2020 Integrated Report
Year ended March 31, 2020

Contents

TOYO’s MVV

Mission, Vision, Values

Tool System Diagram

02 Our Path to Becoming a Global Contractor
17

04 TOYO’s Strengths

October 2019 Vol.

Global Leading Engineering
Partner

06 SDGs: Materiality and Our Commitment
08 Financial and Non-Financial Highlights
10 President’s Message
14	Medium- to long-term strategy

Integrated
ReportCorporate
Brochure

Newsletter
Recruitment“TOYO TIMES” “Intuition”

Integrity, Creativity, Diversity,
Learning, TeamMoving forward with the Blue and Green double spiral strategy

16 Special Feature 1 Challenge for CHANGE
20 Special Feature 2 Ambitious Explorers in TOYO
26 Plant Solution Business Unit Strategy
28 Environment and Infrastructure Business Unit Strategy

DigestOverview

30 Reforming Our Human Capital System
32 Strengthening Project Risk Management

Specific data

MissionVisionValuesEngineering for
Sustainable Growth of
the Global Community

Engineering for Sustainable Growth of the
Global Community

34 Corporate Governance
37 Risk Management Initiatives
38 Directors and Audit & Supervisory Board Members
40 Safety, Quality, Environment
44 Contributing to the Community, Society, and the Environment
46 Ten-Year Financial and Non-Financial Highlights• Securities Report• Financial Statements• Report for Shareholders• Financial Information• Corporate Governance Report

Websitehttps://www.toyo-eng.com/jp/en/

48 Financial Section Consolidated Financial Statements
82 Corporate Information
83 Stock Information

Our future as an engineering company
As human culture continues to develop, the world we live in is faced with an extensive range ofissues at the global level, including energy problems, environmental problems, climate change
problems, political problems, economic problems, and disparity problems.
Ever since TOYO ENGINEERING was founded, our business has been the development of the global
economy as well as industrial infrastructure, and we are once again seeing that there is a major

Purpose of creating this report
To achieve a deep understanding of the philosophy and activities of the Toyo Engineering Group (TOYO) among all of our stakeholders, we have publishedthis Integrated Report. It provides both our financial information (such as our management policies and financial results) and non-financial information (suchas TOYO’s business environment and its connections to society). Please see our Securities Report for detailed financial information about TOYO.
Caution Concerning Forward-Looking Statements
This integrated report includes certain “forward-looking statements.” These statements are based on management’s current expectations and are subject
to uncertainty and changes in circumstances. Actual results may differ due to changes in economic, business, competitive, technological, regulatory, andother factors.

turning point coming in terms of the role human society demands of us.
To contribute to the sustainability of the world and society, we have declared “Engineering for
Sustainable Growth of the Global Community” as mission, and the business fields in which we cancontribute are limitless.
Based on our slogan—“Your Success, Our Pride.”—we will continue to evolve for the sake of our
future as an engineering company.
TOYO ENGINEERING CORPORATION

Integrated Report 202001

Our Path to Becoming a Global Contractor

Our Path to Becoming a Global Contractor

the 1960s

the 1970s to the 1980s

the 1990s

the 2000s• Received our first overseas order, anIndia fertilizer plant, two years after
establishment in 1961.

• Learned about various cutting-edge technologies to enhance our technical capabilities.

• Promoted the utilization of overseas
group companies.

• Cooperated with a licensor to establish a foundation for our technicalcapabilities.

• Listed our stock in 1980.

•
Diversified our portfolio to include
power plant, pharmaceuticals, andenvironmental fields due to more intense competition.
•Applied information technology tothe plant enhancement business andindustrial system fields.

• Unified the Group’s MVV and logo to enhance our solidarity and aim to establish allgroup companies as profit centers.

Expanding Overseas in
Search of Markets

Enhancing Our Technical Capabilities and Expanding
Our Business• Expanded our business through a string of orders for fertilizer plants and ethylene
plants both in Japan and overseas.
• Expanded our overseas group companies to build a foundation for our global
operation.

Diversifying Our
Portfolio

Establishing a Global
Toyo structure• Started growing again due in part tothe high price of crude oil.

the 2010s

Switching from Our
Expansion Course
Enhanced risk management
and CHANGE!
• Enhancing our risk management andtaking on the challenge to our CHANGE!
Initiative to cope with the shale revolution, energy transformation, larger andmore complicated plants, and the rise of
emerging-country contractors by.

Fertilizer
India: Fertilizer

Indonesia: Fertilizer

Trinidad and Tobago: Methanol

China: Ammonia

Venezuela: Fertilizer

Nigeria: Fertilizer

Japan: Ethylene

Iran: Aromatics

Thailand: Ethylene

Korea: Hydrogen

Saudi Arabia: EOEG

Indonesia: Polyethylene

Japan: Naphtha Reforming

Germany: Residue Upgrading

Turkey: EOR

Qatar: GTL

Brazil: FPSO

Brunei: Gas-fired Power Plant

Indonesia: Coal-fired Power Plant

Thailand: Gas-fired Power Plant

Japan: Photovoltaic Power Plant

Japan: Pharmaceuticals

Japan: Drug Substances

Japan: Drug Substances

Japan: Water Treatment Facility

Japan: PCB Detox Treatment

Petrochemicals

Oil & Gas

Infrastructure

More than

10

70

Own
Technologies

Pharmaceuticals

Product
Lines

Environment• EOEG: Ethylene Oxide/Ethylene Glycol• EOR: Enhanced Oil Recovery• FPSO: Floating Production Storage and Offloading

EstablishedGroup
Companies

1972

1976

Toyo-Japan

Toyo-Europe

Toyo-India

TOYO ENGINEERING CORPORATION

Integrated Report 2020

• PCB Detox Treatment: Polychlorinated Biphenyl

1961

SocialTrends02• GTL: Gas to Liquids

1972

Restoration of diplomatic relations between
Japan and China

1973

Shift to a floating exchange
rate system

1986
Toyo-Malaysia
Toyo-USA

1980-1988

Iran-Iraq War

Japan:

®

2010
1987

1998

2004

Toyo-Korea, TPS

Toyo-Brazil

Toyo-China

Toyo-Canada

2011
IKPT

1991

Dissolution of the Soviet Union

2000

IT bubble

2008

Global financial
crisis2015

2018

Crude oil pricecrash

FourthIndustrial
Revolution

TOYO ENGINEERING CORPORATION

Integrated Report 202003

TOYO’s Strengths

TOYO’s Strengths

Group Capabilities

Diverse Portfolio

TOYO has ten EPC* group companies around the world as well as one procurement company, and we do businesson a global basis. The abilities of our group companies—which handle engineering rooted in the community—are
improving every year, and these group companies currently account for over 50% of TOYO’s consolidated net sales.
In particular, Toyo-India and the rest of our Asian EPC group companies handle specialty products, and each ofthem has the ability to execute projects at the scale of several billions of yen on their own. In addition, in the caseof large, complex projects, we use Toyo-Japan as the central hub and decide formation flexibly by taking advantage of the characteristics of our group companies.

As a result of expanding our portfolio in line with
the needs of society and the times, TOYO is now
engaged in a wide variety of businesses.

*Engineering, Procurement, Construction

Engineering andHigh-tech Capabilities
Based on a solid relationship with the ammonia licensor KBR, TOYO has exploited its strength as aurea license holder to achieve a track record of over
100 fertilizer plants. In addition, through technicalcooperation with Lummus—which boasts the industry’s leading share of the ethylene market—wehave constructed more than 40 plants.

FY2019 Net Sales Results
FY2019Net Sales

Other than Japan 70%

Japan 30%

219

billion yen

Milan, Italy• Number of employees: around 1,900• Most recent major collaborative projects:
fertilizer (India, Nigeria), ethylene (Malaysia, Russia)• Most recent major own projects:
LNG regasification facilities (India)

Pharmaceuticals,
Environment, andIndustrial Facilities• Ethylene
4 projects• Polyethylene, etc.
2 projects

77.2 billion yen• European productprocurement company• Number of employees: around 380• Most recent major own projects:
FPSO topside project (Brazil)• Fertilizers, etc.
2 projects• Number of employees: around 900• Most recent major collaborative
projects: ethylene (Malaysia),
polyethylene, acrylic acid production
facility, Butene-1 MTBE (Indonesia)

16%

3%

Towards
Change

KBR

35%
31%

Toyo-Canada
Calgary, Canada

36%

219

Ammonia
licensebillion yen
OtherToyo-Korea

21%

Seoul, Korea

Toyo-Japan
Toyo-Malaysia

Company A

TOYO

3%

Houston, USA• Number of employees:
around 290• Most recent major own projects:
foreign-affiliated company
chemical project

Jakarta, Indonesia

Urea
license67.7 billion yen

Shanghai, China

IKPT

34%

50%

Toyo-USA

Toyo-China

Company B

Chemicals andfertilizers

São Paulo, Brazil

Toyo-Europe

Mumbai, India

Petrochemicals

6.7 billion yen
5.8 billion yen

TSPI
Toyo-India

Other

Global License Shares• Number of employees: around 350• Most recent major collaborative projects:
polyethylene (Indonesia, Russia)• Most recent major own projects:
1,3-Butadiene, 1-Butene (Thailand)

Chiba, Japan

Kuala Lumpur, Malaysia

TPS• Number of employees: around 210• Most recent major collaborative
projects: ethylene (Malaysia)• Most recent major own projects:
environmental-protection
facility (Malaysia)

Chiba, Japan• Number of employees: around 250• Most recent major collaborative projects:
naphtha cracking furnace expansion (Japan)• Most recent major own projects:
propylene rectification facility (Japan)

53%

7%

TOYO
(KBR technology)

Company E

11%9%Power Plant,
Transportation Systems, etc.

45.1 billion yen• Biomass power plant
6 projects• Large-scale photovoltaic power plant
5 projects• Gas power plant
1 project• Mass Rapid Transit (MRT)
1 project

Oil & Gas

16.5 billion yen

LummusCompany D

32%

16%

EthylenelicenseCompany C

28%

TOYO
(Lummus technology)

14%

2018

2019

•
Established the EPC Integration Division to enhance our EPC consistency andachieve overall EPC optimization.

• Established the DXoT* Planning & Promotion Center to become a company that will continue to change its corporate activities and overall structure. We are currently pursuing bold corporate change, including our group companies.

• Established the TOYO Future Architect Department to achieve awareness and communication reforms as well as productivity improvement.

• Established the Next-G Technology & Application Division to develop new technology. This division is driving theGroup’s technological development.
*Digital Transformation of TOYO

04

TOYO ENGINEERING CORPORATION

Integrated Report 2020

TOYO ENGINEERING CORPORATION

Integrated Report 202005

SDGs: Materiality and Our Commitment

SDGs: Materiality and Our Commitment

Engineering for Sustainable

MissionMateriality andAim to realize anenvironmentally-friendly society

Establish an organization withintegrity and discipline

SocialGovernance

Risks

Opportunities

Risks

Opportunities

Risks

Opportunities

Risks

Opportunities

Any delay in developing technologies that achieve low
environmental impact and a recycling-oriented society could
result in missed business opportunities or a decrease in corporate value.

Innovations in environmentally friendly technologies related to the prevention of global
warming and waste management could lead to new business opportunities.

Increased regionalism is resulting in more limited market
access, and the lack of technological innovation is causing
low-price competition.

Harmony with the community would enable us to secure
outstanding local human capital and more smoothly executelocal business.

Taking suitable action could increase technological innovation
and business creation opportunities, help us secure outstanding human capital, improvelabor productivity, and increase
motivation.

Hindering compliance could result in business continuity risks.

Through a solid governancesystem, we could build a stable, strong business-execution foundation based onhighly transparent, prompt
decision-making.

Climate change is resulting
in natural disasters becoming more frequent and severe,
which is hindering the execution of plant EPC business.

Due to increasing needs for a
low-carbon/decarbonized society, there are more business opportunities related to renewableenergy and resource recycling.

There is little demand to construct new plants due to political instability and insufficient
funds resulting from weak industrial infrastructure in emerging countries.

Plant construction could promote job creation and the transfer of technology, thus creating
new business opportunities.

If we do not take suitable action, TOYO’s technical capabilities and competitiveness will
decrease, leading to the outflow of outstanding humancapital from the company, lost
business opportunities, decreased labor productivity, anddecreased motivation.
Occupational accidents could result in a loss of trust from clientsand business continuity risks.

Hindering corporate governance could result in major
loss risks and business continuity risks.

Our Commitment

Our Commitment

Our Commitment

Our Commitment

Pursuing low-environmental-impact plants
By promoting energy saving and the use of renewable energy,
we are contributing to reducing the environmental impact of industrial fields.

Contributing to the development of industrial
infrastructure
We are utilizing TOYO’s global network to provide plants
equipped with state-of-the-art technology, thereby contributing to the development of industrial infrastructure in countries
around the world.

Training and developing human resources
We are striving to train and develop the abilities of diverse human capital who can contribute to the achievement of a sustainable society by providing engineering at the global level.

Compliance
By fleshing out our education and training, internal reporting
system, etc., we are implementing compliance throughout the
TOYO Group.

Contributing to the achievement of a recycling-oriented
society
To reduce the environmental impact by reusing waste, we arepromoting initiatives aimed at the development and social implementation of the relevant technologies.
Waste control and treatment
Through our overall business activities—which include plant construction—we are striving to minimize waste discharge and toachieve suitable treatment and reuse.
​
Created Value
Reducing the emission of greenhouse gases
Preventing environmental pollution

06

Our Commitment
People of diverse backgrounds
engage in active, meaningful work

Enrich people’s lives

Environment

Growth of the Global Community

TOYO ENGINEERING CORPORATION

Integrated Report 2020

Contributing to the resolution of food problems
By constructing fertilizer plants, we are contributing to improved
agricultural productivity in countries around the world.
Transferring technology through EPC implementation
We are creating jobs and transferring technology in various regions at each stage of the plant construction process.
Created Value ontributing to economic and industrial development inCemerging countries
Contributing to improved agricultural productivity
Creating jobs and transferring technology at plant construction sites and in various economic zones

Promoting inclusion
We are doing everything in our power to respect diverse people andpersonalities as well as the cultures and customs of various countries and regions while striving to eliminate discriminatory practices.
Improving the work-life balance
We are striving to build a workplace environment that provides
job satisfaction and aims at a balance between the work and private lives of employees.
Promoting health management and improving
occupational safety and healthIn addition to promoting the health management of our employees, we strive to maximize safety and health during our businessactivities, including plant construction.

Corporate governance
We are working on building and running suitable systems basedon Japan’s Corporate Governance Code while comprehensively
achieving effective risk management.
Created Value
Securing a foundation for business continuity

Created Value reating human capital that contributes to the achieveCment of a sustainable society
Providing a workplace that offers job satisfaction

TOYO ENGINEERING CORPORATION

Integrated Report 202007

Financial and Non-Financial Highlights

Financial and Non-Financial Highlights
Please go to the Ten-Year Financial and Non-Financial Highlights on P. 46 for more information.

Financial Highlights
New Orders, Net Sales, and Operating Income (Consolidated)

Total Assets, Net Assets, and Equity Ratio (Consolidated)(¥ Billion)(¥ Billion)

500

50

400

40

300

30

200

20

100

10

0

0

-100

-10

-200

-20

-300

-30

-400

-40

-500
(FY)

New orders(left scale)Net sales(left scale)Operating income(right scale)

2011

2012

2013

2014

2015

2016

2017

2018

(%)

400

40

300

30

200

20

100

10

0

-50
2010

(¥ Billion)

2019

0

(FY)

Up until fiscal 2011—due in part to active investment in crude oil and gas fields—there was an ongoing seller’s market, and we were able toconsistently increase our revenue. In fiscal 2012, we announced our medium-term management plan, which was aimed at expanding our business scale and achieving further improvements at the Group operations level. After that—as is shown by the changes in the graph of new orders—there was a steady increase in orders received, and, in fiscal 2014, we reported orders received in relation to Malaysia ethylene, Setouchi
large-scale photovoltaic power plant, and the Thailand 12 SPP project, all of which resulted in a record-high level of new orders amounting to
470.3 billion yen. Similarly, in fiscal 2015, we received orders for mega projects early on, including US ethylene and India fertilizer. However,
due to our order backlog suddenly piling up in a short period of time, there were various types of strain on our EPC execution system, which
led to cost increases for various projects and ultimately put pressure on our business performance.
In fiscal 2015, we started reforming our management structure and formulated a Revival Plan aimed at rebuilding our business by strengthening our pre-order risk management, reducing our SG&A expenses, strengthening our project risk management, and improving our communication. Although these measures were successful—which led to an apparent V-shaped recovery in our business performance in fiscal
2015—during the third quarter of fiscal 2016, there was a significant cost increase in relation to our US ethylene project, which had a lasting
effect and resulted in significant operating losses for the three straight years leading up to fiscal 2018. To restore our heavily damaged financial base, in March of 2019, we appointed Integral Corporation as an underwriter to handle the third-party allocation of preferred shares andachieve a capital increase of 15 billion yen, and we are using the funds gained as a result as capital for both DX investment and the promotionof competitiveness strengthening measures focused on R&D. Although the significant decrease in the price of crude oil in fiscal 2015 resulted
in a slump in orders received in fiscal 2016—which cast a shadow in the form of a subsequent downward trend in net sales—our comprehensive implementation of risk management for projects ordered starting in fiscal 2015 is gradually resulting in improvements in our income andexpenditure. At the end of fiscal 2019, the completion and delivery of the results of the US ethylene project, which was a subject of concern,
caused us to go into the black for the first time in four years. For now, we are steering our company in the direction of our new medium- tolong-term growth strategy, which calls for drastic changes to our business model, for which the business income and expenditure fluctuate alot due to the effects of the external environment.

Non-Financial Highlights

2010

2011

2012

Total assets (left scale)

2013

2014

2015

Net assets (left scale)

2016

2017

2018

2019

Equity ratio (right scale)

In order to achieve stable revenue without focusing too much on the scale of our sales, we arethinking of around 300 billion yen as the appropriate level of new orders per year, and—given
the market environment—our goal is to achievebalanced profitability in the plant and infrastructure business fields. In terms of our infrastructurebusiness, because we started taking advantageof domestic renewable energy demand early on,
the percentage of our contract backlog accounted for by large-scale photovoltaic power plant andbiomass-fired power plant projects is on an increasing trend. In particular, after we received our
first order for the biomass-fired power plant project in Kamisu, Ibaraki Prefecture in fiscal 2017,
we received a total of seven project orders up
through September of 2020. We made strong
partnership with a combination of a highly efficient biomass boiler made by Andritz AG (Austria)
and a high-performance steam turbine made bySiemens AG (Germany) as our best formation,and expect orders received in this field to further
increase this year or later as well.

Backlog of Contracts and Renewable-Energy Contract
Backlog Ratio (Consolidated)(¥ Billion)

(%)

1,000

40

750

30

500

20

250

10

0
(FY)

0
2010

2011

2012

2013

Backlog of contracts (left scale)

2014

2015

2016

2017

2018

2019

Renewable-energy contract backlog ratio (right scale)

Number of Foreign National Employees
and Manager Ratio of Foreign National
Employees*3 (Non-Consolidated)

Number of Female Employees
and Manager Ratio of Female
Employees*3 (Non-Consolidated)

Total Recordable Incident Rate (TRIR) (Consolidated)

Number of Employees*3(Non-Consolidated)(Rate)(Rate)(People)(People)(%)(People)

(%)

0.20

2.0

1,200

60

45

200

16

0.15

1.5

40

30

150

12

0.10

1.0

100

8

0.05

0.5

50

4

Lost-Time Incident Rate (LTIR)*1(Consolidated)

*2

1,000
800
600
400

0
(Year) 2010 2011 2012 2013 2014 2015 2016 2017 2018 20190(Year) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

In aiming for zero occupational accidents, TOYO continues to step up its efforts to improve safety. For the last ten years, our lost-time incident rate (LTIR) and total recordable incident rate (TRIR)—two key occupational safety management indicators—have been among the lowest
in our industry. In addition, regarding the Thailand power plant project completed in July of 2019, we reached over 36 million hours without accidents or disasters.
*1. Lost-Time Incident Rate (LTIR) = Number of the Deceased and the Injured and Absent from Work x 1,000,000 / Total Number of Worked Hours*2. Total Recordable Incident Rate (TRIR) = Total Number of Those Who Suffered Recordable Incidents x 1,000,000 / Total Number of Worked Hours

08

After we raised 15 billion yen through athird-party-allocation capital increase in Marchof 2019, our equity ratio reached 17.2% at
the end of fiscal 2019 due to the compression of our total assets. We consider thestrengthening of our financial base as an ongoing management issue, and we are striving to strengthen our shareholders’ equity bysteadily accumulating retained earnings.

TOYO ENGINEERING CORPORATION

Integrated Report 2020

20

15

200
0
(FY)

0
2015

2016

2017

2018

2019

0

(FY)

2015

2016

2017

2018

2019

0
(FY)

0
2015

2016

2017

2018

2019

Number of foreign national employees (left scale)

Number of female employees (left scale)Manager ratio of foreign national employees (right scale)Manager ratio of female employees (right scale)

TOYO encourages diversity in its workforce and pursues merit-based promotion irrespective of nationality or gender. In fiscal 2019, the manager ratio of foreign national employees working at the Head Office was 41.7%, and the ratio of female managers was 12.3%. In June of 2019,
we also received Eruboshi certification (two stars) as a company of proactively engaging in promotion of women’s participation in the workplace, certified by the Ministry of Health, Labour and Welfare.
*3. Excluding temporary employees

TOYO ENGINEERING CORPORATION

Integrated Report 202009

President’s Message

President’s Message

Measures against issues emerged fromthe US ethylene project
In fiscal 2019, we finally completed the US ethylene project, which had been a matter of concern, and managed
to achieve operating profit for the first time in four years.
With cost overruns that continued over several years, theproject had accumulated significant losses that threatened TOYO’s very existence. Looking back, this turned
out to be a monumental project that highlighted issues
in all areas from the pre-award process to contract conditions, project management, EPC engineering work, andmanagement and execution, challenging TOYO to make anumber of changes.
We will further describe the causes of the cost overruns
as well as countermeasures in the “Strengthening Project
Risk Management,” section later in this report, but there
were two main issues. The first is the lack of a rational risk
assessment framework for new issues, and the second is
the delay in strengthening effective EPC capabilities.
Here are some examples of measures implemented by
TOYO to address issues that have come to light throughthe US ethylene project.

Sustainability initiatives will
shape the future of TOYO

• Minimize risk upfront through a more rigorous
proposal process• Establish rules for evaluating new technologies
and implementing countermeasures• Set a rule not to take a risk of construction under
American-style Time & Materials contracts*• Carry out overall business process reforms including
selection of vendor-packaged products, engineering, manufacturing, inspection and construction• Execute measures that strengthen the Construction
Division• Strengthen both proper project management oversight and support functions*A type of contract for which the amount paid is calculated by multiplying
the set unit price by the amount of time the work takes

Haruo Nagamatsu
President and Chief Executive Officer

10

TOYO ENGINEERING CORPORATION

Integrated Report 2020

Through these measures, we managed to secure profitability for projects awarded from fiscal 2015 onward, andfeel confident that we are moving in the right direction.
Additionally, we will work on fostering a corporate cultureof daily continuous improvement to avoid repeating thesame mistakes and ensure that the knowledge and experiences gained through overcoming hardships serve as avaluable asset for TOYO’s growth.

Pioneering the future of TOYO at aturning point
Fiscal 2020 began with a global COVID-19 outbreak thattriggered lockdowns in many countries, with Japan alsodeclaring a state of emergency. Further, uncertainty is
growing in the face of a variety of changes in the external
environment, including stagnant economic activity, geopolitical instability, drastic advances in digital technology,
and extreme weather events with unprecedented devastation. In particular, shifting energy sources to prevent
global warming has become an urgent issue for all humanbeings, and even the oil majors announcing plans to drastically reduce oil and gas production, and capital markets
shifting investments toward low-carbon and decarbonization projects.
Since its founding, TOYO’s main business has been toundertake contracting services for plant construction projects. However, with the drastic changes in the businessenvironment and social structure in recent times, the engineering industry is now faced with the need to change its
business fields and structure. With this external environment in mind, last year we started exploring medium- tolong-term strategies that ensure TOYO will continue tobe needed by society in the future. Specifically, with thegrowing societal need to combat global climate change,
we engaged in deep discussions on ways to strengthen
our sustainability efforts and reaffirmed the significance of
TOYO’s mission of “Engineering for Sustainable Growthof the Global Community.” And once again, with the realization that “sustainability initiatives will shape the futureof TOYO,” we pledge to become a company ready forenvironmental change and committed to contributing
sustainability.

