Nikko

Nikko Corporate Report 2022
Fiscal year ended March 31, 2022

Corporate
Report2022

Future creation thatstarts from an ‘ ’Identity of Nikko Group

Table of Contents, Editorial Policy, Disclosures

In the Nikko Mirai Project, the Nikko Group defined the actions that generate various
kinds of future values in the society as Nikko Corporate Identity.
Being of service to society and having a mission, which is its raison d’être, areimportant to the Nikko Group upon enhancing the sustainability of its management.
They also lead to

CONTENTSINTRODUCTION

���������������������������������������������������

Identity of Nikko Group �������������������������������������

Table of Contents, Editorial Policy, Disclosures
History of Value Creation“Making the world a resilient and gentle place.”�����������������������������������

03

Process for Achieving 2030 Vision ��������������������� ��������������������������������������������

����������������������������������SUSTAINABILITY AND MANAGEMENT FOUNDATION �����

49

Sustainability Strategy in Medium-Term
Management Plan ���������������������������������������������

49

Realization of Carbon Neutrality

51

Creation of New Customer Values

Future creationthat starts froman ‘ ’

Making the world a resilient andgentle place.

SPIRIT Spirit we treasure
1
2

3

Future axis

4

VALUE Values we offer

 e conscious of theB
objective.

59

 ����������������������

61

Improvement of Employee Engagement
Stakeholder Engagement���������������

63�����������������������������������

67

CORPORATE GOVERNANCE
Executives

 ���������������������������������

69�������������������������������������������������������

69

 �����������������

11 �������������������������������������������

11

Roles of Board of Directors and Audit &Supervisory Board

71

����

Target Economy, Social and Environmental Value

21

Interview with Outside Directors�������������������������

79

Medium-Term Management Plan �������������������������

23�����������������������������������������������

83 ��������������������������������������������

11

12

31

Financial Data of the Past 10 Years �����������������������������������������

35

Consolidated Financial Statements�������������������������������������������

CFO on Financial and Capital Strategies
Management Capital
Segment Highlights

87����������������������

89

 ���������������������������������������������

92

Stock Information

39

Company Overview and Offices and Sites �����������������������������������������

41

Summary of Subsidiaries

Environment- and Conveyor-Related BusinessCommunicate with care
to your counterpart.

83

37

Business Strategies: AP-Related Business

Other Businesses �����������������������

������������

 ake on challenges
T
without fear.
Value time.

10

FY 2021 Business Summary and FY 2022 Outlook

BP-Related Business

6

9

31

 ��������������

������������������������

Come up with ideas.

Accomplish to the end.

8

Employeeaxis

Make work interesting.

5

7

MISSION Missions Nikko must fulfill in daily operations�� �������������������������������������������������������STRATEGY FOR VALUE CREATIONVISION The future we want to realize �������������������������

Contribution to Resource Recycling-oriented Society

CORPORATE DATASLOGAN

Update the social
infrastructureby leveraging
engineering that is
one step ahead ofothers.

07

Nikko Group in Figures (Financial and Nonfinancial
09
Highlights)

NIKKO CORPORATE IDENTITYW e will pursue safety and security inall products and services.
2 W
 e will identify true issues and makeproposals from a customer perspective.
3 W
 e will focus our eyes
Customeron where society andaxis
the era are heading
towards, and tocontinue refining our technology.
4 W
 e will stay close to our customers
and support them through the future.
5 W
 e will integrate our engineering
capabilities to exceed expectations.

05

High-Priority Management Issues for Achieving the06
Vision (Materiality)

Interview with CEO

1

01
02

VALUE CREATION VISIONS & STORIES

Symbolization

01

�����

Process of Value Creation

which is the vision of the future we want to realize.

INTRODUCTION

������

43����������������������������������������������

44

Risks and Opportunities������������������������������������

������������

93

 �����������������������������������

94

45

Measures to Reinforce Platform for Delivering Value47
to Realize 2030 Vision���������������������������������������

 elp and enhanceHyour colleagues.
Learn extensively, bothfrom within and outside.
Strive forward sincerely,
and with determination.
 e at ease mentallyBand physically.

Editorial Policy andNikko Group’s Disclosure■Target readers
All stakeholders connected to the Nikko Group.
■Reporting period
The Report mainly covers FY 2021 (April 1, 2021 to March 31, 2022)
but also includes information before and after this period.

Give priority to safety.

■Reporting scope
The Report covers the Nikko Group comprising Nikko Co., Ltd. and 11
subsidiaries (all of which are consolidated subsidiaries).

Basic principles(long-standing values since our establishment)■Serve society through business.
■Work toward prosperity with sincerity and responsibility.
■Produce appropriate profits through original ideas
and improvement efforts.

01 N ikko Corpo ra te R epo r t 2 0 2 2

Nikko Group Corporate Report 2022 aims to disclose Nikko Group’s■Company namemedium- and long-term value creation efforts from both financial and“Nikko” and the “Company” refer to Nikko Co., Ltd. The “Nikko Group”

non-financial aspects to all stakeholders, including our shareholders

and the “Group” refer to the Nikko Group, including consolidated

and investors. The Report is edited referring to The International

Integrated Reporting Framework established by the Value Reporting

subsidiaries.
■Note on forward-looking information

Foundation (VRF) and the Guidance on Integrated Disclosure andThis Report includes statements on future outlook. We appreciate

Dialogues for Joint Value Creation by the Ministry of Economy, Tradethat you understand that actual performance may differ from theand Industry of Japan.

Company’s projections.

N i kko C o r p o rate R ep o r t 2 0 2 2 02

History of Value Creation

INTRODUCTION

Nikko Group, which started business in 1919 with the manufacturing and sales of hardware forconstruction such as shovels, spades, and pickaxes, marked its 100th anniversary in August
2019. In 2022, the Group announced the new Medium-Term Management Plan (2022–2024),
positioning the period as an internal growth phase for building the structure, process, andsystem for realizing what the Nikko Group should be in 2030 (60.0 billion yen in net sales and
10% in operating margin). As a pioneering company in asphalt plants and concrete plants,
Nikko Group will contribute to decarbonized society through innovation and expansion into new
business domains utilizing DX technology, while strengthening its global expansion.
60

700
Net sales

600

50

Operating income (right axis)

500

40

400

30

300

20

200

10

100

0

0

(100 mil. yen) 1971

1975

1980

1985

1990

2000

1995

2005

2010

2015

2020

-10
2030 (100 mil. yen)2022 2023 2024 2025

estimate estimate estimate

Note: In the fiscal year ended March 1991, the Company changed the reporting period ending in November to March. It started consolidated reporting in the fiscal year ended March 1995. It reported non-consolidated performance before that.

target1919-1950

1951-19691970-1989

1990-20112012-2021

2022-2030

Start-up and postwar
reconstruction

Business expansion andrapid economic growth

Transformation into amachinery manufacturer

Foray into environmental
business and strengtheningof group management

Switch to aggressive
management approach

Towards realizing the New MediumTerm Management Plan and what the
Nikko Group aspires to be in 2030

History of Nikko Group
1919: Nihon Kogu Product Co., Ltd. established
1920: Shovel goes on sale1972
1973 1974
1921: Head Officerelocated
to Akashi

1951: Starts production of winches and mixers

1991: Establishes Development Technology Center

1970: New AP plant

1956: Starts production and sales of Manten
1970: Starts production of lifts and scaffold
1976 1977 1978 1979shovels 1981 1982 1983 1984
1991 1992 1993 1994
1986 1987 1988 planks
1989

1934: Second Plant opens, startsproduction ofwooden handles

1958: Nikko’s first asphalt plant completed

1971: Anti-pollution AP completed

Offered shovels and spades forreconstruction demand

Manufacture and sales of various construction
machinery

Offered anti-pollution plants

1994: Satte factory completed

1996 1997 1998 1999

2012: Takahisa Nishikawa appointed
Representative Director and President

2015:
Starts activities
the2018
sole Japanese
2001 2002 2003 2004
2006WELL
2007Burner,
2008 20092011 2012 20132014
2016 as20172019
1997: Develops
a new model
aimed at reducing CO2 emissions

agent for Kleemann of Germany

2022: Announces the new Medium-Term
Management Plan (2022–2024)

2021

2024: Targets of 50.0 billion yen in net sales
and 6% in operating margin

2016: Starts sales of Value Pack, a new asphalt
2030: Targets of 60.0 billion yen in net sales
1998: Starts sales of Recycle 4, a new beverage
1962: Lists shares on the first section of the
1974: Signs technology tie-up withplant modeland 10% in operating margincontainer separator crusher
Tokyo Stock Exchange
Benninghoven of West Germany
1938: Third
Plant
completed,startsproduction
1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2031
2018: Newly constructs Techno Center (Akashi)
2002:
Establishes
Nikko(Shanghai)Construction
1963:
The
first
automatedbatcher
plant
1979:
Signs
technology
tie-upon
drum
mixing1948: Fourth Plant complete construction work,
Machinery Co., Ltd.
completed
plants with Boeing Construction
2018: Establishes Mobile Plant Businessstarts production of cast metal
Equipment Company of the US
Department
2004: Completion ceremony for Jiading factory
1966: Starts production of belt conveyer
1950: Starts production and sales of Ryusenof Nikko (Shanghai) Construction
system1986: Opens Tokyo service center
2019: Masaru Tsuji appointed Representative
handles
Machinery Co., Ltd., the Group’s first
Director and President
1968: Company renamed to Nikko Co., Ltd.
1989: Opens US officeproduction base overseas
2020: Establishes Nikko Asia (Thailand) Co., Ltd.
2011: New Wuhan factory of Shantui Nikko
Construction Machinery Co., Ltd. completed
Solutions offered by Nikko Group

External environment

Offered high quality ready-mix concrete
manufacturing technology

Started manufacture and sales of asphalt plants

Offered products that takes environment andsafety into accountStarted manufacture and sales of batcher plants

Strengthened maintenance service

Offered environmentally friendly and recycling
products

Offered various large-scale machinery andautomated plants

Offered energy-saving, low-noise burners

Proposed technology to reduce CO2 emissions

Proposed decarbonization technology

Strengthened disaster recovery product lineup

Roll-out of environmentally friendly products
Proposed remote operations and automation
utilizing DX

Offered high quality, high environmental
performance products to the Asian market

Post-war robust reconstruction demand

Rapid growth period

Bubble economy and growing environmental awareness

Growing need for environmentally friendly products

Exacerbation of various disasters

Post-COVID era

1924: Hanshin Koshien Stadium completed

1956: Japan Highway Public Corporation
established

1970: The Japan World Exposition, Osaka, held

1994: Kansai International Airport opens

2012: Tokyo Skytree opens

2025: Expo 2025 Osaka Kansai

1958: Tokyo Tower opens

1972: Tohoku Expressway (Iwaki–Utsunomiya)
opens

1995: The Great Hanshin-Awaji Earthquake

2015: Hokuriku Shinkansen (Tokyo–Kanazawa)
starts operation

2026: Asian Games Aichi-Nagoya

1964: Olympic Games Tokyo held

1978: Narita Airport opens

1965: Entire length of Meishin Expressway opens

1983: Entire length of Chugoku Expressway
opens2010: Expo 2010 Shanghai China held

1936: Diet Building completed
1939: The Second World War begins
1945: Japan accepts the Potsdam Declaration
1950: The Korean War begins

Head office factory at the time of founding

03 N ikko Corpo ra te R epo r t 2 0 2 2

1967: Basic Act for Environmental Pollution
Control enacted

1958: Nikko’s
first asphalt
plant completed

2008: The collapse of Lehman Brothers
2011: The Great East Japan Earthquake

2020: Global COVID-19 pandemic
2021: Olympic Games Tokyo 2020 held

1988: Seto Ohashi Bridge opens

1968: The first made-in-Japan plant, Nikko’s NAP602, used in the construction of Tomei Expressway

2018: Osaka, Kansai, chosen as venue for Expo
2025

Introduction of plants especially for quakedisaster recovery

Nikko Asia (Thailand) Co., Ltd. establishedNIIKKO NILKHOSOL CO., LTD.

N i kko C o r p o rate R ep o r t 2 0 2 2 04

Process for Achieving 2030 Vision

High-Priority Management Issues for Achieving the Vision (Materiality)

Nikko Group stipulated the Long-term Basic Policies (10 year vision) that looked into the future while drawing
up its previous Medium-Term Management Plan that was completed in FY 2021. To achieve the long-term visionin 2030, the Group established five basic policies: 1) strengthen revenue base in Japan, 2) establish overseas
sales, 3) promote new businesses (M&A), 4) put work-style reform into practice, and 5) make ROE a KPI.
The Nikko Group newly set forth the 2030 Vision given the increased momentum in recent years of initiatives tomitigate the impact of climate change globally and the considerable changes to the social issues and businessenvironment surrounding the Group. The management vision of what the Group aspires to be was set as “thetop manufacturer of plant facilities and environmental products underpinned by advanced technology” and“customers’ management partner through operation and maintenance service.” The financial targets are 60.0
billion yen in net sales and 10% in operating margin.

Along with the newly formulated 2030 Vision, Nikko Group reviewed its materiality for sustainable
creation of corporate values. Solving materiality by bearing in mind to “promoting self-reform to
win the broad trust from society and fulfill our mission as a solutions partner that evolves with thecustomers” as stated in our Management Philosophy will lead to becoming “the top manufacturer ofplant facilities and environmental products underpinned by advanced technology” and “customers’
management partner through operation and maintenance service,” which is what Nikko Group aspires
to be as described in the 2030 Vision. In the future, the Group plans to increase the effectiveness by
setting KPIs reflecting materiality. At the same time, it believes that it is necessary for the Board of
Directors to monitor them.

FY 2022–2024: Internal investment phase
Upon pursuing the process for achieving the 2030 Vision, Nikko
Group positioned the period until FY 2024 as the internal investment
phase, in which it will actively make up-front investments in human andintellectual capital while maintaining a high level of capital investment
in manufactured capital. In particular, Nikko will add 145 employees(compared with 69 employees it added in the past three years) including

59 employees for the AP-related business domain, which has to takemeasures to address carbon neutrality. In terms of R&D expenses also,
the Group is planning on an investment worth more than 2.5 billion yen(compared with about 1.2 billion yen in the past three years) for new
environmentally friendly products in the AP-related business domain as
well as support for remote operations and automation.

FY 2024–2030: Business expansion phase2030

New Medium-Term Management Plan (2022–2024)

Consolidated net sales:□ Standardization of AP and BP plants​

60.0 billion yen​

□ Introduction of EC for small andOperating margin:

light modular-type belt conveyors,
Business
handling of channel conveyors​□F oray into Indonesia and Vietnamby overseas AP-related business□ Global marketing function, DX

promotion function
Internal □ Building cooperative sales
structure for new businesses​
functions□R ebuilding of human resource
management foundation and system

Present​(FY 2021)​
Consolidated net sales:

38.8 billion
yen​Internal
investment
phase

Operating margin:

5.3%​

Build structures, processes, and systems thatform the foundation of the 10 year vision in thethree years during the next medium-term plan andpromote testing and system development of newservices with an eye towards the next 10 years.

05 N ikko Corpo ra te R epo r t 2 0 2 2

10.0%

2024​
Consolidated net sales:

50.0 billion
yen
Operating margin:

6.0%

Business
expansion
phase

In Japan, release newservices and systems◆ For
overseas, establish
new revenue base◆Introduce technology, rebuild
production structure□ Support for remote operations andBusiness

automation, total management system​□ Roll-out of environmentally friendly products​□ Expansion to the ASEAN region​□ Opening and full-scale operation of theoperation support center​
Internal □ Automation and remote operations
leveraging technology​functions□ Review of production process, consolidationof assembly at the head office factory

improvement in job satisfaction. Realization of carbon neutrality
continues to be the most important materiality and there will be no
improvement in the long-term corporate values of the Nikko Group
without achieving carbon neutrality. Creation of new customer
values is relevant for the Group to become the customers’ partner
and it will improve customer satisfaction by utilizing DX and AI inthe maintenance service business, where its strength lies.

<Changes in Nikko Group’s materiality map>
Realization of Carbon Neutrality

Carbon-neutral initiatives

Establishment ofrecycling-oriented
society

Co-existencewith local
communities
Improvementof Employee
Engagement
Intensification ofdisasters and early
restoration
DX solutions andpursuit of customer
satisfaction

Stakeholders’ interestsof carbon neutrality. The overseas AP-related business is also
expected to welcome a full-fledged harvesting season after
completing up-front investments in the ASEAN region. Internally,
the opening of the operation support center and review of the
production structure by consolidating assembly at the head
office factory are expected to contribute.

Recycling of waste materials
and establishment ofrecycling-oriented society

Stakeholders’ interests

The Group expects the period from FY 2024 onwards to be thebusiness expansion phase in which the up-front investments,
carried out in the internal investment phase, begins to bear fruit.
New services and systems in Japan are expected to result inrevenue expansion and customer needs are also likely to increase
for new environmentally friendly products towards realization

Nikko Group identified and selected the following four points as
its materiality that have high importance for stakeholders and theGroup to raise its corporate values based on what it aspires to beunder the 2030 Vision acknowledging social issues and changes
in industry environment: 1) realization of carbon neutrality, 2)establishment of recycling-oriented society, 3) creation of new
customer values, and 4) human resource development and

INTRODUCTION

Human resource
development andimprovement injob satisfaction
Creation of
New Customer
Values

Impact on the Nikko Group and its corporate values

Impact on the Nikko Group and its corporate values

2021

2022

1 Realization of carbon neutrality (see p. 51)

2 Establishment of recycling-oriented society (see p. 59)

About 70% of CO2 emissions from APs in Japan (approx.
1.3 million tons a year) is estimated to be emittedby Nikko plants. While it will become a major risk if
Nikko is late to respond to this, the Group believes
that it also offers opportunities from various aspects
starting from fuel conversion to electrification, as it isalso an important social issue.

The arrival of a global recycling-oriented society is beneficial
for Nikko in terms of the anticipated increase in recycling
AP in China, as Nikko boasts a 99% recycling rate ofasphalt waste and has a 70% share in AP in Japan. The
Company has been engaged in the development oftechnology for recycling concrete sludge and is working
on its practical applications.

3 Creation of new customer values (see p. 61)

4 Human resource development and improvement in job satisfaction (see p. 63)

In its 2030 Vision, Nikko Group aims to become a“customers’ management partner through operationand maintenance service.” The Group will not only
improve customer satisfaction by leveraging DX and AI
but also pursue subscription contracts of service andmaintenance.

The importance of leveraging human capital increases
further upon solving material matters 1 to 3. For Nikko
to achieve the 2030 Vision, it is necessary to have humanresources based on diversity and inclusion, and improving
motivation by nurturing them, as well as improving theirwork-life balance and well-being also assuming importance.

N i kko C o r p o rate R ep o r t 2 0 2 2 06

Process of Value Creation

INTRODUCTION

Social issues and changes in the industry (risks and opportunities) (see p. 45)◆

Carbon-neutral initiatives◆

ecycling of waste materials and establishment of recycling-oriented society◆

Acceleration of digitization◆

Intensification of disasters and early restoration◆

Declining birthrate and aging population, declining workforce

New Medium-Term Management Plan (2022–2024) (see p. 23)

Robust financial base andample cash (see p. 31)

Capital investment focusing
on the 2030 Vision (see p. 35)➡Capital investment worth 6.0 billion
yen in FY 2022–2024<Business>◆<Internal functions>Standardization of AP and BP plants

Introduction of EC to small andlight modular-type belt conveyors,
handling of stringer conveyors◆ Foray into Indonesia and Vietnamby overseas AP-related business◆

Global marketing function, DX
promotion function◆ Building cooperative sales
structure for new businesses◆ Rebuilding of human resource
management foundation and system◆

Value chain

Human capital

MixingSales and
consultation

Addition of more people and reform of
diversity and work style (see pp. 35, 63)
R&D

Business model innovation byleveraging core technology (see p. 36)➡R&D expenses of more than 2.5
billion yen in FY 2022–2024

Planning
anddesigning

MixingCore
Material technologies Heating
handling Original technologies technology

Intellectual capital◆

Trust as a solutions partner (see p. 36)➡Number of Akitsu-kai members as ofthe end of FY 2021: 195 companies

Natural capital◆

Utilization of energy, water
resources, etc. (see pp. 36, 51)

07 N ikko Corpo ra te R epo r t 2 0 2 2(Creation of social values)

Futurethe Group
wants torealize

Business transformation

Social and environmental
values to be contributed

MaintenanceControl
technology

Procurement
andmanufacturing

Construction
work

Sustainability management (see p. 49)
Management philosophy(see p. 1)

Technology to mix
and knead a wide
variety of materials
from liquids to solids

Heat Technology
Technology to burnor dry materials athigh temperatures(see p. 27)◆

AP-related business in Japan (see p. 39)◆

BP-related business (see p. 41)◆

Maintenance service business (see p. 61)

Strengthening of operation andmaintenance services

Technology to design
and make the brains ofplants and machinery
using IoT and AI◆◆◆

Overseas AP-related business (see p. 29)
Environment- and conveyor-related
business (see p. 43)
Other businesses (see p. 44)

Lateral deployment of
products and markets

Corporate identity(see p. 1)

Financial targets for FY
2024 (see p. 25)◆

Technology to convey
and separate any
material, diagonallyor vertically◆Corporate governance(see p. 69)

Contribution to disasterprevention and mitigation◆ Support for early restoration fromnatural disasters (see p. 60)◆ Co-existence with local communities (see p. 60)◆

Economic values to be created<Business>
Support for remote operations and automation,
total management system (see p. 28)◆

Roll-out of environmentallyfriendly products (see p.56)◆ Expansion of the overseas AP-related
business in the ASEAN region (see p. 29)◆<Internal functions>
Opening and full-scale operation of
the operation support center (see p. 28)◆

Material Handling

Materiality (see p. 6)

Establishment of recycling-oriented,
environmentally friendly society (see p. 59)◆ Contribution to realization of
decarbonized society (see p. 51)◆

Scale expansion leveraging
technology (see p. 29)

Control Technology

protected by high entry
barriers

Social and relationship capital◆

OUTPUT(Business model)(see p. 47)➡An increase of 145 employees at
Nikko in FY 2022–2024(Business value)

OUTCOME

Making the world a resilient and gentle place

Financial capital

Manufactured capital◆

Rising ESG awarenessBusiness activities➡Total assets of 58.5 billion yen and net assetsof 34.0 billion yen at the end of FY 2024◆

The top manufacturer of plant facilities and environmental products
underpinned by advanced technology and customers’ management
partner through operation and maintenance service

INPUT(Business foundation)◆◆

Nikko Group 2030 Vision (see p. 5)

Net sales: ¥50 billion
Operating income: ¥3 billion(Operating margin: 6%)◆

ROE: 6.0%◆

Payout ratio: 60% or more

Automation and remote operations
leveraging technology(see p.50)◆ Review production process, consolidation ofassembly at the head office factory (see p. 32)◆

FY 2030 financial targets (see pp. 21, 27)◆

Net sales: ¥60 billion◆

Operating margin: 10.0%◆

ROE: 10.0%◆

Market cap: ¥50 billion or more(see pp. 1, 12)

N i kko C o r p o rate R ep o r t 2 0 2 2 08

Nikko Group in Figures (Financial and Nonfinancial Highlights)

INTRODUCTION

Financial highlights

Nonfinancial highlights● Net sales and Operating margin(in million yen)(in million yen)(in 70,000
million yen)

70,00070,00060,00060,00060,00050,00050,00050,00040,00040,00040,00030,00030,00030,00020,00020,00020,00010,00010,00010,0000
00

Net sales
Net sales
Net sales

6.0%
6.0%
6.0%

5.8%
5.8%
5.8%

● Net income attributable to owners of parent, return on equity (ROE)

6.1%
6.1%
6.1%

Operating margin
Operating margin
Operating margin

5.3%
5.3%
5.3%

4.5%
4.5%
4.5%
35,14435,14435,144

31,78031,78031,78035,15135,15135,151

Net income attributable to owners of parent
Net income attributable to owners of parent
Net income attributable to owners of parent

3,000
3,000
2,500
2,500
2,500
2,000
2,000
2,000

38,846
38,846
38,84637,86637,86637,866(in million yen)(in million yen)
3,000 yen)(in million

1,500
1,500
1,500

ROE
ROE
ROE

6.8%
6.8%
6.8%

4.9%
4.9%
4.9%
1,490
1,490
1,490

5.2%
5.2%
5.2%

4.4%
4.4%
4.4%

2,082
2,082
2,082

1,588
1,588
1,588

1,345
1,345
1,345

5.2%
5.2%
5.2%
1,649
1,649
1,649

1,000
1,000
1,000
500
500
500

2017
2018
2019
2020
2021(ﬁscal year)
2017
2018
2019
2020
2021(ﬁscal year)(ﬁscal year)2017
2018came to2019
202020216.1%
Operating margin
in FY 2021
5.3%, down
0.8 pp from
in

0
0
0

2017
2017

2018
2018

2019
2019

2020
2020

2021(ﬁscal year)
2021(ﬁscal year)(ﬁscal year)● Number of female employees, number of new-graduate hires, number● Number of consolidated employees, ratio of foreign employees(people)(people)1,600(people)

1,600
1,600
1,400
1,400
1,400
1,200
1,200
1,200
1,000
1,000
1,000
800
800
800
600
600
600
400
400
400
200
200
200
0
0
0

Number of employees (consolidated)
Number of employees (consolidated)
Number of employees (consolidated)

12.5%
12.5%
12.5%
807
807
807

2017
2017

12.3%
12.3%
12.3%
799
799
799

2018
2018

Ratio of foreign employees
Ratio of foreign employees
Ratio of foreign employees

18.7%
18.7%
18.7%

13.8%
13.8%
13.8%

13.5%
13.5%
13.5%

838
838
838

861
861
861

2019
2019

2020
2020

1,038
1,038
1,038

2021(ﬁscal year)
2021(ﬁscal year)(ﬁscal year)

FY 2020. By business, operating margin of BP-related business improved
0.9 pp on the back of sales increase and cost reduction through planned
production, while that of AP-related-business declined 3.3 pp due to rise in
prices of steel and other supplies. That of other business and environmentand conveyor-related business also fell 1.1 pp and 0.7 pp respectively. In FY
2022, the Group expects the operating margin to worsen by 1.3 pp to 4.0%.

2018
2020
2017
Net income attributabletoowners 2019of parent in
FY 20212021
decreased
20.8%, which is more than the 10.8% decline in operating income. The
factors contributing to the decline include the absence of 340 million
yen in special dividend from Maeda Road Construction Co., Ltd. that wasrecorded as non-operating income in FY 2020. Net assets increased 0.6
billion yen compared with FY 2020 reflecting an increase in retained
earnings, etc., while ROE declined 1.6 pp from FY 2020 to 5.2%.

20172018 employees
2019 was 1,038
2020 at the2021
The number ofconsolidated
end of FY
2021, up significantly from 861 at the end of FY 2020. The increase inreal terms after excluding the 67 employees of Ube Kohki, however, was110. Among them, foreign employees were 194, an increase of 78 fromthe 116 at the end of FY 2020 and accounting for 18.7% of the total(13.5% in FY 2020). The primary reason is the addition of 77 employeeswith the start of operations of the Nikko NilKhosol plant in Thailand.

● Return on total assets (ROA)● Net income per share, dividends, total return ratio● Average number of annual paid holidays per employee (non-consolidated)(in million yen)(in million yen)(in 80,000
million yen)

80,00080,00070,00070,00070,00060,00060,00060,00050,00050,00050,00040,00040,00040,00030,00030,00030,00020,00020,00020,00010,00010,00010,000
0
0
0

3.3%
3.3%
3.3%

3.1%
3.1%
3.1%

44,87644,87644,87643,96943,96943,969

3.5%
3.5%
3.5%
45,66745,66745,667

Total assets
Total assets
Total4.3%
assets

ROA
ROA
ROA

4.3%
4.3%

3.2%
3.2%
3.2%
52,07952,07952,07948,697
48,697
48,697

2017
2017
2017

2018
2018
2018

2019
2019
2019

3,000

2021 (ﬁscal year)
2021 (ﬁscal year)
2021 (ﬁscal year)

2020
2020
2020

2,748
2,748

2,500
2,500
2,500

1,907
1,907
1,907

1,889
1,889
1,889

2,000
2,000
2,000

1,483
1,483
1,483

1,500
1,500
1,500

0
0
0

80
80
80

550 468
550 468
550 468291
291
291
2017
2017
2017

508
508
508
211
211
211
2018
2018
2018

611
611
611379
379
379

677
677
677
392
392
392

759
759
759
449
449
449

2019
2019
2019

2020
2020
2020

2021(ﬁscal year)
2021(ﬁscal year)
2021(ﬁscal year)

The Group made capital investment of 1.9 billion yen in FY 2021 including a
0.33 billion yen for Nikko NilKhosol’s plant. Total capital investment for the
Medium-Term Management Plan period from FY 2019 to FY 2021 came to 6.3
billion yen, which exceeded the 2.05 billion yen in depreciation and amortization
by a great margin and drove forward capacity expansion and machinery
upgrade. While R&D expenses at 0.45 billion yen were higher than the 0.39
billion spent in FY 2020, they were lower than the planned 0.7 billion yen.

09 N ikko Corpo ra te R epo r t 2 0 2 2

Net income per share
Net income per share
Net income per share

47.3%
47.3%
47.3%

Total dividend
Total dividend
97.6% Total dividend

97.6%
97.6%

0
0
0

38.7
38.7
38.7

79.7%
79.7%
79.7%

34.1%
34.1%
34.1%

60
60
60

20
20
20

Trendsin capital investment,
depreciation
and amortization, R&D expenses(in●millionyen)
Capital investment
Depreciation and amortization
R&D expenses(in million yen)
Capital investment
Depreciation and amortization
R&D expenses
3,000 yen)(in million
Capitalinvestment
Depreciation
and amortization
R&D expenses
3,000
2,748

500
500
500

100
100

40
40
40

ROA in FY 2021 came to 3.2%, a decline of 1.1 pp compared with FY 2020.
Net assets at the end of FY 2021 increased by 3.4 billion yen compared with
FY 2020. This includes the 1.8 billion yen of Ube Kohki, which was acquired by
the Group. When the impact of Ube Kohki was excluded, inventory rose by 2.4
billion yen and trade receivables declined by 1.4 billion yen while increases incontract liabilities and down payments came to 1.4 billion yen. The Group also
carried out sale of strategically-invested shares worth about 0.7 billion yen.

1,000
1,000
1,000

(yen)
(yen)
100
(yen)

35.1
35.1
35.1

12
12
12

12
12
12

2017
2017
2017

2018
2018
2018

41.2 4041.2 4041.2 40

2019
2019
2019

54.3
54.3
54.3
33
33
33

2020
2020
2020

Total return ratio
Total return ratio
Total return ratio

69.5%
69.5%
69.5%

43.2
43.2
43.2

30
30
30

2021 (ﬁscal year)
2021 (ﬁscal year)
2021 (ﬁscal year)(days)(days)
14(days)

14
14
12
12
12
10
10
10
8
8
8
6
6
6
4
4
4
2
2
2
0
0
0

10.3
10.3
10.3

2017
2017
2017

10.8
10.8
10.8

2018
2018
2018

10.4
10.4
10.4

2019
2019
2019

9.7
9.7
9.7

2020
2020
2020

10.0
10.0
10.0

2021 (ﬁscal year)
2021 (ﬁscal year)
2021 (ﬁscal year)of new hires with prior work experience (non-consolidated)

Number of female employees (non-consolidated)
Numberemployees
Number ofof femalenew-graduate
hires(non-consolidated)(non-consolidated)
Numberoffemaleemployees(non-consolidated)
NumberNumber ofof new-graduate
hires with priorhires
work(non-consolidated)
experience (non-consolidated)
Numberofnew-graduate
hires
Number of hires with prior work(non-consolidated)
experience (non-consolidated)
Number of hires with prior work experience (non-consolidated)(people)(people)70(people)

70
70
60
60
60
50
50
50
40
40
40
30
30
30
20
20
20
10
10
10
0
0
0

45
45
45

42
42
42

19
19
19

15
15
15

7
7
7
2017
2017

14
14
14

8
8
8

2018
2018

59
59
59

55
55
55

51
51
51

21
21
21

2019
2019

13
13
13

29
29
29
22
22
22

21
21
21

2021 (ﬁscal year)
2021 (ﬁscal year)

2020
2020

(ﬁscal year)2018 (non-consolidated)
2019
2020
The number of2017
female employees
was 59 as of2021
the end of FY
2021, an increase of four from 55 as of the end of FY 2020. The number of newhires was 29 on a non-consolidated basis, a significant increase from 13 in FY 2020,
while the number of new female hires was three compared to zero in FY 2020. The
number of hires with prior work experience was 22 (21 in FY 2020) maintaininga high level, and the Group will continue to boost such hiring in accordance with
the new Medium-Term Management Plan with focus on the AP-related business.
● Power usage, output (non-consolidated)(10,000 kwh)
(10,000 kwh)
700 kwh)(10,000

700
700
600
600
600
500
500
500
400
400
400
300
300
300
200
200
200
100
100
100
0
0
0

Power usage (left axis)
Power usage (left axis)
Power usage (left axis)

1,696
1,696
1,696
402.0
402.0
402.0

2017
2017
2017

Output (right axis)
Output (right axis)
Output (right axis)(in million yen)(in million yen)
3,000yen)(in million

3,000
3,000
2,000
2,000
2,000
1,000
1,000
1,000
0
0
0

1,915
1,915
1,915

2,135
2,135
2,135

391.4
391.4
391.4

390.3
390.3
390.3

398.1
398.1
398.1

2019
2019
2019

2020
2020
2020

2021 (ﬁscal year)
2021 (ﬁscal year)
2021 (ﬁscal year)

1,392
1,392
1,392

1,569
1,569
1,569

381.1
381.1
381.1

2018
2018
2018

Dividends for FY 2021 were 30 yen per share (payout ratio of 69.5%).
While total return ratio was 79.7% in FY 2020 with dividends of 33 yen
per share and 0.4 billion yen in treasury stock acquisition as net income
attributable to owners of parent was boosted by special dividend from
Maeda Road Construction Co., Ltd., it decreased slightly in FY 2021.
The Group expects to pay a dividend of 30 yen per share in FY 2022,with which payout ratio is expected to reach 95.6%.

The average number of annual paid holidays used per employee was 10 days in
FY2021 on a non-consolidated basis compared with 9.7 days in FY 2020. While
it increased slightly from the 9.7 days in FY 2020, the figure has been hovering
around 10 days since FY 2017. As stated in the Long-term Basic Policies, the Group
believes increasing the number of paid holidays taken by employees is important for
improving employee satisfaction and realizing a good work-life balance ultimately tosignificantly raise labor productivity by improving operating efficiency.

Power usage in FY 2021 came to 3,981,000 kwh, a slight increase of
2.0% from 3,903,000 kwh in FY 2020. However, production volume
increased 11.9% in FY 2021 compared with FY 2020 and power usage
on a unit consumption basis continued to decline. In accordance withthe guidelines for achieving carbon neutrality, the Group will continue
to reduce CO2 emissions by increasing the ratio of renewable energy as
well as implementing electricity conservation initiatives.

