Kurumin mark and recognition forsupporting childcare by the City of Nagoya
In 2013 we acquired the Kurumin mark, a certificate
granted by the Tokyo Labor Bureau of the Ministry

58

City of Nagoya certification
for companies supportingchildcare

Inspector education

Quality &Environment
System training

Childcare andnursing care

Top Manager (President)

New recruit orientation

Step 3 training

Area

System for promotion of environmental management

SANKI REPORT 2015

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 well as
medical-, nursing- and childcare-related issues, free ofcharge. 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 to present
their proposals or requests to management.

Promoting environmental management
Sanki Engineering believes that environmental problems
represent an important management issue, and so wetherefore promote environmental management with theaim of fulfilling two missions.

Environmental Conference
Reports on Company-wide activities anddecisions on plans (once per year)

Overall Supervisor of Environmental Management
Company-wide EMS
Secretariat

Environmental management at Sanki Engineering: Two missions
To protect the global
environment by meansof our advanced
technological capability

To minimize theenvironmental burdencaused by our businessactivities• Development andintroduction of technologies
for exploitation of energy• Development and introductionof technologies for theeffective use of energy• Development and introductionof technologies enabling
reuse of resources• Minimization of
consumption of energy andresources• Reduction of waste andpromotion of recycling• Provision of environmental
education for employees(Labor Safety, Quality Control &Environment Promotion Office)Eachdivision

Divisional Managers

Environmental Committee
Reports on divisional activities anddecisions on plans (twice per year)

Divisional Environmental Management Supervisors
Divisional EMS Secretariats

Staff Responsible
for Design

Environmental management system
We have constructed a system for implementing
environmental management, with our president as
the overall director. At Company-wide environmental
conferences, convened once a year, each of ourdivisions reports on its activities and we decide on
future plans. The entire Company has received ISO
14001 certification, including two of our subsidiaries(Sanki Kakou Kensetsu Co., Ltd. and Sanki Kankyo
Service Co., Ltd.). In fiscal 2014, we aligned theschedule of the internal and external audits of thesystems for environmental management and quality
management for consistency and improved efficiency
as well as the systems’ operational effectiveness. The
external audit found no issues of non-compliance. In
addition, there were no incidents of legal violations by
the Company in fiscal 2014.

Maximization of energy
efficiency
Target management

Staff Responsible
for Production andConstruction

Staff Responsible for
Office Duties

Manufacturing andconstruction with minimal
environmental burden
Target management

Reduction of environmental
burden through increased
productivity
Target management

Developing environmental leaders
We encourage employees to acquire environment-related
qualifications toward enhancing our response capabilities
for business. In particular, we are planning to increase thenumber of managers of special controlled wastes.
Number of employees withenvironment-related qualifications(As of April 1 of each year)
FY2013 FY2014 FY2015

Certified environmental measurer

7

7

7

Supervisor of management of industrial waste
subject to special control

127

130

145

Pollution prevention manager

73

71

68

SANKI REPORT 201559

Participants in planting event

Environmental education
We emphasize environmental education in response
to a forecasted increase in emissions of constructionwaste containing asbestos as well as the revised Air
Pollution Control Act (enforced in June 2014.) We
implemented an e-Learning program about asbestos
and distributed tools for disseminating appropriate onsite treatment of asbestos, PCBs, CFCs and halon to all
Group employees in cooperation with safety and healthmanagers. In addition, the Labor Safety, Quality Control& Environment Promotion Office implemented special
education on asbestos for employees of the Group
company Sanki Techno Support Co., Ltd.
In order to gain basic environmental knowledge
and deepen understanding of environmental issues,
we conducted Company-wide lectures using a videoconference system and communicate relevant
information through the intranet. In addition, toensure the proper handling of asbestos and othersubstances that are dangerous to people’s health andthe environment, we set up the Hazardous SubstanceManagement Group within the Labor Safety, Quality
Control & Environment Promotion Office in fiscal
2015. We will conduct training, raise awareness anddisseminate information on hazardous substancesin cooperation with the Hazardous SubstanceManagement Group and other related departments.
Major environmental training programs in fiscal 2014
Theme

PeriodNumber ofparticipantse-Learning

Education on asbestos“Learn about the dangers
of asbestos”

April to May
2014

2,383
(all targeted
employees)

Environmental
lecturesEco-businessIndustrial waste treatment
business – asbestos

June 2014

Type

60

SANKI REPORT 2015

245

Initiatives to Prevent Global Warmingand Save Energy
Contributing to conservation of the global
environment with our exceptional technologicalcapabilities
One mission of our environmental management is todevelop and introduce technologies and products thatlead to 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.

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, theamount of the achieved emissions reduction is converted
to Eco Contribution Points (100 yen per one-ton-CO2
reduction), which are used to subsidize environmental
conservation activities. In the second half of fiscal 2013,
customers adopted 81 of our proposals, resulting in
donations totaling 778,300 yen (equivalent to a 7,783-tonCO2 reduction). In the first half of fiscal 2014, 63 proposals
were adopted, leading to donations totaling 880,400 yen(equivalent to an 8,804-ton-CO2 reduction), raising theoverall total of donations since the start of the program in
fiscal 2010 to 8,956,800 yen.

Proposals for CO2 reduction and outcomes
FY2012FY2013

SANKI YOU Eco Contribution Point System

FY2014

NumberCO2
reduction

NumberCO2
reduction

78,549322

48,817430

50,44918,889124

11,273

213

21,059NumberCO2
reduction

Proposals

366

Receivedorders136• CO2 reduction unit: t-CO2/year

Customer
1. Proposing
energysaving
solutions

Proposing energy-saving
solutions for equipment to
reduce CO2 emissions

2. Adopting the
proposal

Sanki Engineering

Technological developments that havecontributed to conservation of the global
environment
Trans Heat containers for simplified transportThis technology, developed through a project commissioned by
the Ministry of the Environment, reduces initial and operating
costs through the use of smaller containers without having touse new or upgraded infrastructure, and thereby promotes theeffective use of exhaust heat from waste incineration and otherfacilities and contributes to the reduction of greenhouse gas
emissions.
Front Air® cooling system for high-heat-generating server
in data centers
This cooling system supplies air from the front of the server tocool its racks as a countermeasure against increased heat fromhigh density. The improved cooling efficiency allows for energy
saving in the air conditioning system.
AEROWING II, a low-pressure drop membrane panel-type
air diffuser
This air diffuser features lower pressure loss and maintains thehigh oxygen transfer efficiency of AEROWING. AEROWING II
contributes to conserving energy at sewage treatment plants
by reducing the electric energy used by blowers that supply
air to reaction tanks, accounting for 30% to 50% of power
consumption at these facilities.

3. One ton of CO2 isconverted to 100 yen

4. Total donated annually

Environmental
conservation activity• Donations to tree-planting projects
Recipients of donations were selected from theframework of global environmental preservation
activities mainly handled by private non-profit
organizations. In fiscal 2014, we donated to two projects
and our employees participated in the activities.
The NPO Laboratory of Earth Conscious Life plansto return vacant pasture land that is not currently being
used to its former beech forest by replanting beech
tree saplings growing along the edges of the site.
These activities are highly praised as an ideal method ofpreserving biodiversity, including genetic diversity. NPO
Environmental Relation cultivates fish-breeding forests
by planting trees near a river source. These activities
contribute to a culture that has protected forests withthe belief that forests attract fish and to conserving thebiodiversity of coastal forests and marine life.

Donation history for tree-planting projects
Recipient

Projects

Amount donated

NPO Laboratory of
Earth Conscious
Life

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

Cultivation of fish-breeding
forests and tree planting in a
350,000 yen in the firstdisaster-affected area (Miyako half of FY2014
City, Iwate Prefecture)

778,300 yen in thesecond half of FY2013

CSR Report

To strengthen our environmental management system,
we provide introductory training on our environmental
management system (EMS) and other forms of education
every year to new recruits, as well as midcareer recruits.
In fiscal 2014, 72 employees received training to become
internal environmental auditors, bringing the total numberof people qualified to conduct internal environmental
audits to 975 on a non-consolidated basis and 983 on aconsolidated basis.

530,400 yen in the firsthalf 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%
compared to fiscal 2012 over a five-year period
from fiscal 2013 to fiscal 2017. In fiscal 2014, we
achieved a reduction of 2.8% from the 2013 level inenergy consumption Company-wide. In addition, theCompany has developed the SSOM lighting control
system, enabling office workers to individually control
single light sources. The system is designed to cut
power consumption of ceiling lights in the office. It
has been introduced to a part of the head office (St.
Luke’s Tower), leading to a 60% reduction in power
consumption from lighting. And in fiscal 2014, theCompany developed a self-powered switch system thatgenerates power and transmits at the press of a button,
thus eliminating the need for batteries even for theswitches, making it easier to use.
• Campaign to reduce copy paper
The volume of copy paper purchased continued toincrease up to fiscal 2013. To accurately grasp the stateof copy paper consumption, we have been surveying
inventory and consumption at the end of each fiscal
year and compiling results into data sets since fiscal
2014. The number of sheets of copy paper used in fiscal
2014, the first year surveyed, was around 20,035,000.
We will continue managing paper consumption andefforts to reduce usage, including paperless meetings.

SANKI REPORT 2015

61

Proper Disposal of Waste

Introduction of a digital manifest
With the aim of ensuring the proper disposal of industrial
waste, we are pushing ahead with the introduction ofa digital manifest. As a result, 7 departments, including
3 branches and 2 branch offices, as well as one Group
company have introduced the digital manifest system
as of April 2015 (including partial introduction.) We willcontinue our efforts to improve the rate of introduction in
individual departments.