TOYO ENGINEERING CORPORATION

Integrated Report 202011

President’s Message

President’s Message

Medium- to long-term strategy—Strengthen conventional EPC services
and explore new business areas

Medium- to long-term market
outlook

Advanced EPC Operation powered by DXoT*

1• Plant EPC market recovery in 1 to 2 years;
electric power EPC market firm, mainly
for renewable energy• Constant risk of deterioration in TOYO
competitiveness due to the rise ofoverseas contractors and technologicalinnovation• Relying solely on demand from products, regions, and customers that
TOYO has excelled in has its limits

Further advance group operations, maximizing
quality and customer value through DXoT
Reinforce EPC
business based on
new knowledge
and business
opportunities

Blue and Green spirals
complement
each other toshape TOYOInternal environment
Self-analysis of recent years• Improved plant EPC/EP execution capability (gross margins on par with global
leaders)• More rigorous proposal process yielded some results, but challenges remain
in ability to secure orders• Diversification of profit sources (development and monetization of new technologies and products, etc.) is an issue
as profit structure is concentrated on
the EPC business

12

TOYO ENGINEERING CORPORATION

Integrated Report 2020

Invest theknowledge,
experience, andprofits gained
from EPC services

2

Sustainable Technology & Business Development
Developing technologies and new business areasthat contribute to realizing a sustainable society

Conceptual image of
profit structure• Blue : Green gross profit composition targets
Fiscal 2025:

75:25

Fiscal 2030:

50:50• The company will respond toBlue demand by flexibly mobilizing group company personnel. The number of employees
assigned to Green businesses will be doubled withoutchanging Toyo-Japan’s overall
structure.
•
Focus will be on profits instead of net sales (sales estimate: ¥300 billion)

Downturn in EPC market
due to COVID-19

13%

25%

50%

Shift human resources to
new business areas

Leverage results of “Advanced EPC Operation
powered by DXoT” during EPC market recovery

2019

2025

Conventional EPC

External environment

Reaping the rewards of the “Sustainable
Technology & Business Development”

Vision forfiscal 2025 to 2030

New business areas

Shaping a new TOYO with a double spiral strategy:
Strengthening conventional EPC services and developing new technologies and businesses.

Solidify Blue businesses while expanding investment in Green businesses to become a stable andprofitable company

Gross profit*

Based on lessons learnt from past experiences, TOYO
has thoroughly implemented risk management measures over the last few years, which have yielded someresults. On the other hand, the outlook for the external
environment is likely to remain uncertain, with the transition from the new normal to post-pandemic life, anda shift in global geopolitical power balance. Against thisbackdrop, although the market for plant investment is
temporarily stagnant, because continued investment in
the petrochemical and chemical industries, which manufacture industrial products that are integral to human
life, is essential, we expect it to recover within a year
or two. In addition, we expect the electric power EPC
market for both renewable energy and gas-fired power

plant to remain strong, supported by continued growth indemand for electric power around the world. However,there is always the risk that competition to secure orders
will intensify due to the rise of emerging engineering
contractors overseas and technological innovation, andonly continuing to rely on products, regions, and customers that TOYO has excelled in to date will not be enoughto get the company back on a stable growth trajectory.
In light of these circumstances, we established a
medium- to long-term strategy to strengthen our conventional products and regional EPC business, both in termsof orders and execution, and to diversify our profit structure by developing technologies and new business areasthat contribute to realizing a sustainable society as a newand stable source of profits. In the image below, initiatives to advance conventional EPC operations are shownin Blue and technologies and new business areas contributing to building a sustainable society are shown in

2030*Including equity-method earnings from business investments, etc.

Green. We will continue to pursue the Blue and Green“double spiral” strategy, where the two spirals intertwine,complementing the strengths of each other and enhancing synergies to shape a new TOYO.
By creating a new Green business model, TOYO will
lower the volatility resulting from the Blue business concentration, and transform into a stable and profitablecompany. We will diligently work through this strategy
to transform our profit structure with an aim to bring theBlue to Green ratio to 75:25 by fiscal 2025, and to 50:50
by fiscal 2030. Moreover, rather than chasing net sales
growth as we did in the past, our aim is to maintain consolidated sales at ¥300 billion while raising gross profit
margins to a level comparable to leading global contractors. Although a drop in earnings is unavoidable with therecent slump in the EPC market caused by the COVID19 pandemic, we will take the opportunity to focus on
strengthening our EPC execution capabilities through
DXoT, and leverage the results of these efforts when themarket recovers to quickly put the company on an earnings growth trajectory. Once the Blue Advanced EPC
Operation is established, we will be able to run our conventional businesses with fewer people, enabling us
to shift Toyo-Japan’s human resources into new areas
under the Green business and accelerate the diversification of stable profit sources. In the meantime, to achieve
profit expansion for the Green business, we will carefullyplant the seeds for Sustainable Technology & Business
Development and grow them up so that we can reap thefruits of our efforts in fiscal 2025 and beyond. Regarding
the increase in demand for Blue conventional businesses,
we will further advance our global operations to respondflexibly. As we implement our medium- to long-term strategy, we plan to establish KPIs and engage in a series of
conversations with all stakeholders to deepen their understanding of our progress.

*Digital Transformation of TOYOTOYO ENGINEERING CORPORATION

Integrated Report 202013

Medium- to long-term strategy

Medium- to long-term strategy: Moving forward with the Blue and Green double spiral strategy

Moving forward with the Blue and Green
double spiral strategy
Further advancement of group operations
Past

Present

FutureGroup company

Group company

Group company

Cooperation

Lab Scale, Investment Planning Stage, O&M• Co-Creation engineering

Driven

nd
e, a
nc
rie s
pe
e
, ex ervic
ge
ed PC sEwl
no romf
ek
t th inedaes
In v f i t s g
pr oInvolvement

Comprehensive plant lifecycle support

Group companies• Conventional EPC/EP projects driven by group companies• Lead the entire process from business development toplant acceptance

TOYO’s current main business targets and areas

Toyo-Japan• Lead the development of business strategies, new technologies,
products, and new business areas
Drive growth in new business areas

CCUS*1

Fertilizer

Oil and gas
development

Advanced EPC Operation
powered by DXoT
Further advance group operations,maximizing quality and customer value through DXoT

Increase productivity 6 times by 2024 through DX

Procurement

Construction

Miscellaneous

Quality

Delivery

Reduce quality-related

Shorten construction period bylosses by

50 %at least

2 months(from 32 months)

HERO

Oil refineryand gasseparation
plantsPower plants

Transportation
systems

Plastics

Integrated Report 2020

Water

Urban infrastructure

FS/PMC/GESA/Owner’s Engineering/FEED* etc.

• Post-EPC Services
Plant operation support using mathematical optimization and DX tools
To become a true lifecycle partner for key customers in the conventional EPC
business, we will strive to create value together with our customers by leveraging our technological problem-solving capabilities to further contribute to theirtechnological development and project planning.
*Feasibility Study/Project Management Consultant/General Engineering Service Agreement/Front End
Engineering Design

Water andsewagemaintenance

Developing technologies and new business areasthat contribute to realizing a sustainable society

Challenge to develop new business models
Business operations, subscriptions, and long tail• Development of the gas supply value chain business
Overseas development of gas operation technology throughcollaboration with partners

Business targets and areas forsustainable technologies• National policy-supported marine resource development
Development of methane hydrate, rare earth, andhydrothermal deposits, etc.

• Environmental and infrastructure-related business development
Business model based on demand creation rather than waiting for ITB*

• Business creation with new business models to TOYO
Expansion of business areas through business investment, M&A,
and services
By leveraging TOYO’s strengths, such as technology development and international project execution capabilities, we will diversify our customer base andbusiness models and develop businesses that generate stable profits.

Manpower:

TOYO ENGINEERING CORPORATION

Urbantransportation

Microbeads

Petrochemicalplants• Customer Planning Support

Sustainable Technology &Business Development

RE100

Energyefficiency
optimization

Reduce costs

14

Plants*2

Cost

50 % Construction: 15 %Equipment & Materials: 10 %DX-PLANT®

Electricitysand rviceege
led EPC sow
kn intonew ities
ack tung b pporodin
Fee inesssbu

DXoT (Digital Transformation of TOYO)Engineering

Operational
support

CO2 recycling
technology

Early testing and commercialization of new technologies through
Co-Creation with customers*1 CCUS: Carbon dioxide Capture, Utilization and Storage*2 HERO: Hybrid Energy saving Re-Optimization (Energy-saving consulting service)*Invitation to bid for plant construction projects

TOYO ENGINEERING CORPORATION

Integrated Report 202015

Special Feature 1

Challenge for CHANGE

Meet Customer Needs with Plant Operation
Support Service DX-PLANT®

Exploring New Business Areas by Deviatingfrom Conventional EPC Approaches

DX-PLANT®, a plant
operation support service

Environment and Energy
Management Development
Department: Pursuing businessin new areas!

Plant owners are constantly trying to
improve facility utilization and reduce production costs, and expectations are growing for operational reforms leveraging
digital transformation (DX) aimed at further
improving profitability. Since fiscal 2016,
TOYO started offering DX-PLANT®, a service that combines engineering knowledge
with data analytics and digital technology tomeet customer needs.
DX-PLANT® is to provide remote support services. It has a virtual plant (digitaltwin) built on the cloud based on big dataconsisting of real time plant operation data,inspection records, and maintenance history of an actual plant. Through this, TOYO
provides four types of remote support services to address customer needs: 1. E:
Engineering information management services, 2. O: Operation support services, 3.
M: Maintenance support services, and 4.
B: Business support services. Customers
can access the digital twin at anytime fromanywhere in the world to not only monitor the current status of the actual plant,
but also to simulate how to improve plantutilization as well as operation and maintenance efficiency.

From service differentiation asa urea production technology
licensor to lateral deployment
at various plants
Toyo fully leveraged its strength as a urea
production technology licensor to realize
implementation of DX-PLANT® at multiple
plants quickly. For example, in the operation support service, a model that combines

16

Special Feature 1: Challenge for CHANGE

TOYO ENGINEERING CORPORATION

Integrated Report 2020

an operation simulator (physical model) andoperation data (statistical model) is used to
calculate factors such as material balance,heat balance, and equipment performance
to monitor plant performance in real time.
Additionally, by conducting scenario studies with different operating conditions, we
can make recommendations for optimal
operation of the actual plant. This is justone example, and to resolve various issues
which our customers are facing on, we
need to have the deep expertise to reach to
the root cause of each issue, propose solutions, and also be able to coordinate withpartner companies such as equipment manufacturers. As a result of steadily increasing
the number of installations in urea plants
and refining our services, we are now in theprocess of expanding DX-PLANT® to nonurea plants being built by TOYO. We believethat we can offer similar services to owners of petrochemical plants and other plants
being built by TOYO.

To become a partner supporting
lifecycle of customer’s plant
through subscription services

Kazuya Oyama
Manager of
IoT Business Department,
Business Development Division

We can provide DX-PLANT® as a subscription service. Unlike the conventional EPC
business model, we work closely withour customers after plant delivery as apartner supporting the plant’s lifecycle tomaximize asset value. In addition, by transferring the knowledge gained through providing DX-PLANT® services back to theplant design process, we will take our customers’ operational needs into consideration and strengthen our EPC business as
an engineering contractor.

and Industry Award), as an example. While
we could propose a significant efficiency
improvement in a specific process by imple®
mentingand present a local
optimum solution, the hurdle was that thiswould not necessarily translate into a quantified energy reduction for the entire plant, andthus would not always result in the go-ahead
for investment. This is because the heat integration within process units and the different
demands of heat at individual energy levels
in utility units are complexly intertwined in aplant, and there are cases where the efficiency
improvements in a specific process do notdirectly tie into reducing the fuel used to produce utilities. Even for cases like this, HERO
can produce the global optimal solution for theentire plant by working through a mind-boggling combination of variables while taking
into account the processes and the utilities
that keep it running. This truly innovated energy-saving methodology.

At the Environment and Energy Management
Development Department, our mission is todevelop patentable, universal technologies tosecure stable profits, and to create businesses
in new business areas based on these technologies. Unlike the conventional EPC business, which focuses on new investments
by customers, our department explores new
business areas by taking a different approach.
TOYO customers and partners look for our
high-tech capabilities as an engineering company. With a focus on internally developed
technologies, we aim to efficiently produce
results in line with the energy and environmental innovation strategy, NESTI 2050, promotedby the Cabinet Office. Of course, we also look
to combine our own technologies with those ofother companies and the needs of other industries, and take an open innovation approach
when appropriate. In addition, by working on
the entire process ranging from marketing andtechnology development to business development and sales promotion, we will leverage
TOYO’s strengths to push forward with developing new business areas.

HERO: Mathematical optimization
technology brings innovation toefficiency and conservation
With a team centered around our younger
employees, we developed a program forenergy-saving consulting services to realize our mission of creating businesses innew business areas. The Hybrid Energy saving Re-Optimization (HERO) program combines mathematical optimization methods
with TOYO’s process design knowledge.
Let’s take the implementation consideration®
of, TOYO’s proprietary distillation technology which has won numerous
awards from various academic associations,most notably the Energy Conservation Grand
Prize (2018 Minister of Economy, Trade

New business model:
Energy-saving performancebased compensation

Toshihiro
Wakabayashi
General Manager of Environment
and Energy Management
Development Department,
Business Development Division

We offer a service where customers pay
TOYO a performance-based fee for a predetermined period using the operating costsavings achieved by using HERO. By making
a clear departure from the conventional EPC
service model, we aim to continuously support our customers in boosting profits andreducing environmental impact. Although
HERO can be used for new plants, it is primarily geared for the vast untapped market
of existing facilities, such as for evaluating
capacity expansion or modifications. We
began providing the service in the bottom
half of fiscal 2019 and have already started
consultations for two domestic petrochemical companies. Going forward, we plan toexpand this business both domesticallyand internationally to secure stable profits.
Moreover, we will use the HERO initiative
as a springboard to further develop technology-based businesses development.
TOYO ENGINEERING CORPORATION

Integrated Report 202017

Challenge for CHANGE

Special Feature 1

Special Feature 1: Challenge for CHANGE

Toward the Energy Transition and Circular Economy

Increasing Productivity 6 times through DXoTThe start of T-Next

DXoT Planning & Promotion Center
is taking the Lead in Digital
Transformation for the Entire
Group directly under the CEOvalues. We are committed to solving societal issues through a Co-Creation engineering
approach that leverages our strengths in boththe process development technology we cultivated over time and the EPC technology
we accumulated as a specialized engineering company.

The Next-G (Next Generation) Technology& Application Division was established in
September 2019 as a specialized organization dedicated to leading the research, implementation, and development of producttechnologies that support energy transitionand circular economy. We nicknamed the division “T-Next” so more people, both within
and outside the company, would recognize
it. “T” stands for TOYO and Technology.
With the pioneering spirit embodied in thename of the division, we are in charge ofdeveloping technologies that support an energy transition and circular economy which
will be the core of TOYO’s next-generation
products.

5 Focus areas
TOYO holds many proprietary process technologies such as urea synthesis technology
ACES21®, methanol synthesis reactor MRFZ®, the steam reformer, primarily built aroundDME (Dimethyl Ether) and synthesis gas systems. By leveraging the process development expertise gained through developing
these proprietary process technologies, wewill work to develop the technologies needed
to realize a low-carbon recycling-oriented
society. Specifically, we are focusing on thefollowing five areas:

From R&D Engineering to
Co-Creation Engineering
To support its customers’ efforts to create new products out of pilot technologies,
TOYO has provided R&D engineering services and successfully verified many pilot
technologies. However, a more comprehensive design package is needed to combine multiple pilot technologies and build
a societal value chain to realize a low-carbon recycling-oriented society. Co-Creationengineering is our new solution for implementing various technologies into society
by collaborating with partners who share our

1. Recycling Plastics to Oil or Gas
2. SAF (Sustainable Aviation Fuel)
3. CO2 Free Ammonia / Green H2
4. CO2 recycling value chain(CCU and CCS)
5. Next-generation urea process

Kenichi Tominaga
Deputy Unit Director,
Engineering and Technology Unit
General Manager, Next-G
Technology & Application Division

With Co-Creation engineering as itscore competence, T-Next will work to add
these 5 focus areas to TOYO’s profit portfolio over the medium- to long-term.

longstanding work processes and styles thathave been considered the existing conventions without doubt previously considered thenorm. To breakthrough them, we set visionary goal that is TOYO’s productivity to be
increased by 6 times.

To respond quickly and flexibly to customer
needs, promoting DXoT for EPC projects has
become increasingly urgent, and the DXoT
Center was launched in July 2019 with a
mission to become a company that continues transforming all corporate activities andstructures, including services, operations,organizations, systems, and culture, in anever-changing society and marketplace.

Leveraging TOYO’s digital twin
to work on three focus areas
We will achieve 6 times productivity by building TOYO’s digital twin with a focus on threeareas to fully leverage data to entire EPC business such as EPC business, project progress
and profitability management, and also KPI
used in management decision making.

Dramatically transforming traditional work processes with DXoT
A number of paper-based tasks remain at plant
construction sites, resulting in contractor’s
low productivities. In addition, project management experience and know-how are accumulated by experienced persons or seniorpersons and often are kept as tacit knowledge, In fact, several work processes heavily depend on individuals. To enhance TOYO’svalue proposition, we must transform theseThree focus areas
1. CC* Driven Engineering

Noriaki Seo
General Manager of DXoT Planning& Promotion Center

TOYO’s Digital Twin
Project

ClientVendorCorporate executive

Subcontractor

Decision!

Decision!

Corporate twin

Project twin

Digital twin

*Commissioning, Construction

Evolution to the Future – Phylogenetic Tree of TOYO’s Technology

Management and financial accounting

New Area

Estimate and forecast management

Founding

EPC BusinessIndustrial System

Power / Infrastructure

Expansion of Low Carbon / Recirculating Society Technology
Waste Plastic liquefaction / Gasification
SAF (Sustainable Aviation Fuel)

Decarbonization
Circulating Society

e-fuel / Bio Jet FuelElectrolysis, Hydrogen Carrier

Digitalization

CO2 Recycling

DX-PLANT®

Decentralization

Digital Plant®

Wind Power

Woody Biomass, PKF, MSW Power System

Renewable Energy Generation

Biomass

Mega-solar Power System
Coal-fired Power

GTCC Power

Solar PowerHigh Efficiency Power System

Infrastructure Development

Methane Hydrate / Rare Metal

Ocean Resource Development

Existing Area 1961

1980

Ethylene

Green Ammonia, Blue Ammonia

R&D Engineering
TEC/MTC Urea Process

Methanol

Bio Ethanol to Ethylene, CO2 to Olefin

KBR Ammonia Process

Core Process
Technology

FPSO

g-Methanol™

Lummus Ethylene Process

Petrochemicals

Ammonia

Co-Creation Engineering
ACES®

ACES21®

2000

Next Generation ACES®

2020

2025

Engineering
AdvisorSupply Chain
Optimizer

Constructability
Optimizer

Project
HealthAdvisorBottleneck
Analyzerg-Urea™

Co-Creation Engineering

Engineering

Equipment

Proposal

Vendorand materials

Contract

Design change

Transport

Sales /

ActionSales and
ProposalEngineering

Urea

Procurement

Real World

2030

Knowledge
AdvisorWith the visualization of business processes
achieved through CC Driven Engineering,
TOYO will realize proactive corporate management based on real time and accurate information. In addition to detecting and evaluating
potential risks, TOYO will also strengthen sales
activities, maximize employee capabilities, andsupport the assessment of investment in newtechnologies and new businesses.

3. Data Leverage

Infrastructure / Transportation

Natural Resource Security

MRF-Z® Methanol Reactor

Pricing
Advisor

Thermal Power

Mass Rapid Transit System

Ocean Resource Development

Talent management

Digital World

VPP / Storage Battery

Offshore Wind Power System

Construction
management

Resource management

Energy Consulting

Energy Management System (EMS)

Procurement
management

2. Proactive Corporate Management

Document management

Green Hydrogen

CO2 Capture, CO2 Recycling, CO2 EOR

HERO /Engineering
management

SFA*

Plastics Recycling

CC Driven Engineering is an EPC strategy
that places the highest priority on the productivity of construction and commissioning.
It is aimed at achieving competitive quality,
cost, and EPC period by preventing schedule delays and rework. To increase competitiveness, the strategy focuses on detaildesign that incorporates uncertainty analysis
and forecasts, using standard modules, andverifying constructability through 3D models.
Furthermore, by leveraging the digital twin
to visualize projects and competent project management to prevent potential problems, TOYO will achieve 6 times increase in
TOYO’s productivity.

WorkerOperations

Construction

supportConstruction &Commissioning

Operations
SupportTOYO will take effective actions driven by
insight derived by mathematical optimization
method and AI technology using field datacollected and accumulated on the data utilization platform.

*SFA: Sales Force Automation

18

TOYO ENGINEERING CORPORATION

Integrated Report 2020

TOYO ENGINEERING CORPORATION

Integrated Report 202019

Special Feature 2

Ambitious Explorers in TOYO

Enriching society withnew math-driven solutions

Toward contribution forenrichment of society throughmathematical optimization

The excitement of finding andcommercializing leads to
new solutions
When I was in graduate school researchingmathematical optimization, I met a senior
TOYO employee who was creating a concept for a new distillation column. He wasa key man for me to decide to join TOYO.
What inspired me was his passion thatwent into figuring out energy savings forthe commonly used unit operation technology of distillation, as well as the determination to commercialize it. Since I joined thecompany, I have been working to create
practical technology by studying the problems our customers commonly face, identifying the underlying problems, and thensearching for the phenomena and basic
technologies that lead to new solutions.
Last year, as part of NEDO’s contract
research, we demonstrated HERO to using
plant data from five domestic customers
and proposed convincing solutions that
can hardly be conceived from experiencealone. Now, we are receiving inquiries
from all over the world, and getting good
responses. While incorporating customer
feedback to enhance functionality, we arealso exploring the possibility of deploying the HERO concept laterally in various

20

TOYO ENGINEERING CORPORATION

Integrated Report 2020

Developing next-generation fuels
bio jet fuel & e-fuel to realize a low carbon society
manufacturing industries. Furthermore, weare engaged in R&D that goes beyond conventional frameworks, mainly focusing on
global challenges such as energy conservation and renewable energy.

The creator of HERO, an optimization
service for oil refineries and petrochemical plants, is Dr. Takase, a thirdyear process engineer. Since efficiency
evaluations for oil refineries and petrochemical plants involve a mind-bogglingly large number of variables, theconventional approach has been to
combine local optima at the area andequipment level. HERO, which is Dr.
Takase’s first commercialized service,uses mathematical optimization technology to take in the vast number ofvariables and produce an optimal solution for an entire plant.

Hiroshi Takase
Process Engineer
Environment and Energy
Management Development
Department
Business Development Division

Special Feature 2: Ambitious Explorers in TOYO

While studying abroad during my doctoral
program, I was surrounded by mathematical geniuses from all over the world, andalthough I could not match their mathematical abilities, I realized that simplifying things
was one of my strengths. When applying
mathematical optimization techniques tocomplex real-world problems, it is crucial
to assign degrees of priority to a number ofconditions. Engineering firms are proficientat creating systems from complex technical requirements and constraints because
they are in the business of getting engineers from different specializations to work
together to build high quality plants. By taking that strength and incorporating methods
like mathematical optimization that exceed
human knowledge, we have the potential to build on our traditional know-how toachieve even greater progress. My seniors
have deep knowledge and insight on whatis needed on site, and I would like to workthrough challenges alongside them to further polish my mathematical optimization
capabilities. This is because I firmly believethat combining plant engineering with mathematics will lead to practical applicationin new areas. Social needs are becoming
increasingly diverse, flooded with a myriad of variables, and the number of social
issues needing solutions will continue togrow. My goal is to help enrich society byaddressing some of these social issues,
working alongside experienced supervisorsand senior colleagues while applying mystrength in mathematical optimization technology to create solutions unique to TOYO
that capture the interest of our customers.

produced by synthesizing electrolytic hydrogen, which is produced from water using
renewable energy, and CO2, which is collected from a variety of emission sources.
Unlike conventional fossil fuels, e-fuel isconsidered to have no impact on total CO2
emissions as it uses collected CO2 as raw
material, and thus is attracting attention asa next-generation fuel. On the other hand,
one of the common issues with low-carbon
technologies is that they are more expensive to produce compared to fossil fuels, so
the pace of widespread is slow. In addressing these issues, I believe we can help realize low-carbon technologies by leveraging
TOYO’s expertise in Co-Creation engineering—one of our basic technologies—tocontribute to design optimization, cost
reduction, and energy conservation during
the verification and build-out phases.

To stop global warming, Europe andmany other countries have set ambitious CO2 reduction targets and areincreasingly regulating the use offossil resources such as coal and oil.
As an engineering company, TOYOis developing its business in linewith the low-carbon movement andaims to explore new business areas.

Development of bio jet fueland e-fuelFor 13 years since joining TOYO, I haveworked as a process engineer, mainly onlarge-scale urea and ethylene projects. Oneof the most unique experiences I had is thedevelopment of lithium carbonate production technology. This is where I discovered
the excitement of developing not-yet established technologies, and when the Next-G
Technology & Application Division wasestablished in 2019 with the aim of developing technologies for a low-carbon recycling-oriented society, I was transferred at
my own request. My fellow team members have expertise in a variety of technologies, and we are constantly discovering
new things and exchanging information
as we work to develop new technologies.
Regarding the development of biojet fuels,
we jointly built verification plant facilities for
integrated production of biojet fuels using
wood-based biomass in collaboration with
Mitsubishi Power, Ltd. (formerly MHPS),JERA Co., Inc., and JAXA, with production
starting in August 2020. We will continue todevelop this technology with aims to commercialize it. In addition, we are currently
working on a verification project to develop
a technology to produce e-fuel, a next-generation fuel. e-fuel is an alternative fuelRealizing a low-carbon society
with next generation fuels

Keita Kamiyama
Research Engineer
Next-G Technology &Application Division
Engineering and Technology Unit

In response to global climate change andgrowing awareness of the need to reducegreenhouse gas emissions, companies
around the world are competing fiercely todevelop new technologies. Even for fuels,
companies are actively developing next
generation fuels such as biojet fuel, e-fuel,and “green hydrogen” that uses renewable energy, and there is a strong commitment to break away from fossil fueldependence to realize a low-carbon recycling-oriented society. My current work
is on next-generation fuels, and my goal
is to deepen my knowledge and become
an expert in this field. I plan to continue
deepening my knowledge and co-creating
new value with a wide range of partners
to help realize a low-carbon society andimprove the global environment.