●(days)Cash Conversion Cycle● Changes(10,000yen) in expenses of ISO activity items (non-consolidated)(10,000 yen)
14,000yen)(10,000●(numberNumberof patent and design registrationsof registrations)(days)

140(days)
140
140
120
120
120
100
100
100
80
80
80
60
60
60
40
40
40
20
20
20
0
0
0

116.6
116.6
116.6

107.7
107.7
107.7

88.5
88.5
88.5

2017
2017
2017

2018
2018
2018

2019
2019
2019

94.5
94.5
94.5

2020
2020
2020

93.9
93.9
93.9

2021 (ﬁscal year)
2021 (ﬁscal year)
2021 (ﬁscal year)

In FY 2021, CCC was 93.9 days, which was more or less unchanged fromthe 94.5 days in FY 2020. Inventory turnover period worsened to 105.2
days, but turnover period of trade receivables improved significantly to
71.5 days, while turnover period of notes and accounts payable-tradealso improved to 82.7 days. The Group intends to continue improving
CCC and allocate the margin to investment for growth, shareholder
returns, R&D, and human capital.

14,00014,00012,00012,00012,00010,00010,00010,000
8,000
8,000
8,000
6,000
6,000
6,000
4,000
4,000
4,000
2,000
2,000
2,000
0
0
0

9,194
9,194
9,194

9,087
9,087
9,087

9,181
9,181
9,181

25
25
20
20
20

7,452
7,452
7,452

7,820
7,820
7,820

15
15
15
10
10
10
5
5
5
0
0
0

2017
2017
2017

2018
2018
2018

2019
2019
2019

2020
2020
2020

2021 (ﬁscal year)
2021 (ﬁscal year)
2021 (ﬁscal year)

Total expenses of ISO activity items (electricity, water, waste, and paper)in FY2021 came to 78.2 million yen, up 4.7% from FY2020. While theexpenses increased compared to the 17.6% decline posted in FY 2020,
the major factor behind this was the rise in electric power charges due
to increasing crude oil prices, etc. The Group will continue to effectively
utilize resources and make contributions to environmental activities.

Patents
Patents
Patents(number of registrations)25(numberof registrations)

-5
-5
-5

12
12
12

16
16
16

7
7
7
1
1
1

2017
2017
2017

Designs
Designs
Designs

2018
2018
2018

10
10
10
3
3
3

2019
2019
2019

10
10
10
9
9
9

2020
2020
2020

11
11
11
6
6
6

2021 (ﬁscal year)
2021 (ﬁscal year)
2021 (ﬁscal year)

The Group registered six patents and 11 designs in FY2021, whichwere down by four and up two, respectively, from FY2020. The increasein design registration in FY2021 include Nikko-developed food mixer
products, Nikko Sec’s temporary scaffolding products, and Tombo
Industry’s shovels. The Group believes registering patents and designs
is important for differentiating products and services and improving
brand value, and it plans to continue to actively register them.

N i kko C o r p o rate R ep o r t 2 0 2 2 10

Interview with CEO

VALUE CREATION VISIONS & STORIES“Update the social
infrastructure by leveraging
engineering that is one stepahead of others.”

We will strengthen human capitalfor achieving the mission.
Session 1.

What we aspire to be in terms of Corporate Identity

Nikko Group recently defined its Corporate
Identity. First of all, please explain the thoughtsthat were put into the mission, which is also
the Group’s raison d’être of “Update the social
infrastructure by leveraging engineering that is
one step ahead of others,” and your thoughts
on how you will link together the company, its
employees, and society.

Representative Director,
President and CEO

Masaru Tsuji

The Nikko Group, in addition to its 2030 Vision and the Medium-Term Management Plan starting in
FY 2022, established the Nikko Corporate Identity, which shows the path to be taken by the Group
going forward.
We asked Mr. Tsuji about the strategic points in realizing the 2030 Vision, utilization of management
resources for such, initiatives in sustainability management including ESG, and stakeholder
engagement based on what the Nikko Group aspires to be as embodied in the Corporate Identity.

11 N ikko Corpo ra te R epo r t 2 0 2 2

We started formulating the Nikko Group’s Corporate
Identity from February this year under the Nikko Mirai
Project.
In doing so, we sought participation from employees
around the country and more than 10 candidates
responded, from young employees to those in the
manager class, and we formed a working group (WG)
made up of 12 members going beyond the boundaries
of position, gender, and department. The WG is made up
of members with high aspirations and they interacted
many times to exchange various views on matters suchas “Why does the Nikko Group exist?”
During the process, they had the opportunity to
speak with Mr. Kishi, a former president of the Groupin addition to myself, for about two hours regarding
the history of Nikko that has been passed down andthings that should not be changed. Mr. Kishi is one of
the former presidents who had the greatest impact onme, and the ideal person whom I aspired to be. He had
been responsible for driving forward sales and service
divisions, and the WG members gained inspiration
listening to him speaking about his management that
did not forget to go on the offensive including thestruggles in new businesses. The members leveraged
that inspiration in creating the Corporate Identity.
And the mission thus formulated was “Update thesocial infrastructure by leveraging engineeringthat is one step ahead of others.”
As a top manufacturer, Nikko has been offering new
products by polishing technologies that were aheadof its time and the industry. So, the words “engineeringthat is one step ahead of others” was incorporated
to show that we would like to remain like that in the
future, as well as showing our desire to compete witha technology-based comprehensive ability. Further,
we deliberately used the word “update,” instead ofa static-sounding word, in order to incorporate theintention to change the social foundation of the future
through engineering.
My role here was to be involved with the project as anobserver, while respecting the independence of the WG.
The mission statement that was developed reveals aforward-looking stance, and I think it is quite good.
Generally, internal meetings are held with members
from the same department most of the time, but thistime around I felt there were many members who
were meeting for the first time. Since we designed theprocess in a workshop format so that all members
share their ideas without fail, there were times when
their views clashed. Nevertheless, I could feel thatthey grew in various aspects, which led to the birthof a team mindset over the course of wrapping up
the discussions among the employees from different
positions. From a comment by a female employee
in charge of public relations who participated in the
project, it appears that she felt that the aspirations of
the company have not been shared much among theemployees.
With the formulation of the Corporate Identity, I believe
we have carried out the groundwork to unify theawareness of the employees and share our goal.

N i kko C o r p o rate R ep o r t 2 0 2 2 12

VALUE CREATION VISIONS & STORIES

Nikko’s company motto, although universal in nature,
has a different take compared to the Corporate
Identity. The objective of the formulation of the
Corporate Identity is to make use of expressions thatreflect the present and work it into the banner thatshows the direction of the company to the employees.
We also set up opportunities to gain feedback fromother employees during the formulation, and there
were many who opined that it had a positive effectthat was different from the previous image.
This should not end with the Corporate Identity justbeing posted throughout the company walls; instead,what is important going forward is to instill it in all of
the employees by incorporating video production andsystem design.
“Making the world a resilient and gentle place.” isthe new vision of the future that we want to realize.
If the employees understand the Corporate Identity
including the vision, and if we can clearly explain it to
the customers and have their understanding, then we
can expect this to spread much deeper.

● Nikko’s Corporate Identity

SLOGANVISION The future we want to realize

Future creationthat starts froman ‘ ’

Making the world a resilient andgentle place.

Symbolization

SPIRIT Spirit we treasure

41

 e conscious of theB
objective.
Come up with ideas.
 ake on challenges
T
without fear.
Accomplish to the end.

6

Value time.

8

Employeeaxis

Make work interesting.

5

7

MISSION Missions Nikko must fulfill in daily operations

Update the social
infrastructureby leveraging
engineering that is
one step ahead ofothers.

2

3

Future axis

VALUE Values we offerW e will pursue safety and security
in all products and services.
2 W
 e will identify true issues and makeproposals from a customer perspective.
3 W
 e will focus our eyeson where society andCustomerthe era are heading
axis
towards, and to continue
refining our technology.
4 W
 e will stay close to our customers
and support them through the future.
5 W
 e will integrate our engineering
capabilities to exceed expectations.

1

9

10

11

12

Communicate with care toyour counterpart.
 elp and enhance yourH
colleagues.
Learn extensively, bothfrom within and outside.
Strive forward sincerely,
and with determination.
 e at ease mentallyBand physically.

■Serve society through business.
■Work toward prosperity with sincerity and responsibility.
■Produce appropriate profits through original ideas
and improvement efforts.

The basic philosophy of the Nikko Group is the spiritof the Company Motto to “Serve society throughbusiness,” “Work toward prosperity with sincerity
and responsibility,” and “Produce appropriate profits
through original ideas and improvement efforts,” andthese values will remain unchanged.

13 N ikko Corpo ra te R epo r t 2 0 2 2The corporate culture cultivated by Nikko is to act
straightforward, be honest, and not to run away fromand lie to the customer.
This is something that happened quite a while backago. A sales representative at that time apparently
put together an inordinately profitable businessproposal. When he came to know of the scheme, Mr.
Higashida, the then president, became furious andtold the employee to “never do anything to deceive
the customer,” and made him rework the contract
with appropriate pricing, and deliberately slashed the
profits.
Nikko does not run away from difficult projects
requested by customers, but instead takes on thechallenge and sees it through to the end. That is also
our corporate culture. We will continue to treasure
this in the future.
What we want to realize in the future vision, is “Making
the world a resilient and gentle place,” where theword “world” denotes foraying into overseas markets,and leveraging the high infrastructure quality standardsof Japan in the growing markets (ASEAN) of theworld. Russia’s invasion of Ukraine happened during
the project and we were once again reminded of theimportance of infrastructure and urban development. A“Resilient and gentle place,” is urban development thatenriches lives, as well as us being conscious of how we
can help people around the world at the foundationsof their lives, in addition to increasing environmental
measures. We anticipated the arrival of an era wherea product’s value is determined by its eco-friendliness,
and we will focus our product development on safety
and environment (see p. 1).

Give priority to safety.

Basic principles(long-standing values since our establishment)

It is clear that you carried out various new
initiatives for drafting the Corporate Identity.
Next, what kind of values specifically are
you thinking of generating from the mission,
based on the basic philosophy of Nikko
Group?

it is important to make investments in and utilize
human capital. The fourth one, which is “We will stayclose to our customers and support them throughthe future,” expresses our attitude to support thecustomer forever by providing maintenance andother services. The last one, “We will integrate ourengineering capabilities to exceed expectations” is ourpledge that we will provide solutions that go beyond
the expectations of the customers by combining
the aforementioned promises with the Company’s
strength.
There are two companies we are competing with in
the domestic market for the asphalt plant (AP)business, which is our mainstay business, and threecompanies in the batching plant (BP) business. It
is necessary to develop and offer what customers
are seeking as early as possible and ahead from ourcompetition to ensure value improvement. In orderto achieve that, I feel that we should never stop new
development, and if anything, we should increase our
speed. In the future, we are also thinking of jointly
developing with our customers a theme that translates
to the workstyle reform of Nikko.
We have come up with 12 Spirit items that should betreasured by the employees. While it is not imperative
for the employees to satisfy all 12 Spirit items, it isnecessary that they try to keep in mind as many ofthem as possible. Our Spirit includes old-fashioned
spiritualism which includes new values such as “Makework interesting,” but at the same time has items thatwere inherited from the Nikko DNA such as “Take onchallenges without fear” and “Strive forward sincerely,
and with determination.”

Based on Nikko’s corporate
culture, leveraging value
and spirit is imperative forrealizing the future vision.

There are five values that are derived from themission, and they are promises we make to thecustomer. The first one is “We will pursue safety andsecurity in all products and services,” and it shows
our intention to pursue safety as a major premise.
The second one “We will identify true issues and makeproposals from a customer perspective,” promisesthat we will be in the customer’s shoes when we areconducting sales activities. The third is “We will focus
our eyes on where society and the era are heading
and continue refining our technology,” which refers
to the handling of new technologies such as carbon
neutral (CN), and in order to realize such, I believe

N i kko C o r p o rate R ep o r t 2 0 2 2 14

VALUE CREATION VISIONS & STORIES

Achievements and issues of the previous Medium-Term Management Plan

Session 2.

The previous Medium-Term Management Plan wascompleted in FY 2021 and while achieving the net
sales target, we were unable to meet the operating
income target. The slump in profit in FY 2021 appears
to have been significant. But if we take that into
account, could you tell us about the achievementsof the previous plan and the issues the Group faced,
and also how we will overcome those issues?

Further, as part of the promotion of new businesses,
we acquired the industrial machinery manufacturer Ube
Kohki, headquartered in Yamaguchi Prefecture, throughM&A and made it a subsidiary in FY 2021.
The achievements during the previous mediumterm plan period are the following three points thatwould link to the next growth: (1) vitalization of capital
investment including the establishment of new overseas
subsidiaries, (2) increased hiring of personnel, and (3)implementation of M&As. Project promotion also resulted
in the improvements of skill and motivation, as well as
clarifying the objective. Looking at the medium- to longterm expansion of overseas business led by ASEAN, thenear-term order situation is strong with us establishinga local sales and manufacturing subsidiary in Thailand.
Among new businesses, mobile crushers and waterproof
boards grew rapidly. In the BP-related business, Nikko’s
domestic dynamic share for FY 2021 exceeded 40% in
both net sales and number of units shipped, coming close
to the medium-term plan target of 50% share in units
shipped. We were also able to expand the sales of service
maintenance better than expected. In terms of companywide achievement, we improved productivity throughworkstyle reform including promotion of remote working
and introduction of IT tools.

Net sales for FY 2021 achieved the previous MediumTerm Management Plan target of 38.0 billion yen,reaching 38.8 billion yen. By business segments, net
sales in BP-related and other businesses exceeded the
medium-term plan targets, but they underperformedin AP-related and environment- and conveyor-related
businesses. As for business environment, thoughasphalt mixture and concrete shipment volume
showed a slight declining trend, the strong appetite
for investment of AP and BP users continued given
the disaster prevention and mitigation plans, as wellas the Plan for Building National Resilience. In the APrelated business, the demand for upgrading the plantsthat were rebuilt during the bubble economy era
plateaued, while the overseas business recovered in FY
2021 despite being affected by COVID-19 in FY 2020.

● Trends in capital investment and hiring (new graduates and those with prior work experience)(million yen)

Capital investment

3,000

Hiring (new graduates and those with prior work experience)

2,748

2,500
2,000
1,500
1,000
500
0

26

1,889

35

23

1,483

1,907

2017

60

50
40
30
20

550

10
2018

Meanwhile, issues remain in terms of profit. Operating
income in FY 2021 came to 2.05 billion yen, below
the 3.0 billion-yen target under the previous MediumTerm Management Plan. By business, the BP-related,environment- and conveyor-related, and other businesses
exceeded the target, while the AP-related businesssignificantly underperformed. The reasons behind the
AP-related business not meeting the target include theoccurrence of unprofitable projects in addition to the risingcost of raw materials, which affected it more significantly
than the other businesses. We have been reflecting
the rise in prices of raw materials in the quotation fromthe beginning of FY 2021, but their contribution to thefinancial performance was limited. We also carried out
salary revision (a uniform increase of 30,000 yen for union
members) as part of investment in human resources.
While our domestic share in AP is high at about 70%, we

15 N ikko Corpo ra te R epo r t 2 0 2 23451(people)

2019

2020

2021

0

(ﬁscal year)

were unable to show any overwhelming superiority withour comprehensive ability including product and service.
It triggered a price war with competitors, which is a pointof introspection. Given this experience, we establisheda specialized organization for marketing on January 1
this year. We will work on improving product service
by enhancing the study of customer requirements andproducts of competitors. Besides these, the restrictions
on movement due to the COVID-19 pandemic affected
the overseas and new business fields, and we had a plant
shutdown (about two months) in China around the time the
COVID-19 pandemic started in 2020 as well as the lockdownin Shanghai (about two months) in 2022, and a seven-monthdelay in the completion of the manufacturing base of theThai subsidiary due to travel restrictions. Furthermore, thefact that we advanced the schedule of decarbonizationrelated development, aiming for full-fledged response to CN,

was also a factor behind the increase in expenses.
Among these issues, some no longer have any impact
and some have already been addressed. However, theupfront investment for responding to CN will continue
for a while. Schedules were changed due to many factors

Session 3.

and we had to make investments upfront, but we plan topromote the medium- to long-term management goals
without changing them. Going forward, we will not only
strengthen the body, which has become large, but also
the internal organs (see p. 23).

Strategy related to the 2030 Vision and the new Medium-Term Management Plan

The Group formulated the 2030 Vision as “The top
manufacturer of plant facilities and environmental
products underpinned by advanced technology
and customers’ management partner throughoperation and maintenance service,” with net sales
target of 60.0 billion yen and operating incometarget of 6.0 billion yen. Please elaborate on yourrecognition of the business environment in the
new medium-term plan and the strategy there.
First of all, regarding business environment recognition,
there is a time lag in the AP-related business inpassing on the steep rise in cost caused by theincrease in prices of crude oil and other materials toroad pavement companies, who are our customers,
and we are seeing negative impact on the financial
results as well as suppression and postponement of
capital investment. In our case, there is also the risein prices of supplies and prolongation of the delivery
period, so, in addition to actively maintaining stock,
we are addressing this by seeking the customers’
understanding regarding a leveling of the delivery time
and the passing of increased costs to the selling prices.
At the same time, our guess is that capital investmentby the road pavement companies will be sluggish not
only in FY 2022 but also in FY 2023. In the case of BP,
the ready-mix concrete industry as a whole is pushingcost pass-through on to the products and there isno sense of deceleration in inquiries at present. We
therefore feel that capital investment will stay strong(see pp. 39, 41).
Nikko has a 70% market share in the domestic AP

market, and it also has a top market share of morethan 40% in the BP market.
The construction of the new plant in Thailand wasdelayed due to the COVID-19 pandemic, but weheld the opening ceremony in March 2022 and theplant has started full-fledged operations. Nikko’s
used machines have the top share in the AP market
in Thailand, with more than 250 units in operation
currently. We have officially concluded a distributor
agreement with TIPCO, the top supplier of asphalt
raw materials in Thailand, and we will capture without
fail the expected replacement demand for the ageingused AP machines manufactured by Nikko, aiming forearly business expansion. We are receiving inquiries
primarily for parts in business negotiations aimed
at Russia, but since its invasion of Ukraine we havestopped business negotiations. We cannot predict
when the invasion will end, but we hope to contributeto Ukraine’s recovery through AP and BP (see p. 29).
There is steady investment in roads in China on theback of measures stimulating internal demand, andNikko Shanghai’s work volume is also increasing. The
work volume has more or less doubled compared to five
years ago. The level of technology also has improved,with recycling and other technologies at almost thesame level as Japan’s. Our policy, even now with therobust AP market, is to handle the increase in demandthrough outsourcing without expanding the production
facility of Nikko Shanghai’s own factory. Labor costin China also has more or less doubled compared to
10 years ago. At the same time, China faces mediumto long-term risks such as the worsening of US-China

Nikko NilKhosol Co., Ltd. in Thailand

N i kko C o r p o rate R ep o r t 2 0 2 2 16

VALUE CREATION VISIONS & STORIES

relations and the Taiwan issue. Though our strategy
differs from the major competitors in Europe in the APbusiness and pursuing expansion of local plants, we will
carry out management taking the risks into account.
The technological level of local Chinese competitors is
also improving, and there is a possibility of a change
in the current composition where three companies(two European companies and Nikko) compete in thehigh-end market. The markets other than the high-end
market, though they enjoy high volume, have high credit
risk, and there is no change to our policy of not entering
these markets.
In new businesses, mobile crushers of the mobile
plant (MP) business had great success, and Nikko is
continuing to expand its market share. Cumulative
units sold have exceeded 110 units, and whencounting smaller models, we are looking at annual
sales of 40 units. In the medium term, we expect anincrease in parts sales, which is a stock business, andtherefore we will be pursuing enhancing parts stockand establishing a service structure (see p. 30).

In the 2030 Vision, the Company has revised
upward its net sales target from 50.0 billion
yen to 60.0 billion yen. Please explain the
background and the important points toachieve that target.
W h e n w e d r a f t e d t h e p r e v i o u s M e d i u m -Te r mManagement Plan in 2019, the 2030 Vision wascloser to a concept. As time passed, management
consultants also got involved as we promoted abusiness administration project to prepare a moreaccurate medium-term management plan. As a resultof that, and based on the performance for the threeyear period, we revised upward the 50.0 billion yen
net sales target for FY 2030 we set forth in 2019 to60.0 billion yen. At the same time, we brought forward
the 50.0 billion yen target by six years to FY 2024, thefinal year of the current medium-term plan (see p. 5).
We were able to carry out capital investment for future
growth in the previous medium-term plan, led bymanufacturing capital. While we will continue to makehigh level investments in the future, in the current
medium-term plan our focus will be on enhancing humancapital by increasing the personnel count and improving
their skills. We are planning to increase the employee
count by 145 for Nikko on a non-consolidated basis
in the current medium-term plan period (against an
increase of 69 during the previous plan period). Of this,59 people will be AP-related and 20 will be BP-related,
and we will also increase the number of development andmobile plant employees. We will also more than double
the investment in R&D, which is intellectual capital, to2.53 billion yen (1.19 billion yen in the previous mediumterm plan). This will include not only the development of
new environment-friendly products, but also support for
remote operations and automation, system development,
and IT investment. In capital investment, we arealso considering a structure that will bring together
cooperating companies, with Nikko at the center, toprepare for future supply chain risks (see p. 25).
I believe that it will be necessary to review thefunctioning of the head office plant in the near
future. For example, by collaborating with overseas
manufacturing subsidiaries and cooperatingcompanies, the head office plant can primarily be
involved in assembly, among other scenarios.
By business, we are anticipating an improvement in the
profitability of the AP-related business and growth inthe other business, which includes Ube Kohki, which
has been made a subsidiary, as well as new businesses.
Domestic AP-related business will leverage its hightechnological capabilities as the top manufacturer
to ensure decarbonization, remote operations and

The new medium-term plan is the phase to
make internal investment for 2030. We willthen move on to the business expansion
phase starting from FY 2025.

17 N ikko Corpo ra te R epo r t 2 0 2 2● Three systems of education and training
Position-based training(Ability development training corresponding to position)

New hire training
New manager training
Training according to year of joining company
Training based on personnel evaluation feedback
Career design training
Objective-based training(Learning opportunities and assistanceprograms aimed at improving specific skills)

Support program for acquiring special
skills, IT certifications
Support program for gaining language skills(TOEIC score improvement; target score: 820)
(In-house English language class, online English
learning, external English language schools)

Autonomous and elective training(Face-to-face, online seminars)(Course details)
Business IT skills (macro, programming)
Business writing
Communication skills
People management skills
Presentation skills
Accounting, tax
Self-coachingAmount invested in personnel training and training hours (total for FY 2021):¥12,847,000 and 3,204 hours (only for major programs)
automation technology to provide plant operation
support to customers more than ever. Also, as the top
manufacturer in Japan, the BP-related business has insight to acquire the domestic dynamic share of 50%,
and will carry out the comprehensive management ofready-mix concrete plants and product development tomeet the high quality requirement of pre-cast concrete
plants (see pp. 39, 41).
The key to the AP and BP strategy is the reformationof the maintenance service business, and in addition
to streamlining the current operations, we will pursue
the spread of subscription and other new services. Net
sales of the maintenance service business for FY 2024
are planned to be 13.0 billion yen, which is more or lessthe same as those of FY 2021, but we aim to improve
profitability. Maintenance service will be considered asasset management (management of customer assets
with prevention and maintenance at its core), and wewill rebuild (segmentation, division of labor, and integration)
the service business structure by carrying out remote
maintenance with smaller numbers of people or without
people. The reason why the net sales of the maintenanceservice business are flat is because we are placing
importance on pursuing profitability by proceeding withimproving the constitution within operational reform. It will
be necessary to make significant changes to the divisionof roles of the business in these three years (see p. 28).
This medium-term plan is positioned as the internal
investment phase to achieve the 2030 Vision. On
top of having significant increases led by human andintellectual capital, we are also going ahead with theestablishment of systems, processes, and precisionsuch as the spread of new services and systemdevelopment, with also a focus towards 2030.

Regarding the utilization of management
capital for raising the ability to generatecash flows in the future, which management
capital does the Group lack upon achieving
2030 Vision, and how do you plan tostrengthen that?
For achieving the 2030 Vision, it is imperative that webolster and utilize human capital, which is the management
capital that we lack the most. There are various ways to dothat such as securing diversity, and raising the employees’skills and is not just limited to increasing hiring. So, firstof all we have to think of how we will leverage the current
employees to strengthen such. We also need to develop
more women-friendly workplaces. We are currently
reviewing our personnel system including these factors, andplan to enact it on April 1, 2023. The new personnel system
carries out evaluations based on the level of performance,
and if that mechanism is implemented further, it will raise
the motivation of talented employees, which is expected
to strengthen human capital. We are breaking away fromthe seniority system, and we will also allow employees toskip grades (job position). We will also review the existingold-style allowance system, link it with the new personnel
system and distribute that capital to where it will lead to
the Company’s growth. We are also considering diverse

N i kko C o r p o rate R ep o r t 2 0 2 2 18

VALUE CREATION VISIONS & STORIES

workstyles such as side job and second job system as wellas an open recruitment system (see pp. 35, 65).
To be specific, we are lacking human capital the mostin the maintenance service business.
The workload is high here, and since it also accounts forthe highest share in net sales of Nikko Group, this is themost important challenge in achieving 2030 Vision. To that
end, we need to change the business from a maintenanceservice to one where we manage the customers’ assets.
We are aiming for a win-win system where we not only
respond to the emergency repair demands of customers
but also offer customers a steady operation of plants,
while we earn asset management revenue. For that
purpose, we will build a business model that will level themaintenance service business work.
This also requires streamlining operations. The operations
carried out by the maintenance staff not only require theknowledge of machinery and maintenance techniques,but also negotiations skills and spontaneity. On top ofthese, it involves numerous management items such as
safety, process, credit, ordering, billing, and sales, andit will take more than 20 years to gain proficiency in all
operations. We hope to also get some outside help anddevelop an outstanding system to streamline operations.
Also, instead of recruiting maintenance staff, if can we hirea staff for system and data management, it will provide
immediate firepower. We will restore the maintenanceservice business from its overflowing condition right now
to what it should be, and set the net sales target for thebusiness at 13.0 billion yen in the new medium-term plan.
Along with modifying the harsh business details, we will
also pursue streamlining by carrying out segmentation
and reconstruction of the contents, after taking into
consideration the operation’s specialization. Through thiswe can expect to utilize and strengthen human capital.
We have been blessed with high sales in the maintenanceservice business. Going forward, we will be focusing ondata analysis, IoT, and DX, by combining the utilization of
intellectual capital of IT and sensors along with humancapital (see p. 61).
We also need to strengthen intellectual capital. Though
we have installed development and testing devices
inside the company, it is not possible to recreate thefield experience inside a company. We hope Nikko will
get an opportunity to make investments and operate
the plant along with its customers. That is because thesituation is different between the testing device andthe site. Gaining actual experience in plant operation
would enable the development of better plants, and theSession 4.

What are the important ESG issues for improving
sustainability? What kind of strategies and figures
do you have in mind regarding environment (E)including realization of CN? Please explain alongwith the sustainability initiatives in governance (G).
We have listed CN-related initiatives for the environment(E). We have presented our decarbonization road map forasphalt mixture plants towards 2050 to customers. Nikko
aims to achieve 4.0 billion yen in net sales of decarbonizationrelated products in FY 2030 (1.2 billion yen in the FY 2022plan). Environment has not only AP- and BP-related themes
but also company-wide themes, and we will also focus on theenvironmental recycling business, which is a new field. The
target is urban mines. We consider recycling equipment for
waste consumer electronics, construction waste, and wastematerials generated at each manufacturing factory as a pillarof our business. In recycling construction waste materials,
major business opportunities exist for treatment systems forplasterboards, soil contamination, and waste soil from dredging,and this is a field where we can contribute to society. We will
expand our track record of recycling system for batteries, which
are going to increase as we go forward. Maekawa Kogyosho, asubsidiary, has received requests for processing solar panels,
and we also expect demand for recycling processing in the
future. Nevertheless, cross-business initiatives are necessary forenvironmental recycling and we need to rebuild the teams thatare working on it (see pp. 49, 51).
In governance (G), we established the Nomination andRemuneration Committee after announcing that wewould list our shares on the Prime Market of Tokyo
Stock Exchange. As for the composition of the boardof directors, it has four outside directors including
one female director, which satisfies the new Corporate
Governance Code. We need to build a board structure
and acquire the skills that are suitable for improving
medium- to long-term business sustainability. Until
now, there were times where I felt that the agenda
items were adopted depending on the sensitivitiesof the times. In the future, however, we will needeffectiveness of governance adapted to sustainability.
It is also important to work on nurturing directors andofficers’ successors, including the president (see p. 73).

connect in fields that go beyond existing boundaries.
In terms of engagement with employees, we needto create opportunities for female employees toparticipate actively, which has been an issue, andmake progress in diversity and inclusion so as tosolve matters that are likely to grow into issues in
the future. On April 1, 2022, we uniformly raised thesalary of employees, and along with the new personnel
system to be introduced in the next fiscal year, we will
also aim to instill our corporate identity.
We would like to discuss our initiatives for achieving
growth with our shareholders and investors byengaging with them through business results
briefings, individual meetings and other means,
while offering shareholder benefits and conducting
questionnaire surveys by keeping in mind the payout
ratio (dividends) they expect from us.
We will drive forward collaboration with customers
and suppliers by working together on new challenges(joint development) and identifying themes that willlead to a mutual work style reform.
We would like to step up to a phase that is different
from where we are at the moment by incorporating
the viewpoints of sales and technology in theconversation (see p. 67).

Finally, please give us a message including
a review of your tenure from the time
you were appointed president to thepresent, as well as the corporate valuethat you consider important, and yourresponsibilities being in top management.
I took office as president on April 1, 2019, the same
year that Nikko marked its 100th anniversary. At thattime, we built the Techno Center on the west side of thehead office building and consolidated our technology
divisions there. That building is now running at full
capacity as the number of engineers increased.
As the scale of our business grew, our impact(contribution) to society also increased, magnifying
our corporate responsibility and raison d’être. In
recent years, our employees have also started feelingthe growth of the company, and we will aim for 60.0
billion yen in net sales in 2030 with the 40.0 billion
yen as a waypoint. If the scale of the company grows
further, the number of Nikko Group employees is also
expected to grow significantly from the current 1,300.
The most important matter upon considering
corporate value, I believe, is continuity and it is myrole to take that responsibility. Nikko is not an owneroperated company and the term of office of thepresident is also fixed to a certain extent, and it is my
duty to create a mechanism for continued growthduring this period. I would like to ensure a passing of
the baton on to the next chief executive so that thecompany continues to move in the growth trajectory.
It is necessary to also improve the earning power toraise the corporate value in capital markets. Rather
than simply increasing the volume of existing business,
what is important here is operational reforms. For
example, we need operational reforms that lead to theenhancement of earning power such as next-generation
preventative and predictive maintenance services
through asset management and developing designs thatare convenient for maintenance and manufacturing. In
operational reforms, we would like to offer valuations
that are satisfactory to the employees by accepting
higher costs when it is necessary (see p. 21).
We look forward to the continuous support from ourstakeholders. We will strive to deliver managementthat lives up to their expectations.

We will aim for thesame goal as our
stakeholders inorder to improve ourcorporate value.

Stakeholder engagement-related initiatives

In order to achieve the 2030 Vision andraise the corporate value, it is necessary
to win the trust of the stakeholders bycooperating with them. What kind ofengagement do you think is necessary in
the future for this?

19 N ikko Corpo ra te R epo r t 2 0 2 2

staff will be able to carry out plant management while
being an engineer. Furthermore, we hope to be able tocarry out development along with customers as equal
partners at the business level (see p. 36).

Nikko’s corporate philosophy has been customer firstover a long period of time. To solve social issues, itis necessary to build a relationship of trust throughrepeated engagement with the stakeholders, including
customers, and share the same goal (interest) withthem. Going forward, it is also important that we

N i kko C o r p o rate R ep o r t 2 0 2 2 20

Target Economy, Social and Environmental ValueVALUE CREATION VISIONS & STORIES
Operating margin of Nikko (graph)

In its 2030 Vision, Nikko Group aims to achieve 60.0 billion yen in net sales and 6.0 billion yen in operating
income (operating margin of 10.0%) in terms of economic value by expanding service business while maintaining
and strengthening the Nikko brand, symbolized by its technical prowess and product appeal as a manufacturer.
Further, of the four material matters related to social and environmental values, it lists; “realization of carbon
neutrality” and “establishment of a recycling-oriented society,” which are related to environmental value, and“human resource development and improving job satisfaction,” which is related to social value. The Group aims
to improve its corporate value by simultaneously raising economic value and social and environmental values.

8.0

10.0（e）

7.0
6.0

6.0

5.9

2012

2013

2014

4.5

2015

2016

2017

2019

2020

2021

FY 2021:0.5 billion yen
FY 2025:
2.0 billion yen
FY 2028 onwards: 4.0 billion yen

Corporate value KPI

FY 2030[Net sales]

1) Fuel transition(million yen)

2) Warm mix

4) Reform of the plant system

6) Transformation of the mixture delivery system*Products related to approaches (5) and (7) are expected to record sales from FY 2031 onwards.

2,000
1,000
500
0

6

6

6

4

4

4

2

2

2

2
1

1

2021

4

4

4

4
2

4
2

4
2

2

2

2

1

1

1

1

1

1

1

1

2022

2023

2024

2025

2026

2027

2028

2029

2030 (ﬁscal year)

Corporate value - market cap

FY 2024

Market cap
24.3 billion yen
50.0 billion yen

2,500
1,500

Social and environmental values

Net sales of CN-related products

2030 year)

Net sales target of related products and investment plan (the figures for FY 2021 are results)

3,000

Environmental value KPI(ﬁscal

2024

3,500

Operating margin
5.3％
6.0％
10.0％

2022

which is a KPI of environmental values, were from fueltransition and the remaining were from warm mix. In
fuel transition, fuel is expected to be switched fromheavy oil, which emits large volume of CO2, to city gas,
natural gas, and biomass fuel for the time being, and willsubsequently switch to ammonia and hydrogen, which
are free of CO2 emissions (see p. 53).

Nikko Group combines seven technologies fordeveloping products to achieve carbon neutrality: 1)
fuel transition, 2) warm mix, 3) transformation of thematerial storage system, 4) reform of the plant system,5) CCU, 6) transformation of the mixture delivery
system, and 7) electrification. In FY 2021, most of
the net sales of carbon neutrality-related products,

4,000

Economic value KPI

FY 2021
Note: The area of the circle
represents market cap

Economic values

Looking at the operating margin of Nikko Groupover the long term, it was low and trending within anarrow range of 0 to 2% until FY 2011, but since FY
2012, it has been in the range of 4 to 6% in general.
However, the topline continued to expand steadily andnet sales have grown from 27.1 billion yen in FY 2012
to a record 38.8 billion yen in FY 2021, even though
growth in operating margin appeared sluggish.
The cause for the slackened growth in operating
margin in the recent several years lies in the slow
growth in profitability of the mainstay AP-related

Nikko’s share price reached 919 yen (36.8 billion yen inmarket cap) at one time partly as announcement of thecapital policy and strengthening information disclosurein 2019. Also, during the previous medium-term plan
period, Nikko’s market cap trended from 19.25 billion
yen as of the end of FY 2018 to 24.36 billion yen as ofthe end of FY 2019, to 29.24 billion yen as of the endof FY 2020, and to 24.28 billion yen as of the end of
FY 2021, posting satisfactory total shareholder return(TSR) in general.

The 50.0 billion yen in estimated market cap as of theend of FY 2030 is based on an estimated share priceof 1,250 yen (40.0 million shares outstanding). If EPS
for FY 2030 is 105 yen, PER would be almost 12 times.
Looking at PER for the past three years, at its lowest
PER was just below 12 times and almost 18 times at its
highest, with the median being almost 15 times. For thisreason, the expected PER of almost 12 times as of theend of FY 2030 is considered to be reasonable, in lightof the results from the past three years.