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.

Scope of aggregation: Sanki Engineering as a whole, or designated sections
Period: April 2014–March 2015
Guidelines for reference: (1) Environmental Accounting Guidelines, Ministry of the Environment (2005 edition),(2) Environmental Accounting Guidelines for the Construction Industry (2002 edition)

Environmental protection costs (aggregated expenditures for environmental protection in our business activities)
Details of main initiatives

Dispatching engineers to the Japanese Antarctic
Research Expedition
Sanki Engineering has been cooperating with Antarctic
research by dispatching 10 engineers to oversee
environmental conservation at the Japanese Antarctic
Research Expedition since 1991, when the Protocol on
Environmental Protection to the Antarctic Treaty was
adopted. An eleventh member of the Company is currently
working in the 56th Antarctic Research Expedition team.
Company technologies are contributing to environmental
conservation at the Showa Station in Antarctica.

Working on the startup and operation of a new wastewater treatment facility
at Showa Station
In February 2015, life for 26 members of the 56th
overwintering expedition began at Showa Station.
I am in charge of environmental protection forthe construction team. My primary duties are theoperation and maintenance of equipment for thetreatment of domestic wastewater discharged fromthe station, the collection of waste brought back, andthe disposal of waste treated locally.
One of my major duties at the 56th expedition is
to start up and operate a new wastewater treatment
facility. Although the facility was delivered to
the National Institute of Polar Research by SankiEngineering in fiscal 2011 and installed by the 53rd
expedition team at Showa Station, the facility did
not immediately go into operation. This is because
Ice Breaker Shirase, laden with necessary materials
and equipment, could not approach the station.
Shirase, however, was able to approach the station
during the 55th and 56th expeditions and completed
transportation of all necessary materials andequipment. I am now proceeding with the startup andEnvironmental Accounting

operation of the facility along with members in chargeof mechanical and electrical work.
Due to persistent bad weather since we began
wintering, we have been very busy removing snow
from station materials, equipment and buildings toprevent them from being buried. In the meantime, mymind has been calmed by the beautiful appearanceof the aurora in the shape of curtains or spirals,
large snow crystals that can be seen even with the
naked eye, and other natural phenomena unique to
Antarctica. My life has been full and satisfying every
day, stimulated by my colleagues who are experts
and professionals in many different fields such as
meteorological observation and machinery.

VOICE

35,137

Resource recycling costs

431,685

Cost of waste disposal (construction sites)
Cost of operating under ISO 14001

4,814

Cost of environment-related education
Management costs

204

Cost of exhibiting in exhibitions/publishing materials

35,993

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

2,975

R&D costs

Cost of environmental protection-related R&D

Social activities costs

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

323,910
2,669
3,735

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

FY2010

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

FY2011

18,696

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

FY2012

18,768FY2013

20,511

19,632*

20,194––––

20,035

12,12015,82815,506

17,187

22,945

Energy consumed

Energy consumed by offices (crude oil equivalent; kl)

2,056

1,922

1,853

1,691

1,643

CO2 emissions (t-CO2)(The CO2 emission factor has been
increasing since FY 2012)

As a result of energy consumption in offices

3,146

2,931

3,419

3,490

3,402

As a result of energy consumption at worksites

1,016

839

889

1,081

833

Amount of industrial waste from Company-wide
construction sites and Yamato Engineering Center (t)Green purchasing of stationery (1,000 yen)

12,034

12,07013,757

15,86916,47932,50628,53731,45331,76233,155* Sheets of copy paper purchased in fiscal 2013 have been recalculated due to a change in the scope of aggregation.

Economic effects of environmental protection measures
Related departments

Photos by Shigematsu, a member of the 56th Japanese Antarctic Research Expedition

FY2014

Volume of water used at Yamato Engineering Center (m3)Volume of industrial waste

In charge of environmental
protection for the 56th
Japanese Antarctic
Research Expedition(Unit: 1,000 yen)

Environmental protection costs

Global environmental protection costs Cost of disposal of waste CFCs and halons

Resources consumed

Kotaro Shigematsu

CSR Report

Proper disposal and reduction of industrial waste
We took action to reduce industrial waste generated atconstruction sites as well as to ensure proper disposal.
In fiscal 2014, we started setting and managing
numerical goals at eight offices across the country,
setting targets for material and equipment reductions
through improved methods in Tokyo, Kansai, Chubu,
Kyushu, Tohoku and Hokuriku, mixed waste generation
rate in Hokkaido and recycle ratio in Chugoku. Although
Hokuriku, Chubu, Chugoku and Kyushu Offices achieved
their respective targets, we were unable to reduce totalindustrial waste discharge. Among the eight offices,
Chugoku was the best performer, achieving a 97%
waste recycling rate, exceeding its target of 95%.
Hokkaido’s mixed waste generation rate was 15%,compared to its goal of 5%. The volume of industrial
waste generated in fiscal 2014 rose by 3.8% comparedto the previous fiscal year. This rate of increase,
however, was lower than the 15.4% in fiscal 2013 and14.0% in fiscal 2012. The rate of increase over theprevious fiscal year was also lower than that of thecompleted construction revenue in fiscal 2014, which
was 5.0%. We will continue our efforts to reduce total

waste discharge. All asbestos-containing waste generated
through the demolishing of buildings or repair work wasproperly disposed of in fiscal 2014.

Details(Unit: 1,000 yen)
FY2010FY2011FY2012FY2013

FY2014

Construction sites

Profit from sale of scrap, etc.

66,615*88,238*138,390

143,463

138,042

Yamato Engineering Center

Profit from sale of scrap, etc.

98

327

398

295

548

Company-wide

Subsidy to introduce eco-cars (ended FY2012)

–

–

2,700

–

–

* Figures have been recalculated due to a change in the computation method.

62

SANKI REPORT 2015

SANKI REPORT 2015

63

Relationship with Local Communities

Enriching the Public Experience andValue of Sanki Nature Park

Major Initiatives for Fiscal 2014
• Regional disaster prevention• Conservation of the local environment• Supporting the development of the next generation• Blood donations• Donations and contributions

Our Approach to Local Communities
As stated in our Group Action Guidelines, “We seek tocontribute to society in order to aid in the development oflocal communities as a good corporate citizen and memberof society,” and our activities reflect this principle. Looking
ahead, we will continue to fulfill our corporate social
responsibility while maintaining active communication
with stakeholders in the communities where we operate.

Coordination with Local Communities
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, which
maintains large-scale facilities in the city. Under the termsof the agreement, we will provide facilities as temporary
shelters for those unable to return home in the event of adisaster. Moreover, we will make the Yamato Engineering
Center available and provide water, toilets and a stockpileof emergency provisions, including potable water, blankets
and mats, and food. We intend to partner with Yamato
City in planning and conducting training in coordination
with local public transport providers.
Evacuation drill for a large-scale disasterAn evacuation drill for a large-scale disaster was
conducted in the Chuorinkan area of Yamato City undera disaster management agreement between the city andthe Company concluded in March 2015. During the drill,
our Yamato Engineering Center served as a temporary
shelter for those who were “unable to return home”
and accepted 54 “evacuees.” Also, our employees
demonstrated a central responsibility as they provided
guidance, received evacuees, issued reports and handled
other tasks as members of the team overseeing the mockevacuation.

64

SANKI REPORT 2015

Training on receiving evacuees at
the Yamato Engineering Center

Dispatching lecturers for community safety and healtheducation
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 aslecturers for courses on heat stroke prevention, safety andother issues.

Cleanup and Environmental Beautification
Activities
Each branch, branch office and Group company
participates in cleanup activities in areas around theiroffices or worksites as well as environmental beautification
activities organized by local governments. In fiscal 2014,
we took part in a variety of activities that included acleanup around our head office and a beautification project
for a river near the Yamato Engineering Center, and the
Hokkaido branch joined the “Love Earth Clean-Up in
Hokkaido” event on Ishikari Beach.

At the Yamato Engineering Center, the Sanki Nature
Park biotope maximizes natural purification capacity.
This 1,000-square-meter park was opened to the public
in 2005 and consists of a large pond, small ponds, amarsh, a stream, walking paths and other features that
contribute to preserving biodiversity by providing wildlife
with a resting and breeding place in this area. Spotbilled ducks have migrated to the park since 2013 andhave also hatched ducklings there.
In February 2015, the Sanki Nature Park recorded
its 5,000th visitor since opening to the public. This
milestone was achieved by a visitor living near thecenter, who received a commemorative gift. The parkis also used by neighborhood nursery schools that
do not have playgrounds as a place for nurturing thecommunity’s next generation.

Welcoming Social Studies Tours byLocal Schools
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 July and November 2014, a total of 203 fifthgrade students from Kitayamato Elementary School and
105 third-grade students from Chuorinkan Elementary
School took the tour, respectively. They got a lookat the factory inside the premises and learned about

Elementary school social studies tour

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 as a volunteer activity
in which employees can readily take part. In fiscal 2014,
65 employees at the head office and 51 employees
at the Yamato
Engineering Center
donated blood in
November 2014
and January 2015,
respectively.

Employees donating blood

Donations and Contributions

Participants in the“Love Earth Clean-Up
in Hokkaido”

Trimming grass near a
Yamagata prefectural
psychiatric medical center

CSR Report

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

the equipment that the Company provides to airport
facilities for use in transporting hand luggage. At
Sanki Nature Park, where spot-billed ducks have been
observed breeding, the children listened attentively tothe tour guide’s stories about four ducklings that had
flown from their nest.
Also in November
2014, nine students
in the first grade at
the Tsuchiura 1stHigh School in Ibaraki
Prefecture visitedthe Sanki Global
Environment Plaza
to observe corporate
activities.