TOYO ENGINEERING CORPORATION

Integrated Report 202021

Ambitious Explorers in TOYOSpecial Feature 2: Ambitious Explorers in TOYO

Aiming to exceed expectations by embracing acustomer-oriented perspective as a project engineer

Challenge to reduce environmental pollution withmicroplastics and microbeads removal technology

Special Feature 2

Hence, when I have the slightest technical concern or issue, I persistently ask thedesign team for clarification. Our experienced design team always respondswith patience and sound advice. It is thiskind of reassuring preparation with ourdesign team that enables me to confidently explain TOYO’s technical proposals to customers. I feel most satisfied asa project engineer when we work throughconstraints to pitch a proposal and thecustomer approves it. Preparation is truly
the key.

Mr. Ikeda, who is a fourth-year engineer, is currently working as a projectengineer on a project where the technology to synthesize methane fromcarbon dioxide (CO2) and hydrogenplays an important role. The majordifference between this project andother oil and gas resource development projects ever done is the novelty of the technology, and the project
also holds great significance for anengineering company aiming to preserve the global environment.

Pursuing customer satisfaction

Advance preparation leads tohigh performance
To put it simply, the role of the projectengineer is to consult with the customer
on design decisions and coordinate withinternal disciplines while working undercost and schedule constraints. The majordifference between this project and otherprojects I worked on in the past is thatthe purpose of this project is the realization of new technology, and the customer
needs TOYO’s support through technical proposals. There are various technicalissues, both big and small, that need tobe addressed, and we will have many discussions regarding these issues with ourcustomer and partners such as equipment
manufacturers over the course of the project. At times, it can turn into a heated discussion. This is why I take to heart whata senior project member told me, whichis to do all the preparation you can to finda convincing solution for the customer.
“Advance preparation leads to high performance.” Since this project revolves
around developing a new technology,
the answer may not necessarily lie in
TOYO’s plant construction experience.

22

TOYO ENGINEERING CORPORATION

Integrated Report 2020

Keisuke Ikeda
Project Engineer
Solution Service Department
Solution Business Division
Plant Solution Business Unit

I learned about the plant industry because
my major was oil exploration and development, and I found the sheer scale andglobal nature of the work to be completely
irresistible. I never imagined that I would
be involved in a project to develop effective CO2 utilization technology, which iscompletely different from my specialization, upon joining TOYO. However, it isnatural for the demands of society andcustomers to change with the times, andI take it as a positive that I was assigned
to a role with the opportunity to deepen
my new technical knowledge. Moreover,
my position as a point-of-contact for customers on this project has given me confidence in what TOYO should truly careabout. And it is that customers expect
TOYO to be a partner that face plant construction seriously with aligned perspectives and values.
Of course, there are budgetary andscheduling constraints, but as an engineering partner, I want to capture the customer’s point of view, involve all project
members both within and outside of thecompany, and provide solutions that go
beyond the customer’s expectations.

Tackling environmental pollution
as an engineering company

Plastics indispensable to our lives are
shredded in the environment after weused them. The plastics that are lessthan 5 mm in size are called microplastics (MPs), and the tiny plastic particles that are used in personal careproducts and released into the natural environment are called microbeads (MBs). Including the pollution ofmarine life, there are concerns overthe negative impact of microscopic
plastic waste on the global ecosystem and the environment.

Interesting point of newtechnology development:
The challenge of building fromscratch and technical problemsolving know-how
TOYO has been developing technology toseparate and remove MPs and MBs fromrivers and oceans with the cooperation of
Chiba Institute of Technology Associate
Professor Yutaka Kameda’s laboratory,
which has provided analysis technology toquantify the separation and removal performance of MPs and MBs for practicaluse. Since my joining TOYO, I designed
plants according to an established workflow as a process engineer, but developing this technology requires a completely
different approach. The work involves
making things from scratch, including
everything from creating models for theoretical calculations through trial and error
to building equipment and conducting test
runs. We often face challenges but overcome making use of the technical problem-solving know-how that TOYO has
accumulated over the years as well as myexpertise as a process engineer. Although
it can be struggle, I enjoy the process ofestablishing new technologies.

Masaki Togo
Technical Expert
Environment and Energy
Management Development
Department
Business Development Division

Our current goal is to contribute to reducing environmental pollution by implementing the MPs & MBs removal system that
TOYO helped develop in rivers and oceans.
MPs and MBs in the natural environment
are dispersed in water or accumulated at
the bottom of the sea, and must be collected using methods appropriate to theircondition and properties. It’s very long
way to develop the equipment for our goal
since we need to try various effective technologies by creating and testing prototype
equipment. However, selecting effective and essential elemental technologies
from numerous options around the world,
establishing partnerships with universities,
research institutes, and companies that
hold these technologies, integrating thetechnologies, and securing funding whennecessary to verify the technologies, are all
dynamic and intricate tasks, and these areexactly the type of work that an engineering company excels in.
The advancement of plastics has supported the development of humanity andsociety, but the disposed plastic productspresent us with a new challenge: environmental pollution. To realize a truly recycling-oriented society, achieving the 3Rs(reduce, reuse, and recycle) alone are notenough; we must also recover and remove
plastic waste, including the MPs and MBs
that have been discharged into the natural world to date. As a member of an engineering company, I would like to use myhigh-tech application capabilities to help
reduce environmental pollution.

TOYO ENGINEERING CORPORATION

Integrated Report 202023

Special Feature 2

Ambitious Explorers in TOYO

Making dreams come true:
Conceptualizing a smart city through creativity
Ms. Kobari, a fifth-year engineer, andMr. Yanagiya, a fourth-year engineer,
are working on conceptualizing a smart
city with local governments, which isuncharted territory for TOYO. Both havebeen at the forefront of the infrastructure business, with Ms. Kobari working as a power plant engineer and Mr.
Yanagiya working in renewable energy
plant sales. Together, they work to integrate advanced technologies into a safe
and secure society by creating a disaster-resistant city based on renewableenergy and leveraging ICT (informationand communications technology) to
manage the health of residents.

The attraction of urban development
Ms. Kobari: After working at overseas plant
construction sites, I felt that I was getting tofulfilling my role as an engineer, and that’s
when I was given the new assignment ofurban development. I originally joined TOYO
because I wanted to contribute to the development of emerging countries, but as I talked
with Japanese local government officials, I
was exposed to the passion for planning anddrafting projects for a better life for local residents with limited financial resources, and I
gradually became more interested in supporting their efforts.
Mr. Yanagiya: Soon after I joined TOYO, I
enthusiastically engaged in business development for biomass power plant, and managed
to secure several large projects consecutively
in a short period of time. I am grateful about
being able to ride the renewable energy invest
boom and for support of our experienced
in-house engineers. As a matter of fact, I
have long wanted to be involved in a businessdevelopment which requires combination ofa wide range of technologies and coordination of all parties involved. With experts invarious technical fields within the company,
TOYO is a unique player capable of handlingbusiness development projects with complex,

24

TOYO ENGINEERING CORPORATION

Integrated Report 2020

intertwined challenges. Things often don’t
move forward as expected, but as Ms. Kobari
and I continue discussions with the customer,
there are also many exciting moments where
we are able to work out the optimal path
between a problem and its solution.

It’s fun because it’s challenging

Asuka KobariEngineer
Strategic Business Domain
Development Department(concurrent post)
Environment and Infrastructure
Business Unit
Power Plant and Utility System
Engineering Division
Engineering and Technology Unit

Kazuki Yanagiya
Sales Manager
Strategic Business Domain
Development Department
Environment and Infrastructure
Business Unit

Ms. Kobari: Unlike ordinary plant design
work, specifications and proposals for urban
development vary widely, and so there weretimes when I felt lost as we struggled throughthe adjustment process. However, as wesolidified specifications through extensive discussions about the customer’s vision of thecity, and made feasible proposals from anengineering perspective for areas where they
didn’t know what to do, the work became
more and more enjoyable. Regardless ofage or experience, being the point of contact
means we represent TOYO. Although I feelthe pressure of my responsibilities, I am still
able to work in my own way.
Mr. Yanagiya: For an urban development
project spanning several decades, delivering value as O&M contractor and/or operations is essential, unlike for conventional
plant EPC work. I would like to first successfully complete one project that leverages
TOYO’s project conceptualization and execution capabilities. And eventually, I would
like to leverage the know-how accumulated
in Japan to expand overseas together withGroup companies.
Ms. Kobari: The Business Area Development
Strategy Office was established as a flagshiporganization for reform, and we have been
given a great opportunity to capitalize on theideas of younger employees like ourselves. I
would love to make this urban developmenta reality.
Mr. Yanagiya: To ensure momentum forreform across the entire TOYO Group, it isimportant for us, the younger generation, totake on the challenges of this unprecedented
field without fear of failure through trial anderror, and to achieve results one by one.

Special Feature 2: Ambitious Explorers in TOYOA front-runner in Emerging Bio-Ethanol and
Bio-Refinery sector in India
technology owners around the world aswell as local companies in India, Toyo-India
strategically focused on promising customers, including state-owned enterprises, andkicked off promotional efforts. Although
it has only been a few months since wekicked off our promotional efforts, we havealready been involved in multiple projects
ranging from feasibility studies to participation in construction projects. I believe wewere able to enter this field quickly becauseof TOYO’s worldwide partner network andToyo-India’s customer base that was built
over many years.

India has made significant modernization investments in recent times.
As it relies on imported oil and gas
resources, there are high hopes forplant-based biomass fuel production.
Mr. Samir Hadaye, who previously
worked as a refinery construction project manager for Toyo-India, is in his
fourth year as a sales manager. He contributes to accelerating India’s progress toward becoming a developed
country by quickly capturing the needsof customers and leading the development of the biomass fuel market.

SDGs in the spotlight in India
India is considered to be the youngest
country in the world. This is because by
2050, it is estimated that 55% of India’s
population will be between the ages of 12
and 35. Through 2020, India’s rapid economic development also led to environmental pollution. However, looking ahead
30 years, I believe that leaving an environment that enables the next generation todrive global economic growth by polishing
their skills and manufacturing in India (Skill
India & Make In India) will become important for the further development of the
Indian economy.

Rapidly developing secondgeneration biomass technology
in India
One of the most promising growth markets in the world, India is also one of theworld’s leading agricultural countries,
with about half of the total working population working in agriculture. In recent
years, the Indian government has beenpromoting the production of second-generation biomass*-derived fuels as a financial measure to reduce crude oil imports,
while also addressing the growing awareness of global climate change and the needto reduce air pollution. Specifically, GOI
guidelines were put in place to increase
the percentage of bioethanol blended withgasoline to 20% by 2030 (currently 6.2%),
and national oil companies announced
investment plans one after another.
*Biomass fuel production technology using non-edible biomass that does not compete with food as araw material

Delivering the world’s leading
bioethanol manufacturing
technology to customers

Samir Hadaye
Sales Manager
Sales Department
Toyo-India

India’s success, our pride
Toyo-India is currently a front-runner in the
Indian bioethanol and biorefinery market.
I am truly proud that TOYO contributes tosolving two of India’s major challenges:
environmental pollution prevention andincreasing energy demand. Being a part of
TOYO’s mission to lead India toward a successful future makes me truly happy. With
the words “India’s success, our pride” inmy heart, I will pioneer the future of India.

In response to the government’s guidelines,
and in anticipation of a flood of interest inbioethanol investment from manufacturing

TOYO ENGINEERING CORPORATION

Integrated Report 202025

Plant Solution Business Unit Strategy
Market Outlook and Basic Policy

26

Plant Solution Business Unit Strategy

Partner for customer
throughout plant lifecycle

Toward more advancing Global
Operations for EPC execution

The recent global movement toward sustainability accelerates decarbonization andrecycling initiatives; accordingly, quite afew companies have revisited their business portfolio and remodeled it in line with
SDGs/ESG. Besides, recession in economy
and its uncertainty due to COVID-19 pandemic stall the flow of people and goods,
which puts a damper on investment, forces
to rebuild supply-chain and makes people/
companies strived toward survival. Both ofabove simultaneously affect economy significantly all over the world and result in
drastic changes in the market. Looking at
the industry specific for our business line,
demand of basic chemical such as ethylene and its derivatives like polymers has
been temporarily dropped; however, we
expect that it will be reinstated and get on
the normal track at late in 2021 or early in
2022, which will be supported by growthin the field of mobility, IoT, healthcare/pharmaceuticals. We also expect that fertilizer of agriculture is also on a stable trendwith gentle increase in demand along withgrowth of global population.
Though we are in the face of tough market situation for the time being, we will takethis opportunity to focus on reinforcing our
EPC execution capabilities by advancing
our global operations and improving operational efficiency through DXoT.
We vehemently aim at being customers’ long-term partner by expanding ourservices and offering technical solution
throughout lifecycle of plant, covering from
R&D, FS/Planning, pre-EPC, EPC, even
including post-EPC phase.
To achieve customer-focused businessdirection, the Plant Business Unit has integrated our Solution Business Division andare working closely with the Business
Development Division and T-Next (Toyo’s
Next-G Technology & Application Division),
which enables us to be more active, providing our services with full range as mentioned above. Those could also be leading
consequent to a foundation for establishinga stock-type business models.

In December 2019, we completed the
Malaysian RAPID project, the largest ethylene complex in TOYO history, and handed
it over to our customer successfully. The
project was truly a group-wide effort, involving Toyo-India, Toyo-Korea, IKPT, ToyoMalaysia and Toyo-Japan.
The history of TOYO is nothing but
growth of group companies. Throughnumerous projects, our global group companies have accumulated technical knowledge and polished project management
skills. In particular, Toyo-India executed 8
ethylene projects and 2 fertilizer projects inthe last 10 years, which is regarded as globally unparalleled experience. Moreover, they
are all-time leader in the Indian LNG regasification market. Their business line evencovers refinery modernization, specialty
chemical as well as industrial factory. All of
those experiences and successful achievements have making them one of the mostexperienced EPC players even in the world.
Toyo-Korea has been recognized around theglobe as an excellent polymer plant contractor backed by success in ample experience. Toyo-China has been continuously
appointed by the world’s leading chemicalcompanies of Japan, Europe and the UnitedStates, to build plants in the Chinese market. Indonesia IKPT is the top EPC player
in the country covering from Oil & Gas,
Petrochemical/Chemical and Infrastructure.
These days IKPT shows its presence in theinfrastructure through Jakarta MRT (Mass
Rapid Transit) geothermal, thermal, andsmall hydroelectric power plant projects.
Moving further into 2021, TOYO’s EPC project execution will be dynamically shifted to
the global group companies, while ToyoJapan will focus more on creating future-oriented technologies and businesses.

TOYO ENGINEERING CORPORATION

Integrated Report 2020

Eiji Hosoi
Senior Executive Officer
Unit Director of Plant Solution
Business Unit

Controlling EPC execution
risks through project
management x DXoT
Nowadays projects are likely to be larger
and more complicated; accordingly, all of

stakeholders of projects are exposed more
to increased risks in the aspects such as
finance, cost, schedule, quality, HSE, etc.
Whether those risks are properly managed is to be a point of critical importancetoward successful completion of project.
In other words, competencies to manage
the risks is nothing but company’s capability of EPC project execution. Previously
such a competency is apt to relying moreon experienced people; however, complexity of project and its associated risks
requires appropriate systems to control therisks in a timely manner.
“Project Twin” is a strong system tomonitor the project status on a real timebasis, which visualizes the latest status at any time round the clock no matter
where we are. The project status covers
the progress of each discipline of engineering, manufacturing by vendors in theworld, delivery of materials to the site,
construction activities, numbers of construction workers/construction equipment,

status of pre-commissioning/commissioning and even budget vs. actual expenditures. Deriving from those status, Project
Twin shows efficiency of works, trend of
progress (ahead/delay) and trend of cost
overrun as well. The information of Project
Twin can be shared with customer, vendors and construction sub-contractor to
make a firm alignment of project status ona transparency basis and to take an immediate action for resolution of issues. With
this system, the management of projectis much encouraged to make a timely andappropriate decision, which results in mitigation of various risks of project.
Through operation of DXoT, including Project Twin, we will continue toadvance our data-centric project management methods by promoting integration ofengineering, procurement, and construction data. We will further strengthen thefoundation of TOYO’s competitiveness byaccumulating and leveraging know-how in
our global operations.

Growth History of TOYO’s
Global Group Companies

The 1990s
Shift to an internationally distributed
engineering model

2000Group companies as profit centers

2006Global Toyo project execution

2012Establishment of the TOYO standard
and consolidated management

2020Toward a group company-centered
EPC operation

Since establishing Toyo-India in 1976, TOYO set up group companies in Malaysia,
the US, and Korea in the 1980s, as well as in Brazil in the 1990s. In 1995, the company set up a dedicated line between Japan and India and began laying the groundwork for its work distribution model.

In line with overseas expansion of the manufacturing industry, the company converted its group companies, which were previously cost centers, to profit centers.
This was followed by a gradual increase in the proportion of EPC work undertaken
by group companies.

With the aim of making each group company an independent EPC execution partner,
TOYO significantly shifted EPC functions for petrochemical and refinery projects.

TOYO established the TOYO Standard as a common group-wide technical standard
to ensure consistency in technology and quality. The logo was unified to promotegroup cohesion, and a consolidated management structure was established.

Group companies take the lead in finding new projects, securing orders, EPC, anddelivery. TOYO’s growth is accelerated by further refining group operations.

TOYO ENGINEERING CORPORATION

Integrated Report 202027

Environment and Infrastructure Business Unit Strategy
Market Outlook and Basic Policy
Electricity power demandis solid. Adapting to drastic
environmental changes is key

Steadily securing projectorders for biomass-fired
power plant

While demand for electric power continues to rise, especially in emerging countries, decarbonization efforts launched by
the Paris Agreement as well as efforts tobuild disaster-resistant power systems
are ramping up. Against this backdrop, a
shift from current system with large-scaleintensive power plant to distributed powersources mainly by renewable energy is
expected to go forward. In addition, traffic
congestion has become the norm in cities,
which not only adds to travel times but also
exacerbates air pollution, and the development of urban transportation networks is
attracting attention as a solution.
Since fiscal 2013, we focused on the
EPC business, positioning infrastructure development projects in the areas ofpower plant, transportation, and water as
our core business. Creating new business
opportunities requires accurate responses
to the needs of the changing environment as well as a long-term perspective. Accordingly, we changed the nameof the business unit to the Environment
and Infrastructure Business Unit this fiscal year, placing the word “Environment”
in the name to show that TOYO will create sustainable businesses and develop
them into primary businesses. We will
strive to be a developer that creates new
businesses by leveraging our project management capabilities to the fullest extent,
while incorporating “amoeba-like” flexible
thinking that goes beyond the norms of anengineering company.
Of course, we are not stepping back withour conventional EPC business, rather, ourbasic policy is to focus on mainly domestic renewable power plant projects in thenear-term, while also pushing forward withconstruction projects such as high-efficiency, low-environmental-impact gas-fired
power plant and public transportation projects that improve people’s daily lives.

Currently, our top priority is to steadily
secure project orders in the booming
domestic biomass-fired power plant EPC
market. We received our first order in2018 and as of September 2020, a total of
7 biomass-fired power plant projects areunderway. TOYO’s strength stems fromthe competitiveness gained from close
partnerships with Andritz, a manufacturerof high performance circulating fluidized
bed boilers, and Siemens, a manufacturerof high efficiency steam turbines, as well
as from the strong relationships TOYO hasdeveloped with its customers. Currently,
we are focusing on power plants with asingle-unit power plant capacity of 50 MW
and 75 MW, and we plan to pave the wayfor even larger turbines while adjusting
to future changes in the feed-in tariff program for renewable energy.
Biomass-fired power is a valuable
source of power that can be run as baseload, unlike solar and wind power, which
are also classified as renewable energy but
are affected by the weather. We are committed to supporting electric power resilience through our business in accordancewith the government’s clear policy on coalfree power plant.

Developing the next flagshipbusiness

Keiji Morino
Senior Executive Officer
Unit Director of Environment andInfrastructure Business Unit

The Jakarta MRT (Mass Rapid Transit),
which began operation at the end of March
2019, marked the successful completion of
TOYO’s first railway project, together with
IKPT. Through a consortium with Mitsui &Co., Ltd. and Kobe Steel, Ltd., we contributed to exporting Japan’s advanced infrastructure technology by providing tracks,
train lines, power receiving and distributing equipment, signaling and communication equipment, platform doors, automatic
ticketing systems, and more.

Environment and Infrastructure Business Unit Strategy

At TOYO’s Infrastructure business, inaddition to railways and renewable power
plant, we are working to develop the next
flagship business in a wide range of business areas, including gas-fired power plant,
FPSO (Floating Production, Storage andOffloading), and nuclear decommissioning.
In addition, we aim to collaborate with ourpartner Nippon Steel Engineering Co., Ltd.
and use their waste-to-energy technology
as a post-biomass-fired power plant system in international projects. We are also
considering expanding into offshore wind
power plant in the future.
In the infrastructure field, we anticipate
that market needs will vary from region toregion at different times, and we will continue working with an eye on business
opportunities while quickly and flexibly
responding to the demands of society.

to work on pioneering new business areas.
The department will be responsible for
expanding new BUSINESS MODELS in theenvironmental and infrastructure fields inaccordance with the medium- to long-term
company-wide strategy, and will drive theshift to a balanced operating revenue structure with the conventional EPC businessand new businesses as the backbone. To
build new businesses, it’s important tofind the shoot of new issues while working with customers and partners on-site. In
doing so, we will strive to cultivate business areas where TOYO can add value.
One specific example is the constructionof power systems based on renewableenergy and hydrogen utilization in anticipation of the shift to distributed powersources. By combining this with the outsourcing of business operations by local
governments, we will work to develop a
concession* business and vigorously takeon the challenge of building cities resilient to environmental disasters by incorporating disaster prevention and mitigation
measures.

Strategic Business Domain
Development Department’s
role in pioneering new businessas a development company*A system in which a public entity retains ownership ofa public facility while assigning operational control of
the facility to a private operator.

This year, we established the Strategic
Business Domain Development Department

2020 Renamed to Environment andInfrastructure Business Unit

Development of TOYO’s
Infrastructure Business2013 Established Infrastructure
Business Unit

2020

2001 Cogeneration Power Plant
116MW (Thailand)
1995 Coal-fired Power Plant 670MW x 2(Indonesia)
1999 Cogeneration Power Plant 77MW
(Thailand)

2010
2000

1990
1980

2010 7SPP Gas Turbine Combined Cycle 790MW total (Thailand)2010 Combined Cycle Power Plant 400MW (Azerbaijan)
2012 Utility Center for a Large Petrochemical Complex (Brazil)
2013 Non-revenue Water Reduction Project (Myanmar)2014 12SPP Cogeneration Power Plant 1,470MW total (Thailand)2015 Complete Railway System and Track Construction Project (Indonesia)

1984 Cogeneration Power Plant 147MW (Brunei)

2014-2019 10 Solar Power Plant Projects 704MW total (Japan)

1985 Cogeneration Power Plant 192MW (India)

2018-2020 7 Biomass-fired Power Plant Projects 380MW total (Japan)

1985 Combined Cycle Power Plant 32MW (Australia)

28

TOYO ENGINEERING CORPORATION

Integrated Report 2020

TOYO ENGINEERING CORPORATION

Integrated Report 202029

Reforming Our Human Capital System

Supporting Innovation Througha Human Capital System That
“Boosts Employee Growth”
Handling Environmental Changes
We are once again seeing that engineering companies will
be expected to play a role as a partner of customers that
achieve both economic development and the sustainabilityof the earth, including from the stage of planning businessto post-construction operations in the long term. In 2019,
we started reforming our human capital system in order toexpand our business portfolio, strengthen our competitiveness in terms of our ability to bring in rapidly advancing digitaltechnologies, and start changes in human capital.
We are aiming to introduce a system in fiscal 2021 thatenables us to redefine the requirements for human capital
capable of succeeding in our rapidly changing business environment, facilitates effective human capital development,
and contributes to the pride and job satisfaction of employees to help maximize their performance.

Developing the Ability to Adapt to Changes
Two pillars of TOYO’s medium- to long-term strategy are to
innovate its EPC business and develop new business fields.
In order to apply the knowledge and experience gained fromour conventional EPC business to new business while simultaneously using technology acquired from new business tostrengthen EPC, we need human capital capable of freely traversing both types of business. For our new human capitalsystem, we are considering how to emphasize the effective
development of human capital that possesses an increased
ability to adapt to changes and can succeed beyond the rangeof specialized fields while also creating a system that boosts
our human capital’s overall success and willingness to takeon new challenges.
In particular, to develop new business fields, it is necessary to possess a broad perspective and flexible thinking ability while increasing new personal connections. Therefore,
we are promoting mid-career recruitment as we encourage
personnel transfers from EPC to new business, and we arepushing employees to utilize the knowledge for new business. In addition, we are actively promoting human-capitalexchange outside the Company and further increase themobility of human capital and knowledge both within andoutside the Company to achieve a system enabling us tobring new knowledge into TOYO.