Nikko’s market cap

Economic value - operating margin

21 N ikko Corpo ra te R epo r t 2 0 2 2

2018

Social and environmental values - net sales of carbon neutrality-related products

4,500

FY 2021:
FY 2030:4.0（e）(FY 2012–2021 results; FY 2022, 2024, 2030 estimates)(results), of 6.0% in FY 2024 and forecasted to be
10.0% in FY 2030. At the same time, net sales ofcarbon neutrality-related products, which are KPIs
of environmental value were almost 0.5 billion yen in
FY 2021 (results) and are expected to be 1.2 to 1.3
billion yen in FY 2022–2024, almost 2.0 billion yen
in FY 2025–2027, and about 4.0 billion yen in FY
2028–2030. The Group aims to achieve 50.0 billion
yen in market cap, which is a KPI for corporate
value, as of the end of FY 2030 (24.3 billion yen asof the end of FY 2021).

Image of corporate value improvement towards FY 2030

FY 2021:
FY 2024:
FY 2030:6.0（e）
5.3

4.8

4.4

6.1

5.8

6.0

4.0

Image of corporate value improvement from FY 2021 to FY 2030
The Nikko Group created a graph illustrating how itwill raise its corporate value from FY 2021 (results)
to FY 2030. The Group positions the period of thecurrent Medium-Term Management Plan till FY 2024
as a phase for internal and upfront investment
for business transformation and scale expansion
leveraging Nikko’s technology. It positions the period
after that as a phase for business expansion in termsof both social and environmental values.
The Group expects operating margin, which is a
KPI of economic value and was 5.3% in FY 2021

[Operating margin (%)]
10.0

business. In the previous Medium-Term Management
Plan, operating margin of the AP-related business
was 6.4% in FY 2019, 6.4% in FY 2020, and 3.1%
in FY 2021. Profitability of the AP-related businesshas been affected by factors such as recording
sales on strategic order projects anticipating future
maintenance revenues and cost increases especiallyin FY 2021 due to soaring steel and supply prices.
In the current medium-term plan, the Group expects
gradual recovery in the AP-related business of 4.3% in
FY 2022, 7.0% in FY 2023, and 7.0% in FY 2024.

[Market cap (mil. yen)]
50,000Market cap

Share price

607

609
481

0

1,250

700
600

30,00010,000[Share price(yen)]

731

40,00020,000

1250

320

441

346

13,503

14,600

2011

2012

343
20,297

18,609

2013

2014

403

462

481

19,2562018

14,47417,005

18,472

2015

2016

2017

50,00024,3602019

29,240

2020

500
400

24,280

2021

300
2030

0

(ﬁscal year)(on a fiscal year basis; end of FY 2012 to end of FY 2021; FY 2030 estimate)

N i kko C o r p o rate R ep o r t 2 0 2 2 22

Medium-Term Management Plan

VALUE CREATION VISIONS & STORIES

Review of the previous Medium-Term Management Plan

Key Points for Each Segment

Summary of Previous Medium-Term Management Plan (1)In the previous Medium-Term Management Plan (FY 2019–
FY 2021) announced on August 8, 2019, we aimed torealize highly transparent and vibrant corporate business
operations with five long-term (10 years) basic policies atthe core. The plan’s numerical targets for FY 2021, which
was the final fiscal year, included net sales of 38.0 billion
yen, operating income of 3.0 billion yen (operating marginof 7.9%), net income of 2.1 billion yen, net assets of 32.3
billion yen, ROE of 6.5%, and dividend per share before thestock split of 160 yen (payout ratio of 60.9%).
However, we could not achieve the numerical targets
other than those for net sales (record high) and payout
ratio due to worsening external environment such as theglobal COVID-19 pandemic and soaring prices of various
raw materials and logistics costs as well as internal
factors of active capital investment and R&D efforts.
Nevertheless, we made more-than-anticipated progress in
employees’ workstyle reform, improvement in the workplaceenvironment, development of products for decarbonization,and strengthening of the fixed-rate maintenance service
business by leveraging DX.

Medium-Term
Management Plan
before the previous plan

Numerical Plan and Resultsof the previous
Medium-Term Management Plan
1st year(net sales)

50,000

5.9%

6.4%

6.0%

4.5%

40,00032,71720,0007.1%

36,50035,151

3rd year

6.1%

37,866

7.9%

5.3%

5,000

38,00038,8464,000

31,78030,0001,944

35,70035,114

2nd year

5.8%(million yen)(operating
income)

3,000
2,300

2,103

2,600
2,053

3,000

Asphalt Plant (AP)-Related Business: An issue with profits（売上高）

50,000

5.9%

2,053

2,000

Batcher Plant (BP)-Related Business: Cleared all three targets

30,000

1,427

1,000

10,000
0

2016

2017

2018

Net sales

Medium- 2021
Medium- 2019 Medium- 2020
term plan (results) term plan (results) term plan (results)
3rd year plan
2nd year plan
1st year plan
Operating income

6.0%

40,00032,7172,302

20,0001,944

35,114-Compared with the net sales target for FY 2021 of 3.4
billion yen and operating income target of 0.578 billion yen(operating margin target of 17.0%), actual net sales were 3.00billion yen
and operating income 0.587 billion yen (operating
16年度 17年度 18年度
中計
margin 1年目
of 19.5%). Net sales were short of the plan but the
売上高
営業利益
営業利益率 計画
profit came in line with the plan. Operating margin has reached-Compared with the net sales target for FY 2021 of 5.2
billion yen and operating income target of 0.679 billion yen(operating margin target of 17.2%), actual net sales totaled
6.7 billion yen and operating income 1.073 billion yen(operating margin of 16.1%). In FY 2021, both revenue andprofit declined compared with the previous year, even as

Previous Medium-Term Management PlanFY 2021 (3rd year) results

Strengthen revenue
base in Japan

Operating margin in Japan

Operating margin in Japan

Operating margin in Japan

1

Improve proﬁtability (10% in
operating margin) by boostingproduct appeal by raising thelevel of all divisions of sales,
service, engineering, andmanufacturing.

2

Establish overseas
sales

As a manufacturer, establish new
overseas bases to spread Nikko
products, which are the best in theworld, in the ASEAN region (doublingoverseas net sales to 9.0 billion yen
from the current 4.5 billion yen).

3

FY 2018: 4.5%

Overseas net sales:

1004.39 billion yen

Feb. 2020: Established Nikko
Asia(Thailand)Co.,Ltd. an AP sales（億円）
and maintenance company

Promote new
businesses (M&A)

Mobile plant business
FY 2018: 90 million yen
FY 2019: 500 million yen

Waterproof board

営業利益率

FY 2018: 210 million yen
FY 2019: 810 million yen

Put work-stylereform into practice●Enhanced web conferencing system toswiftly share information without beingbound by time or location
Improve
operation
efﬁciency
and 3 年目計画
18 年度中計 1 年目計画
19 年度実績
中計 2 年目計画
20 年度実績
中計
21 年度実績●Identiﬁed problems in telecommuting andsigniﬁcantly raise labor productivity
dispersed operating system.
(centralization of ofﬁce work and●Introduced production facilities employing
utilization of IoT and AI).
new technologies to improve productivity
dramatically (ﬁber laser, etc.).

5

Make ROE a KPI

Aim to achieve a market
capitalization of at least 50.0 billion
yen and ROE of at least 8%. Aimfor a dividend payout ratio of 60%
or higher and enhance returns toshareholders.

23 N ikko Corpo ra te R epo r t 2 0 2 2

8 FY 2019: 6.0%
7FY 2020: 6.5％

FY 2020: 6.5%

FY 2021: 5.3％

Market cap End of FY 2018:19.25 billion yen

End of FY 2019:24.36 billion yen
ROE End of FY 2018: 4.4%

End of FY 2019: 5.2％

FY 2019 payout ratio: 97.6％

5Overseas net sales:
4

営業利益率

the business exceeded the medium-plan targets for bothnet income and operating income.
-In addition to steady expansion in sales of mobile plants,
which is a new business, the impact of the large sales
increase in sales of waterproof boards also contributed tostable earnings.

Summary of Previous Medium-Term Management Plan (2) Trends in sales and operating income by business division

6

1990

Invest management resources in
expansion of new businesses andnurture products that will become newpillars of the industrial and construction
machinery ﬁelds (generating 10.0 billion
yen in net sales from new businesses).

4

FY 2019: 6.0％

a level close to 20%.
-Sales were lower than the target, as we could not sufficiently
carry out route sales activities for the conveyor business dueto the impact of COVID-19 and as some customers postponed
their plans. Nevertheless, the business achieved the profit
target, as the effect of product price increases contributed.

Other Related Business: Posted stable profits

Review of the Long-term (10-year) Basic Policy, looking into the future, for the period of the previous medium-term plan
FY 2020 (2nd year) resultsof 10.4%), exceeding the targets by large margins.
-In addition to the impact of the revenue increase supported
by strong replacement demand, planned production and cost
reduction were successful.

10,000Operating margin

FY 2019 (1st year) results

35,700-Compared with the net sales target for FY 2021 of 9.4 billion
yen and operating income target of 0.893 billion yen (operating
margin target of 9.5%), actual net sales came to 10.8 billion yen
2,103 and operating income was 1.123 billion yen (operating margin
31,780

Environmentand Conveyor-Related Business: Secured almost 20% in operating margin
1,427

0

Previous Medium-Term Management Plan

-As COVID-19 continued to spread, the overseas businessexpansion with focus on Thailand got delayed in the firsttwo years and we could not fully transfer the soaring steel
price onto selling price as the delivery time of procured
parts became longer.

-Compared with the target net sales for FY 2021 of 20.0
billion yen and operating income of 1.9 billion yen (operating
margin of 9.5%), actual net sales were 18.3 billion yen with
6.4%
operatingincome of 0.562 billion yen (operating margin of
4.5%3.1%). All three items fell short of the targets.

前々中期経営計画期間(net sales)
21 年度実績
30,000Overseas net sales:

3.73
billionyen
4.74
billionyen 21 年度実績
16 年度
17 年度
18 年度中計 1 年目計画
19 年度実績
中計 2 年目計画
20 年度実績
中計 3 年目計画(estimate)(Sales declined due to the impact of
COVID-19)
Oct. 2020: Started full-ﬂedged operationof Nikko Asia (Thailand)Co.,Ltd.
Received orders for two APs

Signed an agent agreement withTIPCO, the manufacturer with the
top asphalt sales in Thailand
The Thailand factory wascompleted in FY 2021.

Mobile plant business

Mobile plant business

FY 2020: 1,070 million yen

Waterproof board
FY 2020: 900 million yen●Continuing with the FY 2019 initiatives.
●Remote maintenance contract rate:
Jan.-end 2020: 46% -> Aug.-end 2020:67% -> May-end 2021: 73.8%●Created materials and movies for webinar
training, etc. (30 videos have been shot
for the maintenance division)

Market cap End of FY 2020:29.24 billion yen
ROE End of FY 2020: 6.8％
FY 2020 payout ratio: 60.5％

Completed acquisition of treasury stock
on Sep. 17 (Acquired 616,700 sharesin treasury stock for ¥399,960,700)

FY 2021: 1,440 million yen(estimate)

Waterproof board

FY 2021: 1,010 million yen(estimate)

M&A March 1: M&A of Ube Kohki●Continuing with the FY 2019 initiatives.
●Remote maintenance contract rate:
76.1% as of the end of March 2022
●Received orders for 13 ﬂat-rate
maintenance service contracts.

営業利益

中計 3 年目計画
25,00020,000 18,700

20 年度実績

ROE End of FY 2021: 5.2％

FY 2021 payout ratio: 69.5％

6.4%

9.0%

6.4%

3.1%
20,00019,46719,00017,5189.5%

18,32815,00010,000
中計 2 年目計画
1,570

19 年度実績

0

1,239

1,118

562
2019 plan 2019 (results)

中計 1 年目計画
10,0002020 plan 2020 (results)

17 年度

2021 plan 2021 (results)

17.2%

17.0%

20.2%

17.0%

30,0005,000

25,0004,000

20,000

4,000

3,000

15,000

3,000

2,000

10,000 9,200

1,000

5,000

0

0

8.1%

Operating margin

10,000

7,500

2,900

0

2,634
500

562

2019 plan 2019 (results)

544

2,390

482

2020 plan 2020 (results)

879

2020 plan 2020 (results)

2021 plan 2021 (results)

500
0

10.4%

10,839

9,400

1,123

893

2021 plan 2021 (results)

Other Related Business

17.2%

2,500

0

510

2019 plan 2019 (results)

1,000
0

16.1%

2,000
1,500

5,200
1,170

1,020

2,000

2,500
17.2%

5,840
5,000

5,000

6,660

3,018
587

9.5%

6,796

1,000
578

6,000

10.7%

10.4%

5,000 4,900
3,400

9,212

17.5%

2,000

9.5%

9,158

761

2019 plan 2019 (results)

1,500

3,200

9.0%

9,300

9,158

19.5%

5,000

2,500

8.3%

750

Operating income

2,500

7,500

(million yen)

BP-Related Business

6,000

Net sales

Environment- and Conveyor-Related Business
21.3%

18 年度

1,900

1,710

5,000

Market cap End of FY 2021:

24.28 billion yen(operating income)

AP-Related Business
8.3%

559

2020 plan 2020 (results)

1,073

1,000

679

500

2021 plan 2021 (results)0

N i kko C o r p o rate R ep o r t 2 0 2 2 24

価値創造のビジョン＆ストーリー
VALUE CREATION VISIONS & STORIES

Overview of the new Medium-Term Management Plan (FY 2022–FY 2024)

Medium-term plan numerical targets by segment

plan, and the Group aims for 50.0 billion yen in consolidated net
sales, 3.0 billion yen in operating income (operating margin of
6.0%), and a payout ratio of 60% or higher.
Furthermore, it positioned the period from 2025 to 2030 as
the business expansion phase with improved profitability inwhich the Group expects to succeed in full-fledged sales ofenvironmentally friendly products for decarbonization, businessarea expansion into the ASEAN region, actualizing the impact
of introduction of technologies such as automation and remote
operations, and review of production process. In the 2030
Vision, the Group aims to achieve consolidated net sales of 60.0
billion yen and operating income of 6.0 billion yen (operating
margin of 10%) as well as 50.0 billion yen in market cap, which ispart of the Long-term Basic Policy.

On March 29, 2022, Nikko Group announced the 2030 Vision(the top manufacturer of plant facilities and environmental
products underpinned by advanced technology and customers’
management partner through operation and maintenanceservice), which details what it aspires to be in 2030, as well as
the new three-year Medium-Term Management Plan (FY 2022–
FY 2024) starting FY 2022. The Group positioned the new
medium-term plan period as the internal investment phasefor building structures, processes, and systems towards therealization of the 2030 Vision and plans to actively makeinvestment for market introduction of new products andservices and strengthening the organizational capability required
for achieving goals. Numerical goals were set forth reflecting theissues and introspection regarding the previous medium-term
Growth investment
Item

R&D
expenses

Addition of 145
employees at parent
Nikko (up 69)

2.53 billion yen(1.19 billion yen)

●AP-related business field●BP-related business field●Environment- and conveyor-related field●Overseas

59
20
12
6

●AP-related business field■New environmentally friendly products-Net sales target for FY 2024 of 2.7 billion yen and operating
income target of 0.558 billion yen (operating margin targetof 20.4%).

(net sales) (million yen)

35,151
2,053

60,0002.0%

42,000
1,700

1,146
69.5%
32,0505.2%

48,000
2,800

5.7%

30

100 yen
97.6%
69.5%

95.6%

10
10

18

2019

2020

15
2021

15
15
2022 plan

15152023 plan

1,334
63.5%
34,0286.2%

60% or higher

also for the current
medium-term plan.

Year-end dividend

18
172024 planInterim dividend0％

Dividend payout ratio
ROE

10,00034,110

2,249

1,832

35,11432,717

5.8%

1,629

470

541

2010

2011

6.1%

(operating
income)42,00038,846

2,053

5,000

3,000
2,000

1,700

1,427

6,000

4,000
3,000

2,800

2,302

2,053

New Medium-Term Management Plan
5.8%
6.0%
4.0%
50,00048,0005.3%

37,86635,151

31,780

2,103

1,944

1,000

2012

2013

2014

2015

2016

Net sales

2017

2018

Operating income

2019

2020

2021

2022 plan 2023 plan 2024 plan0

Operating margin

Sales and operating income plan by business(million yen)(operating income)

AP-Related Business(net
8 sales)

30,000
7

6.4%

6

7.0%

6.4%

25,0003.1%

519,467

4
20,00017,5183
2
15,0002010

18,328

2011

2012

4.3%

23,000

2013

2014

6

5,000
0

2019

3
2

2010

10,000

2020
2011

2021

2012

2013

1,600

850

562

5
4

2016

1,600

1,239

1,118

23,000

2015

8
7

7.0%

20,00010,000

2022
2014

2023

2024

Net sales
2015
2016

19.5%

2,634
562

10000

0

25,0004,000

20,0003,000
2017

15,000
2018

2,000

20.0%

20.0%

2019

3,018

2,390

20.4%

2,500
2,000

482

2020

588

2021

2,500
500

2022

1,000

2,700

2,500
500

2023

10,000

550

2024

500
売上高
0

6,000

8.3%

0

2020

9,212

2021

10,839

761

879

2019

2020

Operating margin
2019
2020

20,00010.0%2023 計画

2021

9.7%

2,000
1,050

1,050

2022

2023

2024

2022 計画

2023 計画

10.7%

9.6%
13,50012,500

1,020

1,170

3,500
2,500

1,250

1,300

1,500
1,000

800

2,500
0

4,000

2,000

6,660
1,073

0

3,000

9,000
6,796

1,000

4,500

11,70010,000

500
2019

2020

2021

営

2024 計画

16.1%
8.9%

5,840

5,000

3,000

10,8001,050

Other Business

15,0005,000

2024 計画10,80010,500

1,123

2021

17.2%

2022 計画17,500

7,500

9.7%

営

4,000

2019

17.5%

10.4%

9.5%

9,158

5,000

0

1,500

40000

20000 2,500

5,000

3,000

21.3%

50000 5,000
30000

30,000Operating income
2017
2018

Environment- and Conveyor-Related Business

20.2%

BP-Related Business

6,000

1,000

60000

0

★The Company carried out a one-to-ﬁve split of shares in its common stock eﬀective October 1, 2019, and the amount of dividends have been adjusted to the value after the split.

4.5%

1,186

7,500
100th anniversary dividend

Previous Medium-Term Management Plan

6.0%

5.9%

4.8%

30,70727,08724,55323,803

63.5%
50％

15

35

Dividend payout ratio is
to be set at

6.2%

50 yen
15

2,100

1,144
60.2%
33,262
5.7%

100％

60.2%

50,000
3,000

30

1,144
95.6%
32,1063.7%

3.7%

FY 2024 plan

1,900

New Medium-Term Management Plan

5.2%

60.5%

FY 2023 plan

1,200

30

1,260
60.5%
31,451
6.8%

6.8%
5.2%

FY 2022 plan

-While we anticipate a negative impact from imported products
due to the depreciation of yen, we aim to secure stable
operating income from sales expansion and other means.

2.2%

32,073

New Medium-Term Management Plan

1,649

33

1,550
97.6%
30,293
5.2%

ROE

38,846
2,053

2,082

40

6.0%

4.4%

30,000FY 2021 results

37,866
2,302

1,588

7.0%

20,000FY 2020 results-We will prioritize securing high profitability even as we
anticipate both sales and operating income to remainroughly unchanged.

-Net sales target for FY 2024 of 13.5 billion yen and operating
income target of 1.3 billion yen (operating margin target of
9.6%).

0

FY 2019 results-We expect the prices in the market to remain high. We will
maintain the market share and focus on growth investment
such as development of decarbonization products.

Environment- and Conveyor-Related Business: To maintain operating margin at 20% level40,000*The figures in parentheses denote figures during the previous Medium-Term Management Plan.

Dividend payout ratio
Net assets

0 yen-Net sales target for FY 2024 of 10.8 billion yen and operating
income target of 1.05 billion yen (operating margin target of
9.7%).

50,0006.0 billion yen(6.3 billion yen)Previous Medium-Term Management Plan

20

Batcher Plant (BP)-Related Business: Expecting steady business performance

Sales and operating income plan

improvement ■System development■Product development ■EC and other IT
investment■Development of standard model●Environment- and conveyor-related field

Shareholder returns

Sales
Operating income
Net income attributableto owners of parent
Dividend per share(yen)
Total dividend

12
11
25

■Operation support center ■Product●Overseas

Capitalinvestment●Development●Mobile plants●Other■Remote operations and automation support●BP-related business field-We plan to restore operating margin to the 7% level throughgrowth of environmentally friendly products and profit
recovery at overseas subsidiaries.

-Net sales target for FY 2024 of 23.0 billion yen and operating
income target of 1.6 billion yen (operating margin target of
7.0%).

Other Related Business: Aiming to secure stable operating income

Investment (three years)

Staff
reinforcement

Asphalt Plant (AP)-Related Business: Aiming to improve operating margin

2022

2023

2024

0

2

2

2

2

2

2

2

2

2

2

2

2

2

25 N ikko
100Corpo ra te R epo r t 2 0 2 2

中間配当
期末配当

N i kko C o r p o rate R ep o r t 2 0 2 2 26

22

VALUE CREATION VISIONS & STORIESStory for achieving the Medium-Term Management Plan
The new three-year Medium-Term Management Plan ispositioned as the internal investment phase for achieving thenumerical targets of 2030 Vision. The Group’s basic policy is
to make active investment for strengthening organizational
structure while working on 1) business transformation
2030 Vision

AP-related business in Japan: Full deployment of subscription service for maintenance service(strengthening of operation and maintenance services at the APrelated business and BP-related business in Japan) and 2) scale
expansion leveraging Nikko’s technology (lateral deployment of
products and markets at the overseas AP-related business andenvironment- and conveyor-related business).

■ We will expand the service business while maintaining and strengthening Nikko brand,
symbolized by our technical prowess and product appeal as a manufacturer, to achieve net
sales of 60.0 billion yen and operating income of 6.0 billion yen in 2030.

Nikko Group-We will provide more support than ever for customers’
plant operation by leveraging our high technical prowess
as the top manufacturer with approximately 70% market
share in Japan and establishing decarbonization, remote
operations, and automation technology.
-We aim to improve profitability using outstanding
technical prowess and service capability by hiring more
people and strengthening our development of newenvironmental-friendly products and systems sinceneeds for such products are expected to grow in orderto realize carbon neutrality.

1 Support for decarbonization-Development of low-carbon mixture manufacturing system-Development of combustion technology for decarbonized fuels-Offering of biomass and gas combustion technology
2 Remote operations and automation support-Offering of partially remote shipping system-Development of remote operations and automation
technologies-Accumulation of plant operation data based on expansionof the number of maintenance subscription contracts

The top manufacturer of plant facilities and environmental products underpinned by advanced technology andcustomers’ management partner through operation and maintenance service

Consolidated net sales of 60.0 billion yen and operating income of 6.0 billion yen in 2030
Business transformation(strengthening of operation and maintenance services)

Scale expansion leveraging Nikko’s technology(lateral deployment of products and markets)

Asphalt Plant-Related
Business in Japan

Concrete Plant-Related
Business

Overseas Asphalt Plant-Related
Business

Environment- and ConveyorRelated Business

A management partner who leverages
the strong product appeal as a plant
manufacturer and supports plant
operations at customers.

The top manufacturer, who is a cut
above the rest and who implements
comprehensive management of readymixed concrete plants, while being anenvironmentally friendly manufacturer

Global asphalt plant manufacture

A comprehensive belt conveyor
manufacturer with modularization at
its core□ Support of decarbonization□ Remote operations and automation
supportBasic policies□ Comprehensive concrete

management system□ Plant support center□ Mobile plants□ Environmentally friendly products□ Expansion in ASEAN□ Global standard products□ Introduction of EC for small andlight modular-type belt conveyors□ Foray into channel conveyor field□ Conveyor planning service (CPS)□ Overseas expansion■The Group will make active investment in launch of new products and services for achieving thebusiness structure reform set down by the 2030 Vision and for enhancement of the organizational
capability required for that at each business.

Receipt

Customer

Crushing
Production plan
Data composition
Information

Receipt

Vehicle dispatch*Offering of maintenance subscription service

Plant operation

Truck location
information

Operation data
Offering of plant
operation information

DX team

NIKKO
Feedback to planningand development
Evolution of technology andproducts as a manufacturer, based on customer needs

Nikko

Decarbonization, low carbon
Digitization including IoT

Fuel transition

Pavement
works

Become a one and only
presence with technical prowess
and service capability!

Feedback regarding
plant operation

Customersʼ
management partner through service(Present)
Plants withenvironmental burden

Further stability andreliance throughenergy saving proposals

Transport

Stable operation
by on-site MS

Green transformation

Strengthening of customer
relations throughsubscription, etc.
Further stability and reliancethrough predictive maintenance

Remote monitoring, remote
operation
Automated plant operation

Digital transformation(Support for decarbonization)(Remote operations and automation support)

BP-related business in Japan: To strengthen the plant operation support service for our customers
AP in
Japan
BP
Overseas
AP

Conveyors□ Develop environmental products by leveraging the top manufacturer’s development capability□ Support customers’ plant management as a solutions partner□ Implement comprehensive management of ready-mixed concrete plants□ Develop products that satisfy the requirements for high quality of precast concrete□ Design and launch standard model products that are competitive also in overseas markets□ Build an organizational structure for expansion in the ASEAN market□ Realize short delivery time and low price through further modularization and offer convenience and efficiency
that go beyond the boundaries of manufacturers, enabled by engineering conveyor lines□ Improve online service and design structure to build the foundation for delivering new products and services

Business transformation (strengthening of operation and maintenance services):
We aim to become customers’ management partner
Nikko boasts the top market shares in asphalt plants and batcher
plants in Japan. At the same time, the maintenance service businessaccounts for 45% of the total net sales of the two businesses. We
aim to secure firm technological advantage by powerfully driving
forward sales expansion of environmentally friendly products andstrengthening of product development. At the same time, we aim

27 N ikko Corpo ra te R epo r t 2 0 2 2

to become a one and only presence with both technical prowess
and service capability, as we offer measures against on-site labor
shortage by strengthening remote operations and automation
support for operational customer plants as well as support for work
style reform and values such as predictive maintenance throughaccumulation and analysis of plant operation data.

-We aim to become the number one and environmentally friendly
manufacturer through the comprehensive management ofready-mixed concrete plants and development of products that
respond to requirements for high quality precast concrete.
-We have secured a 46.5% market share in Japan, which is
1 Development and deployment
of in-house control panels-Promotion of plant standardization
through deployment of in-housedeveloped control panels andaccumulation of customer plant
operation information-Introduction of customer plant
operation support service
2 Expansion into developing fields-Expand mobile plants into areasthat became unreachable due tothe consolidation of plants-Product development anddeployment in response tocustomers’ environmental needs
such as CO2 emissions reduction

the top share. We need to boost our market share to growfurther as the market remains high. We are positioning the new
medium-term plan period as a time for building a structure for
ensuring the top position by far, and will focus on increasing
personnel and development of products.

Comprehensive
concrete management

Standardization ofplantsPlant support
service

MobileBP

CarbonRecycleGrasp the status of plantmaintenance and operation
to comprehensively manage
plants

Improve proﬁtability
through realization ofshort delivery time andlow price

Become a partner that
supports plantmaintenance

Respond with mobile BP
to remote areas createdthrough plantconsolidation

Product development
addressing customersʼ
environmental needs

Development and deployment
of in-house control panels
Plant maintenance operation
Foundation for data collaboration
and utilization

Secure proﬁts and improve maintenance efﬁciency forready-mixed concrete manufacturers

Expand sales and market share of businesswith secondary concrete manufacturers andlocal general contractors

As an environmentally friendly top manufacturer, we will carry out
a comprehensive management of ready-mixed concrete plants

N i kko C o r p o rate R ep o r t 2 0 2 2 28

VALUE CREATION VISIONS & STORIES

Maintenance service: Expand maintenance service subscription and develop structure for overseas

Conveyor business: Enter the stringer conveyor market, which has a large market-We aim to become an indispensable management partner forcustomers by improving the efficiency of existing operations
through utilization of technology and data and providing support
for the plant operation of our customers.
-The maintenance service accounts for 48% of the net sales of the
AP-related business and 39% of that of the BP-related business.
The AP- and BP-related businesses in Japan will expand sales ofmaintenance subscription service and aim to stabilize customer-We aim to become a manufacturer that realizes short delivery time andlow price through modularization and offer conveyor lines in a package.
-We will modularize and strengthen the design and manufacturing of ourportable conveyors, which have about 60% market share in Japan andaccount for about 80% of the business’s net sales, so as to respondto customize requirements. We will also aim to expand sales of stringer
conveyors, which are slated for a full-scale launch, based on a strategy
of shortened delivery time through modularization. The stringer
conveyor belt market is estimated to be 6.0 billion yen compared withthe estimated 3.0 billion yen market for portable conveyors.

plant operations, data accumulation, and further strengtheningof customer relations. In the new medium-term plan, we plan toincrease net sales of maintenance service by about 20%.
-The conveyor service accounts for about 3% of net sales ofthe environment- and conveyor-related business. In the new
medium-term plan, we aim to build a structure that encompasses
preventative maintenance by developing a swift maintenancestructure in the conveyor business.
■Improve efficiency of existing operations-Promote division of labor and exclusive assignment offunction-based operations and accumulate skills andknowhow as an organization-Promote predictive maintenance to standardize operations

MS■Prepare to start new services-Accumulate data and knowhow required for plant operation
service by expanding maintenance subscription service-Develop a maintenance structure for local agents and a structure
to remotely support customers for entering new markets-Promote predictive maintenance to standardize operations

Support that fully
leverages technology
and data■ Acquire revenue opportunities-Acquire revenue opportunities by leveraging trouble
information and proposal for facility replacement upon
visiting important customers

Conveyors

Overseas AP■Prepare maintenance structure■Promote new services

2 Package offer of conveyor lines-Offer modularized stringer conveyors with short delivery times at
low prices.
-Contribute to the convenience and efficiency for the users byworking on the engineering of the conveyor system and its
peripherals.

Business transformation is a qualitative strategy that involves
improvement of profitability. At the same time, the overseas
AP-related business, conveyor business, and mobile plantbusiness aim to quantitatively expand profits by laterally
deploying successful cases of the existing businesses
and Nikko’s technology. In particular, the overseas APrelated business, where the Thailand factory started full-■Establish maintenance service structure-Establish swift maintenance service structure and evolve intoa structure that enables predictive maintenance in the future■Earn revenue with maintenance service

1 Design standard plants for overseas (universal model)-Launch a marketing team for grasping the needs of each country-Design a new standard plant with price competitiveness that
corresponds to the needs of the overseas markets by introducing
supplies, etc.

Black rubber belt conveyors

scale operations, will develop low-priced global models andposition the Thailand factory as the production base for the
ASEAN market while driving forward market development
in Indonesia and Vietnam. The conveyor business will start
expanding the sales of channel conveyors, which have highunit price, targeting existing customers. The mobile plantbusiness will promote enhancement of its product lineup.

2 Develop the structure to foray into new markets-During the new medium-term plan period, we will newly
enter into the Indonesian and Vietnamese markets-Enhance production capacity in China and Thailand tocover the entire area of ASEAN-Build collaboration structures with local sales agents

Market which we willcontinue to grow inexisting ﬁelds
Customers: major companies
Models: Large*Size of the circles
shows scale of net sales.

[Legend]
Manufacturing
bases
Sales bases
No base(individually
respond toeach project)

Market which will becomea new revenue basewithin 10 years

CPS

Portable conveyor (small and light
modular-type belt conveyors)

Conveyor with functions(measurement, tripper, vertical conveyor)

Stringer conveyors

Conveyor + peripheral devices

Mass manufacturing(modularization)

Information disclosure system

Design and manufacturing

Optimization of conveyor lines-Earn revenue from maintenance services of the conveyor
business through improved efficiency and standardization of
the operations

Overseas AP-related business: From being No. 1 in Japan to Asia’s leading company-In addition to full-scale operation of the Thailand production base,we aim to build a sales structure in Indonesia and Vietnam.
-For the Chinese business, we plan to raise net sales for FY 2024
to 5.5 billion yen (4.5 billion yen in the previous fiscal year) andoperating income to approx. 0.4 billion yen (breakeven) as anenvironment of favorable orders continues and the business also
benefits from the impact of product price revision.
-The Thailand business aims for net sales of about 1.2 billion yen in
the final fiscal year of the medium-term plan (more than 0.1 billion
yen in FY 2022) and posting operating income (approx. 0.3 billion
yen in loss), as its local factory began operations in March 2022
against the backdrop of the robust demand environment.
-In terms of market, there are about 700 estimated units being
operated in Thailand, about 1,000 in Indonesia, and about 500
units in Vietnam. We aim to expand our business into Indonesia andVietnam by laterally deploying the successful case study in Thailand.

A comprehensive conveyor manufacturer with strength in modularization-Contribute to stable operation amid engineer shortage atcustomers by expanding maintenance subscription service-Build relationships with customers and aim to become theirplant operation partner

Scale expansion leveraging Nikko’s technology (lateral deployment of products and markets): The overseas AP-related business to become the driving force of Nikko in 10 years

29 N ikko Corpo ra te R epo r t 2 0 2 2-We will become customers’ partner, offering speed, costcompetitiveness, and security based on standardization of options.