Summertime Family Environmental ClassIn 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.

SANKI REPORT 201565

Third-Party Opinion

Yoshinao Kozuma
Professor, Faculty of
Economics, Sophia University

1. Creative Efforts for Reader-Friendliness
Sanki Engineering has nearly completed
its pilot phase in establishing a content
framework for an integrated report, and I feltthat this year’s report was indeed structured
to promote greater understanding among
readers, with careful consideration given
to enhancing the quality of information andmaking the content easier to read. I particularlycommend the addition of value chain mapping,which has advanced the process of identifying
the environmental, social and governanceissues associated with the Company’s total
engineering business model.
Many other modifications were madethroughout the report to alleviate the impactof the massive volume of information that
was added in transitioning to an integrated
report. For example, important issues andmajor initiatives for the fiscal year underreview were categorized by stakeholder,key performance indicators were added tothe segment information, and the effective
arrangement of “Voice” columns softens
the overall impression of the otherwise onesided presentation of information. In addition,
the effective layout of large photographs,
diagrams and columns has enhanced theoverall look of the SANKI REPORT, making itmuch more reader-friendly.
2. Strengthening the Compliance System
As in previous reports, this year’s publication
provides information on follow-up activities

for the Company’s initiatives related tocompliance with the Anti-Monopoly Act, whichhave continued since 2013. It is particularly
noteworthy that compliance managers havebeen assigned to all operational departments
and that a violation of the Anti-Monopoly
Act has been clearly stated as the reason
for disciplinary action, which indicate thestrong stand taken by Sanki Engineering on
compliance with this act.
I am somewhat concerned, however,about the results of the compliance awarenesssurvey conducted in fiscal 2014 after theCompany was subject to an on-site inspection
by the Japan Fair Trade Commission.
Approximately 80% of the respondents
indicated that the Company’s “initiatives
concerning compliance are adequate,” andfor the fiscal 2015 survey, conducted after
progress had been made in complianceeducation, the percentage was even higher.
This is fine as long as these results arereflecting an organization-wide effort to raisecompliance awareness. I hope the Company
will continue to strengthen its compliancesystem so that it prevents complacency from
creeping into the organizational culture.
3. Social Contribution from Antarctica
Participation in the overwintering expedition
to Antarctica is a symbolic CSR activity of
Sanki Engineering and has continued fora quarter of a century. While this social
contribution is based on the Company’s
advanced environmental technologies, italso benefits Sanki Engineering’s business
operations since feedback on polar activity
experiences can be received and students
who want to be dispatched to the region willseek employment at the Company. This is
another initiative that I hope the Company
will maintain into the future.

4. Full Commitment to PDCAManagement
As for the results of environmental activities,
the Company has taken a remarkable step
forward in its contribution to reducing CO2
emissions. The data covering the past threefiscal years indicate a significant rise in the
proportion of orders received in relation to thenumber of proposals on CO2 reductions. In
fiscal 2014, over 40% of the proposed volumeof CO2 reductions was realized. I highly
commend the Company’s steadfast efforts incontinuously offering these proposals.
On the other hand, the Company did notseem to make much progress in reducing
waste emissions. Initiatives are explainedby emphasizing the decline in the ratio ofyear-on-year increases and comparisonswith completed construction revenues, butchanges over time show that industrial waste
emissions have basically moved in step withcompleted construction revenues, and theCompany’s reduction efforts have not beenreflected well enough in its performance
results.
I would like to see the Company further
enhance its organizational rules on PDCA
management by concurrently strengthening
its information disclosure by, for example,
reporting results against targets.
5. Effective Application of G4
In this year’s report, the G4 Sustainability
Reporting Guidelines have been added to thereference guidelines. G4 is based on a strong
commitment to compliance; incorporatingcompliance benchmarks into core disclosure
themes could lead to significant improvementsin the initiatives and transparency. I hope
the Company will effectively apply G4-based
checklists for reviewing and assessing CSR
management.

Response to Third-Party Opinion
Thank you very much for your valuable opinions on the SANKI REPORT.
Four years have passed since we began compiling these integrated reports, and we have received high marks for the care we have taken to raise
the quality of information and make the report easier to read. Sanki Engineering will maintain these efforts with the intention of continually publishing
reports that are useful and appealing. We will also continue our efforts to strengthen our compliance system, as pointed out by the experts, toward firmly
establishing compliance within our organizational culture.
With respect to waste reduction, we will transform our reduction practice of setting targets at each site into a Company-wide initiative and actively
disclose information, including the results of these activities in an effort to improve them. The company will also consider more effectively applying thefourth edition of the Global Reporting Initiative guidelines (GRI G4) to its CSR management as a whole and strive to enhance its initiatives and increasetransparency even further.
We are resolved to make use of the SANKI REPORT in our future activities toward realizing a comfortable society through our business activities.

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

66

SANKI REPORT 2015

Financial Report
SANKI REPORT 201567

Financial Report

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

Financial Report

Year ended
March 31, 2005
Fiscal year
¥ 245,047¥ 235,401¥ 237,022¥ 218,256¥ 188,653¥ 143,348¥ 147,129¥ 175,291¥ 165,800¥ 168,295¥ 173,398

Balance carried forward

155,876

153,593

144,456

108,253

93,566

77,641

72,976100,272

111,414108,219

102,019

Sales

233,170

237,684

246,159

254,460

203,340

159,273

151,794

147,994

154,658

171,496

179,598

Selling, general and administrative expenses

14,94814,42613,994

13,962

14,97815,41915,763

15,712

15,19915,60415,015

Operating income or loss

4,281

2,892

(9,502)(3,958)

7,125

5,027

3,843

2,525

2,391

2,818

2,951

Ordinary income or loss

4,946

3,319

(8,782)(3,307)

6,900

5,456

4,239

2,268

2,680

3,146

3,809

Net income or loss

2,600

2,355

(6,536)

3,134

3,283

3,141

2,124

176

(4,992)

1,763

2,461

Cash flows from operating activities(3,151)(5,557)(2,819)(4,097)

19,177

1,294

11,554(2,697)

9,729(9,403)(139)

Cash flows from investing activities

7,662(1,024)

2,833

11,511

1,726(1,664)2,610(1,046)(9,481)(3,506)3,440

Orders received(3,315)(3,067)(2,697)(3,812)(4,377)(2,936)(1,883)(280)(1,028)(4,152)(2,901)¥ 28,365¥ 18,717¥ 16,018¥ 19,617¥ 36,142¥ 32,825¥ 45,135¥ 41,097¥ 40,367¥ 23,510¥ 23,667

Total assets

240,234

245,367

251,323

215,680

176,664

163,307

158,501

163,120

166,477

170,181

176,382

Net assets

87,774

98,333

88,94380,27678,78080,49879,833

79,662

76,932

74,91784,869Number of employees

2,327

2,332

2,179

2,225

2,239

2,272

2,316

2,289

2,246

2,283

2,282

Cash flows from financing activities
Cash and cash equivalents at end of year
As of end of fiscal year under review

Per share information
34.49

31.46

(88.47)

42.42

44.45

42.86

29.67

2.46

(71.04)

26.46

38.30

1,187.36

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

18.00

15.00

15.00

15.00

15.00

15.00

15.00

15.00

15.00

15.00

20.00

Equity ratio (%)

36.5

40.1

35.4

37.2

44.6

49.3

50.3

48.8

46.2

44.0

48.1

Return on assets (%)

2.1

1.4

(3.5)

(1.4)

3.5

3.2

2.6

1.4

1.6

1.9

2.2

Return on equity (%)

3.0

2.5

(7.0)

3.7

4.1

3.9

2.7

0.2

(6.4)

2.3

3.0

Earnings per share (yen)Book-value per share (yen)Cash dividends (yen)Other information(Millions of yen)
ProfitOrders received and sales

300,000● Orders received (left axis)● Sales (left axis)■ Operating income (right axis)■ Ordinary income (right axis)■ Net income (right axis)

250,000
200,000
150,000

20,00015,00010,000100,000
5,000
50,00000-50,000-5,000-100,000-10,000-150,000
2004

68

SANKI REPORT 2015

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014 (FY)SANKI REPORT 201569

Consolidated Balance Sheet(Millions of yen)
As of March 31, 2014

(Millions of yen)

As of March 31, 2015

As of March 31, 2014

As of March 31, 2015

¥ 57,888¥ 56,137

6,576

5,672

Liabilities and Net Assets

AssetsLiabilities:

Current assets:
Cash and deposits (Note 1)¥ 23,510¥ 29,267

Notes and accounts receivable on completed construction contracts and other

76,77974,781

Notes and accounts payable on construction contracts and other

Electronically recorded monetary claims

1,321

2,607

Short-term loans payable

Securities

3,998

–

Inventories:
2,471

417

476

Deferred tax assets

1,661

Other

6,715

Allowance for doubtful accounts

(328)

(99)

115,941

116,224

Raw materials and supplies

Total current assets

Lease obligations

72

80

Income taxes payable

625

806

27

23

Advances received on uncompleted construction contracts

5,489

2,636

1,965

Provision for bonuses

2,286

2,176

4,754

Provision for directors’ bonuses

75

80

Provision for warranty costs

428

459

567

1,314

Noncurrent assets:

Deferred tax liabilities

Provision for loss on construction contracts
Other

4,698

2,717

Total current liabilities

78,736

72,106–

660

Financial Report

1,863

Costs on uncompleted construction contracts

Current liabilities:

Property, plant and equipment:
39,79539,289

Accumulated depreciation(34,860)(34,846)

Buildings and structures, net

4,934

4,442

Lease obligations

3,756

3,560

(3,310)(3,154)

Buildings and structures

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

445
4,124

406
3,964

509

629

Accumulated depreciation

(134)

(176)

Lease assets, net

374

453

–

3

9,878

9,269

436

370

Lease assets

Construction in progress
Total property, plant and equipment
Intangible assets

Investments and other assets:
Investment securities (Note 1)

31,28339,704Long-term loans receivable

258

197

Asset for retirement benefits

3,587

6,709

130

206

1,080

1,121

241

345

Other (Note 1)

8,463

3,077

Allowance for doubtful accounts(1,121)(845)

Total investments and other assets

43,92450,51754,23960,157¥ 170,181¥ 176,382

Deferred tax assets
Lease and guarantee deposits
Insurance funds

Total noncurrent assets
Total assets

Noncurrent liabilities:
Long-term loans payable

363

424

Deferred tax liabilities

2,260

6,843

Liability for retirement benefits

8,231

5,384

Provision for directors’ retirement benefits

219

122

Provision for loss on guarantees

29

34

Provision for loss on compensations

–

471

Other

5,422

5,465

Total noncurrent liabilities

16,526

19,406

95,26391,512

Capital stock

8,105

8,105

Capital surplus

4,181

4,181

Retained earnings

58,93561,659Treasury stock(2,444)(2,267)

Total shareholders’ equity

68,777

71,678

9,095

15,332

Total liabilities
Net assets:
Shareholders’ equity:

Accumulated other comprehensive income:Unrealized gains on available-for-sale securities

29

48

Retirement benefits asset and liability adjustments(3,011)(2,253)

Total accumulated other comprehensive income

6,114

13,127

Subscription right to shares

25

51

Minority interests–

12

74,91784,869¥ 170,181¥ 176,382

Foreign currency translation adjustment

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

70

SANKI REPORT 2015

SANKI REPORT 201571

Consolidated Statement of Income and Comprehensive Income

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

Year ended March 31, 2014

Year ended March 31, 2015

¥ 170,336¥ 178,220[For the year ended March 31, 2014](Millions of yen)

Net sales:
Net sales of completed construction contracts
Net sales of real estate business and otherTotal net sales

1,378
179,598

152,224

160,572

848

1,059

153,072

161,632

18,111

17,648

Cost of sales:
Cost of sales of completed construction contracts (Notes 1 and 2)
Cost of sales on real estate business and otherTotal cost of sales
Gross profit:
Gross profit on completed construction contracts

311

318

18,423

17,966

Employees’ salaries and allowances

6,022

5,963

Provision for bonuses

1,006

926

Gross profit on real estate business and otherTotal gross profit
Selling, general and administrative expenses:

Provision for directors’ bonuses

75

80

Retirement benefit expenses

497

588

Provision of allowance for doubtful accounts

42–

Depreciation

398

371

Other (Note 1)

7,559

7,085

Total selling, general and administrative expenses

15,60415,015

2,818

2,951

Operating income
Non-operating income:Interest income

4543Dividends income

506

592

Insurance income

105

169

Foreign exchange gains, net–

143

Reversal of allowance for doubtful accounts

–

273

Other
Total non-operating income

350

386

1,007

1,607

Non-operating expenses:
Interest expense

96

89

Equity in losses of affiliates

107

295

126

Provision of allowance for doubtful accounts

37

–

Other

311

364

Total non-operating expenses

679

749

3,146

3,809

Extraordinary income:Gain on sales of noncurrent assets

181–

Gain on sales of investment securities

163

290

Total extraordinary income

345

290

143

189

Loss on sales of noncurrent assets

851

Loss on retirement of noncurrent assets

30

25

Loss on valuation of stock of unconsolidated subsidiaries

153–

Extraordinary loss:
Impairment loss (Note 3)

–

471

336

737

3,154

3,362

Income taxes-current

959

1,245

Income taxes-deferred

431

(384)

Total income taxes

1,391

861

Income before minority interests

1,763

2,501

Provision for loss on compensations
Total extraordinary losses
Income before income taxes and minority interests

Balance at the beginning of current period
Changes in items during the period
Dividends from surplus
Net income
Change in scope of consolidation
Purchase of treasury stock
Retirement of treasury stock
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balance at the end of current period

Capital surplus¥ 8,105¥ 4,181Net income
Minority interests
Income before minority interests

–

39

1,763

2,461

–

39

1,763

2,501

2,464

6,236

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

120

(8)

Remeasurements of defined benefit plans–

758

Total other comprehensive income
Comprehensive income

2,584

6,986

¥ 4,348¥ 9,487¥ 4,348¥ 9,474¥–¥ 12

Comprehensive income attributable to:Shareholders of Sanki Engineering Co., Ltd.
Minority interests(2,714)(2,408)2,714(1,013)1,763
44(2,408)–�

(1,919)¥ 58,935305¥ (2,444)(1,614)¥ 68,777

Treasury stock¥ 60,855(1,013)
1,763
44

–�
¥ 8,105–�¥ 4,181

Accumulated other comprehensive income

Balance at the beginning of current period
Changes in items during the period
Dividends from surplus
Net income
Change in scope of consolidation
Purchase of treasury stock
Retirement of treasury stock
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balance at the end of current period

Unrealized
Foreign currency
gains ontranslation
availableadjustment
for-sale securities¥ 6,631¥ (90)

2,464
2,464¥ 9,095

120
120
¥ 29

Retirement
Total accumulated
benefits asset
otherand liability
comprehensive
adjustments
income¥–¥ 6,540(3,011)(3,011)¥ (3,011)

Subscription
rights to shares

Minority interests

Total net assets¥–¥–¥ 76,932––¥–(1,013)1,763
44(2,408)–(401)(2,015)¥ 74,917

(426)
(426)
¥ 6,114

25
25
¥ 25

[For the year ended March 31, 2015](Millions of yen)
Shareholders’ equity
Capital stock

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
Net (loss) income
Change in scope of consolidation
Purchase of treasury stock
Disposal of treasury stock
Transfer of loss on disposal of treasury stock
Retirement of treasury stock
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balance at the end of current period

Capital surplus

Retained earnings¥ 8,105¥ 4,181

8,105

4,181

Treasury stock¥ 58,935
3,008
61,943¥ (2,444)(2,444)

Total shareholders’equity¥ 68,777
3,008
71,785

(968)
2,461

(0)
0

–
¥ 8,105–¥ 4,181

Income taxes:

Minority interests¥ (2,750)

Total shareholders’equity¥ 70,391

Retained earnings–

Foreign exchange losses, net

Ordinary income

Capital stock

Financial Report

1,159
171,496

Shareholders’ equity(0)(1,778)

1,778

(968)
2,461
–
(1,604)
3
–
–

(284)
¥ 61,659

177¥ (2,267)(107)¥ 71,678(1,604)
3

Accumulated other comprehensive 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
Net (loss) income
Change in scope of consolidation
Purchase of treasury stock
Disposal of treasury stock
Transfer of loss on disposal of treasury stock
Retirement of treasury stock
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balance at the end of current period

Unrealized
Foreign currency
gains ontranslation
availableadjustment
for-sale securities¥ 9,095
¥ 29
9,095

6,236
6,236
¥ 15,332

29

18
18
¥ 48

Retirement
Total accumulated
benefits asset
otherand liability
comprehensive
adjustments
income¥ (3,011)¥ 6,114(3,011)758
758¥ (2,253)

6,114

7,013
7,013
¥ 13,127

Subscription
rights to shares

Minority interests

Total net assets

¥ 25

¥–

25

–

¥ 74,917
3,008
77,925

12
12
¥ 12

(968)
2,461
–
(1,604)
3
–
–
7,051
6,944
¥ 84,869

25
25
¥ 51

See notes to consolidated financial statements.

72

SANKI REPORT 2015

SANKI REPORT 201573

Consolidated Statement of Cash Flows

Notes to Consolidated Financial Statements(Millions of yen)
Year ended March 31, 2014

Year ended March 31, 2015

Cash flows from operating activities:¥ 3,154¥ 3,362

Depreciation and amortization

740

723

Impairment loss

143

189

Increase (decrease) in allowance for doubtful accounts

46

(588)

(Decrease) increase in liability for retirement benefits

(35)

54

Decrease in provision for directors’ retirement benefits

(60)

(97)

(Decrease) increase in provision for loss on construction contracts

(233)

747

Income before income taxes and minority interests

Interest and dividends income

–

471

(551)

(635)

Interest expense

96

89

Equity in losses of affiliates

107

295

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

(172)

51

Gain on sales of investment securities

(163)

(290)

(14,613)

1,041(Increase) decrease in notes and accounts receivable on completed construction contracts andother
Increase in costs on uncompleted construction contracts

(314)

(607)

Increase (decrease) in notes and accounts payable on construction contracts and other

5,989(1,766)

Increase (decrease) in advances received on uncompleted construction contracts

144(2,866)

Increase (decrease) in other current liabilities

998(1,607)

Other(1,588)

1,091

Subtotal(6,311)(340)

Interest and dividends received

554

632

Interest paid

(95)

(89)

(3,554)(1,135)

Income taxes paid

2792

¥ (9,403)¥ (139)¥ (600)¥ (1,100)–

500(3,998)(6,997)–

11,000Purchase of property, plant and equipment

(549)

(202)

Proceeds from sales of property, plant and equipment

287

147

Purchase of investment securities

(139)

(133)

Proceeds from sales of investment securities

407

642

Proceeds from redemption of investment securities

200

Income taxes refunded
Net cash used in operating activities
Cash flows from investing activities:
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of securities
Proceeds from redemption of securities

Execution of loan

(9)

(67)

Collection of loans receivable

194

59

Proceeds from maturity of insurance funds

844

8

Other
Net cash (used in) provided by investing activities

(141)

(416)

(3,506)

3,440

Cash flows from financing activities:
(323)

(924)

Proceeds from long-term loans payable

–

1,000

Repayments of long-term loans payable

(340)

(320)

(2,408)(1,604)

Net decrease in short-term loans payable

Purchase of treasury stock
Proceeds from exercise of stock options
Repayments of lease obligations

0

(66)

(84)

Cash dividends paid

(1,013)(968)

Net cash used in financing activities(4,152)(2,901)

108

(242)

Effect of exchange rate changes on cash and cash equivalents
Net (decrease) increase in cash and cash equivalents(16,953)

156

Cash and cash equivalents at beginning of period

40,36723,510

Increase in cash and cash equivalents due to inclusion in consolidation
Cash and cash equivalents at end of period (Note 1)
See notes to consolidated financial statements.