Providing Growth Guidelines for
the Next Generation
In order to achieve the balanced operation of conventional andnew business—two pillars of our medium- to long-term strategy—initiatives for promoting new business are not enough.
Developing human capital capable of executing conventional
business without fail is also an important issue. To develop

30

TOYO ENGINEERING CORPORATION

Integrated Report 2020

Reforming Our Human Capital System

TOYO’s Human Capital Development

Naoko Hashimoto

Yuki Homma

Team Leader
Human Capital Innovation Team
Human Capital Development
Department

Human Capital Innovation Team
Human Capital Development
Department

human capital to handle conventional business, we haveselected more than 50 senior engineers to act as role models,and picked up important common traits among them, including a sense of mission and professionalism. Our plan is toinclude them to the basic capabilities that should be acquiredby our engineers of next generation as core competencies
and to then utilize them as growth guidelines when considering career plans. We believe that employees who acquirea solid background through the execution of conventional
business will utilize it when developing new business fields.
In addition, as a way to support the effective development
and transfer of human capital, we have set up a place to discussspecific development plans with each employee that consider
their aptitudes, strengths, and weaknesses in accordance with
their personal career goals. We have also taken on the responsibility of establishing a foundation that supports the growthof individuals from a broad perspective in order to provide anenvironment enabling our employees to face changes without
any fear of failure. By providing a workplace environment andhuman capital system that enable employees to feel growth
as individuals, we hope to improve their motivation by making
them feel like TOYO is a great place to work.

A Remuneration System That
Rewards Performance
For the new human capital system, we are also promoting
revisions to our remuneration system in order to more suitably reward employees for their responsibilities and the performance they achieve. More specifically, we are revising theoperation of the system emphasized up until now—including seniority-based factors—by incorporating job-based salaryfactors to encourage selection-based promotion in accordance with ability and implement operations that provide an
opportunity for employees to succeed regardless of their age.
During the execution of our work, capabilities acquired fromlong years of experience are of course very important, but
we plan to increase the transparency of our system operations so our employees can benefit from treatment more inline with their actual responsibilities and performance. Thissystem will also be fair and convincing to employees in orderto accommodate remote work. In addition, we will certainly
reward employees accordingly for taking on the challenge ofincreased job duties or heavier responsibilities.
A human capital system is a company’s most important
foundation. A human capital system that “boosts employee
growth” will encourage the growth of employees, support
TOYO’s development, and lead to social sustainability before
long, so we are ultimately building a new human capital system to serve as the foundation of TOYO’s sustainability.

We have started building a training system that strikes a balance in covering the development and acquisition of three coreengineering business skills—professional, interpersonal, and problem-solving skills—while also focusing on the global
training of digital human capital.
The TOYO Group regularly holds global HR meetings attended by HR division heads from each group company toachieve collaboration between the human capital development within the TOYO Group. In addition, we are promoting thedevelopment of human capital capable of succeeding globally by deepening the exchange of human capital across theGroup. We are also working on further expanding our common training program within the Group by utilizing ICT tools.
Human skill acquisition(interpersonal skills)

Technical skill acquisition (professional skills)

Conceptual skill acquisition(problem-solving skills)

TOYO management program training
Division Manager training

Managers
Project manager practical training(outside the Company)

Mid-level
and younger
employees

TOYO Academy
Digital humancapital training
English training

New manager training
TOYO Global Learders Seminar

Division-internal education andworkshops
Overseas OFF-JT

Negotiation training
Presentation skill training

Meeting management training
Conflict management training

Seconded training (outside the Company)

Engineering, management,
and business training foryoung employee

Human capital rotation, group company OJT
On-site training

Newcomer training

Global mindset* Bold text indicates training programs common to the Group.

Respecting Diversity and Creating a Rewarding Place to WorkAs an engineering company, TOYO’s only assets are its “human capital.” We value diversity among our employees in accordance with one of the TOYO Values, “Diversity.” We are striving to create a rewarding workplaceenvironment that respects work-life balance and is a place our employees can be proud of in front of family
members and friends, and the results of our efforts are shown by the numbers below. In addition, in June of
2019, we obtained the Eruboshi certification (two stars) as a company of proactively engaging in promotion of
women’s participation in the workplace, certified by the Ministry of Health, Labour and Welfare.
(Non-consolidated)

Unit

FY2015FY2016FY2017FY2018FY2019No. of employees*1

Persons

1,092

1,035

1,030

973

998

No. of female employees*1

Persons

159

164

167

169

179

No. of female engineers

Persons

34

36

42

42

48
22

Persons

14

14

17

22

No. of disabled persons hired*3

Persons

22

24

22

18

21

No. of persons re-employed

Persons

112

104

102

99

86

No. of foreign employees

Persons

54

54

56

47

48

0

0

(1)100(4)100(4)100No. of female managers*2(No. of male employees taking childcare leave)(Persons) %and percentage of returnees*4(No. of female employees taking childcare
leave) and percentage of returnees*4(7)100(4)100(4)100(9)100(3)100No. of persons taking paternity leave

Persons

28

18

14

39

21

No. of persons working shorter hours forchildcare reasons*5

Persons

17

17

21

14

14

No. of persons working shorter hours fornursing care reasons

Persons

1

1

1

2

1

No. of persons taking family care leave*6

Persons

70

75

94

102

96

No. of persons taking nursing care leave(Persons) %Persons

0

0

0

0

0

Percentage of annual leave used*7

%

50.5

55.1

58.3

62.0

61.9

No. of persons with overseas work
experience*8

Persons

482

501

440

479

303

No. of persons working from home*9

Persons

—

—

71

184

207

*1 Excludes temporary employees.
*2 Equivalent to Team Manager orGeneral Manager.
*3 Includes subsidiaries in Japan.
*4 Excludes employees currently taking childcare leave.
*5 Includes employees applying forthe exemption from overtime work.
*6 Scope of family in TOYO’s internal
rules includes children, spouses,
parents, parents-in-law, grandparents, siblings, and grandchildren.
*7 Excludes employees on long-term
assignments overseas, employees
on temporary assignment, midyear recruits, employees on longterm sick leave, and employees on
extended leave.
*8 The number of employees embarking on overseas assignmentsin that year.
*9 In fiscal 2020, the system was renamed as the remote work system, and the limit on the numberof days was abolished.

TOYO ENGINEERING CORPORATION

Integrated Report 202031

Strengthening Project Risk Management

Strengthening Project Risk Management

Strengthening Pre-Order Risk Management

For projects that are large, important, or novel

Discussing our initiative policy and strategy for each project and analyzing risks
at a strategy policy meeting
The Board of Directors determines the advisability of starting proposal
activities (important or novel projects).

Proposal activities and cost estimating work
• Execution system consideration• Risk consideration and measures

ChairmanTomohisa Abe

The Board of Directors approves the risk management policy.

(Chairman of the Board of Directors)

Analyzing Issues Related to Risk
Management
One cause of our business performance worsening in thepast several years is the business-scale expansion strategy included in our fiscal 2012 medium-term management
plan and the resulting sudden increase in orders received.
However, the essence of this problem was not in fact business-scale expansion itself. Instead, our Group’s human capital and operations lacked the project execution capabilities
necessary to keep up with the sudden increase in orders.
Cause Analysis• Too much emphasis on achieving the scale oforders, which resulted in the acceptance oforders with difficult contract conditions• Overly optimistic risk assessment at the time ofproposal• Lack of key persons for projects• Problems resulting from engineering-officedecentralization
To execute EPC projects, it is necessary to set up a teamcapable of steadily executing ordered projects and to havehuman capital combining expert knowledge, ample experience, and leadership aimed at maintaining discipline bothwithin and outside TOYO lead the projects according to plan.
However, as a result of accepting orders for projects thatexceeded the scale of TOYO’s execution abilities, we fell
into a situation in which we frequently failed to demonstrate
our abilities when executing projects. Based on this analysis, starting in fiscal 2015—the first year planned for ourrevival—we started implementing thorough risk management strengthening measures aimed at suitably managing
our order-receiving process and project execution.

US Ethylene Issues and Measures
Regarding the US ethylene project, the negotiations before

32

TOYO ENGINEERING CORPORATION

Integrated Report 2020

contract conclusion were more or less finished in fiscal
2014—the final stage of our expansion policy—and we
started the project in fiscal 2015. Below, I would like toexplain the issues that emerged and measures we implemented in response to this project, which resulted in a major
cost overrun as a result of not applying our risk management
strengthening measures when we accepted the order.
The first issue was that we did not have an adequate
system for performing a reasonable risk assessment of thehighly novel commercial issues, business practices, and technical issues that were involved. More specifically, our risk
assessment function did not work right prior to accepting theorder, and we ended up concluding a lump-sum contract withthe client on the other hand a USA-style Time & Materials
Contract* with the subcontractor without a sufficient understanding of the risks involved, and we also entrusted the construction work to the subcontractor. The second issue wasour delay in strengthening our EPC capabilities to ensure
their effectiveness. More specifically, TOYO failed to suitably
respond to the quality of equipment produced at an affiliatedplant in an emerging country by a manufacturer promoting
the international division of labor, and we were slow to takemeasures in response to the USA’s construction situation.
* A type of contract for which the amount paid is calculated by multiplying
the set unit price by the amount of time the work takes

Our risk management process starting in fiscal 2015 isshown by the flowcharts below. To avoid repeating past mistakes, we took separate strengthening measures for two
categories: Strengthening Pre-Order Risk Management andStrengthening Post-Order Risk Management. Regarding
projects we are currently executing, we are implementing measures to strengthen our approach in terms of bothincome and expenditure on the one hand and quality on theother. Although we are starting to see the results of this,project risks are changing every year due to the need forever larger, more complex plants, so we intend to continue
making daily improvements as we manage risk.

Assessing the suitability at a cost appraisal meeting andschedule appraisal meeting
The heads of business divisions approve the price

Risks to be considered roject novelty and specialP
characteristics
Contract conditions
Client credibility
 artner capabilities, experience,P
resources, and reliability
 isk sharing with the client orRpartner OYO Group resources (execuTtion system) ountry risk (political, economCic, exchange, tax system, public security, infrastructure, etc.)
Schedule

The President, Executive Vice President, and CFO approve and submit the
final offer.

Strengthening Post-Order Risk Management
After order receipt
Implementing a reliable transfer from proposal activities to the project itself
At the time starting the project
Drafting a clear execution policy and making everyone aware of it

Risks to be considered
Weather and disasters

During project execution• Weekly and monthly management as well as reviews by division heads• Ensuring the design and procurement that considering construction and operations• Strengthening construction management• Implementing a Cold Eye Review by in-house experts• Early detection of and response to predictors of trouble• Drafting and executing early measures to respond to trouble• Implementing steering from a high-level perspective• Regularly holding meetings to report to the management• Sharing important risks with other projects in progress

Partner capabilities
TOYO Group resourcesIncreases in the quantity ofmaterials and equipment or
associated construction work
 isks of construction periR
od delays or failing to achieve
performance guarantees
 ountry risk (political, ecoC
nomic, exchange, tax system,
public security, infrastructure,
unions, etc.)

After the project ends
Implementing reliable feedback• Analyzing job data via risk category classification and providing feedback• In-house sharing of project trouble examples at job close-out report meetings

TOYO ENGINEERING CORPORATION

Integrated Report 202033

Corporate GovernanceCorporate Governance

Basic Approach

Corporate Governance System

Toyo Engineering’s mission is to contribute to the sustainability of the world and society through engineering, andwe aim to achieve both sustainability as a company andimproved corporate and shareholder value in the mediumto long-term. We are also working on fleshing out our corporate governance, which we consider the foundation forachieving the above.
More specifically, we are doing everything in our power
to establish and run a corporate governance system,
implement suitable risk-taking management, ensure thorough compliance, actively disclose information, and maintain a dialogue with our stakeholders.

Sustainable Growth
Medium-to long-term improvement of corporate value and shareholder value

Establishment and operation of
corporate governance system

Appropriate risk-taking and risk
management

TOYO recognizes the importance of gaining the trust of its
stakeholders, including shareholders and customers, andensuring transparency and fairness in management decision
making as we fulfill our corporate social responsibilities. To
this end, we have established and endeavor to properly maintain the following corporate governance system.
The Board of Directors comprises eight Directors, including three Outside Directors, who deliberate and determine
all important matters related to management and executionof operation, and also monitor and supervise one anotherwith respect to the execution of duties. We also employ an
executive officer system for the purpose of guaranteeing aswift and efficient business execution system. Executive
Officers are appointed by the Board of Directors and, under
the CEO’s directions, execute the duties they have been delegated. The Executive Committee serves as an advisory bodyto the President & CEO and consists of Executive Officers
with specific roles (Senior Executive Officers or above) andthe heads of key divisions. The Executive Committee reports
on and deliberates important matters related to the execution of operation. The Nomination and Remuneration Advisory
Committee also serves as an advisory body to the President& CEO—its members comprising the President & CEO andOutside Officers. The Committee serves to ensure fair andtransparent officer appointments and remuneration by providing opinions to the President & CEO.
The Audit & Supervisory Board consists of four members,
two of which are Outside Auditors. They report and deliberate on the execution of duties by Directors, the establishment and implementation of internal controls, internal audit
guidelines for quarterly and year-end results, and the details
and results of audits.

Shareholders Meeting
Appointment/Removal

Thorough compliance

Proactive information disclosureand dialogue with stakeholders

Board of Directors

Form of organization

Company with an Audit &Supervisory Board

Adoption of an executive officer
systemYes

Number of Directors
Of which, Outside Directors(Independent Officers)

9
4
(3)

Term of Directors

1 yearNumber of Audit & Supervisory
Board Members
Of which, Outside Audit &Supervisory Board Members(Independent Officers)
Number of Board of Directors
meetings (FY2019)
Average attendance ratio of
Outside Directors
Average attendance ratio of
Outside Audit & Supervisory
Board Members
Number of Audit & Supervisory
Board meetings (FY2019)
Average attendance ratio of
Outside Audit & Supervisory
Board Members

34

2
(2)
19
97.3%

2015

2014
19

100%

Remuneration for Directors
and Audit & Supervisory Board
Members

Directors (excl. Outside
Directors): fixed remuneration andperformance-linked remuneration
Outside Directors and Audit &Supervisory Board Members:
fixed remuneration

Audit firm

Ernst & Young ShinNihon LLC

Establishment ofNomination andRemuneration Advisory
Committee

Appointment of Chief
Compliance Officer

100%

Nomination and Remuneration
Advisory Committee

Integrated Report 2020

2017

Appointment of three
Outside Directors (increased
from one to three)

Establishment ofCompliance Committee

Appointment of one
Outside Director

2008

2006

Adoption of executive
officer system

Nomination and Remuneration
Advisory Committee

J-SOX Committee
ReportCompliance Committee
Crisis Management Team

Project Risk Management Committee

Internal Auditing Division
Audit

Group Management Division
Supervise

Operation UnitsGroup Companies

2018

4

Voluntary committee of theBoard of Directors

TOYO ENGINEERING CORPORATION

Establishment ofCompliance Department

LiaisonExecutive Committee

Crisis (Disaster) Headquarters

2019

Accounting Auditor

Appointment/Removal

Past Initiatives to Strengthen
Corporate GovernanceAppointment of four
Outside Directors(increased from three to
four)

Audit & Supervisory Board (Members)

Appointment/Removal
LiaisonAudit

President and CEO

Corporate Governance Structure (as of July 1, 2020)

Appointment/Removal
Audit

2003

Establishment of Code of
Conduct and Compliance
Program

Auditing by Internal Auditing Division and Audit & Supervisory Board Members
TOYO has established an Internal Auditing Division thatis directly controlled by the President. Internal Auditing
Division assesses the legality and rationality of Company
operations, and provides advice and counsel regarding the operational effectiveness and efficiency of theCompany. Additionally, it independently assesses themaintenance and operation of internal controls related
to financial reports, and these results are reported to the
J-SOX Committee, the organization immediately under
the President.
Audit & Supervisory Board Members audit Directors’
execution of duties through attending important meetings, including those of the Board of Directors, interviewing

Directors, Executive Officers, and employees on the statusof operations and the execution of duties, and investigating
the progress of the Company’s operations and finances.
The Audit & Supervisory Board, Accounting Auditors,
and the Internal Auditing Division conduct their auditing incooperation, while giving full consideration to the independence of one another. Auditing is implemented throughclose communication such as explaining the observations
related to the Company’s operations, and exchanging
opinions on various topics including their respective yearly
auditing plans and critical audit items, auditing methods,
inspection and quality control systems, and audit results.

Internal Controls
Based on the recognition that internal controls serve as
the foundation of corporate governance, the Directors
establish, maintain, and evaluate an appropriate internal control system. They conduct ongoing inspections
and make improvements to the system and periodicallyreview their basic policy for internal controls. Given thatinternal controls ensure the reliability of compliance, risk
management, and financial reports, we also pay sufficientattention to the effectiveness and efficiency of operations. The establishment of this system enables the Boardof Directors to make decisions based on appropriate information and subsequently, the execution of business.
TOYO ENGINEERING CORPORATION

Integrated Report 202035

Corporate GovernanceRisk Management Initiatives

Evaluation of Effectiveness of the Board of Directors

Corporate Ethics and Compliance Risk Management

An evaluation of the Board of Directors by each Director isconducted every year in order to ensure the effectivenessand appropriateness of decision making and supervisionby the Board of Directors and in an effort to improve suchfunctions. Discussions are made on the understandings ofcurrent status and the areas that require improvement inrelation to the effectiveness of the Board of Directors overall.
For fiscal 2019, an anonymous questionnaire was completed in December 2019 by all Directors and Audit &Supervisory Board Members that comprise the Boardof Directors. The results of the questionnaire were thenreported to the Board of Directors by the Director in chargeof the evaluation of effectiveness of the Board of Directors
and in February 2020 the details were analyzed, discussed,and evaluated at the regular Board of Directors meeting.
The responses from the questionnaire regarding the size,
composition, and administration of the Board of Directors

were mostly positive, as was the case last year, which confirmed that the Board’s decision making and supervisory functions with respect to the execution of operation are working
appropriately. These results provided reasonable assuranceof the effectiveness of the Board of Directors overall.
Meanwhile, regarding the suggestion put forward in lastyear’s evaluation that the Board’s composition and methods of deliberation need to be examined in light of theBoard’s role, the Directors voiced the opinion that there
remains room for improvement from the perspective ofstrengthening the Board’s supervisory function and shared
an awareness that they must work on further improving
the Board’s functions and invigorating discussions.
Based on the results of this effectiveness evaluation, TOYO’s Board of Directors will continue to work onenhancing its functions by properly examining the issues
and addressing them swiftly.

TOYO has established a Code of Conduct, compliancemanuals, and other related rules in order to abide bylaws and regulations at the root of our corporate activities, as well as social justice and ethics. We have alsoestablished a Compliance Committee chaired by the
Chief Compliance Officer (CCO), and we established aCompliance Department in April of 2018. In addition, weboost awareness, conduct promotional activities, andFiscal 2019 Compliance Risk Management Report
Number of compliance e-Learning participants (for new
recruits and employees yet to complete the program)

33

Total number of mini compliance test participants

790

Internal reporting/consultations

Outside Directors and Outside Audit & Supervisory Board Members (Outside Auditors)
TOYO appoints Outside Officers with no conflicts of interest with general shareholders pursuant to the independence criteria prescribed by the Tokyo Stock Exchange.
In addition to the requirement that Outside Directors
must be independent of the TOYO Group’s management, we appoint candidates that possess considerable
knowledge and ample experience in areas such as corporate management, risk management, legal compliance,and global management practices, and who can express
objective and practical opinions and give advice from thestandpoint of various stakeholders in view of TOYO’s
overall management. We also appoint Outside Audit &Supervisory Board Members that possess considerable
knowledge and ample experience in various disciplines
and who can suitably undertake audits with respect to theappropriateness of the execution of duties and operation
by Directors in view of TOYO’s overall management.
We believe obtaining opinions of highly independent
Outside Officers fulfills management’s accountability andensures management transparency. We also think thecurrent system and its implementation is allowing our corporate governance to function effectively, considering thenature and structure of our business.

Furthermore, in order to set appropriate remuneration levels for Directors and Audit & Supervisory Board Members andstrengthen accountability, the ratios for both fixed and performance-linked remuneration as well as the calculation formulafor performance-linked remuneration shall be decided by the
Board of Directors based on the findings of the Nomination
and Remuneration Advisory Committee—which consists of
the President & CEO and Outside Officers—after discussing
any revisions deemed necessary by the President & CEO.
Remuneration for Outside Directors and Audit &Supervisory Board Members is fixed and not linked to business performance in light of their roles and independence.
(FY2019)36

Total Remuneration by Type (¥ million)

Total Remuneration(¥ million)

Fixed Remuneration

Performance-Linked
Remuneration

Directors (excluding Outside Directors)

115

115

—

5

Audit & Supervisory Board Members (excluding
Outside Audit & Supervisory Board Members)

36

36

—

2

Outside Officers

36

36

—

6

Officer Classification

TOYO ENGINEERING CORPORATION

Integrated Report 20208
(legal violations/corruption: 0, power harassment: 8,
labor/employment/moral-related: 0)

Bribery Risk Management
We are also working to enhance and expand our programfor preventing the bribery of foreign public officials. In
addition—to enable unified compliance activities throughout the TOYO Group—we are setting up a Compliance

Committee at and assigning a manager to each overseas group company, and we are building a system thatenables them to regularly exchange opinions with ToyoJapan’s Compliance Department.

Information Security Risk Management

Policies on Remuneration Amounts and Determining Calculation Methods for
Directors and Audit & Supervisory Board Members
Remuneration for TOYO’s Directors (excluding Outside
Directors) is intended to be suitable, fair, and balanced andto increase their motivation to maximize the Company’s corporate value while ensuring medium- to long-term profit forshareholders. More specifically, this remuneration consistsof a fixed portion—determined according to each Director’s
position—and a performance-linked portion. The performance-linked remuneration is calculated based on the current
net profit attributable to owners of the parent—which is considered the most suitable indicator that reflects the Group’sbusiness performance—and is determined by the President& CEO according to the level of contribution of each Director.

strengthen the management and oversight of our compliance system through regular compliance-related audits
performed by the internal auditing division and Audit &Supervisory Board Members. To facilitate the proper andserious handling of reporting on compliance matters, wehave also established an internal reporting system as well
as both internal and external hotlines for consultation andreporting.

Number of Eligible
Officers

We regularly implement the initiatives below based on the
ISO 27001 information security management standards.
Our goal for our information security recognition test isa response rate of 100%, and we are strengthening our
educational and awareness boosting activities.

(1) Monitoring the operational status of information
security management measures(2) Assessing and handling information security risks(3) Handling information security incidents(4) Information security education

Fiscal 2019 Information Security Management Report
Number of serious information incidents

0

Investment Risks
We strive to mitigate the above risks with respect tothe business operations of TOYO group companies weinvest in by establishing a collaborative system whereby
our group management division accurately understands
and manages the situations of each group company.
Regarding business operations conducted through our

Brazilian equity method affiliate, situations in which we areunable to guarantee corresponding returns on investment
or where additional funding is needed due to changes in
the political and economic climate of Brazil or credit problems with our business partners might negatively impact
the earnings of the Group.

TOYO ENGINEERING CORPORATION

Integrated Report 202037

Directors and Audit & Supervisory Board Members

Tomohisa Abe

Haruo Nagamatsu

Kensuke Waki

Noriyoshi Torigoe

Masami Tashiro

Reijiro Yamamoto

Tatsuya Terazawa

Sayoko Miyairi

Masayuki Uchida

Chihiro Ubukata

4 years

18/19(94.7%)—

18/18(100%)—

Mr. Haruo Nagamatsu, having served the Company as Unit Director of the Infrastructure Business Unit, a representative of the Company’s overseas subsidiaries, and as a project manager, possesses ample experience anddeep insights related to project and corporate management. In addition, he assumed office as Representative
Director and President & Chief Executive Officer in April of 2018.

3 years

19/19(100%)—

18/18(100%)—

ChairmanMr. Tomohisa Abe, having been engaged in the plant sales and marketing divisions of the Company for many
years, possesses ample experience and deep insights related to planning sales and marketing strategies.
Having served the Company as Representative Director, Senior Executive Director, and Unit Director of the Plant
Business Unit, he had been engaged in supervising the overall sales activities of the Group. In addition, he assumed office as Chairman in April of 2020.

Representative Director
Haruo
President & Chief Executive
Nagamatsu
Officer

Tomohisa
Abe

Experience
Accounting/as afinancepresident

LegalHR/labor

SalesmarketingGlobalbusiness

Technology
R&D

Industryknowledge

Knowledgeof otherindustries

Kiyohito Uchida

Attendance (FY2018)
Audit &
Board ofSupervisory
Directors
Board

Director
Audit & Supervisory
Board Member
Term of office

Position

Yoshiyuki Funakoshi

Attendance (FY2019)
Audit &
Board ofSupervisory
Directors
Board

Reasons for appointment

Name

38

Masayuki Yoshizawa

Directors and Audit & Supervisory Board Members

Masayuki
Yoshizawa

Representative Director
Executive Vice President

Mr. Masayuki Yoshizawa, having served a general trading company for many years, possesses ample experienceand deep insights related to the business of the Company, including investments and EPC businesses in energy
and infrastructure fields and the management of overseas corporations. As Executive Vice President since Aprilof 2019, he has been engaged in promoting business reform and managing projects.

5 years

19/19(100%)—

18/18(100%)—

Kensuke
Waki

Director, Senior Executive
Officer
CFO

Mr. Kensuke Waki, having served the Company as the head of the finance and accounting divisions, possesses
ample experience and deep insights related to finance and accounting. As a Chief Financial Officer since April of2017, he has been engaged in the management of the Company’s finance and accounting divisions.