-Similar to AP in Japan, promote accumulation of skills andknowhow as an organization and leveling of operations

BP

AP in Japan■Improve efficiency of existing operations

1 Further modularization of portable conveyors

Optimum small and light
modular-type
belt conveyors

Conditions
and needs

DesignManufacturing

Standardize shapes and sizes that are in demand

Offer standardize drawing
Reduce man-hours at Nikko and customer

Modularize the body and design, while
limiting manufacturing to ancillary parts

Offer optimum conveyor lines including
devices before and after the line

Supply conveyors with shortdelivery times at low costs

Offer necessary information early
to increases dependence on Nikko

Supplementing customer operations andswift response to customer requests

Offering of conveyor lines
in package

Set manufacturer

Agent and specialized
trading ﬁrm

End user(Industrial
waste and recycling) (Civil engineering) (Agriculture and grains)(Warehouse)

Mobile plants (other business): Strengthen sales expansion by using environmental superiority as a weapon-Against the background of strong replacement demand,
we plan to capture
the largest sales
share by expanding
プラントの
プラント
コンクリートthe product lineup
to strengthen 標準化
profitability. 支援サービス
トータル管理-We aim for net
sales of 2.5 billion
yen in the final
fiscalプラントの保守・
短納期、低価格
プラントの保守をyear of the medium-term plan (approx. 1.5 billion yen in
the previous
and net sales from maintenanceモバイル fiscal year)
Carbonservicesof around 0.1Recycle
billion yen in FY 2023.
BP

プラント集約に運営状況を把握の実現による
支援する
よる遠隔エリア
工場をトータル管理への対応
Mobile plants= self-propelled利益率向上
Crushers, beltパートナーへ
conveyors, soil improver

顧客の環境対応
ニーズに応える
製品開発■Advantages: Easy to install, quick to use, easy to move to the location, sales channel for selling second hand machinery
1 Towards stabilization自社操作盤の開発
of business・展開-Build sales network, establish andpromote rental business
プラントの保守運用
データ連携・活用のベース-Promote maintenance business
2 New product development,
生コンメーカー向けのdevelopment of proposed
products
収益確保・保守効率化

省エネ提案による更なる安定
Imported devicesと信頼

Mobile crushers
and screensCreation of new hit products

199 units

Japan Construction Equipment
Manufacturers Association data

FY 2024: To achieve a 50％ market share and NO.1sales share

Mobile belt
conveyors

Mobile soil
improvers

二次コンメーカー・地場ゼネコン向けの売上・市場シェア拡大-Research of market and customer needs
Development of
Promotion of-Promote sales in Japan and overseas through the development
sales network
rental businessof in-house products
生コン工場のトータル管理を実行し、頭一つ抜き出たトップメーカー且つ、環境に優しいメーカー
Market for self-propelled crushers, screens, soil improvers

現場MSによる

In-house products
安定稼働

Promotion ofmaintenancebusiness

Creation of
new hit products

Deployment of
in-house products
in and outside of Japan

Strengthen performance, ability to propose technology,
and maintenance support capability

Growing proﬁtability

N i kko C o r p o rate R ep o r t 2 0 2 2 30

CFO on Financial and Capital Strategies

STRATEGY FOR VALUE CREATION

1Outlook of balance sheet in the MediumTerm Management Plan taking into accountthe financial performance in FY 2021

Changes to the FY 2021 balance sheet in the assets side
involved a 2.23 billion yen increase in inventories, while on
the liabilities side, contract liabilities, which is roughly equal
to down payments, was 4.42 billion yen. I do not consider
the rise in inventories as excessive as most of the increase
was for order-based production. It also includes the 0.45
billion yen prior to AP shipment at the Thailand subsidiary,
which constructed a local plant. Another factor is thatthe shipment in the first quarter of FY 2022 was large.
Account title of down payments was changed to contract
liabilities, but there was an increase of 1.47 billion yen,which was due to an increase in orders for AP.
We are anticipating total assets of about 58.5 billion yen,excluding M&As, in the balance sheet for FY 2024, thefinal year of the medium-term management plan (FY 2022–
FY 2024), and net assets of around 34.0 billion yen. Basedon the capital investment plan of 6.0 billion yen during the
medium-term plan period, we are expecting property andequipment to be 14.0 billion yen (10.7 billion yen as of end
of FY 2021), current assets (cash and cash equivalents +trade receivables + inventory, etc.) of 38.0 billion yen (34.1
billion as of end of FY 2021), and other assets of about
6.5 billion yen (7.3 billion yen as of end of FY 2021). As aresult, equity ratio is expected to decline slightly to a little
more than 58% (61.5% as of end of FY 2021).

We will increase investment in growth, including inhuman capital, while maintaining the 60% dividend
payout ratio in the Medium-Term Management Plan,
to achieve the 2030 Vision.

Senior Managing
Director andGeneral Manager
of Administrative
Division

Hiroshi Fujii

Nikko Group’s financial and capital policy and approach as the officer in charge of financeIn recent years, Nikko Group’s financial strategy has
been mindful of making active capital investment aswell as R&D, human resources, and other investmentsthat will lead to growth. In the past the policy was
about further reinforcing a stable financial base, but
as the officer in charge of finance, I am currently
not thinking of putting the brakes on investment for
growth. Nevertheless, we are not going to spend thatcash wastefully, and will make the equity ratio above
50% as a benchmark for our financial base (61.5% asof the end of FY 2021). If we assume a net asset of
34.0 billion yen (32.0 billion as of the end of FY 2021)
in FY 2024, the final year of the current medium-term

31 N ikko Corpo ra te R epo r t 2 0 2 2

management plan, we can raise the total assets up to
68.0 billion yen (52.0 billion yen as of the end of FY2021).
Our capital policy is to keep in check the accumulationof total assets to improve the ROE by maintaining apayout ratio of above 60% also during the current
medium-term management plan period, as a measure
to ensure shareholder returns. We expect a ROE of
6.2% in FY 2024, which will exceed the average costof shareholders’ equity of 4.4% over the past five
years. In the 2030 Vision, we are aiming for an ROE of
10%, and therefore it is necessary to further expand
the equity spread of the cost of shareholders’ equity.

2● Balance sheet trends(million yen)

Current assets
Net assets

70,000Property and equipment
Other liabilities

Other assets

Total assets: 58,500

60,000Total assets: 52,078
50,00024,50020,02840,00038,00034,12730,00020,00034,00032,05010,0000

10,66914,000

7,282

6,500

End of FY 2021

End of FY 2024 (plan)

Outlook for growth investment(incl. M&A)

Capital investment for the Medium-Term Management Plan
period is expected to continue at a high level of 6.0 billion
yen (6.1 billion yen in the previous medium-term plan).
Specifically, the breakdown of capital investment is as follows:
1.2 billion yen for the development test center taking into
account the decarbonization business expansion, 0.3 billion
yen for IT and other system-related investment, 0.4 billion
yen for single employees dormitory, and 1.0 billion yen forland and machinery with an eye towards the consolidation ofcontractors. M&A will be added to this. As there is a possibilityof more contractors having difficulties to continue theirbusiness in the medium- to long-term, Nikko is thinking of
arranging land, construction, and facilities where it can bring
together such contractors.
In our M&A policy in the Medium-Term Management Plan, weare considering (1) manufacturers engaged in environmental
recycling and engineering, (2) industrial equipment
manufacturers (with maintenance service) with an eye towards
strengthening the maintenance service business, and (3)service providers that can strengthen our maintenance andservice business. At the same time, we are not considering theacquisition of companies with large intangible asset value that
require a large amount of goodwill amortization.

● Trends in capital investment(million yen)

7,000

6,138
6,000

6,000

5,000

4,000

3,700

3,000

2,536

2,000

1,119
1,000

0

FY 2010—2012

FY 2013—2015

FY 2016—2018

FY 2019—2021

FY 2022—2024 (plan)

N i kko C o r p o rate R ep o r t 2 0 2 2 32

STRATEGY FOR VALUE CREATION

3

Improve CCC for cash flow
creation and reduction ofstrategically-held shares

In terms of cash flow creation by streamlining the balance
sheet, we were able to improve the cash conversion cycle(CCC) during the previous medium-term plan, which was
116.6 days at the end of FY 2018, to 93.9 days at the end of
FY 2021. The effect of receiving down payments equivalent
to a third of the contract amount at the time of orderfrom AP customers was significant, and contract liabilities(account title changed from FY 2021), which are similar
to down payments, increased from 1.63 billion yen at theend of FY 2018 to 4.4 billion yen as of the end of FY 2021,
contributing to the shortening of CCC. We cannot, however,expect the same effect for this medium-term plan, and it isalso difficult to shorten the deadline for notes receivable.
Consequently, the key will be improvement through inventory
reduction. Specifically, in AP’s case, it takes more than a year
from the time of the contract signing to delivery. We are
pursuing the standardization of AP in order to shorten this.
With respect to the reduction of strategically-held shares, wehold such shares in 22 listed companies as of the end of FY
2021 with a total market capitalization of 3.1 billion yen with ashareholders’ equity ratio of 12.7%. Its ratio to shareholders’equity has decreased from the 20.3% at the end of FY 2018
in the previous medium-term plan. But in the current plan,
we are also planning a reduction in excess of 0.8 billion yen

45
based on sales that have been finalized as of now. We are
anticipating some difficulties in reducing strategically-heldshares in the future as many of them are business partners,
but we are aiming for a shareholders’ equity ratio of 9%.
We may have to take measures that involve changing thecompany-wide policy.
● CCC and ratio of strategically-held shares in shareholders’ equity(days)

CCC

Ratio of strategically-held shares

（%）

140

25.0

120

116.6

20.3

100

107.7

17.2

88.5

20.0

94.5

80
11.6

11.8

93.9
15.0

12.7

60

10,0

40
5.0

20
0

FY 2017

FY 2018

FY 2019

FY 2020

0

FY 2021

Policy regarding shareholder
returns

We will continue to maintain the payout ratio of 60% in
the current medium-term plan. We may have to consider
reviewing the payout ratio in the medium-term if we areto significantly increase the investment for growth fromthe current level. However, we are currently not feeling its
necessity. While we are maintaining our policy of flexibly
acquiring treasury stock, we prefer directing the funds togrowth investment for the foreseeable future. Cash andcash equivalents came to 12.4 billion yen as of the end of
FY 2021, maintaining a high level, but interest-bearing debts
rose to 3.7 billion yen and net cash came to 8.7 billion yen(8.62 billion yen as of the end of FY 2018). The increase
in interest-bearing debts include the 1.2 billion yen for thelaunch of the subsidiary in Thailand.
We were able to significantly increase the number ofshareholders from 2,606 at the end of FY 2018 to 12,504
as of the end of FY 2021. This could be attributed to thelowering of the minimum purchase price through a stock
split making it easier to become a shareholder, as well as
the improvement in dividend yield from raised payout ratio
and enhanced information disclosure. We also publishedthe result of the questionnaire survey of shareholders thatwas enclosed with the convocation notice for the Ordinary

33 N ikko Corpo ra te R epo r t 2 0 2 2

General Shareholders’ Meeting on our website. The survey
had a high response rate of 36%. Moreover, we are planning
to invite shareholders to the NIKKO MESSE 2022 held from
November 1. The event, which is held at the head officeonce in every three to four years, is expected to provide
opportunities for their interaction.
● Trends in total return ratio and number of shareholders
（％）

100.0

Number of shareholders
Total return ratio

10,121

12,00069.5

8,200

10,000
8,000

47.3
6,000

40.0

（％）

ROE

8.0

Operating margin

6.8

7.0

6.0

6.0

4.9

5.0

5.8
4.4

6.0

5.3

5.2

5.2

4.0

3.6

3.0
2.0
1.0
0

FY 2017

FY 2018

FY 2019

FY 2020

FY 2021● Trends in operating margin by business（％）

AP-Related Business
Environment- and Conveyor-Related Business

24.0

21.3

22.0
20.0

17.5

18.0
16.0

BP-Related Business
Other Business

20.2
17.2

15.0

19.5
16.1

14.0
12.0

10.7

10.7

10.0

10.3
7.8

8.4

8.3

7.8

5.9

6.4

8.0
6.0

9.5

10.4

6.4
3.1

4.0
2.0
0

FY 2017

FY 2018

FY 2019

FY 2020

FY 2021

We will make an effort so that the
improvement in ROE will lead tothe expansion of equity spreadand raise the corporate value.

4,000

34.1

20.0

● Trends in ROE and operating margin

14,000

79.7

80.0

2,521

We have set ROE as the KPI for capital efficiency. ROE was
5.2% in FY 2021, the final year of the previous medium-term
management plan, which slightly exceeded the 5% cost ofequity. We had raised the dividend payout ratio during theprevious medium-term plan period, and we also managed tokeep in check the accumulation of net assets as of the endof FY 2021, but ROE underperformed the forecast as we did
not achieve the operating income target.
We are expecting a ROE of 6.2% (operating margin of
6.0%) in FY 2024, the final year of the current medium-term
management plan, and ROE of 10.0% (operating marginof 10.0%) in FY 2030. We are assuming the shareholders’equity cost to be between 4 and 5% for the medium-termplan period, based on the average for the past five years. As
we have been able to reduce the cost of shareholders’ equity
in the past few years, the increase in ROE is expected tolead to further expansion in equity spread. This is important
for raising the corporate value and we are conscious of that.
As for business portfolio management, the mainstay APrelated business failed to achieve the operating incometarget by a large margin in the previous medium-term
management plan. The reason behind this is the fact that
although we have a 70% share in the domestic AP market,
instead of an aggressive strategy, we took a defensive
strategy that invited a price war with our competitors andaffected profitability. There was also the impact from thelockdown in China caused by the COVID-19 pandemic andthe rise in raw material prices.
On the other hand, the BP-related business and the otherbusiness, which include waterproof boards, mobile crushers,
screens, and other mobile products, delivered better than
expected profits. So, we feel there are some issues inbusiness portfolio management. In the current MediumTerm Management Plan, we are anticipating an improvementin profitability through a business model reform of
the maintenance service business. By focusing on thismanagement, we hope to improve company-wide profitability
and lead to the achievement of a net sales target of 60.0
billion yen and an operating income target of 6.0 billion yen
under the 2030 Vision.

(people)97.6

12,50460.0

Capital efficiency and businessportfolio management

2,606

2,000
0

FY 2017

FY 2018

FY 2019

FY 2020

FY 20210

N i kko C o r p o rate R ep o r t 2 0 2 2 34

Management Capital

STRATEGY FOR VALUE CREATIONIn the new Medium-Term Management Plan, our policy is to maintain an equity
ratio of 50 to 60% while actively carrying out investments.

Financial capitalIn terms of financial capital, Nikko Group has a strong balance
sheet with total assets as of the end of FY 2021 of 52.1 billion
yen, invested capital of 33.9 billion yen (shareholders’ equity of
30.1 billion yen and interest-bearing debts of 3.8 billion yen), net
cash of 8.6 billion yen (cash and cash equivalents of 12.4 billionyen), and equity ratio of 61.5%. The new three-year medium-termplan period has been positioned as the internal investment phasetowards achieving the 2030 Vision, and we will be actively carryingout investment and shareholder returns (payout ratio of 60% orabove), while maintaining an equity ratio of about 50 to 60%.

Source of strength
Our AP-related business has a 70% share of the domestic
market, while the BP-related business boasts a 40% share, bothof which are the top shares in Japan. Net sales in the service
and maintenance business, in which Nikko Group expects

stable revenues, account for about 34% of its consolidated net
sales, and has high capability to create cash flow. Furthermore,
the other businesses, which handles waterproof boards, etc.,
boasts a relatively high operating margin.

Financial plan in the new Medium-Term Management Plan
Net assets as of the end of FY 2021 stood at 32.1 billion yen, and in the new medium-term plan, we plan to raise that to 34.0 billion yen as the end of FY 2024.
Input

OutputNet sales of 38.8 billion yen, net income of
1.6 billion yen

Stable profit creation

Net cash of 8.6 billion yen

Cumulative FCF for the past three years of
4.2 billion yen

High financial stability (equity ratio of 61.5%)

Invested capital of 33.9 billion yen

Dividend of 30 yen per share (payout ratioof 70%)

Attractive dividend yield (about 5%)

We will deliver high quality products, manufactured under a highly
efficient production structure and strict quality control, to our customers.

With the head office factory at Akashi city in Hyogo Prefecture
as the mother plant, we have five factories in Japan and two
overseas (in China and Thailand). In addition to developing
products and systems ideal for our customers, we procure

various equipment and raw materials using a global network. We
have a highly efficient production structure in the manufacturing
division that combines high-precision machine tools, including afive-face machining center, with automated lines.

Source of strength
Our strength lies in our comprehensive support system based on
integrated production where we not only manufacture the plant internally,
but also the control panels as well. On top of the high market share,
we also boast a track record of constructing more than1,000 plants inmore than 50 countries around the world, and the stable replacement
demand contributes to the stable operation of those plants. As for the
maintenance business, we aim to contribute to the stable operation ofcustomer plants by leveraging various data and other means.

Capital investment plan in the new Medium-Term Management Plan
In the new medium-term plan, we are planning to
make a capital investment of 6.0 billion yen (6.3
billion yen in the previous plan) over the next three
years. Specifically, in addition to constructing a new
Manufactured capital

support plant (0.5 billion yen) on the adjacent land to
the Akashi mother plant, we are planning to build adevelopment and testing center (1.0 billion yen) for
product development, etc. towards decarbonization.

OutputCapital investment of 1.9 billion yen (FY 2021)

Various products in the four businesses

Development of safe and secure roads
and infrastructures

Thorough maintenance services

Environment-friendly recycling society

Five factories in Japan and two overseas

Production of 38.2 billion yen (FY 2021)

Employee-friendly production environment

We aim to become a professional group that is chosen as a management
partner by the customers.

As of the end of FY 2021, Nikko Group had 1,038 employees (anincrease of 177 from the previous year) and the net sales per
employee were 37 million yen. On a non-consolidated basis, theaverage age of the employees are 40.8 with an average length ofservice of 15.3 years. The average annual salary has risen 400,000
yen from three years ago in FY 2018 to 7.10 million yen. We will

35 N ikko Corpo ra te R epo r t 2 0 2 2

uniformly raised the monthly wages of the employees by 30,000
yen from April 2022. We are also strengthening support for
nurturing the next generation and advancing female participation
to further vitalize the organization and improve motivation.

Human resources hiring plan in the new Medium-Term Management Plan
In the previous medium-term plan, we added 69 employees ona non-consolidated basis at Nikko. In the new medium-term
plan, we are planning to increase the number of employees by
145 during the three-year period. Specifically, the AP-related
Human capitalbusiness field will see an increase of 59 people, 20 in the BPrelated business field, 12 in the environment- and conveyorrelated business, 6 in overseas business, 12 in development,
11 in mobile plant, and 25 in other business.

OutputOutcomeNumber of employees: 1,038 (of which 194
are foreign nationals)

Net sales per person: 37 million yen

High job satisfaction

Number of female employees: 59 (nonconsolidated basis, of which 6 are new hires)

Number of annual paid holidays taken: 10 days

Improving ease of work

Annual education expenses: 11 million yen

Length of service (men: 18.7 years, women: 11.0 years)

High motivation

Intellectual capital

We will aim to become a top manufacturer backed by high technologicalcapability for solving social problems.

We aim to strengthen R&D in the DX field for strengthening data analysis of
the plants of the AP-related and BP-related businesses and the service andmaintenance business such as remote monitoring and operation of plants byrebuild the human resources management foundation and systemin the new medium-term plan, and will carry out active investments
towards enhancing our human capital. The long-term (10-year)
basic policy looking into the future lists the implementation ofworkstyle reforms for the employees, and are aiming to improve
operation efficiency and significantly raise labor productivity.

leveraging IoT, AI, etc., in addition to the development of products that contributeto the environment centered on the AP-related business (green transformation)and global standard products for breaking into the ASEAN market.

Source of strength
Nikko boasts the top market share of Japan in not only
APs and BPs, but also in conveyors, where it has a 60%
market share, with steadily expansion. In addition to the four
differentiating core technologies of mixing (kneading), heating,material handling (cumulative conveyor shipment: 300,000
units), and control (in-house development of the brains behindthe plants), we also have a meticulous and comprehensive
support system based on our own integrated production.

R&D investment plan in the new Medium-Term Management Plan
In the previous medium-term plan, we invested about 1.2 billion yen in
R&D over the three-year period. We plan to increase that to around 2.5
billion yen in the new medium-term plan. In the AP-related business, wewill pursue the development of new environmentally friendly products,
strengthen support fields for remote operations and automation, andIntellectual capitaldevelop standardized models for foraying into the overseas market. In
the BP-related business, our policy involves enhancing the operation
support center, product improvement and system development, andin the environment- and conveyor-related business, we will strengthen
new product development as well as EC and IT investment.

OutputOutcomeR&D expenses (about 0.45 billion yen, or
1.2% of net sales)

Net sales of products contributing to CO2 emission
reduction (about 0.4 billion in the AP-related business)

Highly differentiating technology (including
control panels made in-house)

Number of development personnel: 24 (2.4%of consolidated employee count)

Priority fields for AP-related R&D (10 projects)

Environmentally friendly products that
surpass other companies’ products

Number of patents held by the Group: 228

Customized products that satisfy diverse
customer needs

Creation of new markets

OutcomeSufficient production capability to achieve
the medium-term plan goals

Human capital

In September 2019, we granted treasury stock with restriction
on transfer to the employees of Nikko Group. In August 2021,
we allotted 100 shares in treasury stock to long-time employees,
new hires, and hires with prior work experience. Furthermore, we

Outcome

Total assets of 52.1 billion yen

Manufactured capital

Source of strength

Social and relationship capital

We strive towards building a strong relationship of trust with thecustomers, business partners, and local communities.

Nikko Group’s Management Philosophy is customer first and it
lists “Serve society through business” as its Company Motto. In
addition to building a sustainable supply chain, the MS business,
which is the Group’s strength, is jointly creating values with the

Natural capital

Akitsu-kai, which has 195 designated contractors. The Nikko
Memorial Foundation provides assistance to students who arefrom Hyogo Prefecture. It also donates disaster supplies to
Akashi city in addition to funds for COVID-19 countermeasures.

As a global citizen, we aim to become an environmentally friendly company.

The head office factory has acquired the ISO14001 certification,
which is the international standard for environmental management
systems. As a global citizen, the Nikko Group recognizes
environmental preservation as one of the most important issues

based on its basic principle of “environment first.” Each production
base is continuously working on environmental preservation as well as
improvement, and the Group has been focusing on commercializing
environmentally friendly products in product development.

N i kko C o r p o rate R ep o r t 2 0 2 2 36

Segment Highlights

STRATEGY FOR VALUE CREATIONIn FY 2021, consolidated net sales of Nikko Group totaled a record high of 38.8 billion yen, of which the AP-related
business accounted for 47.2% (51.4% in FY 2020), BP-related business 27.9% (24.3%), environment- and conveyor-related
business 7.8% (6.3%), and other businesses 17.1% (17.9%). Overseas, sales expansion in China and Thailand contributed
significantly, accounting for 12.2% (9.9%) of the total. By segment, net sales of the AP-related business declined 5.9%,

AP-Related Business● Asphalt plants● Recycling plants● Crushing plant● Mixture silos● Electronic control devices,plant management system● Concrete plants● Compact concrete plants● Concrete pumps● Electronic control
devices, plant
management system● Concrete manufacturing
plant facilities, etc.

CBD
Global model AP for Thailand
and Southeast Asia markets

Operating margin
4.3%

3.1%

6.4%
19,46718,32820,00010,000

1,118

5,000
1,348
1,239
1,239
1,118
963
850
850
562
562
0
(ﬁscal2020year) 20172021 2022(estimate)
2018
2019
2020
2021 2022(estimate)

In FY 2021, net sales in Japan declined 13.5% (including 6.0%
decline in MS sales), while overseas net sales rose 27.1%.
Operating income declined 55% due to high raw material costs
and strategic projects. The number of strategic projects has
declined in FY 2022 and operating income is expected to increase.

AP demand declined to 42
Nikko
share
share
units inNikko
FY 2021(down 11
units). Nikko’s share fell 6 pp
to 69%.

Nikko share

69％

Operating income
21.3%

n)
3,931
2,775

1,348

0
(ﬁscal year) 2017

963
2018

2,634

69％
32.9％

Net
Operatingsales margin
Operating income

15.0%
20.0% 21.3%
20.2% 7.8%
19.5%
(million yen)
3,931
4,000
3,500
3,018
3,000
2,775
2,500 2,634
2,390
2,500

2,000
R epo r t 2 0 2 2
37 N ikko Corpo ra te 1,500
1,000
588
562
417
500482
308
308

20.2%

Net sales

3,018
2,390

20.0%

2,500

6,000

A plaster-based solidification
5,000
material
manufacturing facility
1,348
1,239
1,239 modular
1,118 Super
963
850
850
562
562 conveyor
It manufactures
gypsumhemihydrate0bydryinggypsumpowder.The
facility
Simplesealed-type
conveyor(ﬁscal2020year) 20172021 2022(estimate)
2018
2019
2020
2021 2022(estimate)
manufactures solidification materialusing steel plate frames thatby blending with cement and lime.
ensures higher safety

4,000

500
417

562

482

500

9.5%

9.5%

8.3%

8.4%
8.3%
10.0%

Operating margin
Net sales
15.0%

Operating income

10.7%
10.4%
(million yen)
12,00010,840In FY 2021, plant sales increased 29.5% and MS sales also grew
4.8%, as facility replacement was strong reflecting the rising readymixed concrete price and market share also increased. Operating
income grew 27.8% as we were able to reduce costs throughplanned production, while operating margin also improved to 10.4%.

Net
Operatingsales margin
Operating income

32.9％
60％

Net sales

Operating income

69％
23％
60％

(million yen) 10.3%
10,0008,000

16.1% 10.7%
8.9%

6,000

2,000

4,480

462

4,677

502

5,840

17.2%
(million yen) 10.3%
10,000
8,000
6,790
6,000
4,000

69％
32.9％
23％

Net
Operatingsales margin
Operating income

10.7%
17.5%

Mobilecrushers
Nikkoshare
share
Nikko
and screens

1,0202,0001,170

16.1%
17.5%

4,677

1,073
462

32.9％
60％

In FY 2021, the demand for
MobilePortable wasportable conveyors
crushers
conveyor
4,300 units(unchanged) andscreens(NikkoNikko’s andshare
alsoshare)remainedat the same level as a year
before.

23％
60％

8,000

10,500

7,893

9,158

4,000

0

Waterproof
boards,ﬂoodgates
24.1%(million yen) 10.3%
10,000
8,000
4,677

2,000

462
0
(ﬁscal year) 2017

Sales composition of mobile
products, which is a new
field, grew significantly by 5.9
pp, while that of temporary
construction materials andother declined 2.6 pp and
5.3 pp.

Net
sales margin
Operating income
OperatingOperating income

10.7%

4,480

9,212

10,840502
201816.1% 10.7%
8.9%
17.2%
17.5%
(million yen) 10.3%
10,000
9,000
5,840

8,000
6,790
6,000

4,000

6,660
4,480

4,677

17.5%

5,840

1,0202,0001,170
2019

23％

17.2%

6,790

9,0
6,660

1,020
1,170
1,073
1,073
800
502
462
0
(ﬁscal2020year) 20172021 2022(estimate)
2018
2019
2020
2021 2022

In FY 2021, sales of mobile products and waterproof boards grew, while sales of
temporary construction materials for rental services decreased, and as a result
the other businesses saw a decline in both net sales and operating income. In FY
2022, though Ube Kohki is expected to contribute 2.0 billion yen to net sales and0.1 billion yen to operating income, the segment’s operating income is expected
to decline due to poor performance of waterproof board and mobile products.

Mobilecrushers
and screens

Operating
16.1%

In FY 2021, demand for mobile
crushers and screens was 220
units, up 58 from FY 2020.

9,000
5,840

6,790

6,660

N i kko C o r p o rate R ep o r t 2 0 2 2 38
800
502

1,020

1,170

1,073

800

10

against water damage (internal
flooding) caused by global warning

Nikko-developed
products
Temporary 9.4%
construction
materials
22.9%

Net sales

6,000

10,8409,521

1761 2,000879
761
1,123
1,123
1,050
1,015
879
666
Waterproof board 666
0
Waterproof
boards,which
areeffective
2018
2019(ﬁscal2020year) 20172021 2022(estimate)
2018
2019
2020
2021 2022

1,015

Mobile(ﬁscal year)plant2017
One set of crusher line (crushers,
screens, belt conveyors, etc.)

4,000

10,000
9,212

10.4%

8.9%

17.2%

9,000

6,660
4,480

Operating margin

Portableconveyor
Nikko
share
(Nikko share)

7,893

9,158

6,000

2,000

Operating margin

15.0%
7.8%
20.0% 21.3%
19.5%

In FY 2021, net sales exceeded 3.0 billion yen for the first time in a longwhile, with sizable contributions also from sales of environmental products.
In addition to sales increase, operating income rose 21.7% partly owing to
the effect of price increase of conveyor products from the third quarter.
In FY 2022, both net sales and operating income are expected to decline.

The BP demand fell to 71
MobilePortableunits (down
6 units) in FY
crushers
Nikko
share
conveyor
2021, thefirst
declineinscreens(Nikkoshare)
three andyears,
but
Nikko’s
steady-state share increased
0.9 pp to 32.9%.

Portableconveyor
Nikko
share
(Nikko share)

9,521

Nikko-developed
Other 5.8%
Other 5.8%
Conveyor
products
Crushers
Crushers
service9.4%
of
5.1%compositionTemporary
5.1%
3.2% The sales
Environmental products
environmental
construction
products
materials
increased
14.3 pp partly
22.9%
thanks to 23.6%
recording of largeMobile
Mobilescale projects, and conveyor
Waterproof
Conveyor
products
plantsboards,products
was plants
down 14.8 pp
21.7%
21.7%
ﬂoodgates
while73.1%
conveyor
service rose
24.1%
0.5 pp. Hand
Hand
tools
tools
10.9%
10.9%

7.8%
21.3%
20.0%
20.2%
20.2%
10.4%
19.5%
10.0%
(million yen)(million yen)
4,000 3,931
4,000 3,931
10,84010,50010,5003,500
3,500
10,000 9,521
9,212 9,521
9,212
9,158 10,000
9,158
3,018
3,018
3,000
3,000
2,775
2,775
7,893
7,893
2,634
8,000
8,000
2,500 2,634
2,500
2,390
2,390
2,500
2,500
6,000
6,000
2,000
2,000
1,500
1,500
4,000
4,000
1,000
1,000
588
588
562
562
2,000
2,000
500
500
482
761
761
1,123
1,123
1,050
1,050
1,015
1,015
417
417
879
879
500482
500
308
308
666
666
0
0
0
0
(ﬁscal year) 2017
2018
2019
(ﬁscal2020year) 20172021 2022(estimate)
2018
2019
2020
2021
(ﬁscal 2022(estimate)year) 2017(ﬁscalyear) 2017
2018
2019
2020
2021 2022(estimate)
2018
2019
2020
2021 2022(estimate)

4,000
588

OperatingNet
sales margin
Operating income

8.4%

10.7%
(million yen)
12,000Operating margin
19.5%

Operating income

10,000
8,000

1,118
2019

12,00012,000OperatingMarket share (basedon Nikko’s survey)

15.0%

ONZEMIX-T50
Mobile BP

5,000

18,32820,000Net sales and operating income bysegment (margin)

7.8%

Net
Operatingsales margin
Operating income

15,0002019

Market share (basedon Nikko’s survey)

Net sales

DASH-H167
Pro065T
Large-scaleprecastconcrete
plant

19,467

10,000

OtherShanghai
5.8%
Nikko
Nikko Shanghai
Nikko Shanghai
NikkoThailand
ShanghaiConcrete
ConcreteNikko-developed
Concrete
ConcreteNikko-developed
Conveyor
Conveyor
Conveyor
ThailandThailandThailandOther 5.8%
products
products
pumps
0.4%pumps
0.4%
0.4%pumps
0.4%
Crushers pumps
Crushers
businessbusiness
servicebusinessserviceservicebusiness
9.4%
9.4%
1.8%
1.8%
1.8% Temporary 3.2%
Sales compositionof theExports
Exports
Exports
5.1%
1.0%
1.0%
China
China
China
China 1.8% Temporary
3.2% 1.0% 5.1%
3.2% 1.0%Exports
Environmental
Environmental
plant sales in Japan wasconstruction
construction
0.3%
0.3%Environmental
0.3%
0.3%
businessbusinessbusinessbusiness
products
products
products
materials
materials
Plant salesof plant sales
sales
Plantppsales
down 6.5%
and that ofComposition
20.6% Plant sales
20.6%
20.6%
20.6% Plant
Maintenance
Maintenance
Maintenance
Maintenance
22.9%
22.9%
23.6%
23.6%
23.6%
26.5%
26.5%
26.5%
26.5%
MS also fell
by 0.1 pp, whilerose 5.3
pp, while that of MSserviceserviceserviceservice
MobileMobilethe composition of Nikko
and concrete pumps fell 4.7
Waterproof
Waterproof
Plant sales
Plant sales
Plant sales
Plant sales
39.1%
39.1%
39.1%
39.1%
Conveyor products
Conveyor products
Conveyor products
plantsplantsboards, 58.4%
Shanghai wasup 2.8 pp andpp andservice
2.5 pp.
58.4%
58.4%
Maintenance service
Maintenance
Maintenanceserviceboards, 58.4% 21.7%
Maintenanceservice
73.1%
73.1%
73.1%
21.7%
ﬂoodgates
ﬂoodgatesthat 48.0%
of exports and Thailand
48.0%
48.0%
48.0%
24.1%
24.1%
Hand
Exports
Exports rose 3.7 pp.
Exports
Exports Hand
tools
tools
3.8%
3.8%
3.8%
3.8%
10.9%
10.9%

4.3%
7.8%
3.1%
6.4%
6.4%
6.4%
5.8%
(million yen)
19,467 18,328 20,000
20,00017,51817,179 16,434 17,518

963
2018

16,434

4.3%
7.8%
3.1%
6.4%
6.4%
5.8%
(million yen)
19,467 18,328 20,000
20,00017,51817,179 16,434 17,518
15,000
6.4%

Conveyor using pipe frames
4.3%
whose lengths
adjusted
3.1% can be
6.4%
in increments of 10cm

● Pipe scaffoldings, steel gangplanks● Temporary aluminum staircases● Shovels, spades● Small-sized concrete mixers, mortar mixers
Hammer crusher● Floodgates,
boards,crushers
Netwaterproof
sales
Operatingincome Particle
OperatingNet
sales
incomesize margin
canOperatingbe● Real estate leasing, construction adjusted with grate size
9.5% and the desired particle
9.5%
8.4%
8.4%
8.3%
8.3%
machinery
product
leasing
10.7%
10.7%
10.0%
size10.4%
can be obtained(millionyen) of housing renovation(million yen)
● Saleswith a single crushing.

FY 2021 businessbreakdown

16,434

1,348r) 2017

Net sales and operating income bysegment (margin)

17,1795.8%

10,000Operating income

5.8%

7.8%
(million yen)
20,00017,179Main products● Belt conveyors, conveyors
for facilities, beveragecontainer recycling plants● Soil remediation plant,
Net
Operatingsales plantmarginOperating income
marginOperating plastic
income recycling
Modular Operating
conveyor

Net sales

DASH-H275EvoV
Twin-ADV
Ultra-strong concrete plants

15,000FY 2021 businessbreakdown

7.8%

en)

Main products

Other BusinessBusiness description

Business description

Main products

VP Ⅱ
Ecological model AP, primarily
for recycling

Net sales

Environment- and ConveyorRelated Business

BP-Related Business

Main products

ABD
Made-to-order AP models
that can handle diverse needs

falling greatly in Japan reflecting factors such as the worsening business performance of road pavement companies due
to high raw materials prices; those of the BP-related business increased 17.7% thanks partly to the stable ready-mixed
concrete market; those of the environment- and conveyor-related business rose 26.3%; and those of the other businesses
fell 2.0% owing to a slowdown in sales of temporary construction materials, despite strength in mobile products.

Business Strategies

STRATEGY FOR VALUE CREATIONSWOT analysis

AP-Related BusinessWe aim to become a one-and-only top manufacturer
by leveraging our technology and service
capabilities and establishing technologies for
decarbonization, remote operation, and automation.

●We aim to achieve net sales of 23.0 billion
yen in FY 2024, operating income of 1.6
billion yen, and operating margin of 7.0%.
●We will support our customers’ decarbonization efforts bystrengthening the development and sales of carbon neutral products.
●We will support our customers’ plant operations morethan ever by establishing plant remote operation andautomation technologies and offering services.
●We will start a full-fledged maintenance subscription
service as a new service.
●We will strengthen the full-scale operation of theThailand plant and the development of strategic
standard models and pursue the establishment of astructure for entering into new markets.
Keypoints●We will offer asphalt plants that will
ensure a secure, safe, comfortable, andsustainable road environment in Japan.
●We will contribute to the reduction of traffic accidents, easingof traffic congestion, and development of environmentallyfriendly road transportation network by supporting the roadinfrastructure development of emerging countries.
●We will contribute to the decarbonization efforts by thecustomers by developing and selling foamed equipment
as well as burners that would allow fuel transition fromheavy oil to natural gas and hydrogen.
●We will offer safe and highly operational plants that
do not shut down and an employee-friendly work
environment by offering predictive maintenance as well
as remote operation and automation service.
Values to
be realized●Quality asphalt that were produced at
Nikko plants have been highly rated andwe have a 100% market share in asphalt plants forexpressways in Japan.
●We have an overwhelming market share and high inhouse manufacturing ratio, and offer maintenanceSource ofstrength

FY 2024 numerical targets
Net sales23.0 billion yen

Operating income
1.6 billion yen

Operating margin
7.0％

Business Strategies■ Support for decarbonization■ Remote operations and automation support■ Development of standard overseas models with competitive edge
■ Build an organizational structure for business expansion in the ASEAN market

39 N ikko Corpo ra te R epo r t 2 0 2 2

service for the entire plant of the customers, including
recycle crushing plants. We have the capability todevelop environmentally friendly products and tocommercialize them ahead of our competition.