74–

SANKI REPORT 201596–

¥ 23,510¥ 23,667

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: 2
Akita Eco Plash Co., Ltd.
Ou Clean Technology Co., Ltd.

(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.
* SHUN HING-SANKI JV LIMITED, an affiliate which
had been excluded from application of the equity
method for the year ended March 31, 2014, wasdissolved in this fiscal year.

Financial Report

Increase in provision for loss on compensations

Basis of Preparation of Consolidated Financial Statements(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
AQUACONSULT
Anlagenbau GmbH
THAI SANKI ENGINEERING &CONSTRUCTION CO., LTD.

Fiscal year end
December 31

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.
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.
Derivatives
Derivatives are stated at fair value.

SANKI REPORT 201575

(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.
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.

76

SANKI REPORT 2015

Provision for bonuses
Provision for bonuses are 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 are 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 are 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 directors’ retirement benefits
Provision for directors’ retirement benefits arestated 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.
(Additional information)
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, 2015.
Provision for loss on guarantees
Provision for loss on guarantees is provided at

an amount of estimated loss on fulfillment ofguarantee obligations.
Provision for loss on compensations
Provision for loss on compensations is provided
at an amount of estimated loss on acceptance ofclaims for damages.
(4) Accounting for retirement benefits
Method of attributing expected benefits to periods ofservice
The retirement benefit obligation for employees
is attributed to each period by the benefit formula
method.
Method of amortization for actuarial gain or loss, andprior 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 theretirement benefit expenses for each consolidated
subsidiary are calculated based on the retirement
benefit obligation which is stated at the amount thatwould be paid if all eligible employees voluntarily
terminated their employment at the end of theperiod.
(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, ofwhich the percentage of completion cannot be
reliably estimated, are recognized by the completedcontract method.
For the year ended March 31, 2015, net sales ofcompleted construction contracts of ¥107,486 million
was recognized by the percentage-of-completion
method.
(6) Foreign currency translation
Monetary assets and liabilities denominated inforeign currencies are translated into yen at theexchange rates prevailing at the year-end date of theconsolidated financial statements, with the resulting
translation gains and losses credited or charged toincome.
Receivables and payables denominated in foreign
currencies hedged by the forward exchange
contracts which qualify for the assigning methodof hedge accounting are translated into yen at theirrespective forward exchange contract rates.
The assets and liabilities and the revenue andexpense accounts of the foreign subsidiaries aretranslated into yen at the exchange rates prevailingat the fiscal year-end date of those respective
companies. The resulting translation adjustments areincluded in foreign currency translation adjustment
and minority interests in net assets.

Financial Report

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

(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.
(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.
(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.

SANKI REPORT 201577

Accounting Changes

Application of accounting standards for retirement
benefits

Consolidated Balance Sheet“Electronically recorded monetary claims”, which
was included in “Notes and accounts receivable oncompleted construction contracts and other” in theprior fiscal year, has been separately presented in
the current fiscal year due to its increased financial
materiality.
To reflect this change in presentation, theconsolidated balance sheet has been reclassified,and as a result, “Notes and accounts receivable
on completed construction contracts and other”
of ¥78,101 million in the prior fiscal year has
been reclassified into “Notes and accounts
receivable on completed construction contracts
and other” of ¥76,779 million and “Electronicallyrecorded monetary claims” of ¥1,321 million in the
consolidated balance sheet for the prior fiscal year
provided herein.
Consolidated Statement of Income and Comprehensive
Income“Gain on sales of waste materials”, which was
separately presented in the prior fiscal year, hasbeen included in “Non-operating income-Other” inthe current fiscal year due to its decreased financial
materiality.
To reflect this change in presentation, theconsolidated statement of income andcomprehensive income has been reclassified, and as
a result, “Gain on sales of waste materials” of ¥123
million and “Non-operating income-Other” of ¥226
million that were separately presented under “Nonoperating income in the prior fiscal year have been
reclassified into “Non-operating income-Other” of¥350 million in the consolidated statement of income
and comprehensive income for the prior fiscal year
provided herein.

Notes to Consolidated Balance Sheet(Note 1)
1) The following assets have been pledged for opening the letter of credits:(Millions of yen)
Cash and deposits (time deposits)
Investments and other assets (time deposits)

FY2013

FY2014¥–¥ 5,300

4,500–

Financial Report

The Company and its domestic subsidiaries haveapplied ASBJ Statement No. 26, “AccountingStandard for Retirement Benefits” (released on May
17, 2012, hereinafter the “Standard”) and ASBJ
Guidance No. 25, “Guidance on Accounting Standard
for Retirement Benefits” (released on March 26,
2015, hereinafter the “Guidance”) effective fromthis fiscal year, in accordance with the provisions
stated in Paragraph 35 of the Standard and Paragraph
67 of the Guidance. As a result, the methods forcalculating the retirement benefit obligation andservice cost have been revised in the following
respects: the method for attributing projected
benefits to each period has been changed from thestraight-line method to the benefit formula method,
and the method for determining the discount rate
has been changed from using years, for a bond term
as a basis of determining the discount rate, whichapproximate the average estimated remaining yearsof service of the eligible employees to using a single
weighted-average discount rate which reflects the
expected timing and amount of benefit payments.
The effect of changing the method for calculating
the retirement benefit obligation and service cost
was recognized by adjusting retained earnings at the
beginning of the fiscal year ended March 31, 2015, in
accordance with the transitional treatment provided
in Paragraph 37 of the Standard.
As a result, the liability for retirement benefits
decreased by ¥2,439 million, and the asset for
retirement benefits and retained earnings increasedby ¥2,234 million and ¥3,008 million, respectively,
at the beginning of the fiscal year ended March 31,
2015. The effect of this change on operating income,ordinary income and income before income taxes
and minority interests for the year ended March 31,
2015 was immaterial.
The effect of this change on the amount per shareis explained in “Per Share Data” of “Notes toConsolidated Financial Statements”.

Changes in Presentation of Consolidated Financial
Statements

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

FY2013

FY2014¥5¥53) The following assets have been pledged as guarantees for the payment of trade payable by the consolidated
subsidiaries:(Millions of yen)
Investments and other assets (time deposits)

FY2013

FY2014¥ 33¥ 334) The following assets have been pledged as guarantees for losses regarding capital investments in the consolidated
subsidiaries:(Millions of yen)
Investments and other assets (time deposits)

FY2013

FY2014¥ 10¥ 10(Note 2)
The following guarantees have been provided to the loans:(Millions of yen)
Guarantee for borrowings by Kokyuki･Allergy Center ESCO Co., Ltd.

FY2013

FY2014¥9¥6

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

Notes to Consolidated Statement of Income and Comprehensive Income(Note 1)
Research and development expenses included in selling, general and administrative expenses and cost of sales for theyears ended March 31, 2014 and 2015 are as follows:(Millions of yen)
FY2013

FY2014¥ 1,171¥ 1,014(Note 2)
Provision for loss on construction contracts included in cost of sales for the years ended March 31, 2014 and 2015 are
as follows:(Millions of yen)78

SANKI REPORT 2015

FY2013

FY2014¥ (233)¥ 747

SANKI REPORT 201579

Notes to Consolidated Statement of Changes in Net Assets(Note 3)
Impairment losses were recognized for the following assets for the year ended March 31, 2014:[For the year ended March 31, 2014](Millions of yen)

Location
Osaka-shi, Osaka

Use

Asset class

AmountBusiness-use assets

Land, Buildings, Structures¥ 143

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.

Use

Asset class

AmountBusiness-use assets

Buildings, Structures,Tools, furniture and fixture¥ 102

Assets used for the real estate business

Land, Buildings

As of April 1, 2013

Increase

Decrease

As of March 31, 2014

Common stock

74,461,156–

4,800,000

69,661,156

As of April 1, 2013

Increase

Decrease

As of March 31, 2014

Common stock

4,921,983

4,002,221

4,800,000

4,124,204(Note) Increase of 4,002,221 shares was due to purchase of treasury shares of 4,000,000 by resolution of the board of
directors and repurchase of fractional shares of 2,221. Decrease of 4,800,000 shares was due to retirement oftreasury shares by resolution of the board of directors.
3. Details of subscription rights to shares were as follows:

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.
(Note 4)
The following table presents reclassification adjustments and tax effects allocated to each component of othercomprehensive income for the years ended March 31, 2014 and 2015:(Millions of yen)
FY2013

FY2014¥ 3,969¥ 8,851

Balance as ofMarch 31, 2014

Stock options

25

Total

25

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

Type of shares

Total dividends(Millions of yen)

Dividends per share(Yen)

Record date

Effective dateJune 27,2013
December 10,
2013

June 26, 2013
Ordinary general meeting of shareholders

Common stock

521

7.50

March 31,2013

November 8, 2013
Meeting of board of directors

Common stock

491

7.50

September 30,
2013(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

Type of shares

Total dividends(Millions of yen)

Source of dividends

Dividends per share(Yen)

Record date

Effective dateJune 26, 2014 Ordinary general meeting ofshareholders

Common stock

491

Retained earnings

7.50

March 31, 2014

June 27, 2014

[For the year ended March 31, 2015]
1. Types and total number of shares issued were as follows:

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

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

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.