2 years

17/19(89.5%)—

13/14(92.9%)—Noriyoshi
TorigoeDirector, Senior Executive
OfficerMr. Noriyoshi Torigoe has many years of experience working at a quasi-public lending institution, and he possesses ample experience and deep insights related to infrastructure business.

Newly appointed

—

—

—

—

MasamiTashiroOutside Director

Mr. Masami Tashiro has many years of international experience working at financial institutions and possesses
ample experience and deep insights as a corporate manager.

5 years

18/19(94.7%)—

16/18(88.9%)—

ReijiroYamamoto

Outside Director

Mr. Reijiro Yamamoto, who serves as the corporate manager of an investment fund management company andhas served as the corporate manager of various business companies, possesses ample experience and deep insights related to finance and corporate management.

1 year and 4 months

19/19(100%)—

2/2 (100%)—

TatsuyaTerazawa

Outside Director

Mr. Tatsuya Terazawa, having served in the Ministry of Economy, Trade and Industry (METI) for many years, possesses ample experience and deep insights related to public policies, mainly in terms of trade policy and trade promotion.

Newly appointed

—

—

—

—

SayokoMiyairi

Outside Director

Ms. Sayoko Miyairi possesses ample business and management experience related to her consulting company
work as well as professional knowledge and broad insight as a university professor.

Newly appointed

—

—

—

—

Masayuki
UchidaSenior Audit & Supervisory
Board Member

Mr. Masayuki Uchida has been engaged in the Company’s technology development and new technology-related business development for many years and assumed office as the head of the administration division. He
possesses ample experience and deep insights related to technology, quality management, corporate management, and internal audits.

4 years

19/19(100%)

19/19(100%)

18/18(100%)

20/20(100%)

ChihiroUbukata

Audit & Supervisory Board
MemberHaving spent many years working as the head of the Company’s finance division, Mr. Chihiro Ubukata possesses
ample experience and deep insights related to finance and accounting.

1 year15/15(100%)

13/13(100%)——

Yoshiyuki
Funakoshi

Outside Audit & Supervisory
Board Member

Having spent many years in corporate management in the chemicals industry, which is closely related to ourbusiness, Mr. Yoshiyuki Funakoshi has wide-ranging experience and deep insights related to management.

5 years

19/19(100%)

19/19(100%)

18/18(100%)

20/20(100%)

Kiyohito
UchidaOutside Audit & Supervisory
Board Member

Mr. Kiyohito Uchida possesses ample experience and extensive knowledge gained as a lawyer.

5 years

19/19(100%)

19/19(100%)

17/18(94.4%)

20/20(100%)TOYO ENGINEERING CORPORATION

Integrated Report 2020

TOYO ENGINEERING CORPORATION

Integrated Report 202039

Safety, Quality, Environment

Safety, Quality, Environment

Safety, Quality, and Environment (SQE) Management Structure
TOYO has established an SQE Committee that reports
directly to the President. The Committee formulates
operating policies regarding safety, quality, and theenvironment, and assesses and approves the results of
SQE activities. Based on the basic policies of the SQECommittee, the SQE Promotion Committee, which
is subordinate organization of SQE Committee, provides support to the SQE activities of divisions, departments, and individual projects. Accordingly, with the
SQE Management
Structure

Safety, Quality andEnvironmental Management Division• HSE Management Department• Quality Management Department

Site Inspections by Managers

management-linked SQE Committee at the center of
the SQE management structure, collaboration between
the SQE Promotion Committee and the Safety, Quality
and Environment Management Division ensures that
PDCA cycles for SQE in divisions, departments, andindividual projects are implemented and that ongoing
improvements are carried out.
All employees also take SQE training course to enhance their knowledge and awareness of these matters.
President

Direction

We call events that are not quite accidents but that are nevertheless tenseor startling “near misses.” TOYO has
been actively collecting and analyzing data on near misses at construction sites since 2008, and we apply the
results to safety management in aneffort to prevent accidents. The graphson the right show the results of analyzing the cumulative data for 14,769 nearmisses up until 2019.

SQE Promotion Committee

SQE monitoring and auditing

Divisions and Departments(Engineering, Procurement, Construction,and Head Office management)

Individual projects

Safety“Safety is fundamentals to our corporate activities.”
Based on this belief and to address three challenges
listed in the right that are indispensable to safety management, we diligently implement a number of safety initiatives
in order to achieve zero casualties on our work execution.

• Strengthening of safety management leadership• Fostering a safety culture• Maintaining and complying with safety standards

Safety Record
The TOYO Group’s safety record over the last 10 years is
as follows. In aiming to achieve zero occupational injury,
we continue to step up our efforts on improving safety.
We have therefore adopted the management indicators oflost-time incident rate (LTIR) and total recordable incident
rate (TRIR). Over this period, our LTIR and TRIR have beenamong the lowest in our industry.

Safety Record (TOYO Group total)

Site inspections (Japan)

Site inspections (Indonesia)

Near Misses

SQE Committee
Reporting of operational issues andimprovement results

Safety management is not viable without strong leadership. At TOYO’s construction sites, we rigidly enforce site
inspections by managers.

(ILO basis: Incidence rate per million hours worked)

Crashesor falls
33.6％

Other
19.9％

Being wedged
or entangled
5.9％

Anticipated
accidents

Contact with dangerously
high or low temperatures
7.0％
Stumbling or falling over
15.7％

Other
42.1％

Neglecting rules
13.6％

CausesInadequate
management
12.1％

Lack ofarrangement
11.6％
Crash
17.9％

Skip safety checks
9.6％

Lack of preparation
11.0％

Safety Campaign
A safety campaign is carried out every year in July at all TOYO group companies for the purpose of raising safety awareness among all employees working
at construction sites and offices.
Safety Campaign Program (2020)
1. President’s message
2. Display of posters, banners,
and panels
3. Heatstroke prevention workshop
4. Safety belt/harness workshop,
hanging experience

5. Voluntary drill by in-housefire-fighting crew
6. Seminar on health care
7. Safety awards

Number of incidents
Year(Jan-Dec)

Man-hours(A)

Fatalities

Lost-time
incidents (LTI)

Medicaltreatment(no lost time)

Total fatalities
and lost-time
incidents (B)Recordable (C)2010

117,295,032

1

5

56

6

62

LTIR*1

TRIR*2

0.05

0.53

2011

80,782,919

1

6

12

7

19

0.09

0.24

2012

120,760,052

3

8

16

11

27

0.09

0.22

2013

105,164,018

0

7

16

7

23

0.07

0.22

2014

89,777,237

1

6

13

7

20

0.08

0.22

2015

67,308,769

1

4

9

5

14

0.07

0.21

2016

52,540,748

0

3

23

3

26

0.06

0.49

2017

76,493,784

2

2

31

4

35

0.05

0.46

2018

102,817,669

1

10

28

11

39

0.11

0.38

2019

46,642,608

0

3

11

3

14

0.06

0.30

TOYO Group Safety Meeting
Safety managers from overseas group companies meet to build a consensus
and promote safety improvements through active communication.
Companies that participated in the Safety Meeting held by
Toyo-Japan in 2019:• Toyo-Japan• Toyo-India• IKPT• Toyo-Korea• Toyo-Malaysia• Toyo-China*1 Lost-time incident rate (LTIR) = (B) x 1,000,000 / (A) (B) = Fatalities + Lost-time incidents*2 Total recordable incident rate (TRIR) = (C) x 1,000,000 / (A) (C) = (B) + Medical treatment (no lost time)40

TOYO ENGINEERING CORPORATION

Integrated Report 2020

TOYO ENGINEERING CORPORATION

Integrated Report 202041

Quality

Environment

Quality Management

Environmental Initiatives

Due to project-related losses in recent years, we are striving to provide feedback to all employees working on projects
without fail while once again promoting the strengthening of
our quality management system. Our company-wide goal isto achieve “zero quality-related losses,” and we are promoting activities leading to improvement at the managementlevel by sorting out, analyzing, and assessing issues related toquality management based on project performance reports.
In addition, we have also independently set quality management KPIs for each division—including engineering, procurement, and construction work—and we are monitoring these
KPIs as we promote the building of a system for assessing

the effectiveness of our quality management system.
TOYO is sticking with the quality management policies
below while sharing the spirit of these policies with clientsand striving to achieve our goals.
1. Provide high-quality products and services that takecare of HSE and meet the requirements of our clients and society.
2. Comply with TOYO rules, and make maximum useof our high-tech application capabilities and engineering technologies.

Quality Management System
TOYO considers the standards below as the main foundation of its quality management system, and constantly strives toachieve further improvements.
TOYO Standards
TOYO has unified its common standards as Global
Standards (GS) and utilizes Local Standards (LS) specificto TOYO group companies in order to execute projects invarious regions and countries.

Japan
(JP)

Korea
(KR)

Malaysia
(MY)

TPS
(JP)

China
(CN)

• We will contribute to the achievement of a sustainable community and society enabling both
the development of humanity and environmental protection.
• As an international company, we will strive to provide engineering services in harmony withthe global environment.
To achieve this philosophy, we will continue actively striving to resolve the environmental issues of customers.

Reducing Environmental Impact at Construction Sites
Annual Domestic and Overseas Waste Volume

We are especially careful to ensure that pollutants neverleave our domestic and overseas construction sites and—since we acquired ISO 14001 certification in 2004—wehave constantly achieved our goal of zero environmental
disasters.
Since 2013, we have maintained a recycling rate of atleast 91%. In addition, we are careful to properly disposeof all hazardous material, and we research our industrial
waste volume as shown by the graph on the right.

(Tons)

50,000Overseas waste
Domestic waste

40,00030,00020,00010,0000(FY)LS(LocalStandards)
India
(IN)

TOYO views both the protection of the global environment and the prevention of global warming as issues shared byhumanity, and we have established the following basic philosophy regarding the environment.

2014

2015

IKPT
(ID)

Multi-Site ISO 9001 Certification
An ISO certification body has certified that TOYO group
activities are executed based on a unified quality management system built on our Global Standards (GS). TOYO
will continue striving to maintain this certification for theentire group.

2019

Changes in Electricity Consumption

Changes in Tap Water andRainwater Consumption

Changes in the Purchase Volume ofPrinting Paper (Wood-Free Paper)(106kWh)(1,000m3)(102 tons)

6.00

40.0
30.0

0.80
Consumed tap water

0.60

20.0

Feedback Knowledge Management System (FKMS)TOYO has been accumulating feedback cases from projects over 30 years, and use them as references for project execution by each TOYO group companies and for preventing the recurrence of troubles.

Integrated Report 20202018

list of “Type 2 Designated Energy Management Factories,
etc.,” which are large-scale energy users required by law
to issue reports. In addition, compared to fiscal 2015, wehave reduced our tap water use by 38% by reusing rooftop rainwater, and we have reduced our printing-paper
purchase volume by approximately 30 tons by encouraging paperless offices.
In 2019, our total CO2 emissions from domestic andoverseas offices amounted to 3,996 tons/year (including 483 tons from the Chiba Head Office), and our total
CO2 emissions from domestic and overseas project site
offices amounted to 1,871 tons/year (including 413 tons
total from within Japan). We will continue striving to
reduce our CO2 emissions.

Under TOYO’s internal environmental management framework, we have established an energy & resource saving
council and a so-called green meeting headed by supervising officers. At these meetings, we advance the discussion regarding environmental matters at the Head Office,confirm industrial waste volumes, check trends in recycling rates, monitor whether any leakage accidents haveoccurred, and examine causes of and countermeasuresin response to changes in energy consumption. Because
we reduced energy consumption at the Chiba Head Officebuilding through efforts such as switching to LED lighting, turning off lights at lunchtime, opening/closing window blinds, and thorough confirmation of shutting down
computers, in June of 2019, we were removed from the

4.00

TOYO ENGINEERING CORPORATION

2017

Reducing Environmental Impact at Offices

GS (Global Standards)

42

2016

2.00

10.0

0
(FY) 2010 ‘11

0.40
Used rainwater

0.20

0
‘12

‘13

‘14

‘15

‘16

‘17

‘18

‘19

(FY) 2010 ’11

0
’12

’13

’14

’15

’16

’17

’18

’19

(FY) 2010 ’11

’12

’13

’14

’15

’16

’17

’18

’19

TOYO ENGINEERING CORPORATION

Integrated Report 202043

Contributing to the Community, Society, and the Environment

Received an Engineering Commendation Award of ENAA 2019 for the Setouchi Kirei photovoltaic power plant projectIn the expansive former Kinkai salt flatsof Setouchi, Okayama Prefecture—alocation blessed with long hours of daylight and little rainfall throughout theyear—TOYO completed the construction of one of Japan’s largest-scale photovoltaic power plants in 2018, and theplant’s 235 MW of output (direct current)
is being used to supply stable power.
During the construction period of thisproject, the logged wood, branches, andleaves were used for mushroom beds andas soil mulching material to reduce thetotal amount of industrial waste by around3,000 tons. In addition, we developed the“Kinkai Habitat”—a nature reserve areathat includes approximately 16 hectares ofendangered animals and plants—with theaim of protecting the salt marsh. By creating a changing habitat while leaving thewaterfront environment and woodlands
intact, we helped to maintain biodiversity.
This project was recognized due to theabove achievements, and we received
an Engineering Commendation Award ofEngineering Advancement Associationof Japan 2019 in the environmental contribution category. By pursuing a harmonious relationship between its businessactivities and environmental conservation, TOYO will continue to actively work
towards realizing a sustainable society.

Contributing to the Community, Society, and the Environment

Donating reusable office supplies and equipment: Resources Reusing WG of the TOYO Future Architect Department

Chiba City International Association

Toyo-Japan centrally manages office supplies and equipment after they have beenused at construction sites and offices
by running a reuse corner where they
are kept for reuse. The quantities andtypes of office supplies that are broughtin are continuing to gradually increase,
and—due in part to the recent promotion of paperless offices—our file folders and colored index folders in particular
exceeded our reuse needs in terms ofquantity. Because all of them were still
perfectly usable, we filled 30 cardboard
boxes with over 4,500 file folders andcolored index folders that were in especially good condition and then donatedthem to municipalities and local communities that needed them. We will continue
to donate reusable items to achieve coexistence with local communities and help
build an environmentally friendly society.
Main donation recipients: Chiba City International
Association, Narashino Chamber of Commerceand Industry, Chiba Employment and VocationalLife Support Center for Person with Disabilities,
nearby universities, elementary schools, preschools, and daycares (through the Narashino
City Children’s Division), etc.

Participating in activities to recycle empty cases for disposable contact lenses
We approve of HOYA Corporation’s“Eyecity Eco Project”—an activity aimed
at recycling empty cases for disposable
contact lenses—and, in February of
2019, we started up our own in-housecollection activities. An estimated 13
million people use disposable contact lenses throughout Japan, and only
about 1% of the cases are collected. The
remaining 99% of cases are apparently
incinerated as garbage. Empty cases for
disposable contact lenses are made ofpolypropylene, which can be recycled
and reused for the products of all kinds ofFor clean energy environment and society’s quality of life improvement by developing a regional supply of power via renewableenergy in Indonesia
IKPT prioritizes the substance of humanwellness by realizing projects that contribute to society’s quality of life improvement. To respond to Indonesia’s strong
infrastructure demand, IKPT is focusing
on initiatives to enrich the lives of people
through the execution of renewable energy
projects. Although our renewable energy
construction projects in Indonesia have
only just begun, we are already involved in
the construction of a biomass-fired power
plant (Siberut island), photovoltaic power
plant (Wakatobi and Karampuang islands),
and small-scale geothermal power plant(Java island). Because Indonesia is madeup of over 13,000 islands, finding a way tosupply power to remote islands and rural
areas has been an issue for many years.
Based on the belief that contributing tomany planned small and medium-scaleregional power construction projects will
support Indonesia’s future. IKPT is looking
forward for more opportunities towards
green energy program in reducing global
warming and increasing the chance forhaving sustainable energy and a cleaner
environment in Indonesia as the countryis blessed by an abundance of renewable
resources.

44

TOYO ENGINEERING CORPORATION

Integrated Report 2020

* Japan Eye Bank Association: a non-profit public interest corporation established to provide
education on and raise awareness of corneal transplants—which can be performed torestore the eyesight of certain people—andeye banks

Accepting overseas internship students (Toyo-Malaysia), building classrooms, and developing women’s restrooms (Toyo-India)

Creating a safe, comfortable transportation environment through the Jakarta MRT project
IKPT and Toyo-Japan participated as
members of the consortium in chargeof the MRT (Mass Rapid Transit) NorthSouth Line project, which opened forbusiness in 2019. As Indonesia’s first
rapid transit system, this project helped
to free the citizens of Jakarta from traffic congestion and environmental pollution—both of which were issues for many
years—by achieving a safe, comfortable,
efficient means of transportation. TOYO
will continue expanding its sustainable

manufacturers. The proceeds from theserecycling activities are being donated to
the Japan Eye Bank Association.* During
the 18 months since we started these
activities, we have collected a total of 45
kilograms of cases, and our employees
are becoming more aware of the need torecycle them.

Toyo-Malaysia’s acceptance ofinternship students

infrastructure business, thereby contributing to betterment of lives of people inthe community as well as the development of society.

Since fiscal 2008, we have worked with
the National Institute of Technology inJapan (also called “Kosen”) to run anoverseas internship program for technical school students at Toyo-Malaysia.
In March of 2020, 4 students were
accepted for around 3 weeks, and we
provided practical training and construction-site visits tailored to each student’s
field of specialization. Up until now, a totalof 25 Kosen students have participated.
In addition, Toyo-India is engaged inongoing school and other education-related support activities, including building classrooms, developing women’s

Toyo-India’s CSR activities

restrooms, donating uniforms to students, providing aid to rebuild old classrooms, and developing drinking-water
infrastructure.

TOYO ENGINEERING CORPORATION

Integrated Report 202045

Ten-Year Financial and Non-Financial Highlights

Ten-Year Financial and Non-Financial Highlights

Toyo Engineering Corporation and Consolidated Subsidiaries
Years ended March 31
Millions of yen

2011/3

2012/3

2013/3

2014/3

2015/3

2016/32017/3

2018/3

2019/32020/3

Net sales

155,696

157,881

228,723

230,124

311,454299,813431,917335,697

294,993

219,094

Gross profit (loss)

26,57324,91824,20025,155

17,21430,513

15,971(12,521)

10,636

18,765

17.1

15.8

10.6

10.9

5.5

10.2

3.7

(3.7)

3.6

8.6

SG&A expenses

19,75819,57722,606

24,69924,57019,426

17,98020,42916,25016,875

Operating income (loss)

6,815

5,341

1,593

455

(7,356)

11,087(2,009)(32,951)(5,613)

1,890

4.4

3.4

0.7

0.2

(2.4)

3.7

(0.5)

(9.8)

(1.9)

0.9

*4

Financial Highlights:

Gross profit margin (%)

Operating income margin (%)
Ordinary income (loss)

7,012

5,102

4,032

4,942

(25,280)

3,873

1,603

(27,821)

3,426

2,467

Profit (loss) attributable to ownersof parent

3,773

3,728

1,457

967

(20,965)

3,038

1,472

(26,846)

(818)

1,664

Comprehensive income

2,751

2,597

3,178

4,088

(25,534)

8,492

1,066

(25,758)(3,818)(376)Interest bearing debt

36,671

38,84040,08744,797

31,91832,64531,84430,841

32,71027,629

18.5

17.5

16.7

17.4

12.2

10.1

10.0

12.2

13.6

13.2

(52,391)(53,195)(31,588)(52,137)(58,543)(91,480)(90,858)(75,694)(65,197)(52,584)

Debt equity ratio (times)

0.56

0.58

0.58

0.61

0.71

0.64

0.62

1.23

0.90

0.77

Equity ratio (%)

32.9

30.1

28.9

28.5

17.2

15.8

16.2

10.0

15.1

17.2

Operating activities cash flows

11,305

5,710(18,986)

21,244(4,192)

46,37618,984(22,824)(25,828)(18,696)

Investing activities cash flows(1,371)(2,417)(1,587)(1,638)

9,587(11,776)(16,650)

6,386

1,354

7,980

Financing activities cash flows

3,822

102

(532)

3,167

(14,341)

1,099(1,548)(1,174)

16,768(6,159)Interest bearing debt ratio (%)
Net debt

New orders

222,540

269,188

290,444

365,137

470,369

443,537

116,790309,325

298,052

187,054

Backlog of contracts

224,693359,120

410,492

538,023

659,005

823,066

492,682448,629426,373

389,236

5.0

6.0

5.0

3.0

4.0

4.0

2.0

0.0

0.0

0.0

3,956

4,494

4,548

4,747

4,463

4,397

4,287

4,085

3,997

3,991

1,069

1,055

1,026

1,037

1,084

1,092

1,035

1,030

973

998

(Number of female managers in
Toyo-Japan)

5

6

7

9

11

14

14

17

22

22

Waste recycling rate(Chiba Head Office)

82

71

72

71

66

69

64

64

67

62

Industrial waste recycling rate
(Domestic construction sites)

80

93

71

95

99

96

96

96

91

91

Dividends per share (annual) (yen)Non-Financial Highlights:
Number of employees*1(Number of employees in Toyo-Japan)

Number of harmful substance leakaccidents (Domestic/overseas
construction sites)

0

0

0

0

0

0

0

0

0

0

Lost Time Incident Rate (LTIR)*2

0.05

0.09

0.09

0.07

0.08

0.07

0.06

0.05

0.11

0.06

Total Recordable Incident Rate (TRIR)*3

0.53

0.24

0.22

0.22

0.22

0.21

0.49

0.46

0.37

0.30

*1. Excluding temporary employees*2. Lost Time Incident Rate (LTIR) = Total Lost Time Incidents × 1,000,000 / Employee-Worked Man-Hours*3. Total Recordable Incident Rate (TRIR) = Number of Recordable Incidents × 1,000,000 / Employee-Worked Man-Hours*4. Due to the Partial Amendments to Accounting Standard for Tax Effect Accounting, etc., the figures related to financial highlights for the fiscal year ending on March 31, 2018 are the result of retroactively applying the corresponding accounting standard, etc.

46

TOYO ENGINEERING CORPORATION

Integrated Report 2020

TOYO ENGINEERING CORPORATION

Integrated Report 202047

Financial Section Consolidated Financial Statements
Consolidated Balance Sheets
Toyo Engineering Corporation and Consolidated Subsidiaries As of March 31, 2020 and 2019
Thousands of U.S.
dollars (Note 1)

Millions of yen

2020

Assets2020

2019

Liabilities and Net Assets:

Current assets:¥ 101,759

Notes receivable, accounts receivable fromcompleted construction contracts and other55,130$753,506

Notes payable, accounts payable for construction
contracts and other

68,193506,662

Short-term loans payable (Notes 4, 6, 8)

Costs on uncompleted construction contracts (Note 7)

19,391

26,422

178,209

Income taxes payable

Accounts receivable-other

7,138

5,793

65,600

Advances received on uncompleted construction contracts

Deposits paid

6,236

841

57,310

Provision for bonuses

422

95

3,878

Provision for warranties for completed construction

18,188

10,249167,153

Provision for loss on construction contracts (Note 11)

Forward exchange contracts
Other
Allowance for doubtful accounts
Total current assets

2020

2019

2020

¥ 64,053¥ 82,509

17,00813,374Current liabilities:¥ 81,989

Cash and deposits (Note 15)

Thousands of U.S.
dollars (Note 1)

Millions of yen

(692)

(655)

(6,359)187,804

212,700

1,725,981$

588,668
156,309

554

701

5,091

64,19369,296589,954

459

778

4,218

158

273

1,452

349

2,144

3,207

Forward exchange contracts

1,027

1,647

9,438

Other

7,866

7,718

72,291

155,672

178,443

1,430,677

9,964

19,294

91,572

388

27

3,565

Deferred income taxes (Note 21)

2,408

2,238

22,130Net defined benefit liability (Note 20)

1,950

1,200

17,921

390

440

3,584

Total current liabilities
Non-current liabilities:
Long-term loans payable (Notes 4, 6, 8)

Property, plant and equipment:
Buildings and structures (Note 4)

14,51014,581

133,351

Machinery, vehicles, tools, furniture and fixtures

5,031

5,113

46,236

Land (Note 4)

6,264

6,289

57,568

Leased assets

1,120

44

10,293

19

36

174

Accumulated depreciation and impairment loss

(15,429)(14,869)(141,797)

Total property, plant and equipment

11,517

11,196

105,845

Construction in progress

Lease obligations

Provision for losses on business of subsidiaries and affiliates

1,964

1,691

18,04917,06624,893

156,842

172,739

203,337

1,587,528

18,19818,198167,245

Capital surplus

4,567

25,74941,972Retained earnings (deficit)

13,862(8,984)

127,396

(445)

(445)

(4,089)36,182

34,519332,524

Other
Total non-current liabilities
Total liabilities
Contingent liabilities (Note 5)
Net assets:
Shareholders’ equity:

Intangible assets:
Other
Total intangible assets

1,338

983

12,296

1,338

983

12,296

Capital stock (Note 14)

Treasury stock, at cost
Total shareholders’ equity
Investments and other assets:

Accumulated other comprehensive income:Investments in securities (Notes 3, 18)

2,842

5,895

26,118Valuation difference on available-for-sale securities

(425)

(123)

(3,905)Long-term loans receivable

4,598

4,572

42,257

Deferred losses on hedges(764)(1,463)(7,021)

Net defined benefit asset (Note 20)

—

635

—

Foreign currency translation adjustments

1,687

2,908

15,504

Deferred income taxes (Note 21)

480

828

4,411

Remeasurements of defined benefit plans

(820)

400

(7,536)

4,701

7,468

43,203

(323)

1,722

(2,968)(4,563)(4,585)(41,935)

Total investments and other assets

8,059

14,81374,064

121

116

1,112

Total non-current assets

20,91426,993

192,206¥ 208,719¥ 239,694$ 1,918,196

Other (Notes 3, 4)
Allowance for doubtful accounts

Total assets

Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets

35,98036,357

330,668¥ 208,719¥ 239,694$ 1,918,196

See notes to consolidated financial statements.