PEST analysis

Details

Countermeasures by Nikko

Risk of changes in public investment
policy due to change of government

Strategy to stabilize revenue
including subscription service

Rising needs for environmentally friendly
facilities for achieving decarbonization
Expect the implementation of recycling
laws in Thailand and China

Bolstering development ofenvironmentally friendly products
Product development thatsatisfies local needs

Economicfactors

Worsening performances and suppression of investment
by road pavement companies due to soaring asphalt priceWorkstyle reform at customers andremote operation and automation needs

Offering of values for improving
operating rate of customer plants
Offering of differentiated products andservices that satisfy customer needs

Weaknesses

Price competitiveness

Re-analysis of user needs andintroduction of semi-custom-made units

Sales expansion of environmentally friendly
products towards a carbon-free society

Development of products that run
on hydrogen and ammonia

Workstyle reform at customers and remote
operation and automation needs

MS proposal utilizing data
analysis and DX

Development of similar products
by rival companies

Strengthening of product development
capability and quality of human resources

Social factors

Growing needs for saving manpower andremote operation reflecting a labor shortage

Entry of foreign rival companies

Maintaining an overwhelming
maintenance service structure

Technologicalfactors

Fuel transition using burner technology developed by Nikko

Threats

Toshimasa Miyake

Countermeasures by Nikko

Strengths

Opportunities

Manager, AP SalesManagement
Department, Business
Division

Details

Overwhelming share and presence Offering of new values suchin the Japanese market
as environmentally friendly
production and subscriptionFull support of customer plants including MS based maintenance service●Nikko’s steady-state share of APs operating in Japan in
FY 2021 came to 77.7%, down 0.3 pp from FY 2020.
●The orders in FY 2021 were limited to 18.2 billion yen,down 10% from a year earlier, and order backlog as ofthe end of the fiscal year stood at 7.7 billion yen. Net
sales of plants declined 25% year on year to 4.9 billion
yen and net sales of maintenance service also fell 6% to
8.8 billion yen. Operating margin declined 3.3 pp from ayear earlier to 3.1% reflecting surging steel price, etc.

Political
factors

Soaring prices and difficulties in purchasing
Revision of product prices
various materials and equipment

Data analysis utilizing control panels developed by Nikko

Promotion of remote operations
and automation support
Decarbonization and strengtheningof support for remote operation
and automation

MS: maintenance service●For FY 2022, asphalt mixture
output is estimated to continue todecline to 39.90 million tons, down 2.0% from a year earlier,and AP demand is also estimated at 37 units, down fiveunits year on year. The budgets of eight road pavementcompanies show a recovery trend in business performance.
While there are concerns of soaring raw material prices
and the impact of the depreciating yen, we are expecting
the market to be firm, reflecting the consolidation ofplants in operation and replacement demand for the plants
delivered during the bubble economy era.
●Nikko has set forth three main strategies for achieving
the medium-term plan and long-term vision. The first one
is the development and sales expansion of products that
support decarbonization by leveraging our technologicalprowess, which is the best in the industry. In FY 2021,
sales volume of decarbonization-related products
increased by seven units to nine (approx. 0.4 billion yen).
Switch from heavy oil burners to natural gas and biomass
burners, and demand for warm mix (foamed) equipment
for asphalt are expected to increase until around FY
2025. From FY 2025 onwards, ammonia burners, newdryer models, and exhaust heat recycling systems are
expected to contribute to sales and we expect a net
sales of about 4.0 billion yen around FY 2028. The
second strategy is the support of remote operation
and automation of plants by leveraging the analysis ofplant operation data and DX based on an ample trackof supply records and control panels developed inhouse. We will offer next-generation maintenance service
that will solve the various issues faced by customers
such as a shortage of engineers, workstyle reform,
and improvement of production efficiency, and aim
to improve profitability and become a one-and-only
presence. The third point is capturing the ASEAN market
by leveraging the Thailand manufacturing base, whichbegan full-scale operation. Of the approximately 700
operating units in Thailand, some 240 are Nikko Group
plants. Compared with the 100% pavement ratio ofJapan, it is about 80% in Thailand. Stable growth in roadpavement works is expected to continue and large-scale
projects are planned from 2023. Nikko has concluded acontract as an asphalt plant agency with TIPCO ASPHALT,
a major asphalt sales company. In addition to sales
expansion, we plan to raise our price competitivenessby locally producing strategic standard models currently
being developed while exploring replacement demand
from high-end customers. Moreover, to achieve the2030 long-term vision, we will start earnestly considering
entering unexplored markets such as Vietnam andIndonesia, where imported second-hand plants are mainly
used. The road pavement ratio of Indonesia and Vietnam
is estimated to be low at 60% and the room for potential
growth is attractive. We aim to establish a businessbase in the ASEAN market by laterally deploying the
successful Thailand model, promoting the developmentof local agents, and supplying strategic standard models
from the production base in Thailand.
●In the new medium-term plan, we will devote all ourenergy to improving profitability, an issue since theprevious medium-term plan, while focusing on thedevelopment and sales expansion of environmentallyfriendly products, which will be at the core of thedifferentiation strategy for the future.

Number of units shipped in AP (V) industry and road project expenditure

Business performance trend of 8 road pavement companies in total and the AP-related businessNet sales by product, operating margin, medium-term plan numerical targets●The road project expenditure, which was on
a declining trend after peaking in FY 1995,
bottomed out in FY 2012 under the Democratic Party ofJapan administration and subsequently have been on a
gradual recovery trend. However, as project budgets wereallotted with emphasis on addressing the aging bridges
and tunnels, asphalt mixture production continued togradually decline. In FY 2021 it was down 1.8% from ayear earlier to 40.71 million tons. The number of APs
in operation also fell further to 1,040 units in FY 2021
from 1,652 units in FY 2000. Under such circumstances,
total AP demand in FY 2021 declined 11 units from ayear earlier to 42 units. The breakdown is 18 units of AP
using virgin asphalt materials, up two units from a year
earlier, and 24 units of recycling plants, down 13 units.
This was primarily due to a decline in appetite for capital
investment and postponement of investment projects
caused by the deterioration in business performance ofroad pavement companies stemming from rising asphalt
costs following the increase in crude oil price.

Business
environment

Business overview

Details

Products

Asphalt and recycling plants

Customer

Construction companies, road pavement companies

Market share

Static share in Japan: 78%

Sales breakdown

Sales breakdown: 47% (Japan: 78%, Thailand: 21%, China: 1%)

Operating margin

3.1% (FY 2021)

Ratio of MS net sales

48%

Production bases

Akashi head office factory, Thailand, and Shanghai, China(10.0 billion yen/1,000 tons)

125,000

Number of units shipped in AP (V) industry
Asphalt mixture manufacturing volume

Road project expenditure(units)100,000

1,400

50

1,200

30
50,00020

25,0000

10
1970(ﬁscal year)

1980

1990

2000

2010

2022

0

estimate

Operating income of the 8 road pavement companies
Net sales of the 8 road pavement companies(million yen)

60

40

75,000Future business opportunities
and strategies

1,000

16,434
12,856

19,467

17,51813,596

13,895

Operating income of the AP-related businessNet sales of the AP-related business (million yen)

18,32813,74920,00014,492

600
864

963

941

1,118

1,142

921 850

817
562

2018

20,000

2019

2020

7.8
790
3,092

10,000

1,239

200
0

15,000Net sales under the medium-term plan
MaintenanceNikko Shanghai
Exports
Operating margin(million yen)

25,00015,000800

400

20,000

2021

2022

0.0

estimate (ﬁscal year)

5.9

3,320

10,000
5,000

477

8,280

8,973

753
3,591

6.4
8,233

0

2017

6.4
9,364

10.0

715
183
3,776
8,797

3.1

5,000
5,033

214
3,465

Plant sales
Thailand business （％）

3,665

4,940

6,424

4,857

2018

2019

2020

2021

7.0

7.0

23,00023,000

8.0
6.0

4.3

4.0

20,0002.0
2022

estimate

2023
plan

2024

0.0

plan (ﬁscal year)

N i kko C o r p o rate R ep o r t 2 0 2 2 40

STRATEGY FOR VALUE CREATION

BP-Related Business

SWOT analysis

Details

Countermeasures by Nikko

Strengths

Solid in-house maintenanceservice structure with the top
market share in the JapanesemarketOffering of new values suchas environmentally friendly
production and subscriptionbased maintenance service

Relatively high fixed cost ratio

Provision of differentiatedproducts and services

Advancement in use of precast
concrete for building components

Product development thatsatisfies high-level demands

Rising needs of CO2 absorbing
concrete

Product development anddeployment addressing customers’
environmental needs

Decline in the number of ready-mixed
concrete plants in operation

Strengthening of mobile
plant sales

Price war with rival companies

Overwhelming maintenanceservice structure combining
manufacturing and sales

Weaknesses

We will implement the comprehensive managementof ready-mixed concrete plants and aim to become
a top environmentally friendly manufacturer.

Opportunities

Senior Executive Officer
Manager, Industrial Machinery
Sales Management
Department, Business
Division

Threats

Morie Okaaki●We aim to achieve net sales of 10.8 billion
yen in FY 2024, operating income of 1.05
billion yen, and operating margin of 9.7%.
●We will strengthen the customer plant operation support
business leveraging plant operation data analysis basedon control panel developed in-house.
●We will promote product and business development
for precast concrete, which requires high quality
performance.
●Amid declining number of ready-mixed concrete plants,
we will strengthen the sales of mobile plants in areasthat are not covered.
Key
points●We will ensure the stable supply of highquality products that meet the standardsof not only JIS standard-concrete, which supports
Japan’s infrastructure, but also special precast concrete
and CO2 absorbing concrete.
●We will offer highly efficient maintenance service
that improve customers’ profits through provisionof predictive maintenance service as well as stable
operation support service for customer plants(subscription service), which addresses workstylereform and operator shortage at the customer side.
Values to
be realized●We develop and manufacture control
technology and control panels in-house,
which are the brain behind plant facilities, and we havea track record of supplying more than 4,000 such units
in Japan and abroad. It enables optimum operationand preventative maintenance based on various data
analysis in addition to the remote monitoring of plants.
●We are the only manufacturer that can comprehensively
offers everything from design to construction workand maintenance including control panels. We haveestablished superiority in our immediate responses toelectrical as well as mechanical problems.
Source ofstrength

FY 2024 numerical targets
Net sales
10.8 billion yen

Operating income
1.05 billion yen

Operating margin
9.7％■ Data management and analysis using Nikko-developed control panels■ Customer plant operation support service■ Expansion of mobile plants to address consolidation of ready-mixed concrete plants■ Product development addressing customers’ environmental needs

41 N ikko Corpo ra te R epo r t 2 0 2 2

Political
factors

Economicfactors

Details

Countermeasures by Nikko

Risk of changes in public investment
policy due to change of government

Operation support service forcustomer plants

Re-evaluation of concrete for CO2
absorption

Joint development withcustomers

Business performance improvement
at customers following theimprovement in the ready-mixed
concrete market and growing
replacement investment needs

Offering of values for improving
output at customer plants
Offering of services that address theshortage of engineers at customers

Soaring prices and difficulties in purchasing
various materials and equipment

Revision of product prices

Social factors

Promotion of workstyle reform atcustomers

Development of highperformance precast concrete

Technologicalfactors

Improvement of strength anddiversification of concrete products

Development of next-generation
mixers●Ready-mixed concrete shipment
in FY 2022 is expected to decline
3% to 73.50 million m3. While private demand, which slowed
due to the COVID-19 pandemic, is gradually recovering led
by redevelopment in the Tokyo metropolitan area including
Shibuya and Shinjuku, and it is expected to post a record
low for the fourth consecutive year. The number of readymixed concrete plants in operation is also expected to
decline. Nonetheless, amid steady construction investment,
the ready-mixed concrete price has been maintaining a highlevel nationwide, and it continues to show a rising trend
in Tokyo and Sapporo also in FY 2022. For this reason,customers’ appetite for making capital investment is highand replacement demand for plants we have suppliedin the past is expected to continue surfacing given theneed for automation due to manpower shortage for plantmaintenance and the improvement of production efficiency
from plants becoming larger.
●In this demand environment, Nikko has set forth three main
strategies for achieving the medium-term plan numericaltargets. The first strategy is business development
leveraging our strength of control panels developed inhouse. We will strengthen customer plant operation support
service as well as standardization of plants by accumulating

and analyzing various operation-related information ofcustomer plants. In particular, we will offer values such as
stable operation and predictive maintenance of customer
plants through subscription-based maintenance service.
The second strategy is to capture new demand stemmingfrom consolidation of ready-mixed concrete plants. Whilethe number of ready-mixed concrete plants in operationis showing a declining trend in Japan, the areas to whicha plant can supply ready-mixed concrete is limited as
the concrete needs to be used within 90 minutes after
production. We will strengthen the sales of mobile plantsthat can be easily transported to areas where it is difficult
to supply ready-mixed concrete within 90 minutes due toconsolidation of the plants. The third one is strengthening
the sales of plants for precast concrete building
components. There is increasing requirement for producing
high quality concrete components inside factories, which
are not affected by the weather, rather than on site against
the backdrop of manpower shortage and workstylereform in the construction industry. High quality concrete
is required for precast concrete, and the key to quality is
the performance of the mixer. We will expand the salesof mobile concrete plants for precast concrete whilestrengthening the development of mixers.
We consider the impact of the need for CO2 absorbing concreteon ready-mixed concrete and BP demand to be neutral, as itraises the unit price of concrete. We are still closely monitoring
the trend while continuing to work on joint development withcustomers, as there is a possibility of concrete being given a reevaluation, due to a backdrop of environmental issues.
●A relatively favorable market environment is expected
to continue during the medium-term plan, and we areassuming the size of the market to remain roughly
unchanged. We will continue to aim for business
operation leveraging Nikko’s strengths as well as the
expansion of market share and profit growth throughresolution of issues faced by customers.

Ready-mixed concrete unit price index of major cities (FY 2015 = 100)

Construction investment and ready-mix concrete shipment volume

Net sales by product, operating margin, medium-term plan numerical targets（％）(trillion yen)

●The ready-mixed concrete shipment
volume in the past had close linkage
to the amount of construction investment. However,while about 6.2 trillion yen has been spent against
the backdrop of the redevelopment of urban areas,measures under the Fundamental Plan for National
Resilience measures, and the Olympic Games Tokyo
2020 since FY 2014, the ready-mixed concrete
shipment volume has been showing a declining trend
given the increase in buildings and construction
works that require smaller amount of concrete. The
consolidation in the number of ready-mixed concrete
plants also continued, decreasing to 3,157 in FY
2021 from 3,406 in FY 2014. Nevertheless, given theadvancement of plant consolidation and increases invarious costs, the price of ready-mixed concrete is seen
rising in Osaka, which is slated to hold the World Expo
2025 Osaka Kansai, and Tokyo, where the metropolitan
area is being redeveloped, as well as Sapporo andFukuoka. The price of ready-mixed concrete attracts
attention as a leading indicator of capital investment
as well as the business performance trend of theready-mixed concrete industry. In fact, replacement
investment for plants built about 20 to 30 years ago
continues to be strong and total demand in FY 2021
rose 3% to 25.9 billion yen year on year, which was thehighest in the past 20 years.
●Our steady-state share in terms of the number of BPs
operating in Japan has been increasing gradually. Nikko’shigh capability in maintenance service has been highly
rated and its share in FY 2021 rose 11.4 pp to 46.5%
from FY 2020, up 14.9 pp compared to six years ago.
●Orders in FY 2021 were strong, increasing 21% to 12.1
billion yen year on year, and net sales of plants rose
30% to 18.6 billion yen and those of highly profitable
maintenance service also grew 4% to 4.2 billion yen.
Operating margin was also up 0.9 pp, reaching 10.4%.
Business
environment

180

SapporoTokyo
BP demand in value

160
140
120

Business Strategies

PEST analysis

100
80
60
40

100.0
100.0
99.7
96.9100.0 96.5
94.3
88.4
91.4
81.1
218
199
27.1

27.7

100.0
100.0
100.0
100.0
100.0

109.1
104.0
100.0
98.9
93.0

NagoyaOsaka
Fukuoka (100 million yen)
Dynamic market share
700
160.8 160.8
160.8
151.7
129.3 133.5
106.9123.4
106.9 104.7
106.9
101.0 104.1

239

240

86.0
233

27.8

28.4

29.6

96.3 97.4
220
30.4

106.9
100.7

600

123.4
108.5

241

106.9
100.7
251

31.1

32.0

123.4
117.5

125.1
123.4
113.8

111.3
100.7 100.7
259
32.6

500

Business overview

02013 2014 2015 2016 2017 2018 2019 2020 2021 2021 (ﬁscal year
(Apr.‒Aug.) average)

Ready-mixed concrete manufacturers,
construction companies, etc.
Static share in Japan: 33%

Operating margin

10.4% (FY 2021)

Ratio of MS net sales

39%

Production bases

Akashi head office factory and Shanghai, China
MS: maintenance service

Future business opportunities
and strategies

Amount of construction investment
Ready-mixed concrete shipped90

80(10,000 m2)

16,00014,00070

12,00060
40

0Customer

Sales breakdown: 28% (Japan: 99%, China: 1%)

300

100

Concrete plants, etc.

Market share

50

20

Products

Sales breakdown

400

200

Details

10,000
8,000
6,000

30
20

4,000

10

2,000

0

2000

2005

2010

2015

0

2022 (ﬁscal
estimate year)

Net sales under the medium-term plan
Plant sales
Maintenance
Other
Operating margin(million yen)

12,00010,000
8,000
6,000

10.7
619
3,770

8.4

339

395

8.3

3,686

3,791

9.5
286

2,000
0

2017

3,812

2018

10.4

10.0

9.7

9.7

4,238

10,500

5,028

4,892

2019

2020

12.0

10.0
8.0

4,035

4,000
5,132

271

（％）

10,80010,800

6.0
4.0

6,330

2.0
2021

2022

estimate

2023
plan

0.0
2024 (ﬁscal
plan year)

N i kko C o r p o rate R ep o r t 2 0 2 2 42

STRATEGY FOR VALUE CREATION

Environment- and Conveyor-Related BusinessWe will drive forward the modularization of conveyors and takeon challenges in new fields. The environmental business will
aim for the creation of new customer values and achievementof the numerical targets of the medium-term plan.

●We aim to achieve net sales of 2.7 billion
yen in FY 2024, operating income of 0.55
billion yen, and operating margin of 20.4%.
●We will aim to shorten the delivery time through further
modularization of the mainstay portable conveyors,which account for about 80% of net sales of conveyors,and improvement in price competitiveness.
●We will enter the stringer conveyor market, which islarge and require high strength, through modularization.
●We will push forward the development of new markets
and customers for environmental products using thefour core technologies unique to Nikko.
Keypoints●In the conveyor business, our products
accurately and safely carry diverse
materials by adapting to various tilt angles.
●In the environmental business, we will contribute to buildinga recycling-oriented society that is friendly to the earth’s
environment through soil improvement, recycling lithium
batteries and plasterboards, biomass-related facilities, etc.
Values to
be realized●We have the capability to modularize conveyors
that ensures shortened delivery time and easy
assembly as well as high-level maintenance service and theability to handle complaints that surpass other companies.
●In the environmental business, we have an integrated systemstarting from development to maintenance services thatsatisfy customer requirements in addition to various testing
facilities based on Nikko’s four unique core technologies(mixing and kneading, heating, material handling, and control).
Source ofstrength●The conveyor business has been delivering
stable performances with an averageannual net sales of approx. 2.2 billion yen for the past
five years. While the portable conveyor market is stable,
there are concerns that opportunities to use them onsite may decline in the future. We will also promote theshift towards higher costs to product prices in responseto the soaring prices of supplies such as frame materials
and motors. We will continue to aim for high profitability.
●The performance of the environmental businessfluctuates significantly depending on projects. In addition,
the number of inquiries has been increasing from theperspectives of ESG and SDGs, buoyed by the rising
Business
environment

FY 2024 numerical targets
Net sales
2.7 billion yen

Operating income
0.55 billion yen

Operating margin
20.4％

Business Strategies■ Modularization and customization of portable conveyors■ Strengthening of relationship with customers utilizing online services■ Offering stringer conveyors with short delivery times at low price■ Engineering proposals for conveyor lines

43 N ikko Corpo ra te R epo r t 2 0 2 2

Other Business

Manager, Industrial
Machinery SalesManagement Department,
Business Division

Tokuhiro Mitsumune

needs related to natural environment and recycling. New
demands such as recycling lithium batteries due to the
expansion of the market are also rising.
Business overview

Details

Products

Various types of conveyors and environmental recycling equipment

Customer

Various manufacturers, crusher manufacturers, agents, etc.

Market share

Share of the portable conveyor market in Japan: 60%

8% of overall sales (conveyors: 73%,
environmental equipment: 24%, service: 3%)
Operating margin 19.5% (FY 2021)

Sales breakdown

Production bases Akashi head office factory
MS: maintenance service●Conveyors are used in various anddiverse fields from civil engineering
to food, chemicals, steel, and waste processing, and wecontinue to expect stable demand. We will strengthen our
modularization and customization ability for portable conveyors,which has a market share of 60% in Japan, and promote thehigh added values of products. At the same time, we aim toenter the stringer conveyor market, whose size (estimated
6.0 billion yen a year) is double the portable conveyor market.
Stringer conveyers require high strength and are priced highly,
and we will enter the market with short delivery time and low
prices leveraging our modularization capability. We will alsoenhance system proposals by combining with crushers, etc.
●For the environmental business, we, while emphasizing
on profitability, will advance new market development
and business deployment that satisfy customer needs toachieve the numerical targets of the medium-term plan.
Future business opportunities
and strategies

Strengths

Weaknesses

Opportunities
Threats

Details

Countermeasures by Nikko

Top share in portable
conveyors in Japan
Business operation combining manufacturing
and sales as well as maintenance service
Product development based on
the four core technologies
Growth potential of portable
conveyor market

Increased market share throughstandardization and shorter delivery time
Proposal of synergies withcrushers, etc.
Comprehensive ability that
includes testing facilities

Calcination technology andhuman resource shortage
Large market
Entry into the stringer conveyor market

Expansion of synergies with
the AP-related business
Proposal of short delivery time andlow price through modularization
Product proposal in response
to customer needs

New markets including lithium
battery recycling

Expansion of product domains

Proposal of short delivery timeand differentiation

Intensifying competition

Net sales by product, operating margin, medium-term plan numerical targets
Net sales under the medium-term plan
Conveyor products
Environmental products
Conveyor service
Operating margin(million yen)

5,000

4,000

102

3,000

1,572

21.3

15.0

111

19.5
100

436

96
297

2,101

2,206

2020

2021

2,000

7.8

1,000

2,256

2,228

2,242

2017

2018

2019

0

20.2
67
222

712

20.0
2,500

20.0
2,500

20.4
2,700

（％）

25.0
20.0

15.0
10.0
5.0

2022

estimate

2023
plan

0.0
2024 (ﬁscal
plan

year)

Takeshi Sone

●We aim to achieve net sales of 13.5 billion
yen in FY 2024, operating income of 1.3
billion yen, and operating margin of 9.6%.
●Mobile crushers, our mainstay product, is an imported machine businessand the continued depreciation of the yen will affect it negatively.
●We are expecting net sales of 2.0 billion yen from Ube Kohki,
which we acquired, in FY 2022 and 2.3 billion yen in FY 2024.
●Waterproof boards are expected to continue posting
stable growth in the future.

Business overview●Mobile products are fuel-efficient and emit
less CO2 and offers high economic values suchas ease of transport and sale as second hand machinery.
●Waterproof boards protect housing, building, and train
stations from torrential rains.
●Temporary construction materials offer construction
scaffold environment that is safe, secure, and efficient.

Ratio of MS net sales 1%

KeypointsValues to
be realized

Ratio of MS net sales 3%

SWOT analysis

Senior Executive Officer
General Manager, Mobile
Plant Business Department,
Business Division

We aim to capture the top share of 50% in mobile
crushers. Waterproof boards are aimed at minimizing
the damage of torrential rain, and we will further
expand their sales.

●As for mobile products, we mainly offer KLEEMANN
products, which are highly fuel efficient with CO2emissions a fifth to a half of the products of other companies.
●We have an integrated structure from design to construction
work for waterproof boards and a good track record.
Source ofstrength●Although the continued depreciation of the yen
affects mobile equipment negatively, there has beena sustained favorable business environment given the shift fromstationary machinery to mobile models and the highly rated productperformances that boasts the world’s highest fuel efficiency andlow CO2 emissions (net sales have risen three-fold over the past two
years). In terms of measures against foreign exchange fluctuations,
we are pursuing price revision and enhancement of productlineup. There is large potential demand for waterproof boards,
but the delivery time has been extended due to postponementof construction works caused by material shortage. Subsidies forsuch products from the central and local governments have been
increasing. The temporary construction materials market is a nichemarket, with an environment of strong demand. We are working on
raising product prices given the soaring prices of aluminum materials.

Business
environment● Construction waste materials are
currently transported and disposed fromconstruction sites to intermediary processing facilities. However, the Japan
Construction Equipment Manufacturers Association is currently discussing

Operating margin 16.1% (FY 2021)
Production bases

Net sales
13.5 billion yen

Operating income
1.3 billion yen

Operating margin
9.6％

Business Strategies■ Sales expansion of mobile plants and strengthening of profitability■ Enhancement of product lineup■ Strengthening of sales structure and promotion of maintenance service business■ Realization of synergies with Ube Kohki

Satte factory, Fukusaki factory, Mobile Center, Kakogawa factory,
Tokyo facory, Akashi head office factory, Japanese subsidiaries
MS: maintenance service

processing and reusing them at construction sites from the perspectiveof switching to a processing method that is more friendly to the earth’s
environment. This may result in an increased demand for mobile
equipment. Going forward, we aim to expand sales to new customers andrental services leveraging our products’ economic superiority such as
high fuel efficiency, while pushing forward with the introduction of mobile
soil improvers, which is under development, and reinforcement of thestructure to handle the increasing demand for maintenance of supplies,
etc. caused by the growth in the cumulative sales of equipment.
●Waterproof boards are expected to enjoy an environment of continued
strong demand, and we are pursuing an upgrade from the current
structure with an annual production of 1.0 billion yen to one with annual
production of 1.5 billion yen. Amid concerns of an increase in the numberof new entrants, we plan to raise the sales ratio of highly profitable slidetype and door-type special products, which currently account for 35% of
net sales, to 50% in the final fiscal year of the medium-term plan.
SWOT analysis
Strengths
Weaknesses

Opportunities

Future business opportunities
and strategies

FY 2024 numerical targets

Details

Mobile crushers, waterproof boards, floodgates,
temporary construction materials, hand tools, etc.
Stone crushing, mining, civil engineering andCustomerconstruction companies, rental services, OEMs, etc.
Mobile crushers: 20% share in Japan; smallMarket share
sized aluminum staircases: 40%
17% of overall sales (waterproof boards and floodgates: 24%,
Sales breakdown temporary construction materials: 23%, mobile crushers: 22%,
hand tools: 11%, Nikko-developed products: 9%; other: 11%)
Products

Threats

Details

Countermeasures by Nikko

Mainstay KLEEMANN products
boast the top share globally
Ample experience and business ability
starting from design to construction work
A weaker yen is a disadvantage formobile equipment, as they are imported

Expansion of product lineupand sales channels
Expansion of the products weoffer and price revision

Shift of demand from stationary Propose high product performancemachines to mobile ones
including high fuel efficiency
Trend towards recycling wastematerials within the construction site
Solid maintenance structure
An increase in natural disasters
such as torrential rains
Offering of products and services
Entry of rival companies
with higher customer satisfaction
Focus on special products,
which have high profitability

Intensifying price competition

Net sales by product, operating margin, medium-term plan numerical targets(million yen)

20,000Temporary construction materials
Hand tools
Mobile plants
Net sales under the medium-term plan

15,000

17.5

17.2

0

2,200

16.1
8.9

10,0005,000

Waterproof boards, ﬂoodgates
Other
Ube Kohki
Operating margin

1,704
1,359
1,647
1,343 508 1,609 1,073 1,605 1,445
1,688
1,525
1,731

2019

2020

2021

2,000
7,000

2022

estimate

10.7

2,300

9.6

（％）

20.0

15.0
10.0

11,70013,5002023

0.02024 (ﬁscal

plan

plan

5.0

year)

N i kko C o r p o rate R ep o r t 2 0 2 2 44

Risks and Opportunities

STRATEGY FOR VALUE CREATION

Nikko identifies risks that could significantly impact the business activities in the future and pursues
the development of a corporate culture resilient to crisis by grasping and managing those risks.
The key risks currently recognized by the management as likely to significantly impact theconsolidated companies’ financial status, operation results, and cash flow are listed below. By
recognizing these risks, we believe that it is necessary for us to strive to avoid the occurrence ofsuch situations, and respond to them if they occur.

Related risks and opportunities(3) Risks related
to theoverseasbusiness

Risk of failing toachieve sales inaccordance withthe plan in the
ASEAN market

Details of risks and opportunities
The asphalt plant market in Japan is an oligopoly where two companies,
Nikko and another company, together account for almost 100% of themarket. Nikko’s market share exceeds 70% and our position as the top manufacturer
has not changed for a long time. However, our ability to showcase our differentiation
to customers may weaken if we fail to carry out sufficient product development or if
the other company develops a meticulous maintenance structure equivalent to ours.

In the past, when the Democratic Party of Japan replaced the Liberal
Democratic Party, “from concrete to people” became a slogan and manyof our customers shifted to limit capital investment. As a result, our sales declined
significantly. In the future, if a party that holds up a policy to reduce public investment
forms the government, our customers may shift to curb investment like they did during
the previous Democratic Party of Japan regime.

Risk(1) Risks related
to the asphalt
plant (AP)related
business inJapan

Risk of overseas
manufacturers
entering theJapanesemarketRisk of shrinking
market due toreorganization ofroad pavement
industry(4) Risk of reduction in public
investment budget

The Fundamental Plan for National Resilience received a budget of 15
trillion yen for five years and there is little possibility of customers rushingto curb investment and we can rather expect expansion of investment.

The Company will pursue differentiation by developing new productsthat contribute to realizing carbon-neutral society and CO2 reduction andthrough business model reform of the maintenance service business to secure ourposition as the overwhelming top manufacturer.
Opportunity

In recent years, no foreign manufacturer has entered the asphalt plant
Risk
market in Japan, but Chinese and Korean manufacturers are graduallyacquiring technical prowess and they may be planning to enter into the Japanesemarket. If foreign manufacturers enter into the Japanese market, the competition
among manufacturers may intensify.

Opportunity

Risk ofintensifying
competition in
the high-end AP
market in China

With our business model, we carry out the entire process from plant
manufacture to installation on site and offering of maintenance service
all in-house. In recent years, manpower shortages has made it difficult to hire onsite workers such as maintenance service staff and construction work staff. If weare unable to hire the required number of on-site workers, it may become difficult tomaintain a competitive edge with our business model.
Risk(5) Risk regarding securing of
human resources to engage inon-site operations

Opportunity

In maintenance service, we can solve the issue of securing humanresources by promoting labor saving through systemization of maintenanceservices using IoT, etc.

Major road builders are going through active reorganization, which may
develop into reorganization of the road pavement industry in the future. If
integration of asphalt plants advances due to the industry reorganization, the market
may shrink.

If an employee gets infected with COVID-19, he or she must stay awayfrom operations temporarily. As our products are designed according to theorder and then manufactured, it may significantly affect delivery to customers, especially
if an employee in a technology division is infected, design work will be suspended fora certain period of time. Further, in overseas operations, if the spread of COVID-19 incountries where we have operations restricts social activities, it may become difficult tocarry out sales activities there. In particular, if the infection spreads in China, Thailand,
and Taiwan, where the Nikko Group has business bases, it may have a direct impact.

Opportunity

It is difficult for a foreign manufacturer without a sufficient maintenancestructure to enter into the Japanese market. Therefore, if a customer, whopurchased a product from a foreign manufacturer, realizes the excellence in our after
sales service, we can expect it to boost our rating among customers.

Risk

Risk

Opportunity

If shipment from a plant increases because of integration, we can expect
the amount spent on capital investment to increase in total.

(6) Risk of spread of COVID-19

The Japanese construction industry, in general, has not had any
significant direct impact from the COVID-19 pandemic and has been
performing solidly, and we expect minimal impact on the industry also in the future.
Opportunity

Asphalt plants primarily use fossil fuels as energy source. About
1.5 million tons a year of CO2 is estimated to be emitted in Japan for
manufacturing asphalt mixture, and 70% of the emissions are thought to be from
Nikko-manufactured plants based on the market share. If the push towards reducing
environmental burden globally advances faster than expected, there is a possibility that
our technological innovation cannot keep pace with it.
In close collaboration with road pavement companies, who are thecustomers, Nikko is working on early social implementation of technologicalinnovations such as combustion efficiency improvement and shifting of heat source atasphalt plants (carbon-neutral fuels, electrical heating technology, etc.), improvement oftransportation efficiency through innovation of mixture transportation method, collectionof CO2 emitted by asphalt plants, and CO2 absorption using ready-mixed concrete.
Opportunity

In the asphalt plant market in China, Nikko has secured a certain positionin the high-end model category and we are steadily recording sales andprofits every year. In recent years, however, Chinese companies in general have gained
technological capability and there is a possibility of many Chinese manufacturers
entering the high-end model market in the future leading to intensified competition.
So far, the rivals in the high-end market are two European companies andone or two top Chinese companies, and the competition is not very tough.
As competing companies in the high-end model market increase, the market itself is
expected to expand.
Opportunity

As the global economy tries to recover from the worldwide COVID-19
pandemic amid widespread price increases caused by supply restrictions,logistics constraints, etc., the prices of fuels such as crude oil and natural gas rosemarkedly due to the Russia-Ukraine situation, resulting in accelerated price increase.
The prices of the materials Nikko purchases also continue to rise, and the Group’s
profitability may worsen if this situation continues into the future.
Risk(7) Risks related to increases inmaterial prices

Nikko reflects the material price increases in the quotations for AP and
BP customers and this is expected to lessen the impact on profits in the
future. Nikko is raising the price of modular conveyors sold by its agents, which has
been largely accepted by customers.
Opportunity

Risk(3) Risks related tothe overseas
business

Opportunity

Risk

Risk

(2) Risk related to Nikko’s
technological innovation notcatching up with the initiatives for
reducing environmental burden

As part of the growth strategy, we established a manufacturing subsidiaryin Thailand in FY 2020 and invested more than 1.0 billion yen in the factory.
The premise of this investment is that we can stably sell asphalt plants every year in
Thailand and other ASEAN countries. However, if our plants are not able to sufficiently
gain the trust of customers in Thailand and other ASEAN countries contrary to the planand sales volume falls short of the plan, the factory would post loss, resulting in risk of
impairment of the factory.
Risk

The ASEAN market is not yet large enough for two European companies,
Nikko’s competitors, to invest resources. Hence, competition with European
manufacturers is not intense, and we can expect to capture the market early on.