(Shares)

Type of shares

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.

Reclassification adjustments for gains and losses included in net income

(163)

(288)

Amount before tax effect

3,806

8,562

Tax effect(1,342)(2,326)

Unrealized gains on available-for-sale securities

2,464

6,236

120

(8)

Amount arising during the year–

956

Reclassification adjustments for gains and losses included in net income–

394

Amount before tax effect

–

1,350

Tax effect

–

(592)

Remeasurements of defined benefit plans–758¥ 2,584¥ 6,986

Financial Report(Millions of yen)

Hatsukaichi-shi, Hiroshima, and others

Type of shares

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

Impairment losses were recognized for the following assets for the year ended March 31, 2015:

Ota-ku, Tokyo(Shares)(Note) Decrease of 4,800,000 shares was due to retirement of treasury shares by resolution of the board of directors.

The net book value of the business-use assets was reduced to their respective net realizable value (i.e., expected sales
amount) since the Company decided to sell these assets. The reduction was recognized as the impairment loss in theextraordinary losses.

Location

1. Types and total number of shares issued were as follows:(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(Note) Decrease of 3,000,000 shares was due to retirement of treasury shares by resolution of the board of directors.

Foreign currency translation adjustment:
Amount arising during the year
Remeasurements of defined benefit plans:

Total other comprehensive income

80

SANKI REPORT 2015

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.

SANKI REPORT 201581

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

Balance as ofMarch 31, 2015

Stock options

51

The Company(Parent company)
Total

51

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

Type of shares

Total dividends(Millions of yen)

Dividends per share(Yen)

Record date

Effective dateJune 26, 2014
Ordinary general meeting of shareholders

Common stock

491

7.50

March 31, 2014

June 27, 20147.50

September 30,
2014

December 10,
2014

November 10 2014
Meeting of board of directors

Common stock

476(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

Type of shares

Total dividends(Millions of yen)

Source of dividends

Dividends per share(Yen)

Record date

Effective dateJune 25, 2015 Ordinary general meeting ofshareholders

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.

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 is extremely
difficult to determine fair value. (Please refer to Note 2 below.)(Millions of yen)
Carrying value(Millions of yen)

Cash and cash equivalents

FY2014
Carrying value Estimated fair value Unrealized gain (loss)¥ 23,510¥ 23,510¥–¥ 29,267¥ 29,267¥–

76,77976,779–74,78174,781

–

1,321

1,321

2,607

2,607

4,302

4,310

7

303

310

7

28,51628,516–36,85836,858–134,431

134,4397

143,818

143,825

7

Notes and accounts payable on
construction contracts and other(57,888)(57,888)–(56,137)(56,137)–

Total liabilities(57,888)(57,888)–(56,137)(56,137)–

Derivative transactions*¥ (301)¥ (301)

¥–

¥ (5)

¥ (5)

¥–

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

Time deposits with maturities of more than three months

FY2013
Estimated fair value Unrealized gain (loss)

Assets:

Notes to Consolidated Statement of Cash Flows

Cash and deposits

Financial Report

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.

(Millions of yen)Type of subscription
rights to shares

FY2013

FY2014¥ 23,510¥ 29,267–(5,600)¥ 23,510¥ 23,667

2) Notes and accounts receivable
on completed construction
contracts and other3) Electronically recorded monetaryclaims: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.

82

SANKI REPORT 2015

*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
and derivative 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 recorded monetaryclaims
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 of March
31, 2015, the fair value of these receivables and claims was almost equal to their carrying value.

SANKI REPORT 201583

Securities

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.”

1) Trading securities
Not applicable, because the Company and its consolidated subsidiaries had no trading securities both at March 31,
2014 and 2015.

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.

2) Held-to-maturity debt securities(Millions of yen)
Carrying value

Difference

Carrying value

FY2014
Fair value

Difference

Derivatives:
Please refer to “Derivatives” of “Notes to Consolidated Financial Statements.”

Securities whose fair value
exceeded their carrying value
Government bonds

¥–

¥–

¥–

¥–

¥–

¥–

(Note 2) Carrying value of financial instruments for which it is extremely difficult to determine the fair value

Corporate bonds

303

312

8

303

310

7

Other

–

–

–

–

–

–

Subtotal

303

312

8

303

310

7

(Millions of yen)
Carrying ValueType
Unlisted stocks

FY2013

FY2014¥ 2,462¥ 2,542

Financial ReportType

FY2013
Fair value

Securities whose carrying value
exceeded their fair value
–

–

–

–

–

–

3,998

3,997

(1)

–

–

–

Government bonds
Corporate bonds

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.

–

–

–

–

–

–

3,998

3,997

(1)

–

–

–

¥ 4,302¥ 4,310

¥7

¥ 303

¥ 310

¥7

Other
Subtotal
Total(Note 3) Redemption schedule for receivables, claims and securities with maturities(Millions of yen)
FY2013Due after one
year throughfive years

Due within
one year3) Available-for-sale securities

FY2014Due 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¥ 23,449

¥–

¥–

¥–

¥ 28,694

¥–

¥–

¥–

Notes and accounts receivable
on completed construction
contracts and other

76,779–––74,781–––

Electronically recordedmonetary claims

1,321

Cash and deposits

–

–

2,607

–

–

–

–

Carrying value

FY2014
Acquisition cost

Carrying value

Difference

DifferenceStock¥ 28,194¥ 14,348

Bonds

–

–

¥ 13,846¥ 36,621¥ 14,230¥ 22,390

–

–

–

Other

1

–

0

0

5

4

1

28,195

14,34913,846

36,626

14,234

22,391

Stock

213

233

(20)

130

132

(2)

Bonds

106

107

(0)

101

103

(1)

Other

0

0

(0)

–

–

–

Subtotal

321

342

(21)

232

235

(3)

¥ 28,516¥ 14,691¥ 13,825¥ 36,858¥ 14,470¥ 22,388

Type
Securities whose carrying value
exceeded their acquisition cost

Subtotal
Securities whose acquisition costexceeded their carrying value

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

3,998

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

–

303

–

–

103

200

–

–

–

–

106

–

101

–

–

¥ 105,549

¥–

¥ 303

¥ 106

¥ 106,082

¥ 204

¥ 200

¥–

Total

4) Information regarding sales of securities classified as available–for-sale securities:(Note 4) Redemption schedule for long-term loans payable, lease obligations and other interest-bearing debts(Millions of yen)
FY2013
Due within
one year84

Due after
four years
throughfive years

Due after
five years

Due within
one year

Due after
one yearthrough
two years

Due after
two years
throughthree years

Due after
three years
throughfour years

Due after
four years
throughfive years

Due after
five years¥ 6,256

¥–

¥–

¥–

¥–

¥–

¥ 5,332

¥–

¥–

¥–

¥–

¥–

Long-termloans payable

320

–

–

–

–

–

340

340

320

–

–

–

Lease
obligations

72

52

35

28

21

225

80

62

55

48

247

10

¥ 6,649

¥ 52

¥ 35

¥ 28

¥ 21

¥ 225

¥ 5,752

¥ 402

¥ 375

¥ 48

¥ 247

¥ 10

SANKI REPORT 2015

FY2013
Proceeds from sales Gross realized gain on sales Gross realized loss on sales(Millions of yen)

Proceeds from sales

FY2014Gross realized gain on sales

Stock

¥299

¥ 162

¥0

¥ 538

¥ 290

¥0

Bonds

108

1

–

105

–

2

Other

–

–

–

–

–

–

Total

¥407

¥ 163

¥0

¥ 643

¥ 290

¥2

Type

FY2014Due after
Due after
Due after
one year two years three years
throughthroughthrough
two years three years four years

Short-termloans payable

Total(Millions of yen)
FY2013Acquisition cost

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.

SANKI REPORT 201585

Retirement Benefits

Derivatives

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.