48

TOYO ENGINEERING CORPORATION

Integrated Report 2020

TOYO ENGINEERING CORPORATION

Integrated Report 202049

Consolidated Statements of Operations

Consolidated Statements of Comprehensive Loss

Toyo Engineering Corporation and Consolidated Subsidiaries Years ended March 31, 2020 and 2019

Toyo Engineering Corporation and Consolidated Subsidiaries Years ended March 31, 2020 and 2019
Thousands of U.S.
dollars (Note 1)

Millions of yen

Net sales

2020

2019

2020

¥ 219,094¥ 294,993$ 2,013,546

200,328

284,356

1,841,080

Cost of sales (Note 11)

Thousands of U.S.
dollars (Note 1)

Millions of yen

Net income (loss)

2020

2019

2020

¥ 1,681¥(771)$ 15,448

Other comprehensive loss (Note 13)

18,765

10,636

172,456

Valuation difference on available-for-sale securities

(302)

(131)

(2,775)

Selling, general and administrative expenses (Notes 9, 10)

16,875

16,250155,086

Deferred gains (losses) on hedges

698

(661)

6,414

Operating income (loss)

1,890(5,613)17,369Foreign currency translation adjustments(788)(1,458)(7,241)Remeasurements of defined benefit plans(1,221)(325)(11,221)

Gross profit

Non-operating income:Interest income

1,012

3,714

9,300

Dividends income

53

190

487

1,451

6,408

13,335Equity in earnings of affiliates
Reversal of allowance for doubtful accounts

—

280

—

Miscellaneous income

632

581

5,808

3,149

11,17528,940Total non-operating income
Non-operating expenses:

Share of other comprehensive loss of affiliates accounted
for by the equity method
Total other comprehensive loss
Comprehensive loss

¥

(444)

(470)

(4,080)(2,057)(3,047)(18,904)(376)¥ (3,818)$ (3,455)(381)(3,863)(3,501)4

45

36Comprehensive loss attributable to:
Owners of parent
Non-controlling interests
See notes to consolidated financial statements.

Interest expenses
Foreign exchange losses, net

422

342

3,878

1,908

128

17,535

Share issuance cost

—

839

—

Miscellaneous expenses

241

824

2,214

2,572

2,134

23,637

2,467

3,426

22,672

—

83

—

1,857

—

17,066

Total non-operating expenses
Ordinary income
Extraordinary income:Gain on sales of property, plant and equipment (Note 12)
Gain on sales of investments in capitalGain on sales of shares of an affiliate
Total extraordinary income
Profit before income taxes

116

—

1,066

1,973

83

18,132

4,441

3,510

40,814

2,036

3,101

18,711

Income taxes (Note 21):
Income taxes
Income taxes-deferred

724

1,180

6,653

Total income taxes

2,760

4,281

25,365

1,681

(771)

15,448Net income (loss)
Net income (loss) attributable to:16

Non-controlling interests
Owners of parent

¥

1,664

147

46
¥

(818)

$

15,292

See notes to consolidated financial statements.

50

TOYO ENGINEERING CORPORATION

Integrated Report 2020

TOYO ENGINEERING CORPORATION

Integrated Report 202051

Consolidated Statements of Changes in Net Assets

Consolidated Statements of Cash Flows

Toyo Engineering Corporation and Consolidated Subsidiaries Years ended March 31, 2020 and 2019

Toyo Engineering Corporation and Consolidated Subsidiaries Years ended March 31, 2020 and 2019

Millions of yen

Treasurystock,
at costValuationdifferenceonavailableTotal
sharehold- for-sale
er’s equity securities

Deferred
losses onhedgesTotal accumulated
RemeaForeignothercurrency surements
Nontranslation of defined comprehensive controlling
benefitadjustinterests
income
plans
ments

2020
Total
net
assetsCapitalstock

CapitalsurplusRetained
deficit¥ 18,198¥ 10,749¥ (8,165)

Issuance of shares

7,500

7,500

15,000—15,000Transfer to capital surplus from
capital stock(7,500)

7,500

—

—

—

(818)

—

(818)

(0)

(0)

—

(0)

0

0

—

0

Balance as of April 1, 2018

Net loss attributable to ownersof parent¥ (444) ¥ 20,338(818)

Purchase of treasury stock
Sale of treasury stock(0)

Net changes of items otherthan shareholders’ equity
Balance as of March 31, 2019

¥ 18,198¥ 25,749¥ (8,984)

¥

8

¥

(801)

¥ 4,835¥ 725¥ 4,767¥ 71¥ 25,176

—

(131)

(661)

(1,927)(325)(3,045)45(3,000)¥ (445) ¥ 34,519¥ (123)¥ (1,463)¥ 2,908¥ 400¥ 1,722¥ 116¥ 36,357

Millions of yen

Balance as of April 1, 2019

Treasurystock,
at costDeferred
losses onhedgesRemeaForeign
currency surements
translation of defined
benefitadjustplans
ments

Total accumulated
other
Noncomprehensive controllinginterests
incomeTotal
netassetsCapitalstock

CapitalsurplusRetainedearnings¥ 18,198¥ 25,749¥ (8,984)¥ (445) ¥ 34,519(21,182)

21,182

—

—

—

1,664

1,664

—

1,664

(0)

—

(0)

Transfer to retained earnings
from capital surplus
Net income attributable toowners of parent(0)

Purchase of treasury stock
Net changes of items otherthan shareholders’ equity
Balance as of March 31, 2020

ValuationdifferenceonavailableTotal
sharehold- for-sale
er’s equity securities¥ 18,198¥ 4,567¥ 13,862¥ (123)—(302)¥ (445) ¥ 36,182¥ (425)¥ (1,463)¥¥ 2,908¥400¥ 1,722¥ 116¥ 36,357

698(1,220)(1,221)(2,045)4(2,040)(764)¥ 1,687¥ (820)¥ (323)¥ 121¥ 35,980

RemeaForeign
currency surements
translation of defined
benefitadjustplans
ments

Total accumulated
other
Noncomprehensive controllinginterests
incomeTotal
netassets$ 26,725$ 15,825

Thousands of U.S. dollars (Note 1)

Capitalstock

Balance as of April 1, 2019

$ 167,245

Transfer to retained earnings
from capital surplus

CapitalsurplusRetainedearnings$ 236,641 $ (82,565)(194,669)

Net income attributable toowners of parent$ (4,089) $ 317,241$ 1,066$ 334,132—

15,292

15,292—

15,292

(0)

—

(0)

—

See notes to consolidated financial statements.

$ 3,676—(0)$ 41,972$ (1,130) $ (13,445)—

Net changes of items otherthan shareholders’ equity$ 167,245

Deferred
losses onhedges194,669

Purchase of treasury stock

Balance as of March 31, 2020

Treasurystock,
at costValuationdifferenceonavailableTotal
sharehold- for-sale
er’s equity securities$ 127,396$ (4,089) $ 332,524(2,775)

Thousands of U.S.
dollars (Note 1)

Millions of yen

6,414(11,212)(11,221)(18,794)

36(18,748)$ (3,905) $ (7,021)$ 15,504$ (7,536)$ (2,968)$ 1,112$ 330,668

Cash flows from operating activities:
Profit before income taxes
Depreciation and amortization
Amortization of goodwill
Increase (decrease) in allowance for doubtful accounts
Decrease in net defined benefit liability
Decrease in provision for loss on construction contracts
Interest and dividends income
Interest expenses
Foreign exchange losses (gains)
Loss (gain) on sales of property, plant and equipment
Equity in earnings of affiliates
Gain on sales of investments in securities
Gain on sales of shares of an affiliate
Gain on sales of investment in capital
Decrease (increase) in notes receivable, accounts receivablefrom completed construction contracts
Decrease in costs on uncompleted construction contracts(Increase) decrease in accounts receivable-other
Decrease in notes and accounts payable-trade(Decrease) increase in advances received on uncompleted
construction contracts
Increase in deposits paid
Other, net
SubtotalInterest and dividends income received
Interest expenses paid
Income taxes paid
Net cash used in operating activities
Cash flows from investing activities:
Net decrease in time deposits
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Proceeds from sales of investments in securities
Proceeds from sales of shares of an affiliate
Proceeds from sales of investments in capital
Net increase in short-term loans receivable
Other, net
Net cash provided by investing activities
Cash flows from financing activities:
Net (decrease) increase in short-term loans payable
Proceeds from long-term loans payable
Repayment of long-term loans payable
Repayment of finance lease obligations
Proceeds from issuance of preferred stock
Other, net
Net cash (used in) provided by financing activities
Effect of exchange rate change on cash and cash equivalents
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period (Note 15)¥ 4,441
1,442
(10)
14
(6)
(1,793)(1,065)422
373
0(1,451)—(116)(1,857)

2020

2019

3,510
1,233
(9)
(289)
(324)
(11,739)(3,904)
342
(203)
(81)
(6,408)(0)——$ 40,814
13,252
(91)
128
(55)
(16,478)(9,787)
3,878
3,427
0
(13,335)—(1,066)(17,066)

11,3806,561(806)(17,470)(7,134)
5,091
1,569(21,042)

104,585
60,297(7,407)(160,555)(4,158)(5,395)(6,883)(16,380)
1,079
(349)
(3,045)(18,696)

7,250
(150)
2,750
(29,540)
6,678
(335)
(2,632)(25,828)(38,213)(49,581)(63,257)(150,537)
9,916(3,207)(27,984)(171,822)

1,721
(464)
18
(660)
—
3,081
4,255
(3)
32
7,980

506
(561)
637
(335)
500
—
—
(0)
606
1,354

15,816(4,264)165(6,065)—28,315
39,104(27)
294
73,338(1,088)900(5,459)(511)—(0)(6,159)(818)(17,694)
97,907¥ 80,213

7,358
1,000
(6,581)(7)
15,000(0)
16,768(923)(8,628)106,536¥ 97,907(9,999)8,271(50,170)(4,696)—(0)(56,603)(7,517)(162,613)
899,797$ 737,184¥

See notes to consolidated financial statements.

52

TOYO ENGINEERING CORPORATION

Integrated Report 2020

TOYO ENGINEERING CORPORATION

Integrated Report 202053

Notes to Consolidated Financial Statements
Toyo Engineering Corporation and Consolidated Subsidiaries

1. BASIS OF PREPARATION
Toyo Engineering Corporation (the “Company”) and its domestic consolidated subsidiaries maintain their accounting records andprepare their financial statements in accordance with accounting principles generally accepted in Japan, and its foreign consolidated subsidiaries maintain their books of account in conformity with those of their respective countries of domicile. The accompanying consolidated financial statements have been compiled from the accounts prepared by the Company in accordancewith the provisions set forth in the Financial Instruments and Exchange Law of Japan and with accounting principles generally accepted in Japan, which are different in certain respects as to the application and disclosure requirements of International
Financial Reporting Standards.
For the convenience of readers, the accompanying consolidated financial statements and the relevant notes have also beenpresented in U.S. dollars by translating all Japanese yen amounts at the exchange rate of ¥108.81 to U.S.$1.00 prevailing on
March 31, 2020.
As permitted, amounts of less than one million yen have been omitted. As a result, the totals shown in the accompanying
consolidated financial statements (both yen and in U.S. dollars) do not necessarily agree with the sum of the individual amounts.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(a) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its significant subsidiaries.
Investments in significant affiliates are accounted for by the equity method. As of March 31, 2020, the numbers of consolidated
subsidiaries and affiliates accounted for by the equity method were 13 and 4, respectively.
Toyo Engineering Korea Limited, Toyo Engineering Corporation (China) and 5 other subsidiaries are consolidated using theirfinancial statements as of their respective fiscal year end, which falls on December 31, and necessary adjustments are made totheir financial statements to reflect any significant transactions from January 1 to March 31. Intercompany accounts and transactions are eliminated in consolidation. The difference between the acquisition cost and the equity in the net assets at the time ofacquisition is amortized in principle within 20 years on a straight-line basis.
(b) Securities
All debt and equity securities other than equity securities issued by subsidiaries and affiliates are classified into one of three categories: trading, held-to-maturity or available-for-sale securities. Trading securities are bought and held principally for the purposeof selling them in the near term. Held-to-maturity securities are those securities which the Company and its consolidated subsidiaries have the ability and intent to hold until maturity. All securities not included in trading or held-to-maturity are classified asavailable-for-sale securities.
Trading securities are recorded at fair value. Held-to-maturity securities are recorded at amortized cost, adjusted for the amortization or accumulation of premiums or discounts. Unrealized gains or losses on trading securities are included in earnings. Other
securities classified as available-for-sale securities are recorded at fair value with changes in unrealized holding gain or loss, netof the applicable income taxes, included directly in net assets. Non-marketable securities classified as available-for-sale securities are recorded at cost.
Cost of securities sold is determined by the moving-average method.
(c) Derivative Financial Instruments
The Company and certain consolidated subsidiaries enter into various derivative transactions in order to manage certain risk arising from adverse fluctuations in foreign currency exchange rates and interest rates. Derivative financial instruments are carried atfair value with changes in unrealized gain or loss charged or credited to operations, except for those which meet the criteria fordeferral hedge accounting under which unrealized gain or loss is deferred as a component of net assets.
Deferral hedge accounting is adopted for derivatives which qualify for hedge accounting, under which unrealized gain or loss isdeferred. Hedging instruments are derivative transactions such as foreign exchange forward contract, currency option, currency
swap and interest rate swap, and hedged items are primarily forecast sales and costs denominated in foreign currencies, andreceivables and payables denominated in foreign currencies. Hedge effectiveness is not assessed if the substantial terms andconditions of the hedging instruments and the hedged forecasted transactions are the same. The Company and its consolidated
subsidiaries manage derivative transactions in accordance with their internal “Policies and Procedures for Risk Management”.
(d) Costs on Uncompleted Construction Contracts
Costs on uncompleted construction contracts are stated at cost, determined by the identified-cost method.

54

TOYO ENGINEERING CORPORATION

Integrated Report 2020(e) Depreciation and Amortization
Depreciation of property, plant and equipment is principally computed by the declining-balance method based on the estimateduseful lives of the assets. However, buildings acquired on or after April 1, 1998, and facilities attached to buildings and structuresacquired on or after April 1, 2016 are depreciated on a straight-line method.
The useful lives of property, plant and equipment are as follows:
Buildings and structures:
3 to 50 years
Machinery, vehicles, tools, furniture and fixtures:
2 to 20 years
Amortization of intangible assets of the Company and its consolidated subsidiaries is calculated principally by straight- line
method. Software for internal use is amortized on a straight-line method 5 years of the estimated available period.
(f) Leases
Depreciation of assets under finance leases which do not transfer ownership of the leased assets to the lessee is calculated by
the straight-line method over the lease period with the residual value estimated at zero.
From the fiscal year ended March 31, 2020, overseas consolidated subsidiaries adopted International Financial ReportingStandard (“IFRS”) 16 “Leases” as disclosed below in “Accounting change.” Accordingly, the subsidiaries, as lessees, accountfor all leases on the balance sheet, in principle, under a single model and depreciation of leased assets is calculated based on thestraight-line method.
In “Note 16 LEASES”, leased assets based on IFRS 16 are classified as “(a) Finance Leases”.
(g) Allowance for Doubtful Accounts
The Company and its consolidated subsidiaries have provided an allowance for doubtful accounts at an estimated amount of probable and reasonably possible bad debts and an estimated amount computed on the actual percentage of credit losses.
(h) Provision for Bonuses
Provision for bonuses to employees is provided at the expected payment amount for the fiscal year.
(i) Provision for Warranties for Completed Construction
Provision for warranties for completed construction is provided based on past experience.
(j) Provision for Loss on Construction Contracts
Provision for loss on construction contracts is provided in case the material loss is expected for a certain large-scale contract work.
(k) Provision for Losses on Business of Subsidiaries and Affiliates
Provision for losses on business of subsidiaries and affiliates is provided based on the financial position of the subsidiaries
and affiliates.
(l) Retirement Benefits
Net defined benefit liability at year-end is stated based on the fair value of plan assets and the projected benefit obligation.
As to calculation of the projected benefit obligation, the expected benefit payments at the year-end have been recorded mainly
at the amount calculated based on benefit formula.
Actuarial gain or loss is amortized by the straight-line method within the average of the estimated remaining service years of
the employees (over 9 years) in the year following the year of recognition.
Unamortized actuarial gain or loss is provided with tax effect as a component of remeasurements of defined benefit plans
under accumulated other comprehensive income of net assets.
(m) Foreign Currency Translation
Both short-term and long-term receivables and payables in foreign currencies are translated at the rates of exchange in effect atthe balance sheet date and differences arising from the translation of these accounts are credited or charged to profit or loss.
The balance sheet accounts of the consolidated foreign subsidiaries are translated at the rates of exchange in effect at thebalance sheet date, except for capital stock and capital surplus, which are translated at their historical exchange rates. Revenues,
expenses and net income for the year are translated at the rates of exchange in effect at the balance sheet date. Differences arising from translation of the accounts of foreign subsidiaries and affiliates are presented as “Foreign currency translation adjustments” and “Non-controlling interests” in the accompanying consolidated balance sheets.

TOYO ENGINEERING CORPORATION

Integrated Report 202055

(n) Recognition of Revenues
Revenues and costs of construction contracts of which the percentage of completion can be reliably estimated, are recognizedby the percentage-of-completion method. The percentage of completion is calculated at the cost incurred as a percentage of theestimated total cost. The completed-contract method continues to be applied for contracts for which the percentage of completion cannot be reliably estimated.
(o) Cash and Cash Equivalents
For the purposes of the consolidated statements of cash flows, the Company and its consolidated subsidiaries consider all
highly liquid investments with insignificant risk of changes in value purchased with an original maturity of 3 months or less to
be cash equivalents.
(p) Share Issuance Cost
Share issuance cost is recorded at cost.
(q) Consumption Taxes
Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes.
(r) Consolidated Tax Return System
The Company files a consolidated tax return with domestic its fully-owned subsidiaries.
(Adoption of Tax Effect Accounting for the Transition from Consolidated Taxation System to the Group Tax Sharing System)
With respect to items subject to the review of the Non-Consolidated Taxation System conducted to coincide with transition fromthe Consolidated Taxation System to the Group Tax Sharing System, established under the Act on Partial Revision of the Income
Tax Act, etc. (Act No.8 of 2020), the Company and certain of its domestic consolidated subsidiaries have not applied the provision of Paragraph 44 of “Implementation Guidance on Tax Effect Accounting” (Accounting Standards Board of Japan (“ASBJ”)
Guidance No.28, February 16, 2018) in accordance with the treatment set out in Paragraph 3 of “Practical Solution on theTreatment of Tax Effect Accounting for the Transition from the Consolidated Taxation System to the Group Tax Sharing System”(ASBJ Practical Issues Task Force No.39, March 31, 2020) and the amounts of deferred tax assets and deferred tax liabilities are
based on the provisions of tax laws in effect before the revision.
(s) Advances Received on Uncompleted Construction Contracts
Advances received on uncompleted construction contracts from customers are shown as a liability, not as a deduction from theamount of costs on uncompleted construction contracts.
(t) Income Taxes
Deferred tax assets and liabilities are determined based on the differences between carrying amounts of existing assets and liabilities in the financial statements and their respective tax bases. Deferred tax assets and liabilities are measured using the enacted
tax rates and laws which will be in effect when the differences are expected to be reversed.
(u) Research and Development Costs
Research and development costs are charged to income when incurred.
(v) Additional Information(Accounting change)
International Financial Reporting Standard (“IFRS”) 16 Leases
Effective from the beginning of the fiscal year ended March 31, 2020, overseas consolidated subsidiaries adopted IFRS 16 “Leases.”
Accordingly, the subsidiaries, as lessees, account for all leases on the balance sheet, in principle, under a single model. In the adoptionof IFRS 16, the subsidiaries adopted the method where the cumulative effect of applying this standard is recognized at the date of initial
application, which is allowed as a transitional measure.
As a result, “Leased assets” under property, plant and equipment increased by ¥604 million ($5,550 thousand), “Other” undercurrent liabilities increased by ¥253 million ($2,325 thousand), and “Lease obligations” under non-current liabilities increased by ¥367
million ($3,372 thousand) in the consolidated balance sheet as of March 31, 2020.
Also, the effect of the application on the consolidated statements of operation and per share information as of and for the year ended
March 31, 2020 is immaterial.
Cash flows from operating activities increased by ¥489 million ($4,494 thousands) and cash flows from financing activities decreasedby the same amount in the consolidated statement of cash flows for the year ended March 31, 2020.

56

TOYO ENGINEERING CORPORATION

Integrated Report 2020

(Accounting Standards Issued But Not Yet Effective)
Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020)
Implementation Guidance on Accounting Standard for Revenue Recognition (ASBJ Guidance No. 30, March 31, 2020)(1) Overview
The accounting standard and implementation guidance mainly focus on the recognition of revenue and cash flows arising fromcontracts with customers. Revenue is recognized by applying the following five-step model.
Step 1: Identify the contract
Step 2: Identify performance obligations
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to performance obligations
Step 5: Recognize revenue based on progress of performance obligations(2) Planned date of application
The above accounting standard and implementation guidance are scheduled to be applied from the beginning of the fiscal year
ending March 31, 2022.
(3) Effects of application of the accounting standard and the implementation guidance
At present, the Company is in the process of evaluating the impact on the consolidated financial statements from the adoptionof the accounting standard and implementation guidance.
Accounting Standard for Fair Value Measurement (ASBJ Statement No. 30, July 4, 2019)
Implementation Guidance on Accounting Standard for Fair Value Measurement (ASBJ Guidance No. 31, July 4, 2019)
Accounting Standard for Measurement of Inventories (ASBJ Statement No. 9, July 4, 2019)
Accounting Standard for Financial Instruments (ASBJ Statement No. 10, July 4, 2019)
Implementation Guidance on Disclosures about Fair Value of Financial Instruments (ASBJ Guidance No. 19, March 31, 2020)(1) Overview
ASBJ developed “Accounting Standard for Fair Value Measurement” and “Implementation Guidance on Accounting Standard
for Fair Value Measurement” and established the guidance defines the fair value measurement method, to improve the international comparability of accounting standards. These accounting standard and implementation guidance will be adopted for the fairvalues of the following items.
—Financial instruments defined in “Accounting Standard for Financial Instruments”—Inventories held for trading purposes defined in “Accounting Standard for Measurement of Inventories”
In addition, revised “Implementation Guidance on Disclosures about Fair Value of Financial Instruments” requires to disclose thebreakdown of financial instruments by level of their fair values.
(2) Planned date of application
The above accounting standards and implementation guidance are scheduled to be applied from the beginning of the fiscal year ending
March 31, 2022.
(3) Effects of application of the accounting standards and implementation guidance
At present, the Company is in the process of evaluating the impact on the consolidated financial statements from the adoptionof the accounting standards and implementation guidance.
Accounting Standard for Accounting Policy Disclosures, Accounting Changes and Error Corrections (ASBJ Statement No. 24,
March 31, 2020).
(1) Overview
The revised accounting standard requires to disclose principles and overviews of the accounting treatment adopted when relevant accounting standards, etc. are unclear.
(2) Planned date of application
The above accounting standard is scheduled to be applied from the end of the fiscal year ending March 31, 2021.
Accounting Standard for Disclosure of Accounting Estimates (ASBJ Statement No. 31, March 31, 2020)(1) Overview
The new accounting standard requires to disclose the information that deepens the understanding of users for accounting estimates recorded in the financial statements for the current fiscal year that have the risk of material impact on the financial statements of the following fiscal year.
(2) Planned date of application
The above accounting standard is scheduled to be applied from the end of the fiscal year ending March 31, 2021.

TOYO ENGINEERING CORPORATION

Integrated Report 202057

(Changes in Presentation)(Consolidated Balance Sheets)
Deposits paid and forward exchange contracts, which had been included in “Other” under current assets as of March 31, 2019are presented separately as of March 31, 2020 because their materiality has increased.
To reflect this change in presentation, deposits paid of ¥841 million and forward exchange contracts of ¥95 million which
had been previously included in “Other” under current assets, were reclassified as “Deposits paid” and “Forward exchange
contracts” as of March 31, 2019.
(Consolidated Statements of Cash Flow)
Increase in deposits paid, which had been included in “Other” under cash flows from operating activities for the year ended
March 31, 2019 is presented separately for the year ended March 31, 2020, because its materiality has increased.
To reflect this change in presentation, Increase of deposits paid of ¥(150) million, which had been previously included in“Other” under cash flows from operating activities, was reclassified as “Increase in deposits paid” for the year ended March
31, 2019.
(Impact of Global Spread of COVID-19 on Accounting Estimates)
With regard to certain projects, the Company recognized the expected additional costs resulting from delays in construction
progress due to COVID-19.
In addition, the Company forecasts certain impacts on new orders, as a result of customers’ reconsidering or extending
their investment plans due to falling oil prices caused by COVID-19.
As for impairment test of non-current assets and tax effect accounting, the Company estimated the future cash flow andrecoverability of deferred income taxes based on the assumption that the effect of COVID-19 lasts for at least one year, and thebusiness environment surrounding the Company and its group companies will improve gradually from the fiscal year ending
March 31, 2022.

3. INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES AND AFFILIATES
Investments in and advances to unconsolidated subsidiaries and affiliates included in investments in securities and other in the
consolidated balance sheets as of March 31, 2020 and 2019 are as follows:
Thousands of
U.S. dollars

Millions of yen

As of March 31,
Investments in unconsolidated subsidiaries and affiliates
Other

2020
¥ 995
518

2019

2020

¥ 3,685690$ 9,144
4,760

Contingent liabilities as of March 31, 2020 are as follows:
Guaranteed parties
Other
Total

Millions of yen

Thousands of
U.S. dollars

¥ 84
¥ 84

$ 771
$ 771

Details

Loan guarantee etc.

6. COMMITMENT LINE CONTRACTS
In order to maintain access to a stable and effective sources of operating capital, the Company has entered into commitmentline contracts with 8 trading banks. The status of these commitment line contracts as of March 31, 2020 and 2019 is as follows:
Thousands of
U.S. dollars

Millions of yen

As of March 31,
Total amount of commitment line contracts
Used amount
Available amount of commitment line contracts

2020

2019

2020

¥ 8,000—¥ 8,000¥ 10,000
1,000¥ 9,000$ 73,522—$ 73,522

7. COSTS ON UNCOMPLETED CONSTRUCTION CONTRACTS
Costs on uncompleted construction contracts and provision for loss on construction contracts related to the construction contracts
with substantial anticipated losses are not offset. Costs on uncompleted construction contracts corresponding to provision forloss on construction contracts as of March 31, 2020 and 2019 are as follows:
Thousands of
U.S. dollars

Millions of yen

As of March 31,
Costs on uncompleted construction contracts

2020

2019

¥ 237

¥ 110

2020
$ 2,178

8. SHORT-TERM AND LONG-TERM DEBT
The average interest rates on the short-term loans payable outstanding as of March 31, 2020 and 2019 are 1.39% and 0.69%,
respectively.
The average interest rates on the current portion of long-term loans payable outstanding as of March 31, 2020 and 2019 are
0.14% and 1.56%, respectively.
The average interest rates on the long-term loans payable outstanding as of March 31, 2020 and 2019 are 1.09% and1.24% respectively.
The following schedule shows the maturities of long-term loans payable subsequent to March 31, 2020:

4. PLEDGED ASSETS
The following assets as of March 31, 2020 and 2019 were pledged as collateral:Thousands of
U.S. dollars

Millions of yen

As of March 31,
Collateral
Buildings
Land
Other
Total

5. CONTINGENT LIABILITIES

2020

2019

2020

¥

¥

$ 6,718
8,785
1,341$ 16,855

731
956
146
¥ 1,834

These assets above were mainly pledged for issuing the performance bonds.

803
969
99
¥ 1,872

Years ended March 31,
2021
2022
2023
2024
2025
2026 and thereafter

Millions of yen

Thousands of
U.S. dollars¥ 10,197
3,785
4,952
1,046
180
—

$ 93,713
34,78545,510
9,613
1,654
—

The following schedule shows the maturities of lease obligations subsequent to March 31, 2020:
Years ended March 31,
2021
2022
2023
2024
2025

Millions of yen

Thousands of
U.S. dollars

¥ 267
157
142
48
35

$ 2,453
1,442
1,305
441
321

As of March 31, 2020 and 2019, short-term loans payable and long-term loans payable with financial covenants concerning
the financial condition or business results of the Company and its consolidated subsidiaries and affiliates amounted to ¥8,480
million ($77,934 thousand) and ¥11,240 million, respectively.

58

TOYO ENGINEERING CORPORATION

Integrated Report 2020

TOYO ENGINEERING CORPORATION

Integrated Report 2020

59

9. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

13. OTHER COMPREHENSIVE INCOME

The main components of selling, general and administrative expenses for the years ended March 31, 2020 and 2019 are as follows:
Thousands of
U.S. dollars

Millions of yen

Years ended March 31,
Salaries
Provision for bonuses
Retirement benefit expenses
Depreciation
Research and development costs

2020

2019

2020

¥ 7,155
367
1,137
752
1,925

¥ 7,241
312
994
308
798

$ 65,756
3,372
10,4496,911
17,691

10. RESEARCH AND DEVELOPMENT COSTS
Research and development costs included in cost of sales and selling, general and administrative expenses for the years ended
March 31, 2020 and 2019 amounted to ¥1,925 million ( $17,691 thousand) and ¥798 million, respectively.

11. PROVISION FOR LOSS ON CONSTRUCTION CONTRACTS
The amount of gross increase in provision for loss on construction contracts included in cost of sales in the consolidated statementsof operations for the years ended March 31, 2020 and 2019 are as follows:
Thousands of
U.S. dollars

Millions of yen

Years ended March 31,
Amount of provision for loss on construction contracts

2020
¥ 349

2019

2020

¥ 2,126$ 3,207

12. GAIN ON SALES OF PROPERTY, PLANT AND EQUIPMENT
Breakdown of gain on sales of property, plant and equipment is as follows:
Thousands of
U.S. dollars

Millions of yen

Years ended March 31,
Buildings and structures
Machinery, vehicles, tools, furniture and fixtures
Land
Total

2020
¥—
—
—
¥—

2019

¥ 44
3
35
¥ 83

2020
$—
—
—
$—

Thousands of
U.S. dollars

Millions of yen

Years ended March 31,
Valuation difference on available-for-sale securities:
Amount arising during the year
Valuation difference on available-for-sale securities
before tax effectTax effect
Valuation difference on available-for-sale securities
Deferred gains (losses) on hedges:
Amount arising during the year
Reclassification adjustments for gains and losses realized
in profit or loss
Deferred gains (losses) on hedges before tax effectTax effect
Deferred gains (losses) on hedges
Foreign currency translation adjustments:
Amount arising during the year
Foreign currency translation adjustments before tax effectForeign currency translation adjustments
Remeasurements of defined benefit plans:
Amount arising during the year
Reclassification adjustments for gains and losses realized
in profit or loss
Remeasurements of defined benefit plans before tax effectTax effectRemeasurements of defined benefit plans
Share of other comprehensive losses of affiliates accounted
for by the equity method:Amount arising during the year
Total other comprehensive loss

2020

2019

2020

¥

¥

(178)

$ (3,510)

(382)
80
(302)

(178)
46
(131)

(3,510)735(2,775)

82

(426)

753

615
698
(0)
698

(234)
(660)
(0)
(661)

5,652
6,414
(0)
6,414

(788)
(788)
(788)

(1,458)(1,458)(1,458)(7,241)(7,241)(7,241)(1,221)(194)(11,221)(170)(1,391)170(1,221)

(258)
(452)
127
(325)

(1,562)(12,783)
1,562(11,221)(444)¥ (2,057)(470)¥ (3,047)(4,080)$ (18,904)(382)

14. SUPPLEMENTARY INFORMATION FOR CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSFor the year ended March 31, 2020(a) Type and number of outstanding shares
Number of shares

Type of shares

Issued stock:
Common stock
Class A preferred stock
Total
Treasury stock:
Common stock
Total

Balance as ofbeginning of year

Increase in shares
during the year

Decrease in shares
during the year

Balance as ofend of year

38,558,507
20,270,300
58,828,807

—
—
—

—
—
—

38,558,507
20,270,300
58,828,807

224,680
224,680

784
784

—
—

225,464
225,464

Note: T reasury stock increased by 784 shares due to the purchase of shares less than one unit.

60

TOYO ENGINEERING CORPORATION

Integrated Report 2020

TOYO ENGINEERING CORPORATION

Integrated Report 202061

17. FINANCIAL INSTRUMENTS

For the year ended March 31, 2019(a) Type and number of outstanding shares
Number of shares

Type of shares

Issued stock:
Common stock
Class A preferred stock
Total
Treasury stock:
Common stock
Total

Balance as ofbeginning of year

Increase in shares
during the year

Decrease in shares
during the year

Balance as ofend of year

38,558,507—
38,558,507—
20,270,300
20,270,300———

38,558,507
20,270,300
58,828,807

223,648
223,648

1,035
1,035

3
3

224,680
224,680

Note: Issued stock increased by 20,270,300 shares due to the issuance of Class A preferred stock.
Treasury stock increased by 1,035 shares due to the purchase of shares less than one unit.
Treasury stock decreased by 3 shares due to the sale of shares less than one unit.

15. CONSOLIDATED STATEMENTS OF CASH FLOWS
A reconciliation between the balance of cash and deposits reflected in the accompanying consolidated balance sheets and thatof cash and cash equivalents in the accompanying consolidated statements of cash flows as of March 31, 2020 and 2019 aresummarized as follows:
Thousands of
U.S. dollars

Millions of yen

As of March 31,
Cash and deposits
Time deposits with maturities over 3 months
Cash and cash equivalents

2020¥ 81,989(1,776)¥ 80,213

2019

2020

¥ 101,759(3,852)¥ 97,907$ 753,506(16,322)$ 737,184

1. Condition of Financial Instruments
The Company and its consolidated subsidiaries hold their temporary cash surplus through low-risk financial assets and raise funds
through borrowings from banks.
Derivative financial instruments are utilized for reducing the risk of exchange rate fluctuations, interest rate fluctuations, andcredit. Therefore, there are no derivatives for speculative purposes.
Notes receivable, accounts receivable from completed construction contracts are exposed to credit risks of customers andrisks of exchange rate fluctuations. The Company deals with these risks by organizing careful reviews on awarded contracts,
letters of credit, and export credit insurance. The Company minimizes exchange fluctuation risks by entering into corresponding
forward-exchange contracts, in principle.
Investments in securities are exposed to volatility risks of market price. The Company manages these risks by periodic monitoring, as they mainly consist of stocks of business partners.
Notes payable, accounts payable for construction contracts and other are mostly due within 1 year.
Borrowings from banks are raised mainly for capital investment or working capital. For some long-term loans payable, theCompany entered into interest swap agreements to minimize risks of interest rate fluctuations.
Regarding derivatives, forward-exchange contracts are used to minimize exchange fluctuation in foreign-currency operations,and interest-swap contracts are used to minimize interest rate fluctuations.
The fair value of financial instruments is based on their quoted market prices, if available, or reasonably estimated amounts if
there is no market price. Since various assumptions and factors are reflected in estimating the fair value, different assumptions
and factors could result in different fair value. In addition, the notional amounts below are not necessarily indicative of the actual
market risk involved in derivative transactions.
2. Fair Value of Financial Instruments
Book value, fair value, and net unrealized gain or loss of financial instruments consist of the following:
The following does not include items for which it is extremely difficult to determine the fair value.
Millions of yen

16. LEASES(a) Finance Leases(a-1) Finance leases which do not transfer ownership of the leased assets to the lessee
The main component of the leased assets is rental office of foreign subsidiaries.
Depreciation methods
See “2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (f) Leases “(b) Operating Leases
Operating Leases (as Lessee)
Future minimum lease payments subsequent to March 31, 2020 for noncancelable operating leases are summarized as follows:

As of March 31,
Within 1 year
Over 1 year
Total

62

TOYO ENGINEERING CORPORATION

Integrated Report 2020

Millions of yen

Thousands of
U.S. dollars

2020

2020

¥ 143
168
¥ 312

$ 1,3141,543$ 2,867

Unrealized gain /(loss)

As of March 31, 2020
(1) Cash and deposits(2) N otes receivable, accounts receivable fromcompleted construction contracts
Less: Allowance for doubtful accounts (*1)
Notes receivable, accounts receivable fromcompleted construction contracts, net

Book Value

Fair Value¥ 81,989¥ 81,989¥ —54,47254,473

1(3) Accounts receivables-otherLess: Allowance for doubtful accounts (*1)
Accounts receivable-other, net

7,138
(30)
7,108

7,109

1

637
144,207
64,053
6,811
20,161
91,026637
144,209
64,054
6,811
20,192
91,058

—
2
0
—
31
32

158
(764)
(605)

158
(764)
(605)

—
—
¥ —

(4) Investments in securities
Available-for-sale securities
Total of assets(1) Notes and accounts payable for construction contracts and other(2) Short-term loans payable(3) Long-term loans payable (including current portion)
Total of liabilities
Derivatives (*2)
not designated as hedging instruments
designated as hedging instruments
Total derivatives

55,130(658)¥¥

TOYO ENGINEERING CORPORATION

Integrated Report 202063

Thousands of U.S. dollars

Unrealized gain /(loss)

As of March 31, 2020
(1) Cash and deposits(2) Notes receivable, accounts receivable fromcompleted construction contracts
Less: Allowance for doubtful accounts (*1)
Notes receivable, accounts receivable fromcompleted construction contracts, net

Book Value

Fair Value$ 753,506$ 753,506$ —500,615500,624

9(3) Accounts receivables-otherLess: Allowance for doubtful accounts (*1)
Accounts receivable-other, net

65,600(275)
65,32465,3349

5,854
1,325,310
588,668
62,595
185,286
836,559

5,854
1,325,328
588,677
62,595
185,571
836,853

—
18
0
—
284
294

1,452
(7,021)(5,560)

1,452(7,021)(5,560)——$ —(4) Investments in securities
Available-for-sale securities
Total of assets(1) Notes and accounts payable for construction contracts and other(2) Short-term loans payable(3) Long-term loans payable (including current portion)
Total of liabilities
Derivatives (*2)
not designated as hedging instruments
designated as hedging instruments
Total derivatives

506,662(6,047)$$(*1) Notes receivable, accounts receivable from completed construction contracts and accounts receivable—other listed above
are offset by the corresponding figures of allowance for doubtful accounts listed above.
(*2) Net receivables and payables derived as a result of derivative transactions are presented. Values in parentheses show
contra-asset account, net liabilities and unrealized loss.
Millions of yen

Unrealized gain /(loss)

As of March 31, 2019(1) Cash and deposits(2) Notes receivable, accounts receivable fromcompleted construction contracts
Less: Allowance for doubtful accounts (*1)
Notes receivable, accounts receivable fromcompleted construction contracts, net

Book Value

Fair Value¥ 101,759¥ 101,759

67,54567,546

0(3) Accounts receivables-otherLess: Allowance for doubtful accounts (*1)
Accounts receivable-other, net

5,793
(1)
5,791

5,793

2

(4) Investments in securities
Available-for-sale securities
Total of assets(1) Notes and accounts payable for construction contracts and other(2) Short-term loans payable(3) Long-term loans payable (including current portion)
Total of liabilities
Derivatives (*2)
not designated as hedging instruments
designated as hedging instruments
Total derivatives

906
176,00382,5097,900
24,768115,177906
176,006
82,5137,900
24,831
115,244

—
3
3
—
62
66

(88)
(1,462)(1,551)(88)(1,462)(1,551)

—
—
¥ —

¥

Liabilities(1) Notes payable, accounts payable for construction contracts and otherBook values for items which are settled in a short-term are used as fair values of these items because they are nearly equal tosuch book values. Fair values of other items are based on the present value discounted by an appropriate discount rate coupledwith the remaining maturity and credit risks.
(2) Short-term loans payable
Book values are used as fair values because they are nearly equal to such book values.
(3) Long-term loans payable (including current portion)
The present values of the principal and total interest, discounted by the rate assumed to be applied to the new borrowings under
the same conditions, are used as the fair values.
Derivative Transactions
See “19. DERIVATIVE TRANSACTIONS“.
(Note 2) Financial instruments of which it is extremely difficult to determine the fair value
Unlisted securities that amounted to ¥1,572 million ($14,447 thousand) as of March 31, 2020 and ¥1,673 million as of March
31, 2019 are excluded from the above table because they are deemed extremely difficult to determine the fair values; they do
not have market prices and it is not possible to conduct alternative methods such as the estimation of their future cash flows.
(Note 3) Redemption schedule for monetary assets, and investment in securities with maturities¥ —68,193(648)¥(Note 1) Computational method and related issues
Assets(1) Cash and deposits
Book values are used as fair values because they are nearly equal to such book values.
(2) (3) Notes receivables, accounts receivable from completed construction contracts and accounts receivable—otherBook values for items which are settled in a short-term are used as fair values of these items because they are nearly equal tosuch book values. Fair values of other items are based on the present value discounted by an appropriate discount rate coupledwith the remaining maturity and credit risks.
(4) Investments in securities
Fair value of stock items are based on the market prices and bond items are based on the market prices or their price provided
by financial institutions.

Millions of yen

As of March 31, 2020
Cash and deposits
Notes and accounts receivablefrom completed construction contracts
Accounts receivable-other
Total

Within 1 year

After 1 year
through 5 years

After 5 years
through 10 years

After 10 years¥ 81,989

¥

—

¥—

¥—

54,296
6,647¥ 142,933

834
491¥ 1,325

—
—
¥—

—
—
¥—

Within 1 year

After 1 year
through 5 years

After 5 years
through 10 years

After 10 years

—

$—

$—

7,664
4,512
$ 12,177

—
—
$—

—
—
$—

Thousands of U.S. dollars

As of March 31, 2020
Cash and deposits
Notes and accounts receivablefrom completed construction contracts
Accounts receivable-other
Total

$

753,506

498,998
61,088$ 1,313,601$(*1) Notes receivable, accounts receivable from completed construction contracts and accounts receivable—other listed above
are offset by the corresponding figures of allowance for doubtful accounts listed above.
(*2) Net receivables and payables derived as a result of derivative transactions are presented. Values in parentheses show
contra-asset account, net liabilities and unrealized loss.
64

TOYO ENGINEERING CORPORATION

Integrated Report 2020

TOYO ENGINEERING CORPORATION

Integrated Report 202065

19. DERIVATIVE TRANSACTIONSMillions of yen

As of March 31, 2019
Cash and deposits
Notes and accounts receivablefrom completed construction contracts
Accounts receivable-other
Total

Within 1 year

After 1 year
through 5 years

After 5 years
through 10 years

After 10 years¥ 101,759

¥

—

¥—

¥—

67,594
5,105¥ 174,459

599
688¥ 1,287

—
—
¥—

—
—
¥—

(Note 4) Schedule for repayment of bonds and long-term loans payable
See“ 8. SHORT-TERM AND LONG-TERM DEBT”.

18. INVESTMENTS IN SECURITIESThe acquisition cost, unrealized gain and loss and the related book value of available-for-sale securities with available fair values
as of March 31, 2020 are summarized as follows:
Millions of yen

As of March 31, 2020
Securities whose carrying value exceeds their acquisition costs:
Equity securities
Subtotal
Securities whose carrying value does not exceed their acquisition costs:
Equity securities
Subtotal
Total

Book value

As of March 31, 2020
Securities whose carrying value exceeds their acquisition costs:
Equity securities
Subtotal
Securities whose carrying value does not exceed their acquisition costs:
Equity securities
Subtotal
Total

Book value

Acquisition cost

¥ 506
¥ 506

¥ 390
¥ 390

¥ 115
¥ 115

¥ 130
¥ 130
¥ 637

¥ 138
¥ 138
¥ 529

¥ (7)
¥ (7)
¥ 107

Acquisition cost

Unrealized gain

$ 4,650$ 4,650$ 3,584$ 3,584$ 1,056$ 1,056$ 1,194$ 1,194$ 5,854$ 1,268$ 1,268$ 4,861

$
$
$

(64)
(64)
983

The acquisition cost, unrealized gain and loss and the related book value of available-for-sale securities with available fair values
as of March 31, 2019 are summarized as follows:
Millions of yen

Book value

Acquisition cost

Unrealized gain

¥ 529
¥ 529

¥ 376
¥ 376

¥ 906
¥ 906

Proceeds from and gain on sales of securities for the year ended March 31, 2019 are as follows:
Millions of yen

Year ended March 31, 2019
Equity securities

Proceeds¥ 500

Gain on sales¥0

Loss on sales¥—

Impairment of investments in securities
For the year ended March 31, 2019, the Company recognized ¥13 million of impairment loss on unconsolidated subsidiaries.

66

TOYO ENGINEERING CORPORATION

Integrated Report 2020

Millions of yen

All notionalamounts

Non-market transaction:
Foreign exchange forward contracts
Selling
USD
JPY
Buying
USD
EUR
Total

¥

Notional
amounts due
over 1 year649
11,313¥

Unrealized
gain / (loss)

Fair value

23
2,858

¥ (29)
121¥ (29)
121

6,219
79
¥ 18,26028—¥ 2,911

68
(2)
¥ 158

68
(2)
¥ 158

All notionalamounts

Notional
amounts due
over 1 year

Unrealized gain

Thousands of U.S. dollars

As of March 31, 2019
Securities whose carrying value exceeds their acquisition costs:
Equity securities
Total

For the year ended March 31, 2020
1. Derivatives not designated as hedging instruments(1) Currency-related

Thousands of U.S. dollars

Non-market transaction:
Foreign exchange forward contracts
Selling
USD
JPY
Buying
USD
EUR
Total

$

5,964
103,970$

57,154726$ 167,815

Unrealized
gain / (loss)

Fair value

211
26,265$ (266)
1,112$ (266)
1,112

257
—
$ 26,753

624(18)$ 1,452624(18)$ 1,452

Fair value

Computational
method of fairvalue

2. Derivatives designated as hedging instruments(1) Currency-related
Millions of yen

Main hedged
items

Deferral hedge accounting method:
Foreign exchange forward contracts
Selling
USD
EUR
BuyingUSD
EUR
Alternative method:
Foreign exchange forward contracts
Selling
USD
EUR
Buying
USD
EUR
SGD
Total

Accounts
receivableandaccounts
payableAccounts
receivableandaccounts
payableAll notionalamounts¥ 2,026
923

Notional
amounts due
over 1 year

¥

861
—

32,30524,935

2,718
9,819

6,005
2,364

337
282

1,819
958
35
¥ 71,373

194——¥ 14,214¥ (131) Based on
39 prices offeredby financial
480 institutions(1,152)

N/A

Based onforwardexchange
contract prices

TOYO ENGINEERING CORPORATION

Integrated Report 202067

Thousands of U.S. dollars

Main hedged
items

Deferral hedge accounting method:
Foreign exchange forward contracts
Selling
USD
EUR
BuyingUSD
EUR
Alternative method:
Foreign exchange forward contracts
Selling
USD
EUR
Buying
USD
EUR
SGD
Total

Accounts
receivableandaccounts
payableAccounts
receivableandaccounts
payableAll notionalamounts$ 18,619
8,482

Notional
amounts due
over 1 year$

296,893229,160

Fair value

7,912
—

$ (1,203)358

24,97990,2394,411(10,587)

55,187
21,725

3,097
2,591

16,7178,804
321$ 655,941

1,782
—
—
$ 130,631

N/A

Computational
method of fairvalue

Based onprices offeredby financial
institutions

Based onforwardexchange
contract prices

Transaction type

Main hedged
items

All notionalamounts

Notional
amounts due
over 1 year

Fair value

Computational
method of fairvalue

Accounting method:
Interest swap
Long-term
contracts
loans payable
floating for
fixed rate swap

Total

¥ 7,300¥—¥ 7,300¥—

N/A

Based onprices offeredby financial
institutions

Thousands of U.S. dollars

Transaction type

Main hedged
items

All notionalamounts

Notional
amounts due
over 1 year

Fair value

Computational
method of fairvalue

Accounting method:Total

All notionalamounts¥ 2,827
5,147
863
123
84
¥ 9,046

Non-market transaction:
Foreign exchange forward contracts
Selling
USD
MYR
Buying
USD
EUR
JPY
Total

Interest swap
Long-term
contracts
loans payable
floating for
fixed rate swap

$ 67,089$—$ 67,089$—

Fair value

Unrealized
gain / (loss)

¥—
—

¥

¥

7
23
—
¥ 31

(6)
(5)
(1)
¥ (88)

47
(123)

47
(123)

(6)
(5)
(1)
¥ (88)

2. Derivatives designated as hedging instruments(1) Currency-related

Main hedged
items
Millions of yen

Special method forinterest rate swap

Millions of yen

Notional
amounts due
over 1 year

Millions of yen(2) Interest-related

Special method forinterest rate swap

For the year ended March 31, 2019
1. Derivatives not designated as hedging instruments(1) Currency-related

N/A

Based onprices offeredby financial
institutions

Deferral hedge accounting method:
Foreign exchange forward contracts
Selling
USD
EUR
Buying
USD
EUR
SEK
SGD
Alternative method:
Foreign exchange forward contracts
Selling
USD
EUR
SEK
Buying
USD
EUR
Total

Accounts
receivableandaccounts
payableAccounts
receivableandaccounts
payableAll notionalamounts

Notional
amounts due
over 1 year

¥ 15,148
5,840¥ 3,324
1,764

39,642
23,321
204
51

15,734
11,428—2

10,188
252
16

—
—
—

1,873
678
¥ 97,218

173—¥ 32,428

Fair value

¥

(895)
323
164
(1,030)
(25)
0

N/A

Computational
method of fairvalue

Based onprices offeredby financial
institutions

Based onforwardexchange
contract prices(2) Interest-related
Millions of yen

Main hedged
items

All notionalamounts

Notional
amounts due
over 1 year

Fair value

Interest swap
Long-term
contracts
loans payable
floating for
fixed rate swap

¥ 7,800¥ 7,300

N/A¥ 7,800¥ 7,300

Transaction typeComputational
method of fairvalue

Accounting method:
Special method forinterest rate swap
Total

68

TOYO ENGINEERING CORPORATION

Integrated Report 2020

Based onprices offeredby financial
institutions

TOYO ENGINEERING CORPORATION

Integrated Report 202069

20. RETIREMENT BENEFITS(4) Retirement benefit expenses

The Company and certain consolidated subsidiaries have either funded or unfunded defined benefit plans and lump-sum payment
plans and the defined contribution plans.
The Company and certain consolidated subsidiaries provide lump-sum or pension which is based on salary and service timein the defined benefit plans and introduce cash balance-style pension plans in a part of defined benefit plans. In this institution,
hypothetical individual employee accounts which are equal to the source of deposit and pension by each buyer are established.
In these accounts, the interest credit which is based on the movement of market interest rate and the contribution credit which
is based on the salary level, etc. are accumulated. In a part of defined benefit plans, etc., retirement benefit trust is established.
In lump-sum payments plans (part of which becomes funded as a result of benefit trust although the system is unfunded), thelump-sum based on the salary and service time as retirement benefits is provided.
Defined contribution plans and lump-sum payments for certain consolidated subsidiaries are accounted for using the simplified method in which calculates retirement benefit liabilities and retirement benefit expenses.