Related risks and opportunities

Risk ofinsufficientdifferentiation
with competitors

Details of risks and opportunities

Nikko has suspended business with Russia. The impact of the suspension ofbusiness with Russia is negligible, as they were limited to parts transactions
worth several tens of millions of yen a year in recent years. However, there is a possibilityof capital investment plans at Nikko’s customers getting affected by the increases in crude
oil prices due to the Russia-Ukraine situation and the changes in the global economy.
Risk(8) Risks related to the RussiaUkraine situation

Even if the price increases in crude oil, etc. and changes in the global
economy affect customers’ capital investment plans, etc., it is unlikely toresult in a significant decline in sales, as net sales in service maintenance, which isstable, account for more than 60% of AP and BP net sales.
Opportunity

Note: Items (7) and (8) were newly added in FY 2021.

45 N ikko Corpo ra te R epo r t 2 0 2 2

N i kko C o r p o rate R ep o r t 2 0 2 2 46

Measures to Reinforce Platform for Delivering Value to Realize 2030 Vision

Nikko Group upholds a customer-first policy as its corporate philosophy. Our mission is to provide products
and services that truly satisfy our customers while gaining widespread trust from society, and becoming asolution partner that grows with our customers.

R&D

Kawamura,Manager

Sales and
consultation

Nakayama,
General Manager

Planning anddesigning

Platform for delivering value

Uehara,Manager

Procurement

Umezawa,
Manager

Construction work

Noguchi,
Section Manager

MaintenanceTanaka, Manager

47 N ikko Corpo ra te R epo r t 2 0 2 2

Issues to be addressed

To realize the 2030 Vision, it is important to make the value co-creation platform strong and it is necessary tocontinue refining the four core technologies of mixing and kneading, heating, control, and material handling.

Delivering Value to Realize 2030 Vision

Input (management resources)

Goals in 2030

(short, medium, and long term)

Measures (short, medium, and long term)

Progress, outlook

FY2021 evaluation- R&D expenses: 0.73 billion yen- Development division engineers: 28
people- Joint development with customers
and external organizations- 4+α core technologies (drying, mixing
and kneading, material handling, andcontrol) + measurement-Full-scale installation of lowcarbon and environmentallyfriendly products-Installation of automatedproducts leveraging AI and IoTtechnologies-Lateral deployment ofenvironment-related equipment-Human resource development for transfer
and expansion of core technologies-Short-term and medium- to long-term productdevelopment aimed at decarbonization-Building a development platform forenvironment-related equipment-Acceleration of development for increasing
the amount of social implementation- R&D expenses from FY 2022 to FY 2024: 2.5 billion yen (2.1 times)- The number of development personnel to be hired from FY 2022 to
FY 2024: 12- Nurturing based on active implementation of human resource rotation- Promotion of open innovation with customers and externalorganizations including universities- Update of product development roadmap and redistribution of resources- Promotion of company-wide project themes-Human resource rotation implemented in thecurrent fiscal year: 2 employees-FY 2021 -> FY 2022: employees increased by 4
-Joint R&D: 4 projects being implemented-Updating product development roadmap-2 company-side projects to be implemented○-Establishment of a marketing
division-Adaptation of theorganization for globalization-Utilization of past and future
data-Support of comprehensive
operation of plants-Offering of environmentallyfriendly products for low
carbonization-Offering of products +operation through remote
operation and automation-No. 1 manufacturer in Asia

-Development of environmental products-Acquisition of plant operation knowhow-Acquisition of overseas partners (agents)-Nurturing of human resources who will play
the main role in developing fields-Trade shows for new products-Collaboration with customers (development, education)-Establishment of overseas planning division and support
for acquisition of products and partners-Enhance the hiring of new graduates-Arranging more environmentally friendly products by
joining an industry association-Trade show for new products: Scheduled in
November-Collaboration with customers: To be
implemented for mutual education-Acquisition of partners in neighboring countries
by utilizing the Thailand House Messe-Joining Japan Road Contractors Association(JRCA) as a support member○- Group of skilled engineers who
respond to customer needs- Core technologies (mixing andkneading, heating, material handling,
and control)- Accumulation of knowhow regarding
plant design and technical bases- Cooperation structure with technicaldesign partner companies-Plant solution provider-Proposals that create values
at both customers andsociety-Comprehensive support of
remote operation, automation,saving manpower-Overseas expansion of global
standard products- Systematic human resource hiring, strengthening
the knowledge of the workers through nurturing- Enhancement of core standard products that
respond to customer needs- Improve customer satisfaction in quality, safety,
and environment friendliness- Propose suitable products that reflect customer
requests and meeting the delivery date
- Improvement of design work efficiency and shiftof resources to new expanding business fields-The number of engineers to be hired from FY 2022 to FY
2024: 35
-Promotion of standardization and development of
products with high added values-Build engineering structure that combines sales andmaintenance service-Restructuring and development of global models andtechnological involvement in overseas production-Promotion of outsourcing and digitization of operations- Active investment in resources, placing engineers at theeastern and western bases- Offering of a series of block-type plants, a highpercentage of which is built in-house- Restructuring of organizations in charge of mission
implementation and building engineering methods- Establishment of a team dedicated to overseas markets,
hiring of human resources for overseas expansion- Development of a new control panel model○-Introduction of a new coresystem-Construction of newmaterials warehouse-Human resources to build
procurement base

- Operation structure focused on stablepurchasing and cost reduction- Information sharing with suppliers andfavorable relationship of trust with them
- Acquisition of ample knowledge of
products and industry trends andenhancement of communications with
suppliers and within the company- Contribute to the mitigation ofenvironmental burden(Short term)- Soaring prices of supplies and prolonged delivery time
- Large burden of daily operations including
receiving and placing orders- Aging of the core systems(Long term)- Surging raw material prices, their shortage, anddepreciating yen- Discontinuation of the production of supplies- Downsizing and closure of suppliers(Short term)- Early dissemination of information regarding price revisions
and delivery information- Improvement of operating efficiency using a new system (costaccuracy, divisional collaboration, EDI)(Long term)- Work with designing section and promote functional purchase- Cost reduction through centralized and distributed purchasing- Reconsider sustainable supply chain- Promote communication with suppliers- Information on price revision status and delivery=> Continue to disseminate. Details are being
prepared at individual levels- New system=> The Purchasing Department has already implemented, andother departments’ EDI implementation rate exceeds 30%- Cost reduction=> rate of achievement in FY 2021: approx. 80%- Reconsider supply chain=> Being implemented△- Further improving productivity by 10%- Flexible, large variety and enhancementof production corresponding todestinations- Achievement in both quality improvement
and reduction of manufacturing cost
- Thailand subsidiary NIC to turn profitable
in a stable manner-Further improving productivity by 10%-Flexible, large variety and enhancement of
production corresponding to destinations-Achievement in both quality improvement
and reduction of manufacturing cost
-Thailand subsidiary NIC to turn profitable ina stable manner-Expansion of the manufacturing factory block of head
office factory-Replacement of aged equipment-Reconstruction of factory layout-Promoting engineers to acquire multiple skills-Utilization of foreign technical interns-Human resource rotation-Vitalization through appointment of young
employees as group leaders-Number of technical interns accepted in FY
2022: 6
-Implementation of environmentally friendly
factory construction plan○

- Operation engineers: 20 including
8 field management engineersand 17 chief engineers- Contractors around the country- End-to-end structure fromassembly to operation adjustment- Operation engineers: 30- Increase field management engineers
and chief engineers and take on allsorts of plant installation works- Digitization of work plan, safety
documents, etc. to enable a structure
where anyone can handle them

- Reduction of work processes and response to safe
operations or safety instructions- Identifying new contractors and collaboration withother departments- Easy-to-implement structure in the design andconstruction work stages-Digitization of work plans and safety documents(conversion to online, and online work)-Easy-to-construct unit structure, increasing thepercentage of parts built in-house, forming JV with othercompanies-Promotion of structure designs that facilitates safe work
-Proactive negotiations with contractors throughout Japan-Reduction of on-site construction man hours
by improving the degree of product completion-Initiatives for reviewing construction work
processes-Two new contractors. Continued efforts fordiscovering more contractors○- Service men: 110 employees- Transfer of front office operation,
strengthening of organization- Development of workplace safety
and machinery management
system- Plant management throughasset management- Start of operation service- Global operation of customer
support-Shift from after-incident maintenance topredictive maintenance-Acquisition of on-site human resources-Remote management and utilization ofplant operation data for prevention andprediction-Predictive maintenance based on next-generation diagnosis
and promotion of shift to next-generation preventative andpredictive maintenance-Hiring, reduction of emergency repair, and improvement ofefficiency through division of labor-Starting actual operations at cooperating factories and refining it-Expecting contracts with 10 AP users and 20
BP users-Plan to appoint employees who are in chargeof area-based front office operations-Start of data monitor operation○

Manufacturing - Three latest fiber laser processing

Yamada,Factory Manager

Measures to Reinforce Platform for

STRATEGY FOR VALUE CREATION

machines, etc.
- Technology and skills of integrated
in-house manufacturing from primaryprocessing of materials to canningwelding, machine processing, final
assembly, and trial run as well as
production and shipment control

N i kko C o r p o rate R ep o r t 2 0 2 2 48

Sustainability Strategy in Medium-Term Management Plan

Since its founding in 1919, Nikko Group has been focusing on solving various social issues for more than acentury. Furthermore, in the next 100 years we will continue our aim towards solving the problems facing
society, as well as creating a sustainable corporate value.
To solve customers’ issues, it is essential to realize green transformation including offering of plants
supporting decarbonization in addition to digital transformation, which enables automatic operations using
remote monitoring and remote operation of plants leveraging IoT and AI technologies. In the new MediumTerm Management Plan, we will further accelerate the implementation of such initiatives.

Strengthening of
national resilience2

Sustainability Strategy in the AP-related business in Japan
Receipt

Customer

Crushing

Receipt

Vehicle dispatch*Offering of maintenance subscription service

Plant operation

Production plan
Data composition
Information

3

Harmony withnatural environment

Feedback to planningand development

Development of aprosperous society

Evolution of technology andproducts as a manufacturer, based on customer needs

Nikko

Decarbonization, low carbon
Digitization including IoT

Fuel transition
Further stability andreliance throughenergy saving proposals

DX team

Early restoration from natural disasters
Initiatives towards intensifying disasters● Development of business continuity
management● Disaster prevention and mitigation,
addressing aging infrastructure●

Decarbonized society●

Pursuit of customer satisfaction●

Recycling-oriented society●

Improvement of employee engagement●

Water resources●

Collaboration with business partners●

Biodiversity●

Co-existence with local communities

1 Strengthening of national resilience
For early restoration from intensifying natural disasters,such as large typhoons, severe rainstorms, and earthquakes,
we need the quick recovery of the Groups’ plants. We arestrengthening our emergency responses including early
identification of damages (by natural disasters), supply

Strengthening of customer
relations throughsubscription, etc.

Plants withenvironmental burden
Stable operation
by on-site MS

Further stability and reliancethrough predictive maintenancechains, subsidiaries, and partner businesses and working
to offer multifaceted support for customers. We also
immediately respond to customer needs related to disasterprevention and mitigation as well as measures to address
aging infrastructure. (See p. 60)

Nikko Group aims to become the plant operation partnerof its customers by establishing, as a plant manufacturer,
absolute superiority in environmentally friendly services suchas decarbonization as well as by building lasting relationships
with customers through plant operation service. To thisend, it is essential to realize green transformation including
offering of plants supporting decarbonization in addition toautomated plant operation at customers. Nikko will pursue
business model innovation and sustainable growth, as thethree cross-divisional teams deepen collaboration and work
to solve various issues.

CEO’s Office
Low Carbon Task Force(LCTF)DX teamOffering of next-generation
maintenance service by leveraging
IoT tools● Development of a seamless plant
information system● Development of a new control systemutilizing AI and image recognition● Integration of platforms of in-housesystems●resources and for reducing the environmental burden(recycling rate of 99%). Currently we are working on
recycling cement sludge (waste generated from rinse waterof mixers and secondary concrete products). It is also
expected to contribute to decarbonization, as the recycling
process of precipitated calcium carbonate (reused as a raw
material for pharmaceuticals, ferrite, coatings, etc.) that is
generated from concrete sludge absorbs CO2. (See p. 59)

of satisfaction and nurturing empathy through the offeringof new values to customers, employees, business partners,
local communities, and shareholders. (See p. 67)

Green transformation and digital transformation in the Medium-Term Management Plan

49 N ikko Corpo ra te R epo r t 2 0 2 2

Digital transformation(Remote operations and automation support)

At Nikko, three cross-divisional teams are active directly
under the president to transform the business model froma model based on plant manufacturing and sales into “aleading company in a decarbonized society,” which supports

3 Development of a prosperous society
Partnership with diverse stakeholders is indispensable
for solving social issues. We aim to simultaneously realize
sustainable economic and social values by raising the level

digital transformation, which enables automatic operations
using remote monitoring and remote operation of plants
leveraging IoT and AI technologies.
We have been actively working on these two transformations
to enable us to be the chosen management partner of ourcustomers for reforming their plant operations by leveraging
our strong product appeal as a plant manufacturer.

Remote monitoring, remote
operation
Automated plant operation

Green and digital transformation promotion structure

2 Harmony with natural environment
Nikko Group clearly positions the goal of net-zero CO 2
emissions by 2050 among its management policies andclosely cooperates with customers to achieve carbon-neutral
goals during plant manufacturing at the company as well as
during operation of Nikko-made plants at the customers’.
(See p. 55)
Nikko Group has been successfully recycling construction
and road waste materials given the limitations of natural

Become a one and only
presence with technical prowess
and service capability!

Customersʼ
management partner through service(Present)(Support for decarbonization)●

Pavement
works

Feedback regarding
plant operation

Green transformation●

Transport

Truck location
information

Operation data
Offering of plant
operation information

NIKKO

Sustainability issues Nikko Group is working on

1

SUSTAINABILITY AND MANAGEMENT FOUNDATION

Joining decarbonization-relatedorganizations● Offering engineering proposals to
Nikko customers● Sales expansion of decarbonization
devices● Entry into new related businesses● Carbon-neutral initiatives●

Global Marketing Team
Analysis of market trends in Japanand overseas, customer needs, andcustomer information● PR strategy for stimulating demand● Creation of market, based on mutual
trust with customers● Deployment to overseas customers●

R&D and human resource development and enhancement
R&D in priority areas and development and enhancementof human resources are important to promote and achieve
the two transformations. We will actively hire external
human resources including science major students,

visualize the skill levels of our internal human resources,
and implement reskilling for developing and enhancing
human resources, and achieve innovation by boosting
expertise and diversity.

[Priority fields for R&D]
● New burner control technology
Warm mix plant facilities● Co-generative system
AP regenerative burner● Long-distance mixture transportation technology● Ammonia burner● New RAV system● Shipment-linked plant operation system● AP exhaust gas CO2 capture system● Sand drying equipment●●[Priority fields for human resource
development and enhancement]
Product development ● Design and engineering
Control, remote, automation technologies● Technical support and plant operation support● Remote maintenance●●N i kko C o r p o rate R ep o r t 2 0 2 2 50

Realization of Carbon Neutrality

SUSTAINABILITY AND MANAGEMENT FOUNDATION

Nikko Group set forth to achieving virtually zero CO2 emissions (carbon neutrality) in 2050 as amanagement goal and has started implementing various initiatives to achieve this.

❷ Fuel transition
making efforts to change the fuel used in its asphalt
plants to low-carbon and decarbonized fuels and havebeen actively proposing the alternatives to our customers
for achieving carbon neutrality.

Initiatives for reducing CO2 emissions (Scope 2)

The Group has been developing liquid and powder
biomass burners as well as gas burners that has low
CO2 emissions to replace existing heavy oil burners byapplying Nikko’s combustion technology. We have been

❶ Installation of solar power generation facilities● Alternative fuel burners that have been developed and launched

The Group installed solar power generation facilities at
the head office factory of Nikko Co., Ltd. in March 2013.
◎Area: 338 m2◎Power generated: 415,163 kWh(cumulative total for FY 2013–2021)

Nikko plans to further increase the number of solar
energy power generation facilities within its premises.

Gas burner❷ Switch to CO2-free electricity
Nikko Co., Ltd. switched all electricity used at its head
office to electricity generated from renewable energy
sources in March 2022. It has been promoting similar

initiatives at its offices and group companies, and Nikko
Group aims to achieve RE100 (100% shift to electricity
made using renewable energy) in 2030.

Power usage (parent Nikko)
Regular electricity(10,000 kwh)

500

400

CO2-free electricity

31

Liquid biomass burner● Alternative fuel burners in development
Nikko Group has been driving forward todevelop burners that use ammonia andhydrogen, which do not emit CO2 in the
combustion process. The development is
not just aimed at asphalt plants, as theGroup is conducting joint research with
Osaka University and Tokyo Gas Co., Ltd.
to enable the application of its technology
in various industries.

300

200

402

381

392

390

367

367

100

0

Powder biomass burner

Ammonia burner (in development)

Hydrogen burners (in development)❸ CO2 absorption effect in the recycling process of concrete sludge
Calcium carbonate is created when highly alkaline calciumrich waste water reacts with the exhaust gas (CO2) inthe air. The use as a concrete admixture is expected toreduce CO2 emissions by 440 kg CO2-t.

Manufacturing flow of PAceCS and Eco Tankaru
2017

2018

2019

2020

2021

23
2022(plan) (ﬁscal year)

Solid-liquid separator

Crystallizer

Water treatment facility

Filter press

We have succeeded in developing and commercializing a mechanicalfoamed asphalt generation equipment, something which roadpavement companies had been actively working on. We are the firstJapanese plant manufacturer to develop and commercialize such.
The equipment lowers the temperature during the manufacturing ofasphalt and thus contributes to a reduction in CO2 emissions.
Tokyo Metropolitan Government had been verifying thetechnological aspects of low-carbon (warm mix) asphalt mixture,
which is expected to curb CO2 emissions, and it approved thetechnology as a new mixture in June 2022.
According to calculation by the Tokyo Metropolitan Government, if
the low-carbon (warm mix) asphalt mixture, whose manufacturing
temperature is reduced 30°C, are used in projects ordered by the
metropolitan government, it is expected to reduce CO2 emissions
by 3,470 tons a year.

51 N ikko Corpo ra te R epo r t 2 0 2 2

Elution tank

Receives concretesludge created incentrifugal casting

Dilute concretesludge withwater

Exhaust gas from boilers(CO2 supply)

SolidsReleased into rivers

Satisfy waste water
criteria by adding
chemicals toneutralized water

Releasedwater❶ Shift to warm mix

Concrete sludge
storage pit

Neutralizedwater

LiquidInitiatives for reducing CO2 emissions (Scope 3)

Calcium carbonate manufacturing
equipment
Squeezed water

Calcium carbonate(Eco Tankaru)

Transport anddry sludge cakes
Transport

DryingCrusher
Crush and grade the dried sludge cakes
Crushing
facility

Screen

PAdeCS
Features

It can capture CO2 at normal temperature and pressure without using chemicals.

*The technology is called Mineral Carbon Capture & Utilization <MCC&U> technology, and is one of CO2 reduction technologies.

◎Eco Tankaru (precipitated calcium carbonate): A low environmental burden product manufactured bycapturing the CO2 in the boiler exhaust of secondary concrete product factories. It is used in concrete
admixtures, paper, coating, rubber products, etc.
◎PAdeCS：A highly alkaline environmental purification material derived from cement. It is used as waterpollutant remover, as material for recovering phosphorus, which is getting depleted, in deodorizers, etc.
Complete the commercialization of mechanical foamed asphalt generation equipment<Source: PAdeCS Study Group>N i kko C o r p o rate R ep o r t 2 0 2 2 52

SUSTAINABILITY AND MANAGEMENT FOUNDATION

Information disclosed based on TCFD framework
Climate change caused by greenhouse gas (GHG) emission has
an enormous impact on society and economy, and Nikko Group
recognizes that it is the most pressing social issue the Groupshould work on. For the realization of a decarbonized society
targeted in the Paris Agreement, Nikko Group is aiming toachieve a 50% reduction in CO2 emissions (compared with FY2021) from its business activities as well as operation of Nikkomade plants at customers as an interim target for FY 2030.

Governance structure diagram

The Group is promoting the development of technologies for
reducing CO2 emissions and provision of related products andservices towards achieving carbon neutrality in 2050. After
endorsing the TCFD recommendations in October 2021, it
has been disclosing information in accordance with the TCFD
framework for smooth communication regarding climatechange issues with stakeholders including shareholders andinvestors.

Board of Directors
ReportCommittee of Inside Executives●

Governance●●

Strategy

The Board of Directors deliberates on the validity of strategies and inherent risks andsupervises the progress towards targets.
Identify risks and opportunities in scenario analysis considering the 2°C and 4°C scenarios●

Analyze the impact of risks and opportunities on business and finance●

Formulate plans for product development and market introduction towards achieving carbon neutrality●

Strategy

The committee shares risk information with the Committee of Inside Executives and the Board of
Directors and decides appropriate responses from the perspective of company-wide risk management.
Verification of CO2 emissions by Nikko Co., Ltd. (Scope 1 and 2)●

Switch to renewable energy-based electricity and establishment of RE100 target●

Verification of CO2 emissions in Scope 3

2°C scenario(Assuming progress in
low-carbonization)<FY 2050 target> - CO2 emissions(Scope 1, 2, and 3): aim for virtually zero

53 N ikko Corpo ra te R epo r t 2 0 2 2

carbon neutrality based on data verification and evidence.
The Committee of Inside Executives discusses the plan
proposal drafted by LCTF and formulates concrete target
values and specific strategies for achieving the targets.
The Board of Directors deliberates on what the Committee
of Inside Executives formulated and monitors its progress.

■ IPCC AR5-RCP2.6 (2°C scenario)-RCP8.5 (4°C scenario)

Impact on
finance

Opportunity

Impact on
finance

Rapid shift to decarbonized burners (plants)

High

High

Request from users to share the carbon tax
burden (discount)High

Demand for updating to lowcarbon or decarbonized burners(plants)

Market introduction of highly carbon-efficientroadbed materials alternative to asphalt

High

Growth in market share due tosuperiority in the R&D competition

High

Increase in R&D expenses and capital investment(decarbonized burners, CO2 capture and storage technology, etc.)

MediumMediumNew entry by boiler, burner, and electric
furnace manufacturers

MediumIncrease in demand for concrete
products(roadbed materials alternative toasphalt)

Decrease in the number of operating plants
due to centralization to large plants

MediumGrowth in demand for recycling andlow-carbon plants due to stricter
environmental restrictions in China
and Southeast Asian countries

MediumIncrease in the cost of procurement of raw
materials (steel materials, etc.)

Low

Low

Increase in the cost of electricity derived fromrenewable energy

Low

Provocation of demand for new
plants due to spread of CO2
fixation concrete

Increase in the cost of procurement ofalternative fuels

Low

Increase in demand for lithium
battery recycling equipment due
to expansion of the EV market

Low

Increase in demand for preemptive
maintenance for stable operation

High

Increase in demand for disasterprevention or mitigation models

MediumIncrease in demand for disasterprevention products (waterproof
boards, temporary scaffolding, etc.)

MediumIncrease in demand for counterdisaster mobile plants

Low

Increase in demand for transferring
plants to areas with low disaster risk

Low

Risks

<FY 2021 results> - CO2 emissions (Scope 1 and 2): 2,759 t-CO2- CO2 emissions (Scope 3): 779,260 t-CO2

Nikko established the Low Carbon Task Force (LCTF)
led by the managers of the Business and Technology
Development Divisions as an organization that promotes
the realization of carbon neutrality. Through its monthly
meetings, it has a system in place to examine and discuss
the issues in a cross-divisional manner for the realization of■ IEA “World Energy Outlook 2020”-STEPS (stated policies scenario)-SDS (sustainable development scenario)

Business and financial impact of climate-related risks and opportunities based on scenario analysis

Establishment of the interim target for 2030 and formulation of product development andmarket introduction plans

Carbon neutrality promotion structure

Give instructions<Reference scenarios>

Nikko assumes the future temperature rise scenarios in therange of 2°C and 4°C upon and carries out the mediumterm (2030) and long-term (2050) scenario analyses.

<FY 2030 target> - CO2 emissions (Scope 1, 2, and 3): 391,000 t-CO2

Governance

ReportClimate change scenario analysis

The Risk Management Committee chaired by Senior Managing Director and General Manager
of Administrative Division identifies and manages risks that have major impact on business andfinance as priority management risks.

●●

Metrics andTargets

Key measures and action plans formulated by the committee are promoted company-wide andthe progress is reported to the Board of Directors.

●

●

Risk
Management

The Committee of Inside Executives sets forth targets based on the proposals by LTCF andformulates detailed strategies for achieving them.

Low Carbon Task Force

ReportBusiness divisions, subsidiaries

Nikko Group’s initiatives
The Group has established the Low Carbon Task Force (LCTF) led by the managers of businessand development divisions, which gathers and analyzes carbon neutrality-related informationand carries out planning (once a month meetings).

Give instructions

Give instructions

Status of the initiatives related to the four core elements of the TCFD recommendations●

Supervision

4°C scenario(Assuming no progressin low-carbonization)

Expansion of the new roadbed and construction
material markets due to measures against heatisland effect (shrinkage of the existing asphalt
and concrete markets)

MediumIncrease in the cost of procurement ofmaterials due to suspension of supply chains

Low

Increase in BCP expenses

Low

The degree of financial impact is evaluated across three levels between high, medium, and low, depending on the materialization of the risks and opportunities and the impact on periodic income.

N i kko C o r p o rate R ep o r t 2 0 2 2 54

SUSTAINABILITY AND MANAGEMENT FOUNDATION

Four steps and seven approaches towards the realization of carbon neutrality

Road map for the development of carbon-neutral products
Fuel transition● Four steps
To grasp CO2 emissions in Scope 1, 2, and 3 as accurately
as possible, we verified major categories by setting
certain conditions. As a result of the verification, CO2
emissions from using products such as the Nikkomade plants we sold were 692,000 tons, accounting
STEP 1for 89.3% of overall emissions in Scope 3. The
Group will offer products and services by identifying
the most cost-effective methods for reducing CO 2
emissions, while sharing with customers the evidence
extracted from verification data.

STEP 2

Accurately grasp thevolume of emissions

STEP 3

Reduce theemissions

Offsetwater content has proved effective in reducing theenergy consumption in the drying and heating process.
Based on such verified data, Nikko has been taking
seven approaches to developing products aimed at
decarbonization as part of efforts to reduce emissions.

● Seven approaches①
Fueltransition

②
Warm
mix

③
Transformationof the material
storagesystem⑤
CCU④
Reform ofthe plant
system⑥
Transformationof the mixture
delivery system

Nikko is conducting product development by combining seven technologies for the realization of carbon neutrality.
①Fuel transition
To replace heavy oil, which has high CO2 emissions, theGroup is considering the R&D of burners using ammonia
and hydrogen, which are promising CO 2 -free fuels,in addition to the development and improvement ofburners that use city gas, natural gas, and biomass fuels.

②Warm mix
Manufactures asphalt mixture at a temperature lower
than the usual heating temperature by reducing theviscosity of asphalt by adding water to heated asphalt andfoaming it. The energy consumption in heating is reduced
as we use warm mix, thus reducing CO2 emissions.

③Transformation of the material storage system
Reducing water in aggregate, which is the raw material ofasphalt mixture, enables to lower energy consumption in theaggregate incineration process, thus reducing CO2 emissions.

④Reform of the plant system
CO2 emissions can be reduced by reducing the amountof newly used consumption energy by recycling exhaustgas and heat from plant operation for heating andprocessing aggregate.

55 N ikko Corpo ra te R epo r t 2 0 2 2⑤CCU
The external CO2 emissions of a plant can be reduced byabsorbing CO2 emitted at the plant using the technology
to absorb CO2 with concrete. We are also considering
absorbing the CO2 emitted from the asphalt plant at theconcrete plant.

⑥Transformation of the mixture delivery system
CO 2 emissions can be reduced by lowering energy
consumption by improving production efficiency of
mixture through establishment of technology forextending the distance of mixture transport and improving
transport efficiency from the plant to the destination.

⑦Electrification
Assuming that the use of CO 2-free electricity would
spread, we are considering development of an allelectric plant to replace fossil fuels by promoting theelectrification of drying and heating equipment.

LNG
satellite

Reform of theplant system

Liquid biomass
burnerSolid biomass
burnerCounter-curr
ent R dryer

Ammonia /hydrogenburner (small)New burnercontrol technology

FY 2025

FY 2030

Co-generative
systemNew RAVsystemAggregate yard forenhanced moisturemanagement
CCU
Equipment to
reduce water inaggregate in yard

Warm mix
plant facilities

Equipment to collectand transport driedmaterial

Development ofapplication for
CO2-ﬁxing minerals

Transformation of
the mixture
delivery system

AP exhaust gas
CO2 capturesystemSand drying
equipment

Shipment-linked
plant operation
systemElectriﬁcation

Ammoniaburner(large)Mechanicalfoamed equipment

Long-distance mixture
transportation
technology

AP regenerative
burnerCO2 emissions
Achievement of
50% reduction

Transformation of thematerial storage system

Equipment for ﬁxing
CO2 in ready-mixed
concrete

Heat pumpsystemAmmonia /hydrogenburner (medium)⑦

Electrification

Gas burner

Powderbiomass burner

STEP 4

CaptureTo accurately understand the CO2 emissions during
the mixture manufacturing process, Nikko analyzed
the energy consumption at the mixture plants. Since
about 80% of energy is used to remove water andheat aggregates (recycled materials), reducing the

FY 2021

Warm mix

Induction heating
equipment forreheating aggregates

Dispersed mixture
storage system

FY 2040
CO2 emissions
Achievement of
80% reduction

Electro heat
dryer
Hydrogenburner (large)

FY 2050

Centralセントラル
plant
プラントシステム
systemCommercializedVeriﬁcation stage
Being considered
Before concrete conception

All-electricplant

CO2 emissions
Achievement of
virtually zero
emissions

Net sales target of related products and investment plan (the figures for FY 2021 are results)[Net sales][Development investment]

250(million yen)

4,500

200

4,000

6

6

6

150

3,500
3,000

4

4

4

2,500

50

2,000
1,500
1,000
500
0

100

2
1

2021

①Fuel transition

4

4

4

2

2

2

1

1

2026

2027

4

4

4

2

2

2

1

1

1

1

2022

2023

2024

2025

②Warm mix

④Reform of the plant system

0 (million yen)
2

2

1

1

2028

2029

⑥Transformation of the mixture delivery system

2

1*Products related
to approaches ⑤
and ⑦ areexpected torecord sales fromFY 2031 onwards.

2030 (ﬁscal year)
Development investment(cumulative total of10 years: 1.82 billion yen)

N i kko C o r p o rate R ep o r t 2 0 2 2 56

SUSTAINABILITY AND MANAGEMENT FOUNDATION

Utilization of renewable energy-based electricity

Risk Management
The Low Carbon Task Force (LCTF) formulates anddrafts the carbon neutrality-related plans and promotes
company-wide response to climate change.
The Risk Management Committee evaluates andidentifies climate change-related impact on the
Company and manages the effects. Furthermore, it
plays the role of integrating the impact of climatechange-related risks into company-wide risks by closelycollaborating with the Committee of Inside Executives.
The Committee of Inside Executives discusses theimpact of and response to climate change and evaluatesthem. It also formulates policies, key measures andtargets, and action plans for minimizing climate risks.
The contents of the discussion at the meetings of theCommittee of Inside Executives are reported to theBoard of Directors twice a year or more.
The Board of Directors performs the supervisory
function, regularly receiving reports on climatechange-related action plan and risk evaluation fromthe Committee of Inside Executives and the Risk
Management Committee, and deliberating on thosereports.

Nikko Co., Ltd. switched all electricity used at its head
office to electricity generated from renewable energy
sources in March 2022. A similar initiative will be promoted
at its offices around Japan and group companies.

Nikko Group aims to realize virtually zero CO2 emissions
from its business activities and Nikko products it sells
in FY 2050. It promotes the development of productsthat contribute to the reduction of CO2 emissions aswell as thorough energy saving activities and proactive
utilization of renewable energy.

FY 2021 (results)

7.9%

FY 2022 (plan)

94.2%

FY 2030 (target)

100%

The result andplan are on aparent Nikko basis
RE100 target
Nikko Group (Japan)

Environment-related data

Consumption of fossil fuels (kl) <head office factory + sales offices>

Metrics and Targets

Rate of renewable energy-based electricity used

CO2 emissions (t-CO2) Scope 1 and 2 <head office factory + sales offices>

FY 2021

1,145

FY 2021

FY 2020

1,104

FY 2020

2,759(Scope 1: 305; Scope 2: 2,454)

2,892

Result of CO2 emission verification (from April 2021 to March 2022)
Category

CO2 emissions (t-CO2)

Target activities
Power usage (kwh) <company-wide>

2,759【[Scope 1 and 2]

305

Combustion of fuels

2,454

Use of electricity

Emissions from manufacturing, processing, and experimenting
Manufacturing, all offices, branches, and sales offices

779,260[Scope 3]
1. Purchased products and services

48,0029,206

2. Capital goods
3. Fuel- and energy-related activities notincluded in Scope 1 and 2
4. Transport and distribution in upper stream

328
24,67083

6. Business trips by employees

323

7. Commuting by employees
11. Use of products soldEmissions in upstream of the product purchased
Emissions in upstream of capital investment that has been recently introduced
Emissions from mining, refining, etc. of fuel used

Rail service, private vehicle, bus, motor cycle, etc.
Emissions from operation of AP, BP, and conveyors sold95

Emissions from disposal of AP, BP, and conveyors soldFY 2021 emission results: 2,759 t-CO2 (Scope 1 and 2); 779,260 t-CO2 (Scope 3)
FY 2030 emission targets: 39,100 t-CO2 (Scope 1, 2, and 3; down 50% from FY 2021)
FY 2021

FY 2030

3.98 million (down 13% from the peak)

FY 2021

1,858 (down 39% from the peak)

FY 2020

3.90 million

FY 2020

2,038

FY 2019

3.92 million

FY 2019

2,496

FY 2018

3.81 million

FY 2018

2,738

FY 20174.02 million

FY 2017

2,370

Use of rail service, airplane, etc.