1) Derivative transactions, to which hedge accounting is not applied2) Defined benefit plans (including plans accounted for using the simplified method)

1. Currency-related transactions

1. The changes in the retirement benefit obligation for the years ended March 31, 2014 and 2015 are as follows:

Financial Report5) Impairment loss on securities
An impairment loss on investment securities of ¥153 million (stock of unconsolidated subsidiaries with no market
value of ¥153 million) was recorded for the year ended March 31, 2014, and an impairment loss on investment
securities of ¥0 million (available-for-sale securities for which it is deemed extremely difficult to determine the fairvalue of ¥0 million) was recorded for the year ended March 31, 2015.
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)[For the year ended March 31, 2014](Millions of yen)Type of transactions

Type of derivatives

Transactions outside of market

Forward exchange contracts
Sell: U.S.Dollars

Notional amounts(total)(over one year)¥ 1,240–

Fair value

Unrealized gain (loss)¥ (301)(Note)¥ (301)(Note) Fair value was estimated based on the price information provided by the financial institutions.
[For the year ended March 31, 2015](Millions of yen)Type of transactions

Type of derivatives

Transactions outside of market

Forward exchange contracts
Sell: U.S.Dollars

Notional amounts(total)(over one year)

¥ 954

–

Fair value

Unrealized gain (loss)¥ (5)(Note)¥ (5)(Note) Fair value was estimated based on the price information provided by the financial institutions.
2. Interest-related transactions
Not applicable both for the years ended March 31, 2014 and 2015
2) Derivative transactions, to which hedge accounting is applied
1. Currency-related transactions
Not applicable both for the years ended March 31, 2014 and 2015

Balance at the beginning of the year

FY2014¥ 25,170¥ 25,316–(4,673)25,17020,642Service cost

940

1,008

Interest cost

297

243

Actuarial loss

491

170

(1,585)(2,023)Cumulative effect of change in accounting policy
Restated balance at the beginning of the year

Retirement benefit paid
Other
Balance at the end of the year

10

¥ 25,316¥ 20,041(Note) Retirement benefit expenses of the consolidated subsidiaries applying a simplified method have been included in
the service cost.
2. The changes in the plan assets for the years ended March 31, 2014 and 2015 are as follows:(Millions of yen)
Balance at the beginning of the year

FY2013

FY2014¥ 20,334¥ 20,672

Expected return on plan assets

326

410

Actuarial gain

544

1,126

Contributions by employers
Retirement benefits paid

2. Interest-related transactions
Not applicable both for the years ended March 31, 2014 and 2015

FY2013

Balance at the end of the year

–

–

(532)

(842)

¥ 20,672¥ 21,366

3. The following table sets forth the funded status of the plans and the amounts recognized in the consolidated balance
sheets at March 31, 2014 and 2015 for the Company’s and its consolidated subsidiaries’ defined benefit plans:(Millions of yen)
FY2013

FY2014Retirement benefit obligation under the funded plans¥ 24,961¥ 19,647

Plan assets at fair value(20,672)(21,366)

4,289(1,719)Retirement benefit obligation under the unfunded plans
Net liability for retirement benefits

86

SANKI REPORT 2015

354

393

4,644

(1,325)

Liability for retirement benefits in the balance sheet

8,231

5,384

Asset for retirement benefits in the balance sheet(3,587)(6,709)Net liability for retirement benefits¥ 4,644¥ (1,325)

SANKI REPORT 201587

4. The components of retirement benefit expenses for the years ended March 31, 2014 and 2015 are as follows:

Stock Options(Millions of yen)
Service cost

FY2013

FY2014¥ 940¥ 1,008

Interest cost

297

243

Expected return on plan assets

(326)

(410)

Amortization of actuarial loss

306

583

Amortization of prior service cost

(202)

(188)

Other

18

19

¥ 1,034¥ 1,255(Note) The consolidated subsidiaries’ retirement benefit expenses have been included in the service cost.
5. The components of retirement benefits asset and liability adjustments included in other comprehensive income (before
tax effect) for the years ended March 31, 2014 and 2015 are as follows:(Millions of yen)
Prior service cost

FY2013

FY2014¥–¥ (188)–

1,539

Actuarial loss
Total

¥–

¥ 1,350

6. The components of retirement benefits liability adjustments included in accumulated other comprehensive income(before tax effect) as of March 31, 2014 and 2015 are as follows:(Millions of yen)
FY2013

FY2014

Unrecognized prior service cost

¥ (232)¥ (43)

Unrecognized actuarial loss

4,911

3,371

¥ 4,679¥ 3,328

Total

7. The fair value of plan assets, by major category, as a percentage of total plan assets at March 31, 2014 and 2015 are as
follows:(Millions of yen)

2) 1. Description of the stock option plans:
Stock option plans

2013 Stock option
2014 Stock option(Share subscription rights) (Share subscription rights)

Name of company

The Company

The Company

Resolution dateJune 26, 2013

June 26, 2014

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

8

6

Corporate officers (except persons concurrently serving as a director)

2020Type and number of shares to be issued upon exercise of the share subscription rights

Common stock
44,000 shares

Common stock
42,000 shares

Grant dateJuly 11, 2013

July 11, 2014

Conditions for being vested

None

None

Required service period

None

None

Exercise period (Note)

July 12,2013
to July 11, 2043

July 12, 2014
to July 11, 2044

(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, 2015:
Stock option activity

2013 Stock option
2014 Stock option(Share subscription rights) (Share subscription rights)

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

FY2013

FY2014

Outstanding at March 31, 2014

–

–

Bonds

37%

37%

Granted

–42,000 shares

Stocks21

22

Forfeited––

Short-term funds

5

7

Vested–42,000 sharesLife insurance general accounts

21

22

Outstanding at March 31, 2015

–

–

Other

16

12

Total

100%

100%

(Note) The plan assets included the retirement benefit trust for the corporate pension plans, which comprised 22% and
18% of the total at March 31, 2014 and 2015, respectively, as well as the retirement benefit trust for the lumpsum payment plans, which comprised 11% of the total both at March 31, 2014 and 2015.

Share subscription rights which have already been vested(Number of shares):44,000 shares–

Vested–42,000 shares

Exercised

6,000 shares–

Forfeited––

38,000 shares

42,000 shares

Exercise price (Yen)¥1¥1

Weighted average exercise price (Yen)

¥ 792

–

Fair value per stock at the grant date (Yen)

¥ 579

¥ 695

Outstanding at March 31, 2014

Outstanding at March 31, 2015

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.

Financial Report

Retirement benefit expenses

1) Stock option expenses were included in “Selling, general and administrative expenses” for the years ended March 31,
2014 and 2015 were ¥25 million and ¥29 million, respectively.

8. The assumptions used in accounting for the above plans are as follows:
FY2013

FY2014

Discount rate

1.2%*

1.2%*

Expected long-term rate of return on plan assets (principally)

2.5%*

2.5%*

* The weighted average rate is presented.
3) Defined contribution plans
The amount contributed to the defined contribution plan by the Company for the years ended March 31, 2014 and2015 was ¥98 million and ¥106 million, respectively.

88

SANKI REPORT 2015

SANKI REPORT 201589

3) Fair value at the grant date for stock options which were issued during the year ended March 31, 2015 was estimatedusing the Black-Scholes option pricing model with the following assumptions.
2014 Stock option(Share subscription rights)
Expected volatility (Note 1)

28.372%

Expected holding period (Note 2)

3.1 years

Expected dividend (Note 3)
Risk-free rate (Note 4)¥ 15 per share
0.077%FY2013

FY2014

Statutory tax rate

38.0 %

35.6 %

Items permanently not deductible for tax purposes

4.6

3.8

Items permanently not taxable

(3.5)

(6.6)

3.0

2.8

Valuation allowance(1.3)(12.2)

Effect of changes in effective statutory tax rate

4.2

2.0

Equity in losses of affiliates

1.3

3.1

(Note2) 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 the rights
become exercisable.

Research and development tax credit

(1.3)

(1.9)

Other

(0.9)

(1.0)

Effective tax rates

44.1 %

25.6 %(Note4) Risk-free interest rate is the yield on government bonds for the period that corresponds to the remaining life of
the option.
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 .

1) The significant components of deferred tax assets and liabilities at March 31, 2014 and 2015 were as follows:(Millions of yen)
FY2013

FY2014

1. Deferred tax assets
¥ 431

¥ 178

Provision for bonuses

819

722

Accrued business taxes

50

85

2,355

2,013

151

149

Impairment loss
Provision for warranty costs

202

430

4,074

1,545

Provision for directors’ retirement benefits

85

45

Loss on devaluation of investment securities

621

468

Loss on devaluation of utility rights

165

141

1,027

1,241

Provision for loss on construction contracts
Liability for retirement benefits

Other
Subtotal
Valuation allowance for deferred tax assets

9,986

7,023

(3,312)(2,517)

Total deferred tax assets

6,673

4,506

2. Deferred tax liabilities
(832)

(739)

Gain on valuation of investment securities(1,470)(1,332)

Unrealized gains on available-for-sale securities(4,729)(7,055)

Deferred capital gains for tax purposes

(135)

(73)

Total deferred tax liabilities(7,167)(9,201)

Net deferred tax liabilities¥ (494)¥ (4,695)

Other

SANKI REPORT 20153) Due to the promulgation of the “Act for Partial Amendment of the Income Tax Act, etc.” and the “Act for Partial
Amendment of the Local Tax Act, etc.” on March 31, 2015, the statutory tax rate used for calculating deferred tax
assets and liabilities has been changed from 35.6% for the prior fiscal year to 33.1% and 32.3% for the temporary
differences expected to be realized or settled in the fiscal year beginning on April 1, 2015, and for those expected tobe realized or settled in the fiscal year beginning on or after April 1, 2016, respectively.
These tax rate changes resulted in a decrease of ¥550 million in deferred tax liabilities (after deducting deferred
tax assets), an increase of ¥67 million in income taxes-deferred, an increase of ¥729 million in unrealized gains onavailable-for-sale securities and a decrease of ¥111 million in remeasurements of defined benefit plans.

Investment and Rental Properties

Tax-effect Accounting

Allowance for doubtful accounts

Financial Report

Inhabitants' per capita taxes(Note1) The volatility of the share price is estimated based on the market prices of the Company’s stock from June 5,2011 to July 11, 2014.

(Note3) The expected dividend is based on the dividends paid for the year ended March 31, 2014.