2020
Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial gains and losses
Other
Total

¥ 900
228
(507)
34
163
¥ 819

2020

¥ 1,004
222
(540)
(241)
(72)
¥ 372

$ 8,271
2,095(4,659)312
1,498$ 7,526

Thousands of
U.S. dollars

Millions of yen
Thousands of
U.S. dollars

Millions of yen

2020

2019

¥ 18,764
900
228
155
(1,387)(46)¥ 18,613¥ 19,441
1,004
222
(510)
(1,173)(220)¥ 18,7642020$ 172,447
8,271
2,095
1,424
(12,746)(422)$ 171,059

2020
Actuarial gains and losses
Total

Thousands of
U.S. dollars

Millions of yen

2020

2019

¥ 18,198
507(1,271)559(1,137)(194)¥ 16,663¥ 19,004
540
(721)
602
(1,089)(138)¥ 18,1982020$ 167,245
4,659(11,680)
5,137(10,449)(1,782)$ 153,138

2020

2019

¥ (1,391)¥ (1,391)$ (12,783)$ (12,783)¥ (452)¥ (452)(6) Accumulated remeasurements of defined benefit plans
The unrecognized actuarial gains and losses recognized in accumulated other comprehensive income (amount before income tax
effect) as of March 31, 2020 and 2019 are as follows:
Thousands of
U.S. dollars

Millions of yen

2020
Unrecognized actuarial gains and losses
Total(2) Changes in plan assets

Beginning of year
Expected return on plan assets
Actuarial gains and losses
Contributions by the employer
Benefit paid
Other
End of year

2019(5) Remeasurements of defined benefit plans(1) Changes in defined benefit obligations

Beginning of year
Service cost
Interest cost
Actuarial gains and losses
Benefit paid
Other
End of year

Thousands of
U.S. dollars

Millions of yen

2020

2019

¥ (820)¥ (820)$ (7,536)$ (7,536)

¥ 570
¥ 570

(7) Major breakdown of plan assets

2020
Components of plan assets
Securities
StocksCash and deposits
Other
Total

2019

27%
41%
13%
19%
100%

26%
46%
11%
17%
100%

18% and 20% of total plan assets as of March 31, 2020 and 2019, respectively, are included in the retirement benefit trust.
(3) Reconciliation of defined benefit obligations and plan assets to net benefit liability and asset
The reconciliation of the defined benefit obligations and plan assets to net defined benefit liability and asset recognized in the
consolidated balance sheets as of March 31, 2020 and 2019 are as follows:
Thousands of
U.S. dollars

Millions of yen

Funded defined benefit obligations
Plan assets
Subtotal
Unfunded defined benefit obligations
Net amount of liability and asset recognized in consolidatedbalance sheets
Liabilities (net defined benefit liability)
Assets (net defined benefit asset)
Net amount of liability and asset recognized in consolidatedbalance sheets

70

TOYO ENGINEERING CORPORATION

Integrated Report 2020

2020

2019

¥ 17,367(16,663)704
1,246¥ 17,608(18,198)
(589)
1,155

$ 159,608(153,138)
6,469
11,451

1,950
1,950
—

565
1,200
(635)

17,921
17,921—565$ 17,921¥ 1,950¥

2020(8) Basis of actuarial calculation
Basis of calculation of projected benefit obligation for the years ended March 31, 2020 and 2019 are as follows:
Discount rate
Expected rate of return on plan assets
Expected salary increase rate

2020

2019

Mainly 0.08%
Mainly 2.5%
Mainly 3.1%

Mainly 0.08%
Mainly 2.5%
Mainly 3.1%

Defined contribution plans
The contributions by the Company and subsidiaries to the defined contribution plans were ¥306 million ($2,812 thousand) and¥280 million for the years ended March 31, 2020 and 2019, respectively.

TOYO ENGINEERING CORPORATION

Integrated Report 202071

21. INCOME TAXES

Millions of yen

The statutory tax rate applicable to the Company and its domestic subsidiaries for the years ended March 31, 2020 and 2019 wasapproximately 30.5%. Income taxes of the foreign subsidiaries are based generally on the tax rates applicable in their countries ofincorporation.
(1) Significant components of the deferred income tax assets and liabilities
Thousands of
U.S. dollars

Millions of yen

As of March 31,
Deferred tax assets (gross):
Net operating loss carry forwards (*2)
Accounts payable for construction contracts
Provision of allowance for doubtful accounts
Net defined benefit liability
Interest income receivable
Provision for loss on construction contracts
Deferred losses on hedges
Other
Total deferred tax assets (gross)
Valuation allowance for net operating loss carry forwards (*2)
Valuation allowance for deductible temporary differences
Total valuation allowance (*1)
Total deferred tax assets (gross)
Deferred tax assets-Deferred tax liabilities
Total deferred tax assets

2020

2019

2020

¥ 13,429
4,475
2,198
1,414
845
89
225
1,859
24,538(13,426)(10,312)(23,738)
799
(319)
480

¥ 14,665
3,112
2,220
1,307
660
626
436
2,275
25,304(14,657)(8,051)(22,708)
2,596(1,767)828$ 123,416
41,126
20,20012,995
7,765
817
2,067
17,084
225,512(123,389)(94,770)(218,160)
7,343(2,931)
4,411

Deferred tax liabilities (gross):
Undistributed earnings of subsidiaries and affiliates
Valuation difference on available-for-sale securities
Gain on securities contribution to retirement benefits trust
Other
Total deferred tax liabilities (gross)
Deferred tax assets-Deferred tax liabilities
Deferred tax liabilities
Net deferred tax liabilities

1,522
35
652
304
2,515
(106)
2,408
¥ (1,928)

2,202
115
660
1,027
4,006
(1,767)2,238¥ (1,409)

13,987
321
5,992
2,793
23,113(974)
22,130$ (17,718)(*1) The Company studied the recoverability of deferred tax assets under the increasing uncertainty in business environment andfuture profitability due to COVID-19 and falling oil prices. As a result, total valuation allowance has increased by ¥1,030 million($9,466 thousand) from the end of previous fiscal year.
(*2) A breakdown of net operating loss carry forwards and valuation allowance by expiry date as of March 31, 2020 and 2019 are
as follows:
Millions of yen

As of March 31, 2020
Years ended March 31,
2021
2022
2023
2024
2025
2026 and thereafter
Total

Net operating loss
carry forwards

Valuation
allowance

¥

¥

14
—
—
445
—
12,969¥ 13,429

12
—
—
445
—
12,969¥ 13,426

Deferred tax
assets

As of March 31, 2019Years ended March 31,
2020
2021
2022
2023
2024
2025 and thereafter
Total

Net operating loss
carry forwards

Valuation
allowance

¥

¥

—
18
—
—
445
14,201¥ 14,665

Deferred tax
assets

—
10
—
—
445
14,201¥ 14,657

¥—
8
—
—
—
—
¥ 8

(2) The effective tax rate on income before income taxes in the accompanying consolidated statements of operations were notequal to the above-mentioned statutory tax rate for the following reasons for the year ended March 31, 2020 and 2019.
Year ended March 31,
Statutory tax rate in Japan
Adjustments:
Permanently nondeductible expenses
Permanently nontaxable income
Per capita levy on corporate inhabitant tax
Temporary differences excluded from calculation of deferred tax assets
Difference in tax rates for foreign subsidiaries
Difference in tax base between corporate income tax and enterprise tax
Net operating loss carry forwards etc.
Equity in earnings of affiliates
Adjustment of tax in prior years
Non-income based tax in foreign countries
Undistributed earnings of subsidiaries and affiliates
Changes in tax rate of foreign subsidiaries
Adjustment for consolidation of gain on sales of shares of an affiliate
Other
Effective tax rate

2020

2019

30.5%

30.5%

5.3%
(9.7%)
0.5%
3.0%(0.9%)(6.5%)
49.9%(10.0%)(0.2%)
7.9%(15.3%)
2.4%
6.6%(1.3%)
62.2%

3.5%(1.2%)
0.4%(132.6%)(1.1%)(11.2%)
253.3%(55.6%)
1.4%
10.2%
21.4%
—
—
3.0%
122.0%(3) Change in deferred tax assets and deferred tax liabilities due to tax rate changes
Due to the amendment of the Income Tax Act in India, the statutory tax rate in the country has been changed from 34.94% to25.17% for the calculation of deferred income taxes arising from future deductible or taxable temporary differences.
As a result, deferred income taxes in investments and other assets (amount offset by that of non-current liabilities) in the
consolidated balance sheet as of March 31, 2020 decreased by ¥108 million ($992 thousand) and income taxes-deferred in the
consolidated statement of operations for the year ended March 31, 2020 increased by ¥108 million ($992 thousand).

¥ 2
—
—
—
—
—
¥ 2

Millions of U.S. dollars

Years ended March 31,
2021
2022
2023
2024
2025
2026 and thereafter
Total
72

TOYO ENGINEERING CORPORATION

Integrated Report 2020

Net operating loss
carry forwards

Valuation
allowance

$

$

128
—
—
4,089
—
119,189$ 123,416

110
—
—
4,089
—
119,189$ 123,389

Deferred tax
assets

$ 18
—
—
—
—
—
$ 18
TOYO ENGINEERING CORPORATION

Integrated Report 202073

22. SEGMENT INFORMATION

23. RELATED PARTY INFORMATION
1. Related Party Transactions
For the year ended March 31, 2020

(1) Information by geographical segment based on the locations of projects
Millions of yen

Year ended March 31, 2020
Net Sales

Japan

India

Nigeria

Indonesia

Thailand

Other

Total

¥ 65,060¥ 39,964¥ 28,512¥ 26,841¥ 22,767¥ 35,948¥ 219,094

Japan

India

Nigeria

Indonesia

Thailand

Other

Total

$ 597,922$ 367,282$ 262,034$ 246,677$ 209,236$ 330,374$ 2,013,546

Thousands of U.S. dollars

Year ended March 31, 2020
Net Sales

Millions of yen

Year ended March 31, 2020
Property, plant and equipment

Japan

Indonesia

Other

Total

¥ 7,869¥ 2,012¥ 1,635¥ 11,517

Japan

Indonesia

Other

Total

$ 72,318$ 18,490$ 15,026$ 105,845

Thousands of U.S. dollars

Year ended March 31, 2020
Property, plant and equipment

Japan

India

Nigeria

Indonesia

Thailand

Other

Total

¥ 50,086¥ 40,524¥ 10,493¥ 48,859¥ 37,765¥ 107,264¥ 294,993

Japan

Indonesia

Other

Total

¥ 8,003¥ 2,089¥ 1,104¥ 11,196(Changes in presentation)
Nigeria, which had been included in “Other” for the year ended March 31, 2019, is presented separately for the year ended
March 31, 2020 because the corresponding amount exceeded 10% of net sales on the consolidated statement of operations forthe year ended March 31, 2020.
USA and Malaysia, which had been presented separately for the year ended March 31, 2019, are included in “Other” for theyear ended March 31, 2020 because the corresponding amounts are below 10% of net sales on the consolidated statement ofoperations for the year ended March 31, 2020.
To reflect these changes in presentation, ¥10,493 million attributable to Nigeria for the year ended March 31, 2019, which had
been previously included in “Other,” was reclassified and presented separately, while ¥49,030 million attributable to USA and¥41,168 million attributable to Malaysia for the year ended March 31 ,2019, which had been previously presented separately, arereclassified as “Other” as of March 31, 2020.

Millions of yen

Net Sales

Segment¥ 32,855¥ 28,512

EPC
EPC

Thousands of U.S. dollars

Year ended March 31, 2020
Hindustan Urvarak & Rasayan Limited
Indorama Eleme Fertilizer & Chemicals Limited

Net Sales

Segment$ 301,948$ 262,034

EPC
EPC

Year ended March 31, 2019
Shintech Louisiana, LLC
PRPC REFINERY AND CRACKER SDN. BHD.

Net Sales

TOYO ENGINEERING CORPORATION

Integrated Report 2020

¥ 45,607¥ 37,610

Accountbalance

Transaction
amountTitle ofaccount

AccountbalanceLong-term
loans
receivable¥ 3,707$—

Long-term
loans
receivable$ 34,068

Name: N EDL-CONSTRUCOES DE
DUTOS DO NORDESTE LTDA.
Category: Affiliate
Address: Brazil
Capital and investments:
15,153 thousands BRL
Business: Construction
Equity ownership percentage:
42.5% directly
Relation with related party:
Loan for operating fund

Summary of Transaction
transactions amount

Loan for
operatingfund¥—

Title ofaccount

AccountbalanceLong-term
loans
receivable¥ 3,707

Notes: 1. Interest rate on loan is determined by considering effective market rates.
2. The Company reserved ¥3,707 million ($34,068 thousand) of allowance for doubtful accounts as of March 31, 2020,
against the loan above.
3. The Company reserved ¥3,707 million of allowance for doubtful accounts as of March 31, 2019, against the loan above.
For the year ended March 31, 2019
Millions of yen

Category: Affiliate
Address: Brazil
Capital and investments:
38,904 thousands BRL
Business: Construction
Equity ownership percentage:
50% indirectly
Relation with related party:
Contingent liabilities

transactions

amountTitle ofaccount

AccountbalanceContingent
liabilities¥ 1,601—¥—

Note: 1. Contingent liabilities are provided for refund guarantee etc. of Toyo Setal Empreendimentos Ltda.

Millions of yen

74¥—

Name: T oyo Setal Empreendimentos Ltda. Summary of Transaction(2) Information by major clients
Year ended March 31, 2020
Hindustan Urvarak & Rasayan Limited
Indorama Eleme Fertilizer & Chemicals Limited

Loan for
operatingfund

Thousands of U.S. dollars

Title ofaccount

Millions of yen

Millions of yen

Year ended March 31, 2019
Property, plant and equipment

Summary of Transaction
transactions amountFor the year ended March 31, 2019

Millions of yen

Year ended March 31, 2019
Net Sales

Millions of yen

Name: N EDL-CONSTRUCOES DE
DUTOS DO NORDESTE LTDA.
Category: Affiliate
Address: Brazil
Capital and investments:
17,141 thousands BRL
Business: Construction
Equity ownership percentage:
42.5% directly
Relation with related party:
Loan for operating fund

Segment

EPC
EPC

TOYO ENGINEERING CORPORATION

Integrated Report 202075

For the year ended March 31, 2020
Millions of yen

Name: Estaleiros do Brasil Ltda.
Category: Affiliate
Address: Brazil
Capital and investments:
57,749 thousands BRL
Business: Construction
Equity ownership percentage:
50% indirectly
Relation with related party:
Loan for operating fund

Summary oftransactions

Transaction
amountTitle ofaccount

Loan for
operating fund

Short-term¥—
loans
receivable

Repaymentof loan for
operating fund884

Accrued interest
income5

Thousands of U.S. dollars

Accountbalance¥ 5,389

Transaction
amountTitle ofaccount

Short-term$—
loans
receivable

Accountbalance——Thousands of
U.S. dollars

Millions of yen$ 49,526

8,124—

2. Summary of Financial Statements of Significant Affiliates
For the years ended March 31, 2020, the significant affiliates were MODEC and Toyo Offshore Production Systems Pte.Ltd. and
TS Participações e Investimentos S.A.
Their condensed financial information is as follows:—

As of and for the years ended March 31,
Total current assets
Total non-current assets
Total current liabilities
Total non-current liabilities
Total net asset deficiencies

2020

2020

¥ 13,627
3,483
31,266
1,864¥ (16,020)$ 125,236
32,009287,344
17,130$ (147,229)

¥

$

45
Net sales
Profit before income tax
Profit

For the year ended March 31, 2019

¥

5,270
1,749
1,656

$

48,433
16,073
15,219Millions of yen

Name: Estaleiros do Brasil Ltda.
Category: Affiliate
Address: Brazil
Capital and investments:
57,749 thousands BRL
Business: Construction
Equity ownership percentage:
50% indirectly
Relation with related party:
Loan for operating fund

Summary oftransactions

Loan for
operating fundTransaction
amount¥—Repaymentof loan for
operating fund

2,986

Accrued interest
income688

Title ofaccount

Accountbalance

Short-term
loans
receivable¥ 5,432—

Note: 1. Interest rate on loan is determined by considering effective market rates—

For the years ended March 31, 2019, the significant affiliates were Moeco Thai Oil Development Co.,Ltd., MODEC and Toyo
Offshore Production Systems Pte.Ltd. and TS Participações e Investimentos S.A.
Their condensed financial information is as follows:
Millions of yen

2019

As of and for the years ended March 31,
Total current assets
Total non-current assets
Total current liabilities
Total non-current liabilities
Total net asset deficiencies¥ 26,178
11,17236,646
5,057¥ (4,351)

Net sales
Profit before income tax
Profit¥ 10,461
9,598¥ 7,209

24. AMOUNTS PER SHARE
Yen

As of and for the years ended March 31,
Net assets per share
Income (loss) attributable to owners of parent per share

U.S. dollars

2020

2019

¥ 544.16
28.40¥ 554.11(20.51)2020$ 5.000.26

Income (loss) attributable to owners of parent per share is computed based on the Income (loss) available for distribution to shareholders of common stock and the weighted average number of shares of common stock outstanding during each year.
For the calculation of “income (loss) attributable to owners of parents per share”, the number of Class A preferred stocks
were included.
Net assets per share are computed based on the number of common stock outstanding and the net assets excluding non-controlling interests and residual assets attributable to Class A preferred stock at the year end.

76

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TOYO ENGINEERING CORPORATION

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TOYO ENGINEERING CORPORATION

Integrated Report 202081

Corporate Information

Stock Information (As of March 31, 2020)

Corporate Data
Corporate Name:

Toyo Engineering Corporation

Capital Stock¥18,198 million

Founded:May 1, 1961

Stock Exchange Listing

Tokyo Stock Exchange

Authorized Shares

Common Shares
100,000,000
Class A Preferred Shares 25,000,000

Capital Stock Issued

Common Shares
38,558,507
Class A Preferred Shares 20,270,300

Number of Employees: 3,991 (Consolidated, as of March 31, 2020)
Corporate Philosophy:

Mission Engineering for Sustainable Growth of the Global Community
V i s i o n Global Leading Engineering Partner
V a l u e s Integrity, Creativity, Diversity, Learning, Team

Business Activities:

Engineering and Construction for Industrial Facilities
R&D support, design, engineering, procurement, construction, commissioning, technical assistance for industrial facilities:oil, gas, oil & gas development, petrochemicals, chemicals, water treatment, transportation systems, power plant,
nuclear power, advanced production systems, pharmaceutical, fine chemical, logistic center, biotechnology, environment
conservation and others

TOYO was established. Capital: 300 million yen

1962

An agreement for engineering service and technicalassistance was concluded with Lummus Co. (U.S.A.).

1963

The first overseas contract for a fertilizer plant with The
Fertilizer Corporation of India Ltd. was awarded.

1964
1965
1969
1970
1972

The first urea plant contract in the former Soviet Union
was awarded.

Toyo U.S.A., Inc. established.
Toyo Engineering & Construction Sdn. Bhd.
established in Malaysia.

1987

Toyo Engineering Korea Limited established.
Tecno Frontier (currently TEC Project Services)established in Japan.

1989

Capital: 12,219 million yen

TOYO was awarded its first ethylene plant contract(Osaka, Japan).

1990

Head Office/Engineering Center (Bay-TEC Building)started operation in Narashino, Chiba.

TOYO was awarded the contract for the first ammonia plantin the former Soviet Union.

1993

Capital: 13,017 million yen

TOYO was awarded the contract for two ammonia plants inthe former East Germany.

1994

TOYO received ISO 9001 registration.

2004

TOYO received ISO 14001 registration.

International Procurement & Service Corporation(Currently Toyo Engineering Europe, S.r.l.) established.

1973

A contract for a Ethylene plant for China was awarded.

1975

Capital: 1,890 million yen

1976

Toyo Engineering India Limited established.

1978

Capital: 2,970 million yen

1980

Capital: 3,300 million yen
TOYO was listed on the second section of
the Tokyo Stock Exchange.

1982

1986

Capital: 5,040 million yen
TOYO was listed on the first section of
the Tokyo Stock Exchange.

Toyo Engineering Corporation, China established.
2006

Capital: 18,198 million yen

2007

Relocation of Tokyo head office.

2009

TOYO formulated the Group MVV (Mission, Vision, Values).

2010

TOYO acquired Tri Ocean Engineering Limited in Calgary,Alberta, Canada (Currently Toyo-Canada).

2011

The 50th Anniversary
TOYO invested in PT. Inti Karya Persada Tehnik (IKPT)in Indonesia.

2012

TS Participações e Investimentos S.A. established in Brazil.
Consolidated Group logo developed.

2018

Haruo Nagamatsu was elected as President and CEO.

2019

TOYO formulated “Your Success, Our Pride.” as the slogan
for the entire TOYO Group.

Worldwide Network

Types of Shareholder (Common Shares)

1. Common Shares
Number of shares(thousands)

Voting rights
ratio (%)

Percentage of
total (%)

Mitsui & Co., Ltd.

8,754

22.89

14.93

Japan Trustee Services Bank, Ltd.
(Sumitomo Mitsui Trust Bank, Limited
Re-trust Account, Mitsui Chemicals, Inc.
Pension Trust Account)

5,140

13.44

8.77

The Master Trust Bank of Japan, Ltd.
Trust Account

1,070

2.80

1.82

Taisei Corporation

OVERSEAS GROUP COMPANIES• Head Office/Engineering Center• Toyo Engineering Korea Limited• Toyo Engineering Europe, S.r.I.

• TEC Project Services Corporation

Chiba, Japan

Seoul, Korea

Milan, Italy• Tokyo Head Office• Toyo Engineering Corporation(China)• Toyo Engineering Canada Ltd.

EPC and maintenance services forplants and facilities• Jakarta Office
Indonesia• Moscow Office
Russia

1,000

2.61

1.70

SSBTC CLIENT OMNIBUS ACCOUNT

811

2.12

1.38

Japan Trustee Services Bank, Ltd.
Trust Account 5

533

1.39

0.91

Japan Trustee Services Bank, Ltd.
Trust Account

530

1.38

0.90

Sumitomo Mitsui Banking Corporation

470

1.22

0.80

Number of shares(thousands)

Voting rights
ratio (%)

Percentage of
total (%)

Others
1.18%

Financial
institutions
26.24%

Individuals
35.07%

Type of Shareholder

Domestic
companies
26.57%

Foreignshareholders
10.94%

2. Class A Preferred Shares

Integral Team Limited Partnership

17,576—

29.99

Innovation Alpha Team L. P.

2,693

—

4.59

Notes) 1. The shareholding ratio was calculated based on the exclusion of the 225,464
shares of treasury stock.
2. Class A preferred stock do not have any voting rights.

Stock Chart

HEAD OFFICETokyo, Japan

15,5692

Sumitomo Mitsui Trust Bank, Limited
1-4-1 Marunouchi, Chiyoda-ku, Tokyo
100-0005, Japan

Administrator of
Shareholders’ Register

Major Shareholders

History
1961

Number of Shareholders Common SharesClass A Preferred Shares

Shanghai, China• PT. Inti Karya Persada Tehnik(IKPT)
Jakarta, Indonesia• Toyo Engineering & Construction
Sdn. Bhd.
Kuala Lumpur, Malaysia• Toyo Engineering India Private
LimitedMumbai, India

DOMESTIC GROUP COMPANIESCalgary, Canada•T EC Business Services Corporation• Toyo U.S.A., Inc.

Staffing service, contracted businessservice, translation and interpretation
service, facility management service

Houston, U.S.A.

• TS Participações e Investimentos
S.A.
Sao Paulo, Brazil

(Yen)

2,000

1,500

1,000

500

• TEC Air Service Corporation
Travel and insurance services

Trading Volume (Thousands of Shares)

0

10,0008,000• TEC Accounting & Consulting Ltd.

6,000

Business support and consulting foraccounting and accounting systemdevelopment• Chiba Data Center Corporation
Data entry, scanning services andcommercial printing

4,000
2,000
0
4

5

6

7

8

9

10 11 12

1

2

3

4

5

6

7

8

FY20179

10 11 12FY2018

1

2

3

4

5

6

7

8

9

10 11 121

2

3

FY2019*Stock prices are converted taking into account the impact of share consolidation.

82

TOYO ENGINEERING CORPORATION

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TOYO ENGINEERING CORPORATION

Integrated Report 2020

83

TOYO ENGINEERING CORPORATION
2-8-1 Akanehama,Narashino-shi, Chiba 275-0024, Japan
https://www.toyo-eng.com/jp/en

2020