Interim targets (FY 2030) of CO2 emissions (Scope 1, 2, and 3)<Nikko Co., Ltd.>FY 2021

Procurement and transport of raw materials and parts, and shipment of products

696,553

12. Disposal of products soldPower usage (kwh/production) output intensity <entire company>

FY 2040

Power expenses (10,000 yen) <entire company>
FY 20216,734 (down 28% from the peak)

FY 202145,075FY 2020

6,366

FY 2020

45,713

FY 2019

8,051

FY 2019

19,896

FY 2018

7,969

FY 2018

31,281

FY 2017

7,955

FY 2017

50,160FY 2050
Industrial waste generated (by category)CO2 emissions under Scope 1, 2, and 3

57 N ikko Corpo ra te R epo r t 2 0 2 2

Solar power generated by the company (kwh) <head office building>Wood chips

Waste plastics

FY 2021386㎥

13,915kg

FY 2020368㎥

20,519kg

FY 2019332㎥

13,300kg

FY 2018

335㎥

216㎥

FY 2017

365㎥

182㎥

Water usage (m3)
FY 2021

9,416

FY 2020

9,488

FY 2019

10,509FY 2018

12,448FY 2017

14,253

OffsetN i kko C o r p o rate R ep o r t 2 0 2 2 58

Contribution to Resource Recycling-oriented Society

SUSTAINABILITY AND MANAGEMENT FOUNDATION

Since the 1970s, the Nikko Group has been pursuing the development of plants capable of recycling
construction and road waste materials for reducing the environmental burden, thus contributing towards
improving resource productivity and establishing a recycling-oriented society. We are also actively pursuing
new initiatives for minimizing industrial waste such as resource recycling of cement sludge and development ofcamping gear using the residual steel generated in the manufacturing process of plants and other products.
1 Recycling of asphalt waste
To advance the recycling of asphalt and concrete
waste materials, Nikko in the 1970s commercializedasphalt plants that handled resource recycling. Since
then, we have been continuously improving theFlow of recycling pavement waste

products, and as a result, have been recycling almost
all of the asphalt waste generated. Currently, about
75% of the asphalt mixtures used for paving roads
are recycled mixtures mixed with asphalt waste.

We launched Nihon Tetsugu Seisaku, a camping
gear brand for BBQ plates, bonfire stands, etc., foreffectively reusing the residual steel generated in the
manufacturing process of plants and other products.
We are working to enhance the product lineup. As a“made-in-Akashi” brand, where everything from thematerial processing to the packaging of the products
are carried out at the Akashi head office factory, it isalso registered as a hometown tax return gift of thecity of Akashi.
Extra thickiron plate for
BBQ

Recycled roadbed materials
Recycled aggregates

Crushing and segregation

SupplyRecyclingoriented society
development
cycle

Crushing
plant

3 Effective use of residual steel generated in the manufacturing process of plants and other products

Acceptance

Early restoration from intensifying disasters

Asphalt mixture
manufacturing plants(asphalt plant)

Carrying out

Collection of waste frompavement works

Cement sludge comes from residual concrete andreturned concrete generated during the manufactureof ready-mixed concrete and secondary concrete
products. Cement sludge requires specific processes,
such as dewatering and drying, before being disposedof as industrial waste. Japan produces about 3.5
million tons of cement sludge every year, and thedisposal cost is 5,000 yen to 10,000 yen per ton.
When cement sludge is separated into liquid andsolid, precipitated calcium carbonate (CaCO3) is
extracted from the liquid and phosphorus remover(PAdeCS) is extracted from the solid portion. Various
products use precipitated calcium carbonate as a
Flow of recycling concrete sludge

raw material: pharmaceuticals, paper, cosmetics,
ferrite, condensers, optical glass, coatings, rubber,and plastics. Phosphorus remover is also expected tohave many applications: rock phosphate substitute,neutralizer, night soil treatment agent, deodorizer,
antiseptic, heavy metal remover, and water-bloom
suppressant. Precipitated calcium carbonate absorbs
CO2 in the refining process that could reduce CO2.
Nikko will contribute to technology development forrecycling cement sludge and its practical applications
by closely working with the ready-mixed concrete,secondary concrete products, and cement industries.

FY 202172

FY 2020

62

FY 201952

FY 2018

53

FY 201746

in the research laboratories of the universities and technology/
engineering colleges in Hyogo Prefecture and to researchers
who reside in Hyogo Prefecture and work for universities outside
the prefecture. The recipients of these grants are not obligatedin any way to join the Nikko Group or to provide the results of
their research to the Group. It incorporates the strong feeling of
the Nikko Group “to contribute to the development of the local
economy and communities by providing assistance for humanresource development and technological innovations.”

Our Head Office is located in Akashi City, Hyogo Prefecture—theplace our factory was located when the company was established.
The Nikko Business Foundation has been offering scholarshipsthat do not require repayment since 1989 to domestic andoverseas students enrolled in universities and institutes oftechnology offering a five-year program specializing in technology/
engineering in Hyogo Prefecture and to students from Hyogo
Prefecture studying outside the prefecture.
Furthermore, the Foundation provides research grants toresearchers who conduct research on technology development[Number of scholarships and grants offered so far (cumulative from FY 1989 to FY 2021)]

Cement sludge
Ordinary temperature and pressure
No chemicals used

[New scholarships and research grants awarded in FY 2021]
Number of scholarships awarded: Two
Kobe City College of Technology● Kansai Gakuin University●

59 N ikko Corpo ra te R epo r t 2 0 2 2

Number of disaster sites(locations)

Number of scholarships awarded:
139
Number of research grants awarded: 195

Separation of solids

Contributes to CO2emission reduction

concrete plants, Nikko Group strives to ensure earlyrecovery from disasters by closely collaborating withcustomers so as to fulfill its supply responsibility.

To recover from intensifying natural disasters,such as large typhoons, severe rainstorms, andearthquakes, we start with a quick recovery workof the Group’s damaged plants. In recent years, it
has rained a lot unexpectedly around the country,
frequently causing torrential damages. Natural
disasters, including large-scale typhoons, large
earthquakes such as the Nankai Trough and Tokyo
Metropolitan near-field earthquakes, and the resultant
tsunamis and volcanic eruptions, are anticipated.
The disaster risks facing Japan is moving into a
new stage. As the top manufacturer of asphalt andCo-existence with local communities

2 Recycling of cement sludge

Exhaust gas from boilers(CO2 concentration of
about 10%)

Bonfire standLiquidSolid

CaCO32

PAdeCS

Precipitated calcium carbonate

Phosphorus remover

Various products using the recycled materials

Number of research grants awarded: Two
Kobe City College of Technology●(Research theme: High-speed crystal thin-film fabrication of magnetic garnet
using organometallic decomposition by baking with ammonia flame)●

Source: PAdeCS Study
Group, Nippon Concrete
Industries Co., Ltd.

Kobe City College of Technology(Research theme: Development of combined non-destructive
probing method of exfoliated concrete through deep learning)

N i kko C o r p o rate R ep o r t 2 0 2 2 60

Creation of New Customer Values

SUSTAINABILITY AND MANAGEMENT FOUNDATION

Nikko Group offers solid after sales service so that customers can use the products with ease of mind. In
addition to the nation-wide service network, we also carry out regular inspections to prevent troubles andprovide plant operator training to nurture engineers. The analog-type plant maintenance service until now was
based on post-incident maintenance where repair was carried out after malfunction and preventive maintenancethat relied on the experience and intuition of the service personnel. We are currently working on establishinga next-generation preventive and predictive maintenance that utilizes advance measuring equipment andcommunication network, in addition to introducing a new service model, aiming to create new customer values.

●Next-generation preventive and predictive maintenance●Digital transformation at Nikko

Tasks,

Management policy●

Maturing Japanese plant market●

Declining profitability of the plantbackground●

Driving force ofinnovation

business due to the service of things●

Enhance contact with customers

Chronic labor shortage●

Strengthen revenue base in Japan●

Requirement for work-style reform●

Introduce next-generation service model

Achieve appropriate rate of operation using preventive and predictive●

Visualize plant operation status (share information between customers and Nikko)●

Offering of next-generation maintenance service based on information on malfunction signs●

Propose flexible monitoring and maintenance●

Propose optimum plant operation●

AP, BP Profit Improvement Project Team●

Implementation Plan Formulation Team●

Next-Generation Service Action Team●Technology Development Committee

Improvement of customer satisfaction
Values to berealized

Nikko
Development anddesign divisions●

Improve productivity of road pavement●

Upgrade plant operationand construction sites●

Remote operation support●

Contribute to cost reduction through61 N ikko Corpo ra te R epo r t 2 0 2 2

the cause of the problem. We also offer plant failure
prediction reports by analyzing the accumulated data,
which can be utilized to formulate a maintenance planover the life cycle of the plant.
Visualizing the operation status allows to collect failure
information and identify the location of the fault. It
enables to examine the cause without waiting for anengineer to arrive and greatly shortens the time taken
for recovery.

Power supply voltage●

Alert signal●

Coolant temperature●

Vibration●

Electric current●

Image information●

Volume of residual oil●

Number of rotations●

Pressure●

Number of operations●

Operation time●

Overload

Plant
●

●

of the drive unit
Internet

Plant●

Nikko’s area service staff

Monitoring of plantstatusInstant information
sharing with Nikko’s
service division
Reduction of plant life
cycle cost
Retention of plant
product value

Contractor information
Offering of swift andprecise support

Introduction of flat-rate service and contribution to the cost performance of customers
Along with offering the next-generation preventive andpredictive maintenance service, we are considering the
introduction of a flat-rate charge to replace the existing charge
system based on each recovery project. We will contributeto improved cost performance at customers by carrying out
regular repairs and parts replacement in accordance withthe long-term preliminary maintenance plan and by reducing
maintenance cost as well as emergency post-incident repairs.

One NIKKO Platform, which realizes lifecycle support
We are building a new CRM (customer information
database) that will connect customers with Nikko. We
will utilize big data accumulated in the next-generation
preventive and predictive maintenance service to support●One NIKKO Platform thatconnects customers and Nikko

plant life cycle management at customers through
Nikko’s value chain and develop new products. We will
create new values by enhancing customer contact in thedigital space in addition to face-to-face services.

Marketing division
Trade show

Product survey

Inquiry proposals
and comparison

Sales division

Production plan

optimization of maintenance cost

We can propose appropriate advance maintenance byaccumulating various operation information, inspection
data, and repair and work history of user plants in the
Nikko cloud and visualizing operation status. Taking
action after the occurrence of malfunction requires
suspension of plant operations, which significantly
lowers productivity. In addition to the operation
information of the plant, collecting and analyzing
facility environment information enables to identify●●

perspective

maintenance and maintain asset value
Reform through DX

Nikko
Sales division

Pursue functions from customer

●

●

Plant

Data to be obtained

status of the plant becomes unstable. In order toresolve such issues, Nikko Group will remotely monitor
the plant operation status, catch signs of malfunction
based on data analysis, and replace parts and carryout repair in advance.

Management environment

Customer

Nikko
cloud

Nikko
Service division(CSC)

Creating new values through digital transformation
Stable operation of asphalt and concrete plants is
indispensable for improving the productivity of roadpavement and construction sites. To this end, it isimportant to detect the necessary maintenance inadvance and take required action before the operation

Offering of new values

CRM Offering of new values(customer information database)

Replacement

Complaint information
Product development request
New customer needs

Procurement andmanufacturing
divisions

One NIKKO Platform

Quality assurance anddevelopment divisions

Conclusion ofcontract, order Collaboration with
suppliers

Improvement and developmentof next products

Information of replacement
parts on EC websites

Next-generation preventive andpredictive maintenance
Periodic
inspection

Sharing information with the design
and manufacturing divisions from theearly stages of business negotiations

Delivery,
construction

Repair, maintenance,
inspection

Service division

Information sharing
with contractors

N i kko C o r p o rate R ep o r t 2 0 2 2 62

Improvement of employee engagement

SUSTAINABILITY AND MANAGEMENT FOUNDATIONAll employees are the most valuable asset for Nikko. We focus our efforts on building anorganization and strengthening our human resources so that we can quickly respond to allchanges surrounding our business to make sustained contribution to society. It is our high-priority
management theme of ours to improve employee engagement by understanding the expectationsof each employees with different attributes and values to develop a rewarding work environment.

Trend of the number of hires
Male

FemaleFY 2022 (as of end of June)26

FY 202126

FY 2020(people)fiscal year

Number of employees＊1

Number of temporary employees＊2

End of FY 2021
End of FY 2020

1,058
861

135
144
(people)Number of employees

Segment name

End of FY 2020

End of FY 2021

Asphalt Plant-Related Business

461

518

54

43

Concrete Plant-Related Business

202

233

31

30

Environment- and Conveyor-Related Business

32

43

7

10

Reportable segment subtotal

695

794

92

83
43

Other

128

206

46

Common for all companies＊3

38

38

6

9

Total

861

1,038

144

135

Situation at affiliated subsidiaries (as of end of FY 2021)
4

93

Nikko Machinery Co., Ltd.

3

Tombo Industry Co., Ltd.

6

6

2

0

0

40

3

15

0

2

5

51

13

0

17

0

0

4

34

FY 2019

14

0

9

2

0

10

35

FY 2018

15

0

3

0

0

5

23

FY 2017

19

0

6

0

0

1

26

Number of temporary
employees

●
●
●

●
●
●
●
●

5

102

43

25

71

●

3

12

2

17

Nikko Sec Co., Ltd.

3

30

6

39

2

9

9

20

Maekawa Kogyosho Co., Ltd.

1

17

2

20
76

●

Hires with priorwork experience

80.0％

Implementation of rehiring system targeting employees who have left for childbirth or child rearing
Measures to promote utilization of annual paid leave

Introduction of workstyle that is not dependent on location such as work from home and telecommuting

Active promotion towards job applicants, of being a workplace where women can play an active role

Awareness building to create a workplace culture where men as well as women can contribute to both workplace and family
Realization of a flexible workstyle such as shortened working hour system, flexible working hour system, work from home, telecommuting, etc.

Spreading a strong message regarding the rectification of long working hours from those at the top of the organization
Personnel evaluation with focus on hourly labor productivity

Fair assessment of utilizing childcare leave and shortened working hours based on personnel evaluation with emphasis on hourly labor productivity
Proactive operation of the system to shift employees from non-regular positions to regular positions

Nikko has been developing an environment that facilitates active participation by female employees from theperspectives of both infrastructure and services through efforts such as setting up a dormitory for singles where
women can stay safely. It is also reviewing its personnel system and will continuously strive to ensure diversity.

Ube Kohki Co., Ltd.

3

67

2

Nikko Baumachinen GmbH

2

0

0

2

Nikko Asia Thailand Co., Ltd

1

14

0

15

Nikko Nilkhosol Co., Ltd

3

78

0

81

Nikko (Shanghai) Construction Machinery Co., Ltd.

2

106

0

108

60

Total

49

469

51

551

50

Changes in paid leave acquisition rate（%）
Paid leave acquisition rate = Total number of hours acquiredfor paid leave / Total number of hours granted for paid leave

51.5

54.0

52.0

48.5

Situation by gender (Nikko Co., Ltd.)(people)

50.2

508

19

10
0

Regional employees

2

41

Contract employees＊1400Master＊2

18

0

Senior＊3

130Partner employees＊4017Fixed-term employees＊5

0

16

Total

581

93

Year-on-year change (%)

＋1.9

＋6.9

Average age

43.3

44.8

Average years of service

18.7

11.0

Average wage (1,000 yen)＊6

7,682

3,357

*1 Contract employees: rehired employees who are post-seniors or post-masters (non-regular employees) *2 Master: employees rehired after retirement (non-regular
employees) *3 Senior: employees who are post-masters with extended employment (non-regular employees) *4 Partner: part-time employees with no fixed term (nonregular employees) *5 Fixed-term employees: part-time employees whose terms have been renewed (non-regular employees) *6 Male and female average wage: While
there is no wage gap between men and women in the same position, wage gap does occur due to differences in office organization and lengths of service.

12

20

10.3

10.8

10.4

9.7

10.0

2019

2020

2021 (ﬁscal year)

0

2017

2018

2019

2020

2021 (ﬁscal year)

Initiatives for flexible workstyle and enhancement of health
Number of employees who have
utilized childcare leave system (people)

12.7

14.6

16.6

5

2
2018

16.3

10

4

2017

17.5

15

6

20

FemaleTrend in overtime hours (hours, monthly)(days)

8

30

Male

Number of paid leave utilized by employees
1040

63 N ikko Corpo ra te R epo r t 2 0 2 2

85.7%[Promoting active participation of women]

Total

Nikko Kosan Co., Ltd.

Company employees

New graduates[Measures to support development of next generation](people)Nikko Electronics Co., Ltd.

FemaleNikko has established the following policy regarding development of working environment and is promoting related measures.

*1 Employees: employees of Nikko + employees of affiliated companies (including accepted seconded personnel and excluding seconded personnel)*2 Temporary employees: temporary employees of Nikko + temporary employees of affiliated companies (including part-time workers and excluding temporary workers dispatched from agencies)*3 Common for all companies: employees of the planning, administrative divisions, etc.

Employees

Male

Number of temporary employees

End of FY 2021

Executives (full-time)

Female＊2

End of FY 2020

Name

Total

Male

Retention rate three
years after joining(employees who joined
in FY 2019)

Development of working environment

Situation by segment＊1

New graduatesfiscal year

Employee situation
Nikko Group (including affiliated subsidiaries)(people)People with prior work People with prior work
experience (global)
experience (area)

Number of employees who have utilized
shortened working hours for childcare (people)

0

2017

2018

2019

2020

2021 (ﬁscal year)

Number of employees who
used workplace clinics (people)

fiscal year

Female

Male

Total

fiscal year

Female

Male

Total

fiscal year

Number of patients

FY 2021

51

6

FY 2021

4

0

4

FY 2021992

FY 2020

30

3

FY 2020

20

2

FY 2020

873

FY 2019

50

5FY 2019

2

0

2

FY 2019

948

FY 2018

10

1

FY 2018

10

1

FY 2018

912

FY 2017

2

0

2

FY 2017

2

0

2

FY 2017953(on a medical expense incurred basis, multiple visits within the same month are counted as one visit)

N i kko C o r p o rate R ep o r t 2 0 2 2 64

SUSTAINABILITY AND MANAGEMENT FOUNDATION

Human resource development and training programs
Nikko is striving to enhance employee education throughoffering of three types of human resource development
programs. Supports the skill acquisition and career

Trend of occupational accidents

development that are required of each employee basedon position-based training, objective-based training, andautonomous and elective training programs.
Nikko Group

Three education andtraining systems

Position-based training(Ability development training
corresponding to position)

New hire training
New manager training(number of accidents)

FY 2017

FY 2018

FY 2019

FY 2020

FY 2021

Severe accidents

0

0

1

1

0

Accidents withlost workdays

1

3

1

1

2

Accidents without
lost workdays

8

5

4

3

10

Total

9

8

6

5

12

Severe accidents

0

0

1

0

2

Accidents withlost workdays

3

0

2

7

6

0

6

8

6

9

3

6

11

13

17

Contractors(Nikko-related
Accidents without
local projects)
lost workdays

Training according to year of joining the company

Total

Training based on personnel evaluation feedback
Career design training

Objective-based training

Autonomous and elective training(Learning opportunities and assistanceprograms aimed at improving specific skills)(Face-to-face, online seminars)(Course details)

Support program for acquiring
special skills, IT certifications

Business IT skills (macro, programming)
Business writing
Communication skills
People management skills
Presentation skills
Accounting, tax
Self-coaching

Gaining language skills (TOEIC score improvement)
Support program (target score: 820)
(In-house English language class, online English
learning, external English language schools)

Allotment of treasury stock with restriction on transfer to employees
Commemorating the 100th anniversary of its
foundation, Nikko allotted 100 shares in treasury
stock to all employees of Nikko Group (worth 293,000yen) in September 2019. Subsequently, the Company
in 2021 introduced a system for allotting sharesin treasury stock with restriction on transfer to its
employees with the main aims of improving employee

Status of allotment of shares in treasury stock with restriction on transfer
Implementation
periodSeptember 2019

August 2021

August 2022

Target857 employees(all employees including
non-regular employees)(1) Number of employees who
received president’s award(individuals, groups)(2) Employees who have achieved
10, 20, and 30 years in service(3) New hires (new graduatesand mid-career hires)(4) Hires with prior work
experience other than thoseallotted treasury stock in 2019(1) Number of employees who
received president’s award(individuals, groups)(2) Employees who have achieved
10, 20, and 30 years in service(3) New hires (new graduatesand mid-career hires)(4) Employees at affiliatedcompanies other than thoseallotted treasury stock in 2019

Target857 people

106 people

169 people

Number of sharesawarded100 shares

100–1,000 shares

100–1,000 shares

Price at whichshares are awarded

2,980 yen

687 yen649 yen

Period of restriction
on transfer

3 years

15 months

15 months

Amount invested in personnel training and training hours (total for FY 2021):¥12,847,000 and 3,204 hours (only for major programs)

Development of a safe and healthy environment
Nikko Group has been ensuring compliance with safety
and health-related laws and regulations and has beenworking to improvement its level of safety and healthmanagement. It is also making sure to implement stresslevel tests and special health examination for employeeswith focus on improvement of personal as well as
workplace environment. In the manufacturing divisions,which are associated with higher risks of accidents,
the Group aims to achieve zero occupational accidents
through the enhancement of education and support.

Nikko Group accident prevention slogan

Let’s lower risks through continuous risk assessment and achieve zero accidents!
Let’s prevent accidents by pointing and calling as well as by paying attention to each otherengagement and stimulating their awareness as ashareholder for participating in management. Almost
all employees have become Nikko shareholders andthe Company expects their active contributions froma shareholder perspective to achieve 60.0 billion yen
in net sales and ROE of 10%, which are Nikko Group’s
long-term goals.

Ensure “don’t fall,” “stop,” “step aside,” and “confirm”
Goals[Safety and health] Zero accidents (employees, employees at contractors, factory floors and work sites)[Health] Zero long-term medical treatment (1 month or longer)[Traffic safety] Zero accidents at fault, own injury

65 N ikko Corpo ra te R epo r t 2 0 2 2

N i kko C o r p o rate R ep o r t 2 0 2 2 66

Stakeholder Engagement

SUSTAINABILITY AND MANAGEMENT FOUNDATIONThe business of Nikko Group is established on the relationship of trust with its stakeholders. Nikko Group,
through continuous dialogues with its stakeholders, aims to gain their understanding regarding the direction
it is pursuing and the path of its value creation, and along with contributing to the sustainability of society
based on the stakeholders’ understanding, it ultimately aims to realize a sustainable growth as a company.

Relationship with stakeholders●

Materials
suppliers

Value co-creation with Stakeholders

Customers

Employees

1

Three sustainability issues Nikko Group is working on
Strengtheningof national
resilience

Early restoration from natural disasters
Initiatives towards intensifying disasters
Development of business continuity management● Disaster prevention and mitigation,
addressing aging infrastructure●●2

Harmony
with naturalenvironment

3

Tombo-kai

Development ofa prosperous
society●

Decarbonized society●

Pursuit of customer satisfaction●

Recycling-oriented society●

Improvement of employee engagement●

Water resources●

Collaboration with business partners●

Biodiversity●

Co-existence with local communities●

Business
partners

Business
partners(Sales agent
network)

Akitsu-kai(contractors’
network)Nikko Group
believes that
it is essential
to work on
solving thesocial issues
faced by its
supply chain
together withall business
partners
includingmaterial
suppliers, sales
agents, andcontractors.

●

Suppliers ofoutsourced products
based on Nikko
deszign (about 20
companies)
General materials
suppliers (about
100 companies)

Stakeholders’ main interests●

Equal, fair transaction terms●

Quality assessment●

Centralized purchasing●●

Members: 123
companies●●

Members: 195companies●●

Local community,
future generation

Shareholders,investors

Customers

Employees

Nikko Group is contributing
to business expansion andproductivity improvement at
customers through the provisionof products and services. At thesame time, it contributes to thedevelopment of a prosperous
society together with customers
through the development ofsocial infrastructure.

Employees are the mostvaluable asset of Nikko. We
focus our efforts on building
an organization and nurturing
our human resources so that
we can quickly respond toall changes surrounding ourbusiness to make sustained
contribution to society. We will
strive to develop a workplaceenvironment that offers job
satisfaction by responding to
the expectations of employees,
who have diverse attributesand values.

Proposal of new
products●●●

Stakeholders’ main interests
●

●

●

●

Offering of high-performance,high-quality products
Service structure thatoffers safety and security
Appropriate price setting
Ability to propose solutions
to issues●

Response to technological innovation●

Early restoration from natural disasters●

Respect to basic labor rights

●

●

●

●

●

●

Offering opportunities for
growth and self-realization
Equal opportunities andfair evaluation
Creating a workplace that isvery safe mentally
Ensuring safe operations
and consideration for
natural environment
Realization of work-life balance
Securing of diversity andworkstyle options

Main dialogue channels

●

●

●

●

●

Daily sales and service activities
Various trade shows(participation to the 2021 MP
Messe and N-EXPO 2021)

Local community, future
generation

For Nikko Group to develop andgrow, it needs to contribute toraising the sustainability of society.
Nikko considers the realization ofcarbon neutrality as its responsibility
towards future generations.

Offering of plant operator training

●

●

●

●

Factory, warehouse visits
Quality audit●

Support for seeking
new sales channels

Intranet●

Company newsletter (Tombo)

●

●

●

●

●

●

Target setting and progressconfirmation, evaluation feedback
English and special skill
training, autonomous andelective development seminars
Campaign to improve
operating efficiency

Shareholders, investors

Shareholders and investors, whooffer financial capital, support thegrowth of Nikko Group and has therole of monitoring its management.
We will further strengthen our
relationships of trust with themthrough our efforts in improving
corporate value and enhancing
information disclosure.

●

●

●

Whistleblowing system
Allotting shares withrestriction on transfer●

Holding general
meetings andsubcommittee
meetings

Safe work
environment
Advice regarding
specialized skills andtechnologies●

Safety and healthmeeting

Securing stable work
load over the long term

Co-existence with local
communities
Creation of
employment●●

Contribution to local
development
Preservation of
the local naturalenvironment●

Safe operation●

Nikko website●

Quality improvement
support●Journals (editing and publicationof NAP NEWS and BP EYES)●

Daily procurement
activities●●

Relationship with stakeholders and main channels of dialogue
Relationship with stakeholders

Support forbusiness succession,technology transfer

Main dialogue channels

Offering of grant-type
scholarship to students
from Hyogo Prefecture
Offering of research grants
to researchers from Hyogo
Prefecture
Support for disaster prevention
education at primary and special
needs schools (14 of them) within
Akashi city (offering of disasterprevention tenugui towels)
Responsible responses toclimate risks
Investment in SDG bonds issued
by Hyogo Prefecture (endorsing
the purpose of issuance such as
the renewable energy project)

Improving our corporate
value
Promotion of fair disclosure●

Capital policy that is
conscious of capital efficiency
Achievement ofbusiness returns thatexceed the capital cost
Strengthening of
initiatives towards
ESG and sustainability,and enhancement of
information disclosure●●

General Shareholders’Meeting (attended by
5,081 people including
online participants)
Financial results
briefing sessions (fourtimes)
Individual meetings
with institutional
investors (10 meetings
with 18 investors)

Improvement in
effective governance
The figures are results for FY 2021.

67 N ikko Corpo ra te R epo r t 2 0 2 2

N i kko C o r p o rate R ep o r t 2 0 2 2 68

Executives

CORPORATE GOVERNANCE
Directors

Audit & Supervisory Board Member
Nobutaka Yasuda (full-time)

Takahisa
Nishikawa

MasaruTsuji

HiroshiFujii

Born onMarch 31, 1959

Born onJune 4, 1960

Born onJanuary 16, 1959

April 1982 Joined Nikko Co., Ltd.
June 2007 Executive Officer and Manager of Head Office Factory
June 2008 Director and Manager of Head Office Factory
June 2011 Managing Director, General Manager of Technology
Division, and Manager of Head Office Factory
June 2012 Representative Director and PresidentInternal Control in-charge and General
Manager of Technology Division
April 2019 Representative Director and Chairman
Affiliates in-charge and General Manager
of Manufacturing Division
June 2021 Director and Chairman
Affiliates in-charge and General Manager
of Manufacturing Division (current)

September 1987 Joined Nikko Co., Ltd.
June 2007 Executive Officer, Manager of Market Development
Department, and General Manager of Business
Development Promotion Office
June 2008 Director, Manager of Market Development
Department, and General Manager of Business
Development Promotion Office
June 2011 Managing Director and General Manager
of Sales Division
June 2015 Senior Managing Director, General Manager of Business
Division, General Manager of the Tokyo Head Office
April 2019 Representative Director and PresidentInternal Control in-charge and General
Manager of Technology Division (current)

Shareholding in the Company: 117,100 shares

Shareholding in the Company: 103,100 shares

Born on September 27, 1959

Born on March 1, 1955

April 1982 Joined Nikko Co., Ltd.
June 2010 Executive Officer and Branch Manager of Chubu Branch
January 2011 Executive Officer and Manager of Batching
Plant (BP) Business Department
June 2012 Executive Officer and Manager of Business
Planning Department
June 2013 Executive Officer, General Manager of theTokyo Head Office, Business Division, andManager of Business Planning Department
June 2015 Audit & Supervisory Board Member
June 2019 Standing Audit & Supervisory Board Member(full-time) (current)

April 1982 Joined Taiyo-Kobe Bank Limited (current Sumitomo
Mitsui Banking Corporation)
April 2009 Manager of Kansai Corporate Solution Sales Department,
SMBC Consulting Co., Ltd.
June 2011 Director and Manager of Financial Department, Nikko Co., Ltd.
June 2018 Managing Director and General Manager of Financial Division
April 2020 Managing Director, General Manager of Financial
Division, and Security Export Control in-charge
June 2021 Senior Managing Director
General Manager of Management Division and
Security Export Control in-charge (current)

Shareholding in the Company: 37,000 shares

Tsuyoshi Fukui (Outside/Independent)
Born on July 24, 1965

October 1991 Joined the Kobe Office of Century Audit Corporation(currently Ernst & Young ShinNihon LLC)
August 1995 Certified as Certified Public Accountant of Japan.
April 2018 Joined the Kobe Office of RSM Seiwa
Partner, RSM Seiwa (current)
2019
Audit & Supervisory Board Member, Nikko
Co., Ltd. (current)<Important concurrent position>
Representative Director and President, Nikko Kosan Co., Ltd.
Shareholding in the Company: 61,900 shares

Shareholding in the Company: None

Tomomi
Nakayama

MinoruTanakaBorn onJanuary 10, 1963

Born onDecember 18, 1960

April 1982 Joined Nikko Co., Ltd.
January 2011 Branch Manager of Chubu Branch
July 2013 Manager of Asphalt Plant Sales Management
Department, Tokyo Head Office
June 2015 Executive Officer, Manager of Business Planning
Department, Business Division, and Manager ofAsphalt Plant Sales Management Department
April 2016 Executive Officer, Manager of Business Planning Department,
Business Division, Manager of Asphalt Plant Sales Management
Department, and Director of AP Technology Center
April 2018 Executive Officer, Manager of Business Planning
Department, Business Division, Manager of Asphalt Plant
Sales Management Department, Director of AP Technology
Center, and Manager of Mobile Plant Business Department
June 2019 Director, General Manager of Business Division, Manager
of Business Planning Department, and Manager ofAsphalt Plant Sales Management Department
June 2022 Managing Director
General Manager of Business Division, Manager ofBusiness Planning Department, and Manager ofAsphalt Plant Sales Management Department (current)

April 1981 Joined Nikko Co., Ltd.
October 2007 Branch Manager of Tohoku Branch
April 2010 Director of Tokyo Service Center, Sales
Division
June 2012 Executive Officer and Manager ofService Planning Department, Business
Division
June 2019 Senior Executive Officer and Manager
of Service Planning Department, Business
Division
June 2021 Directors
Manager of Service Planning Department,
Business Division (current)

Tsutomu
Yuasa(Outside/Independent)
Born onJune 27, 1946

April 1970 Joined Matsushita Electric Industrial Co., Ltd.
(current Panasonic Corporation)
April 2002 Joined Rock Field Co., Ltd.
July 2002 Director, Rock Field Co., Ltd.
July 2005 Managing Director, Rock Field Co., Ltd.
July 2008 Senior Representative Managing Director,
Rock Field Co., Ltd.
July 2014 Vice-Chairman of the Board of Directors,
Rock Field Co., Ltd.
June 2016 Outside Director, Nikko Co., Ltd. (current)
Shareholding in the Company: 5,000 shares<Important concurrent position>
Representative Director and President, Nikko
Electronics Co., Ltd.
Shareholding in the Company: 35,600 shares

Rika
Saeki

Shigeru
Sadakari

Born onNovember 3, 1957

Born onFebruary 27, 1961

Born onSeptember 22, 1957

(Outside/Independent)

April 1980 Joined the Ministry of Foreign Affairs
February 2002 Private Secretary to the Minister for Foreign
Affairs
January 2004 Minister, Embassy of Japan in the UK
Ju l y 2006 Minister, Embassy of Japan in the USA
January 2013 Director-General, International Legal
Affairs Bureau, Ministry of Foreign Affairs
July 2014 Ambassador Extraordinary and Plenipotentiary,
Embassy of Japan in Belgium
March 2017 Ambassador Extraordinary and Plenipotentiary,
Embassy of Japan in Indonesia
January 2021 Retired from the Ministry of Foreign Affairs
June 2021 Outside Director, Nikko Co., Ltd. (current)
Shareholding in the Company: None

69 N ikko Corpo ra te R epo r t 2 0 2 2

Masao Natori

Born on May 22, 1961
Senior Executive Officer

April 1984 Joined Nikko Co., Ltd.
November 2007 Director of R&D Center
June 2008 Executive Officer and Director of R&D Center
April 2010 Executive Officer and Manager of Engineering
Department
June 2012 Executive Officer, Deputy General Manager ofTechnology Division, and Manager of Technology
Department
April 2016 Executive Officer, Manager of Corporate
Planning Department, Manager of General Affairs
Department, and Manager of Cost Management
Department
June 2021 Senior Executive Officer, Manager of General
Affairs Department, Manager of Cost Management
Department, and Head of First-Class Architect
Office of Technology Division
June 2022 Senior Executive Officer
Manager of General Affairs Department and Headof First-Class Architect Office of Technology
Division (current)

Born on December 16, 1970
Executive Officer

Masafumi
Ishii(Outside/Independent)

April 2002 Established Usystem Limited(current Usystem Co., Ltd.)
Representative Director and President,
Usystem Co., Ltd. (current)
June 2021 Outside Director, Nikko Co., Ltd. (current)
Director, Kobe Commerce, Industry andTrade Center (current)<Important concurrent position>
Representative Director and President, Usystem Co., Ltd.
Director, Kobe Commerce, Industry and Trade Center
Shareholding in the Company: None

(Outside/Independent)

April 1980 Joined Taiyo-Kobe Bank Limited(current Sumitomo Mitsui Banking Corporation)
April 2010 Executive Officer and Manager of Internal Audit
Department, Sumitomo Mitsui Banking Corporation
May 2011 Managing Executive Officer, The Minato Bank, Ltd.
April 2013 Senior Representative Managing Director and Senior
Managing Executive Officer, The Minato Bank, Ltd.
June 2015 Representative Director and Vice President, Kobe
Tochi Tatemono Co., Ltd.
June 2016 Representative Director and President, Kobe
Maintenance of Building Co., Ltd.
June 2019 Audit & Supervisory Board Member, Nikko Co., Ltd.
June 2022 Outside Director, Nikko Co., Ltd. (current)<Important concurrent position>
Shareholding in the Company: None

April 1979 Joined Nittoseiko Co., Ltd.
February 2009 Representative Director and President,
Wacoh Corporation
March 2011 Director, Nittoseiko Co., Ltd.
March 2013 Director and Manager of Fasteners Business
Department, Nittoseiko Co., Ltd.
March 2016 Full-time Audit & Supervisory Board Member,
Nittoseiko Co., Ltd.
2019
Audit & Supervisory Board Member, Nikko
Co., Ltd. (current)<Important concurrent position>
Shareholding in the Company: None

Koji Yoneda (Outside/Independent)
Born on February 17, 1957

April 1990 Certified as attorney
Joined Motohara & Tanaka Law Office(current Tamon Law Office)(current)
June 2022 Audit & Supervisory Board Member,
Nikko Co., Ltd. (current)
Shareholding in the Company: None

Executive Officer

Kazuhiro Yamada

Shareholding in the Company: 38,960 shares

Naoki Ota (Outside/Independent)

April 1995 Joined Nikko Co., Ltd.
December 1995 Development Team, Development Research Center
April 2008 Business Development Promotion Office
April 2008 (Transfer) Representative Director and President,
Maekawa Kogyosho Co., Ltd.
April 2019 (Reinstatement) Manager of Head Office Factory,
Manufacturing Division, Nikko Co., Ltd.
June 2020 Executive Officer, Manager of Head Office Factory,
Manufacturing Division, General Manager of
Manufacturing Technology Office, and General
Manager of Quality Assurance Office, Nikko Co., Ltd.
June 2022 Executive Officer
Manufacturing Division Head Office Factory Manager,
General Manager of Manufacturing Technology
Office, Nikko Co., Ltd., and Representative Director
and President, Ube Kohki Co., Ltd.