902) The reconciliations of the significant difference between the statutory tax rates and the effective tax rates reflected in
the consolidated statement of income and comprehensive income for the years ended March 31, 2014 and 2015 arepresented as follows:

The Company owns commercial facilities and housing for rent in Kanagawa Prefecture and other areas. Profit from
renting those real estate properties was ¥235 million and ¥230 million for the years ended March 31, 2014 and 2015,
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 sheets and corresponding fair value of those rental real estate properties forthe years ended March 31, 2014 and 2015 were as follows:(Millions of yen)
FY2013

FY2014¥ 3,521¥ 3,559

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

37

308

3,559

3,868

¥ 13,188¥ 13,518

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 ¥280 million, and decrease in the carrying value mainly due to depreciation of ¥234 million, forthe year ended March 31, 2014. Increase in the carrying value included in the net change during the year was mainly
due to acquisition of rental real estate 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 anddepreciation of ¥250 million, for the year ended March 31, 2015.
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.

SANKI REPORT 201591

Segment Information[For the year ended March 31, 2015](Segment Information)(Millions of yen)
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.
The methods for calculating the retirement benefit obligation and service cost in the reportable segments have beenrevised in the same way as stated in “Accounting Changes” effective from April 1, 2014.
The effect of this change on segment profit was immaterial.

Facilities
construction

Machinery Environmental
systems
systems

Real estate

Total

Other
(Note 1)

Total

Adjustments(Note 2)

Consolidated(Note 3)

¥ 1,285¥ 179,464¥ 124¥ 179,588¥9¥ 170,598

Sales :
Sales tothird parties
Inter-segment sales
and transfers¥ 150,838¥ 9,953¥ 17,387

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)

Financial Report

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.

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.

3. Sales, profits or losses and other items by reportable segment(Note 3)
Segment profit was adjusted to be equal to ordinary income in the consolidated financial statements.

[For the year ended March 31, 2014](Millions of yen)

(Other Information)

Reportable segments
Facilities
construction

Machinery Environmental
systems
systems

Real estate

Total

Other
(Note 1)

Total

Adjustments(Note 2)

Consolidated(Note 3)

Sales :
Sales tothird parties
Inter-segment sales
and transfers¥ 143,361¥ 9,846¥ 17,067¥ 1,077¥ 171,352¥ 132¥ 171,484¥ 11¥ 171,496

336

0

101

–

438

475

914

(914)

–

¥ 143,697¥ 9,846¥ 17,169¥ 1,077¥ 171,791¥ 607¥ 172,398¥ (902)¥ 171,496¥ 3,260¥ (287)¥ (23)¥ 147¥ 3,096¥ 63¥ 3,159¥ (13)¥ 3,146

Depreciation

¥ 347

¥ 60

¥ 76

¥ 235

¥ 719

¥0

¥ 719

¥ 21

¥ 740

Interest income

16

0

5

–

22

0

22

23

45

Interest expenses

48

0

5

–

54

–

54

41

96

Equity in earnings(losses) of affiliates

–

–

1

–

1

–

1

(108)

(107)

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.
Business segment of Shin-yu Services Co., Ltd., which has been newly consolidated since the fiscal year ended March
31, 2014, was included in “Other”.

[For the years ended March 31, 2014 and 2015]
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 2)Adjustments for segment profit or loss of ¥13 million for the year ended March 31, 2014 included corporate generallosses of ¥224 million which were not allocable to the reportable segments such as foreign exchange losses and reversalof interest expenses of ¥211 million which had been allocated to each of the reportable segments for administrative
purpose.
(Note 3)
Segment profit was adjusted to be equal to ordinary income in the consolidated financial statements.

92

SANKI REPORT 2015

SANKI REPORT 201593

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, 2014]
Environmental
systems

Real estate

Total

Adjustments(Note)

Consolidated

¥–

¥–

¥–

¥–

¥–

¥ 143

¥ 143

Impairment loss

¥–

¥–

¥–

Real estate

Other
¥–

Adjustments(Note)¥–¥ 189

Consolidated¥ 189(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.
(Information about amortization and balance of goodwill by reportable segment)[For the years ended March 31, 2014 and 2015]
Not applicable(Information about gain on negative goodwill by reportable segment)[For the years ended March 31, 2014 and 2015]
Not applicable

94

SANKI REPORT 2015

¥ 38.30¥ 26.45¥ 38.26

Amount not attributable to shareholders of common stock

Total
¥–

¥ 26.46

Diluted net income per share

Net income(Millions of yen)
Environmental
systems

Net income per share

FY2013

FY2014¥ 1,763¥ 2,461––¥ 1,763¥ 2,461

66,637 thousand shares

64,275 thousand shares––

31 thousand shares(31 thousand shares)

69 thousand shares(69 thousand shares)––

Basic:[For the year ended March 31, 2015]
Machinerysystems¥ 1,334.65(Millions of yen)

(Note)
Adjustments of ¥143 million were impairment loss on welfare facilities to be sold.

Facilities construction

FY2014¥ 1,142.74

Financial Report

Impairment loss

Machinerysystems

FY2013
Net assets per share

Basis for the calculation of net income per share and diluted net income per share is summarized as follows:(Millions of yen)

Facilities
construction

Per Share Data

Net income attributable to common stock
Average number of shares of common stock outstanding
Diluted:Adjustments to net income
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 net income
per share due to non-dilutive effect

As stated in “Accounting Changes” of “Notes to Consolidated Financial Statements”, the Company has applied“Accounting Standard for Retirement Benefits” and has followed the transitional treatment provided in Paragraph 37 of
the standard for application thereof.
As a result of this change, net assets per share increased by ¥47.57 for the current fiscal year.
The effect of this change on net income and diluted net income per share for the year ended march 31, 2015 wasimmaterial.

SANKI REPORT 201595

Corporate Information and Share Information
Corporate information (as of March 31, 2015)
Company nameSanki Engineering Co., Ltd.

Date of establishment

April 22, 1925

Stated capital

8,105.18 million yen

Representative

Tsutomu Hasegawa, President (from April 1, 2015)

Principal lines of business

Facilities construction, plant and machinery systems, real estate

Number of employees

Consolidated: 2,282, Non-consolidated: 1,908

Offices

Branches: 3, Branch offices: 15, Laboratory: 1

Head office8-1, Akashicho, Chuo-ku, Tokyo

Share information (as of March 31, 2015)
Fiscal year

April 1 to March 31 of the following year

• Ownership statistics

Annual general meetingof shareholders

Late June of every year

Trading unit

100 shares (changed to 100 shares from

Individuals and other: 3,057
11,800 thousand shares(17.70%)Treasury stock: 1
3,119 thousand shares(4.68%)

1,000 shares on September 1, 2014)
Number of shares authorized

192,945,000

Number of shares issued

66,661,156

Number of shareholders

3,375Transfer agent and special
account management institution Sumitomo Mitsui Trust Bank, Limited
1-4-1, Marunouchi, Chiyoda-ku, Tokyo
Stock exchange listing

Tokyo Stock Exchange

Securities code

1961

Financial institutions: 36
29,597 thousand shares(44.40%)Foreign corporations
and other: 125
16,621 thousand shares(24.93%)
Other corporations: 133
5,183 thousand shares(7.78%)

Securities companies: 23341 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

Sanki Kyoueikai

2,775

4.37

Japan Trustee Services Bank, Ltd. (Trust account)

2,525

3.97

The Master Trust Bank of Japan, Ltd. (Trust account) State Street Bank and Trust Company

2,261

3.56

State Street Bank and Trust Company 505223

1,801

2.83

CBNY DFA International Cap Value Portfolio

1,536

2.42

JP Morgan Chase Bank 385093

1,392

2.19

Northern Trust Co. (AVFC) Re. U.S. Tax Exempted Pension Funds Security Lending

1,298

2.04

Name of shareholder

Although the Company holds 3,119 thousand shares of treasury stock, it is excluded from the major shareholders listed above.
Shareholding ratio is calculated excluding treasury stock.

96

SANKI REPORT 2015

SANKI REPORT 2015

97

List of Business Locations and Introduction to 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, wewill strive as a group to contribute to the realization of a sustainable society.
(As of June 30, 2015)

Domestic business locations

Representative offices and Group companies overseas● Representative officeGroup company

Hokkaido branch office

Hokuriku branch office
Toyota branch office
Tohoku branch office

Chubu branch
Kyoto branch office

Sanki Construction Engineering(Shanghai) Co., Ltd.

Salt Lake City Office

Facility design, construction,
maintenance and consulting

Kanto branch office

AEROSTRIP
Corporation

Ibaraki branch office

Chugoku branch office
Kyushu branch office

Manufacture and sale ofaeration systems

Chiba branch office
Head office
Tokyo branch
Yokohama branch office
Sanki Shonan Training Center
Yamato Engineering Center/
Technical Research & Development InstituteShizuoka branch office
Mikawa branch office
Shikoku branch officeKansai 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

98

SANKI REPORT 2015

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

Austria Office

Bangkok Office

AQUACONSULT
Anlagenbau GmbH

THAI SANKI ENGINEERING &CONSTRUCTION CO., LTD.

Manufacture and sale of aeration systems

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 generalwaste and supply of heat

Sanki Construction Engineering (Shanghai) Co., Ltd.
Established
July 2005
Capital12.4 million US dollars
Business areas
Facility design, construction, maintenance and consulting
AEROSTRIP Corporation
Established
September 2006
Capital100 US dollars
Business areas
Manufacturing and 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 operationof wastewater treatment facilities and emergency
generators at the Okubo Water Purification Plant,
Saitama Prefecture
Period of business 3 years and 4 months for design and construction; 20
years for operation, maintenance and management

SANKI REPORT 201599