Katsuhiro Kawamura
Born on February 26, 1968
Executive Officer

Morie Okaaki

Born on November 2, 1963
Senior Executive Officer

April 1986 Joined Nikko Co., Ltd.
April 2004 Manager of Kitakanto Sales Office
January 2007 Manager of BP Business Department
April 2009 Manager of BP Business Department andBusiness Expansion Promotion Team
April 2010 Manager of BP Business Department, and Conveyance &Environmental Business Department, Special Environment
Sales Section, Conveyance Sales Department
July 2013 Manager of BP Sales Management Department
April 2016 Manager of BP Sales Management Department, Manager
of Industrial Machinery Sales Management Department,
and Director of Industrial Machinery Technology Center
June 2016 Executive Officer, Manager of BP Sales Management
Department, Manager of Industrial Machinery SalesManagement Department, and Director of Industrial
Machinery Technology Center
April 2017 Executive Officer, Manager of Industrial Machinery
Sales Management Department, and Director ofIndustrial Machinery Technology Center
April 2021 Senior Executive Officer
Manager, Industrial Machinery Sales Management
Department, Business Division (current)

Koichi Kawakami
Born on July 8, 1965
Executive Officer

December 1988 Joined Nikko Co., Ltd.
March 2003 General Manager of Corporate Planning Office,Administrative Division
April 2007 (Transfer) Representative Director and President,
Nikko Diacrete Co., Ltd.
April 2010 (Reinstatement) General Manager of International Planning
Office, International Business Department, Nikko Co., Ltd.
M a y 2012 General Manager of International Planning Office,International Business Department(Dispatch) Vice President, Shantui Nikko Construction
Machinery Co., Ltd.
October 2014 General Manager of General Affairs Office, General
Affairs Department
April 2018 Branch Manager of Chubu Branch, Business Division
April 2021 General Manager of President Office and General
Manager of Quality Assurance Office
June 2021 Executive Officer, Manager of Corporate Planning Department,
CEO’s Office, and General Manager of Quality Assurance Office
June 2022 Executive Officer
Manager of Corporate Planning Department, CEO’s
Office, DX Business Team Leader (CDO), and General
Manager of Quality Assurance Office (current)

Takeshi Sone

Born on February 25, 1970
Senior Executive Officer

April 1990 Joined Nikko Co., Ltd.
June 2012 Director of Tokyo Service Center, Business Division
October 2013 Director of Tokyo Service Center and Director of
Wangan Service Station, Business Division
April 2015 Deputy Manager of Service Planning Department
and Director of TSC Center, Business Division
April 2016 Branch Manager of Chubu Branch, Business
Division
April 2018 Branch Manager of Kanto Branch, Business
Division
June 2019 Executive Officer, Branch Manager of Kanto
Branch, and Manager of Mobile Plant Business
Department, Business Division (current)
June 2022 Senior Executive Officer
Branch Manager of Kanto Branch and Manager
of Mobile Plant Business Department, Business
Division (current)

Toyokazu Uehara
Born on July 3, 1969
Executive Officer

April 1990 Joined Nikko Co., Ltd.
April 2009 Product Development Group Leader, Chief ofProduction Sales Section, Market Development
Department, and Business Development
Promotion Office, R&D Center
June 2012 Acting Manager of Development Sales Department
and Chief of Production Sales Section, R&D
CenterApril 2016 Vice Director of R&D Center and Manager ofBusiness Development Department
April 2019 Manager of Engineering, Techno Center,
Technology Division
April 2021 Manager of Technology Management Department,
Technology Division
June 2021 Executive Officer
M a n a g e r o f Te c h n o l o g y M a n a g e m e n t
Department, Technology Division (current)

April 1994 Joined Nikko Co., Ltd.
April 2009 Chief of Design Section I, Design Department
April 2016 Manager of Tokyo Technology Department, General Manager of Tokyo Technology Office, and Chiefof Tokyo Design Section, AP Technology Center
April 2019 Manager of Development Department, Techno Center, Technology Division
April 2021 Manager of Development Department, Technology Division
June 2021 Executive Officer and Manager of Development Department, Technology Division (current)
June 2022 Executive Officer
Manager of Development Department, Technology Division and Low Carbon Task Force, CEO’s Office

N i kko C o r p o rate R ep o r t 2 0 2 2 70

Roles of the Board of Directors and Audit & Supervisory Board

CORPORATE GOVERNANCE

Basic approach

Roles and composition of supervisory bodies
human resources who understand and are capable ofputting into practice the Nikko Group’s Management
Philosophy. The term of Directors is set as one year
to clarify management responsibility, and we haveintroduced the executive officer system to separate
the execution and supervision of duties. Nikko
appoints four Outside Directors and three Outside
Audit & Supervisory Board Members as independent
officers to enhance corporate governance andensure the objectivity and neutrality of management
and supervision functions.

Nikko positions corporate governance as “themanagement governance function for maximizing
corporate value for our shareholders and otherstakeholders.” Under the Executive Officer system
built upon the Board of Directors and the Audit &Supervisory Board, we endeavor to clarify management
accountability, speed up business execution, increase
the transparency of management decision-making,and strengthen compliance in order to ensure soundbusiness management.
The Company’s decisions based on the on-sitesituation are made in an appropriate manner by

Organization

Composition

Board of Directors

Audit & Supervisory Board

Chair

5 inside members +4 outside members● Representative Director
and President is the chair●

Purpose andauthority

Resolution of matters
including determinationof the basic management
policies● Supervision of theexecution of duties by
Executive Officers, etc.

Supervision of the duties
of Directors and Executive
Officers● Preparation of audit
reports● Determination of theagenda details regarding
the appointment anddismissal of an accounting
auditorDetermination of agenda
details regarding appointment
and dismissal of Directors
to be submitted to Ordinary
General Shareholders’ Meeting● Appointment and evaluationof Executive Officers, etc.
● Determination of policies
regarding remuneration, etc. of
Directors and Executive Officers● Determination of policies regarding
performance evaluation of
Directors and Executive Officers

Ratio of independent
outside officers

44％

75％

67％

Number ofmeetings in 2021

13

14

4

OfficeCorporate Planning Department

Assistant to Audit & Supervisory Board

Corporate Planning Department●

Overview of corporate governanceFull-time Audit & Supervisory Board Members andrelevant staff members in the Internal Control Officeand Internal Audit Office attend the meetings ofthese committees.

Nikko is a company with the Audit & Supervisory
Board. To smoothly execute business, we have acommittee of internal executives and other various
committees as consultative organs for the President.

Ordinary General Shareholders’ Meeting
Appoint/Dismiss

Appoint/Dismiss

Appoint/Dismiss

ReportCommittees,
projects(including 4 Outside
Directors)

Groupcompanies

Give
instructions
Present
opinions

Board of Directors
9 Directors

Report
Audit

Audit & Supervisory Board Report
4 Audit & Supervisory
Cooperation
Board Members(including 3 Outside Audit &Supervisory Board Members)

Appoint/ dismiss/ auditAudit

Proposepolicies

Audit &
Supervisory
Board Office(Secretariatof the Audit &Supervisory Board)

Inside directors

Accounting
Auditor(Committee of Inside
Executives)

Main decision-making bodies◆ Board of Directors

Determine the agenda for
appointment / dismissal
Judge the appropriatenessof accounting audits
Cooperation◆ Audit & Supervisory Board

Director and President◆ Nomination and Remuneration Committee

Cooperation<Meeting bodies on business executive side>◆ Committee of Inside Executives

5 Inside Directors + 1 Full-time Audit & Supervisory Board Member + 7 Executive Officers+ General Managers of Internal Control Office + Internal Audit Office
Chair: Masaru Tsuji (Representative Director and President)◆ Management Strategies Committee◆ M&A Examination Committee

Executive Officer

Bamboo Group

Exchange
information

GeneralManager,Business
Division

GeneralManager,
Manufacturing
Division

Head: Hiroshi Fujii

GeneralManager,
Administrative
Division

GeneralManager,President
Office◆ Finance Committee

Head: Hiroshi Fujii◆ Development Technology Committee

Head: Katsuhiro Kawamura◆ Safety and Health Committee

Head: Masao Natori

71 N ikko Corpo ra te R epo r t 2 0 2 2Internal directors involved in strategic themes + Executive Officers + Divisional General Managers

Chair: Masaru Tsuji (Representative Director and President)

Audit

Head: Hiroshi Fujii

GeneralManager,
Technology
Division(1 Inside Directors + 7 Outside Officers)

Chair: Masaru Tsuji (Representative Director and President)◆ Compliance and Risk Management Committee

Management Strategies
Committee

3 Directors (including 2 Outside Directors)

Head: Masaru Tsuji (Representative Director and President)Internal Control
OfficeInternal Audit
OfficeReportAudit

Present
opinions/ report(information exchange meetings forpresidents of subsidiaries)

4 Audit & Supervisory Board Members (including 3 Outside Audit & Supervisory Board Members)

Chair: Nobutaka Yasuda (Full-time Audit & Supervisory Board Member)

Audit

Present
opinions/ report

9 Directors (including 4 Outside Directors) + 4 Audit & Supervisory Board Members (including 3 Outside Audit & Supervisory Board Members)

Chair: Masaru Tsuji (Representative Director and President)◆ President and Outside Officers Meeting

Give
instructions

Independent outside officers<Meeting bodies on the monitoring side>

ReportExecutive Committee

Head

1 inside member +2 outside members● Representative Director
and President is the head●●●

ReportNomination
andRemuneration
Consult
Committee

Chair

1 inside member +3 outside members● Internal, full-time Audit & Supervisory
Board Member is the chair●

Nomination andRemuneration Committee◆ Company-wide Promotion

Selection Committee
Head: Masao Natori◆ Reward and Punishment Committee

Head: Masao Natori◆ Personnel System Committee

Head: Koichi Kawakami◆ Improvement Activity Committee

Head: Kazuhiro Yamada◆ Tombo-kai Vitalization Committee

Head: Morie Okaaki◆ Product Commercialization

Committee of each business
Head: General Manager of eachbusiness division◆ Bamboo Group (informationexchange meetings forpresidents of subsidiaries)
Chair: Masaru Tsuji

N i kko C o r p o rate R ep o r t 2 0 2 2 72

CORPORATE GOVERNANCE

Members of Board of Directors Meeting (as of July 2022)
Name

Title

Attendance(Board of Directors
Meetings in 2021)

Main expertise and experience

Number of
Appointed in Nikko shares
held

Independence(outside officers
alone)

Insight and experience*1 expected
Corporate
management
and business
operation

Industrial
knowledge●●

Financial
LegalInternational
Sales
accounting compliance experience experience

Takahisa
NishikawaDirector and Chairman

13/13

June 2008

117,100
shares

MasaruTsuji

Representative Director
and President

13/13

June 2008

103,100
shares●HiroshiFujii

Senior Managing Director(General Manager,
Administrative Division)

13/13

June 2011

61,900shares●Tomomi
Nakayama

Managing Director(General Manager,
Business Division)

13/13

June 2019

38,960shares●●●MinoruTanakaDirectors(Manager of Service
Planning Department,
Business Division)

13/13

June 2021

35,600shares●●●Tsutomu
Yuasa

Directors

13/13

June 2016

5,000
shares●

Masafumi
Ishii

Directors

10/10

June 2021

None

●

Rika
Saeki

Directors

10/10

June 2021

None●

Shigeru
Sadakari

Directors

13/13

June 2022(attended as Outside Audit &Supervisory Board Member)

●
●

●

●

Chair of Board of
Directors●

Head of Nomination andRemuneration Committee

●

●

●
●

●
Nomination andRemuneration
Committee member

●
●

●

●

●

●

None

●

●

Appointed in

Number of
Nikko shares
held

Independence

Corporate
management
and business
operation

Industrial
knowledge●●(newlyappointed)

Technical Administrative
experience experience

●

●

●

ICT*2

Delegation of
authority ofchair and head●

Nomination andRemuneration
Committee
member●Members of Audit & Supervisory Board (as of July 2022)
Attendance

Title(Upper row: Audit & Supervisory
Board Meeting in FY 2021)(Lower row: Board of Directors
Meeting in FY 2021)

Nobutaka
YasudaFull-time Audit &Supervisory Board
Member

14/14
13/13

June 2016

37,000shares

Naoki
Ota

Audit & Supervisory
Board Member

14/14
13/13

June 2019

None●

Tsuyoshi
Fukui

Audit & Supervisory
Board Member

June 2019

None

●

Koji
YonedaAudit & Supervisory
Board Member

None

●

Name

14/14
13/13

(Not applicable)

June 2022(newlyappointed)(outside
officers alone)

FinancialLegalaccounting complianceInternational
experience

Sales
experience

●

●

ICT*2

Technical Administrative
experience
experience

Delegation of authorityof chair and head
Chair of Audit &Supervisory Board●●●*1 The above list does not indicate all insights and experiences the officers possess.
*2 ICT in the above list stands for information and communication technology.

73 N ikko Corpo ra te R epo r t 2 0 2 2

N i kko C o r p o rate R ep o r t 2 0 2 2 74

CORPORATE GOVERNANCE

Reasons for appointment and expected roles of Outside Officers

Outside Officers

Name

Appointed in

Date of birth

Careerbackground

Reasons for appointment and expected roles

Independent Outside
Director (reappointed)

Tsutomu Yuasa

June 2015

July 18, 1951

Corporate
management

Yuasa is expected to reflect his abundant knowledge and experience, nurtured through his long engagement in corporate management asa director of a business company, in Nikko’s management. As a Nomination and Remuneration Committee member, he is engaged in theselection of officer candidates and decision on the remunerations from an objective and neutral standpoint.

Independent Outside
Director (reappointed)

Masafumi Ishii

June 2021

November 3, 1957

Diplomatic official

Ishii possesses extensive insight into international affairs, nurtured through his rich international experience including long service invarious key positions at the Ministry of Foreign Affairs, as well as knowledge of the Asian region where Nikko aims to expand in the future.
He is expected to provide a diverse and broad range of advice.

Independent Outside
Director (reappointed)

Rika Saeki

June 2021

February 27, 1961

Corporate
management

Saeki is expected to reflect her abundant knowledge and experience, nurtured through her engagement in corporate management as afounder and current executive of an operating company. She is also expected to supervise and advise Nikko on its business execution withher knowledge of ICT, which is Saeki’s main field of business, as well as from a diversity perspective.

Independent Outside Director(newly appointed)

Shigeru
Sadakari

June 2022

September 22, 1957

Corporate
management

Sadakari is expected to reflect his abundant experience and broad knowledge, nurtured through his long engagement in corporate
management at financial institutions and business companies, in Nikko’s management. As a Nomination and Remuneration Committee
member, he is engaged in the selection of officer candidates and decision on the remunerations from an objective and neutral standpoint.
Sadakari has served as an Outside Audit & Supervisory Board Member since June 2019.

Independent Outside Audit &Supervisory Board Member

Naoki Ota

June 2019

March 1, 1955

Corporate
management

Ota is expected to supervise and provide instructions regarding the legality of management execution from an objective and neutral
standpoint, leveraging his abundant experience in overall corporate management and broad knowledge gained in his long engagement incorporate management at a business company.

Independent Outside Audit &Supervisory Board Member

Tsuyoshi Fukui

June 2019

July 24, 1965

Certified as Certified Public
Accountant of Japan

Fukui has been demonstrating high performance from the specialist perspective as Certified Public Accountant and possesses deep insight
into corporate management, and he is expected to supervise and provide instructions regarding the legality of management execution
from an objective and neutral standpoint.

Independent Outside
Audit & Supervisory Board
Member (newly appointed)

Koji Yoneda

June 2022

February 17, 1957

Attorney

Yoneda has been demonstrating high performance from a specialist perspective as an attorney and also has deep insight in management,
and he is expected to supervise and provide instructions regarding the legality of management execution from an objective and neutral
standpoint.

Ensuring transparency of management
Nikko Group has been strengthening the foundationof its corporate structure based on the judgmentthat ensuring transparency of management is
indispensable in gaining the trust of stakeholders.
In 2021, the Group increased the number ofoutside directors, appointed a female director,

and established the Nomination and Remuneration
Committee, to develop a structure that enables
discussions from more diverse perspectives. We willcontinue to work on governance reform so as togain even more trust of stakeholders and to realize
sustainable growth.

Nomination and Remuneration Committee(established in FY 2021)◆ President and Representative Director: 1 Masaru Tsuji◆ Independent Outside Directors: 2 Tsutomu Yuasa and Shigeru Sadakari

Evolution of Nikko’s governance reformfiscal year
DirectorandChairmanWith
representativeright
Without
representativeright

Representative
Director andPresident
Number ofmembersof Board of
Directors
Number ofmembersof Audit &Supervisory
Board
Advisory
committees

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Masaru
Kishi

2012

2013

2014

2015

2016

2017

2018

Takahiko Fukatsu

Kenkichi
Inoue

2019

2020

Takahisa Nishikawa
Takahiko
Fukatsu

KenkichiInoue

Masaru Kishi

2021

Takahiko Fukatsu

Takahisa
Nishikawa

Takahisa Nishikawa

Masaru Tsuji

Inside

10

9

9

8

6

7

8

7

6

6

6

6

6

5

5

5

5

6

6

5

Outside

0

0

0

0

0

0

0

0

0

0

0

0

0

1

2

2

2

2

2

4

Inside

2

2

2

2

2

2

2

2

2

2

1

1

1

1

1

1

1

1

1

1

Outside

2

2

3

3

2

3

3

3

3

3

3

3

3

3

3

3

3

3

3

3

Inside

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

1

Outside

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

2

Corporate slogan

Big
PassionMedium-Term Management
Plan (name)75 N ikko Corpo ra te R epo r t 2 0 2 2

Customer-first policy
PLAN 5・7・9 with Best CS

Direction to be pursued, achievementof “vision”

Group management thatis well-balanced between
sales and profits

Promote activities to further raise the image of
the Nikko brand and become a manufacturer
that our customers truly depended on

INNOVATION

Future creation that starts
from an ‘n’

N i kko C o r p o rate R ep o r t 2 0 2 2 76

CORPORATE GOVERNANCE

Matters regarding officers’ remuneration●

Issues identified in the survey of the effectiveness of Board of Directors in FY 2021 and initiatives for improvement
Issues identified in Board of Directors in FY 2021

Basic policy

as fixed compensation, performance-linked compensation, andstock compensation. To Outside Directors whose main function
is supervision, basic compensation and performance-linked
compensation are paid.
From April 2021, the optional Nomination and Remuneration
Committee (hereinafter, the “Committee”) was established, where
remuneration is revised as necessary based on reports from theCommittee.
Breakdown of Director’s
remuneration
Total remuneration of Directors and Audit & Supervisory Board Members
Nikko set out a basic policy to develop a system of remuneration of
its Directors that adequately functions as an incentive to sustainably
improve corporate value while paying attention to the interestsof shareholders, and to decide remuneration of each Director at
an appropriate level based on their duties in accordance with theInternal Regulations on Remuneration and Bonuses of Executives(hereinafter, “Internal Regulations”) set by the Board of Directors.
Remuneration of Executive Directors comprises basic compensation

Officer ranks

Total
amount of
remuneration(million yen)

Directors(excluding Outside Directors)
Audit & Supervisory
Board Member(excluding Outside Audit &Supervisory Board Members)
Outside Officers

Total amount of all types of remuneration (million yen)
Performance-linked Shares with restriction Retirement
Fixed
compensation
on transfer
compensation
allowance

Those
entitled(people)

142

103

25

13

−

7

22

17

3

2

−

1

40

36

3

−

−

7

① Basic compensation＋② Performance-linked compensation＋③ Stock compensation (shareswith restriction on transfer)
In di c ato r s
Consolidated net income● Achievement rate of
medium-term plan targets●① Basic compensation

It is monthly fixed compensation and is determined upon comprehensive consideration of the officer rank, duties, and years ofservice while also taking into account the standard at other companies, Nikko’s performance, and the level of the employees’ salary.

② Performance-linked compensation

It is determined upon consideration of the consolidated net income which is considered as the basic performance indicator, as well as performanceof Nikko alone and of group companies, dividends to shareholders, and bonuses to employees, and is provided as bonuses for officers.
As for specific figures, consolidated net income of 1 billion yen is set as the target for achieving profits, and a 15% or 30% increase or decreaseis added to the standard bonus for fluctuations of at least 200 million yen or 500 million yen from the target respectively. When consolidated net
income is less than 500 million yen, performance-linked compensation is not provided. When consolidated net income exceeds 1.8 billion yen or alarge amount of extraordinary loss or income is generated, compensation is discussed separately at the Board of Directors.
The level of companywide contribution to the Medium-Term Management Plan is evaluated on a scale of three, based on which 10–20% is added tothe standard bonus. To Outside Directors, about a month’s worth of monthly compensation is paid as performance-linked compensation when thepayment standard is achieved.

③ Stock compensation (shares with restriction on transfer)

Its percentage is set around 10% of the monthly compensation, and the number of shares is determined based on the share priceas of a specific date, for each officer rank and in accordance with the Internal Regulations. The timing of allotment is decided at thefirst Board of Directors’ Meeting after the conclusion of the Ordinary General Shareholders’ Meeting. The duration of restriction ontransfer is 30 years or when the Company allows (retirement, etc.). Outside officers are not entitled to the stock compensation.

●

Ratio of remuneration composition

Composition ratio of remuneration for executive directors is
set at 7 : 2 : 1 for basic compensation, performance-linked
compensation, and stock compensation. The Committee willcontinue to discuss the future remuneration system.

●

Determination of the amount of individual remuneration

To determine the amount of individual remuneration,
the Committee deliberates on it and provides areport, and the Director and President decides theamount within that scope.

Initiatives for improving the effectiveness of Board of Directors
Nikko is implementing initiatives for improving the corporate
governance structure and its effectiveness, which it considers
as the most important management issue. Every year in July,●

we carry out an evaluation of the effectiveness of Board of
Directors to measure the success of the development andoperation of the governance structure in the past fiscal year.

Evaluation of the effectiveness of Board of Directors for FY 2021

In the evaluation of Board of Directors for FY 2021, nine
Directors (including four independent outside members)
and four Audit & Supervisory Board Members (including
three independent outside members) were asked torespond to a questionnaire with 30 questions regarding
six items of overall evaluation of Board of Directors,
composition of Board of Directors, Operation of Boardof Directors, quality of discussions at Board of Directors,
provision of information and training, and other (freedescription). As a result of deliberations based on theoutcome of the survey, the Board of Directors judgedthat it was functioning at favorable level in terms of
all of the above six items in FY 2021. We will work on
improving the issues grasped in the survey in FY 2022.

Initiatives from FY 2022 onwards

Issue 1

Enhancement of opportunities for deliberation regarding
medium- to long- term strategies and management vision●

Issue 2

Enhancement of opportunities for deliberations
regarding SDGs and diversity●●

Enhancement of disclosure of ESG and non-financial information
Strengthening of supervisory function regarding climate change problems

Issue 3

Improvement of provision of information in advance●

Consideration of the timing to provide materials distributed in advance

Issue 4

How to carry out continued deliberation of important matters●

Identifying matters for continued deliberation and securing deliberation time

Development of internal control system

The internal control system primarily aims at developing
rules, flexibly planning and implementing employee
training, and ensuring its effectiveness. In accordancewith the basic policy regarding internal control, the Groupreorganized the Audit Office into the Internal Audit Office
to strengthen audit structure, formulated the compliancerules and basic risk management rules, and established theDevelopment of risk management structure

Risk factors surrounding the management include
changes in market environment, product pricefluctuations, exchange rate fluctuation, environment,
and other regulations regarding products, protection of
intellectual properties, capital investment, and impacts
of disasters, wars, terror attacks, strikes, etc. To swiftly
cope with these risks, Nikko established the basic risk

Status of reducing strategically-held shares

The Board of Directors annually examines whether or not tocontinue holding strategically-held shares and facilitates thegradual sales of the shares if it determines that there is norationale to keep holding them. To make this decision, theBoard looks into the purpose of holding the shares, their risks,
Nikko’s relationship with the issuers, and capital cost. In theStrengthening the progress management of the medium-term plan
● Identifying important agenda items

Compliance Committee and Risk Management Committee.
Subsequently, it divided the Internal Audit Office to theInternal Control Office and Internal Audit Office to clearly
separate promotion of internal controls and evaluation
function. The Nikko Group will continue to improve thestructure to raise the effectiveness of the internal control
system.

management rules. The Risk Management Committee
comprehensively recognizes, evaluates, and analyzes risks
faced by Nikko and the Nikko Group, deliberates issues
and countermeasures, and reports them to President.
The Company also receives advices and guidance andproposals for improvement from experts including its
corporate lawyers and tax accountants.

last five years, we sold a total of 35 issues (17 sold-off issues)
at a total value of 2.52 billion yen. We aim to achieve the ratioof market capitalization to shareholders’ equity of 9%.
We judge exercise of voting rights upon comprehensive
consideration of not only short-term results and stock price of
the issuers but also Nikko’s relationship with them.

Status of reducing strategically-held shares(million yen)

FY 2017

FY 2018

FY 2019

FY 2020

FY 2021

7
（5）

6
（1）

6
（2）

9
（5）

7
（4）

Amount sold

405

194

720

506

691

Book value

1221

106

272

469

376

Gain on sales

184

88

448

38

314

Ratio of market capitalization toshareholders’ equity (%)

20.3

17.2

11.6

11.8

12.7

Number of shares sold( ) denotes the number of shares that have been completely sold off.

Dialogues with shareholders and investors

We position the building of long-term, trusting relationships with
our shareholders and investors as an important management
issue. We proactively work on improving constructive dialogues
through the appropriate information disclosure in both
Japanese and English and regular information dissemination

by our management staff. The opinions of our Japanese andoverseas shareholders and investors we have learned throughmeetings with them are reported to the Board of Directors
and shared with relevant sections to reflect them in ourmanagement decisions and reports for investors.

Results of dialogues with shareholders and investors
FY 2018

FY 2019

FY 2020

FY 2021

Event types

Numberof events

Number ofparticipants

Numberof events

Number ofparticipants

Numberof events

Number ofparticipants

Numberof events

Number ofparticipants

Financial Results
Briefing Session

4

58

4

69

4

90

4

134

Individual meetings

12

15

23

28

17

23

10

18

Small group meetingsby Nikko

1

6

2

8

0

0

0

0

Ordinary General
Shareholders’ Meeting1

53／791

1

21／3,3031

19／4,7091

23／5,062(attendance in person/attendance in writing)

77 N ikko Corpo ra te R epo r t 2 0 2 2

N i kko C o r p o rate R ep o r t 2 0 2 2 78

Interview with Outside Directors

CORPORATE GOVERNANCE

We asked the two Independent Outside Directors, who were appointed in June 2021, about the initiatives they
undertook in their first year as well as their respective views on Nikko’s sustainable corporate value creation.
Date of the discussion: August 10, 2022 Location: Conference room at the head office (Akashi City, Hyogo Prefecture)

Masafumi
Ishii
Outside Director

Rika
Saeki

Outside Director

employees is understandable. However, there still remain shadesof the traditional Japanese manufacturing industry, and I feelthere is a kind of gender bias that deems on-site work to be
impossible for women because it is dangerous. It is necessary
to create many workplaces where women, who lack in terms ofphysical strength, can participate actively through the promotionof DX, and I believe I can leverage my experience and knowledge
for that.
I did not have opportunities to interact with employees on-site
during the first year, partially due to COVID-19, but this year I
would like to listen to the voices from the work sites, especiallyof female employees. As for the gender issue, I would like to aim
for a level comparable to other companies listed in the Tokyo
Prime Market over the long term. The ratio of women among
new hires is also rising with each passing year, which gives hope,
but at the same time, I believe it is imperative to take drastic
measures such as hiring female managerial positions fromoutside the company.
There is a career program for students instituted by Hyogo
Prefecture, where a team formed of several female students
prepare proposals based on a theme provided by a company
in the prefecture. I was able to have Nikko participate in that
program. It will be an opportunity to objectively learn how
present-day female students perceive Nikko, and there could
also be suggestions as to the approaches to take when hiring
females.
There is data that says people who are highly interested in SDGs
are open-minded about relocating to rural areas. I feel this isa tailwind for Nikko, given its seriousness in tackling the social
issue of carbon neutrality and the fact that it is based in the cityof Akashi, which offers excellent child care support.

Ishii : It is necessary to raise the name recognition of Nikko tohire diverse human resources, including females and students
with interest in working overseas. The fact is that Nikko is
not that well known, despite having an overwhelming market
share in an especially important industry that is responsible for
infrastructure development. Human resources are the source
for long-term growth, and therefore I intend to deepen thediscussions in the Board of Directors Meetings as to what canbe done to grab the attention of potential job seekers regarding
Nikko’s business, while also considering cost performance. Since
Nikko has embarked on re-drafting its corporate philosophy andcomprehensive reforms of its personnel system, it is a good
opportunity to not only actively appeal to the capital market but
also to the labor market.

Q.

What do you think of the contents that ought
to be discussed in the Board of Directors

Meetings and the dynamics of the debates?

Saeki : I have requested to slightly advance the timing ofproviding information in order to energize the discussions. There
were times when large volumes of documents were provided on
the eve of the board meeting, and I felt it was difficult to sortout the issues given the time constraints. In addition to providing
the materials in advance, if we can get the briefing directly fromthe persons in charge, it would deepen the discussions as wewould be able to sufficiently understand the points at issue.

“It is necessary to establish a
career path centered on theoverseas business field.”Q.

How have you been contributing to thecorporate value creation of the Nikko Group?

Ishii : As I had worked overseas for many years as a diplomatic

official, l recognize that the Group expects my insights regarding
international affairs and geopolitics as well as knowledge of
the Asian region, where Nikko is strengthening its businessfoundation. With the domestic market maturing, the Group,in order to focus on the Asian region as a source of growth,
entered Thailand as the core base in the ASEAN market after
China, and is steadily laying the groundwork. At the same time,
I feel there are issues with the establishment of the frameworkfor overseas expansion. The urgent task ahead is to expand the79 N ikko Corpo ra te R epo r t 2 0 2 2

battle-ready human resource pool for the overseas business andto build awareness that would break down the wall between thedomestic and international operations.
I started an online class, held once a month, to raise theemployees’ interest in international affairs. It is a relaxedseminar in which any employee can participate. And given
the impact of Russia’s invasion of Ukraine and the Shanghai
lockdown due to COVID-19 on Nikko’s business activities, theparticipants are highly motivated, which is encouraging.

Saeki : I believe there are expectations on my experience asan entrepreneur who built an IT company as well as my ability
in promoting diversity from the female standpoint. In theconstruction machinery field, having fewer number of female

N i kko C o r p o rate R ep o r t 2 0 2 2 80

CORPORATE GOVERNANCE“In order for a company to promotea shortage of overseas human resources does not become abottleneck for growth overseas. Another is the public relations
activities aimed at raising the social visibility of Nikko. I feel
more efforts need to be made toward getting more and more
people to know that Nikko is a company that is supporting theprosperous lives of people both in Japan and abroad.

DX of their own issues.”

Q.

DX, it is imperative that all its
employees are also engaged in the

What are your views on the successes andissues of Nikko’s sustainability initiatives?

Saeki : I think it is important to raise the job satisfaction of
employees. It would be difficult to sufficiently increase the job
satisfaction of mid-level and young employees with conventional
human resources management that are premeditated on
mass hiring fresh graduates, the seniority system, andlifetime employment. As Nikko is in the midst of discussing
comprehensive changes to the personnel system, I am looking
forward to the upcoming changes. It is also necessary tosimultaneously promote the development of employee-friendly
workplaces. As the requirements for being employee-friendly
vary depending on the life stage of the employee, if an employee
is able to choose a workstyle that suits his or her situation, theirmotivation would also rise. If the starting time is restricted to 8a.m., there may be people who are put off by that alone.
Ishii : I believe job satisfaction will increase if a person has

Ishii : Another option to secure enough time for discussions isto reduce the number of agenda items. If the Outside Directors
can attend the executive officers’ meeting held prior to theBoard of Directors Meeting as observers, we would be able todeepen the understanding of the reasoning and backgroundof the presented agenda item, which I think is worthy of
consideration.

Saeki : One of the important decisions made in the previous

fiscal year was the acquisition of Ube Kohki. I believe we wereable to discuss the risks and opportunities by having sufficienttime. At the same time, I also felt that more time could havebeen spent on discussing the post-merger integration processincluding the alignment of corporate cultures.

Ishii : M&A is an important option for strengthening thebusiness foundation and for identifying new businesses, andwe are seeing an increase in agenda items that call for majordecisions. Of course, it is possible to consider the increase inagenda items positively as being prepared for taking the risks
necessary for growth. I hope to engage in lively discussions
regarding matters such as the realization of carbon neutrality
stated in the long-term vision, progress towards transforming
the business model through DX, and measures to tackle newly
arising issues. I can deeply feel the spirit of “we will set highgoals and take on new challenges” coming from the company’s
directors led by the president. So, I hope to actively offer
opinions from a perspective that is clearly distinct from Nikko’s
perspective.

81 N ikko Corpo ra te R epo r t 2 0 2 2

Saeki : How to drive forward DX is quite an important
discussion point. As DX is the core of business modeltransformation, a certain level of internal manufacturing isnecessary. If you rely too much on external vendors, you willlack in speed and flexibility. It is important that managerial staff
with knowledge of IT take the lead at the development site.
Simultaneously, it would be good if all the employees visualize
their work and ensure that whatever could be automated isbeing carried out with the help of IT. In order for a company topromote DX, it is imperative that all employees also engage in
DX of their own issues. If you write down the business process
in the form of a flow chart, it will reveal concrete issues suchas how much you are still doing manually, inter-divisionaltransactions that no one noticed existed, and processes that canbe done in one-take by using an automated implementation tool.
Automation improves efficiency, while identifying needless workraises operational efficiency. With all employees getting used
to DX, Nikko’s DX progress will also gain speed. If DX makes
progress, it would become easy to address the issues of labor
shortage and diversity, and I think this point should be discussed
at the Board of Directors Meetings.

choices and a sense of security that he or she can work
autonomously. In my previous workplace at the Foreign Ministry,
it was natural to work overseas regardless of gender or theplace or time. Now, however, they accept individual situations
such as not being able to take overseas responsibilities becauseof the necessity to provide care to a parent. At the same time,

there are people who are not worried about transfer and are
eager to work overseas. So, if the company is able to offer
opportunities for self-realization and growth that correspondto their respective situations, employee engagement will also
improve. As for gender diversity, while we are waiting for internal
appointments of female managerial staff, the reality is that theavailable pool is limited and it is likely to take time. Meanwhile,
the ratio of women among new graduates hired by Nikko
has been increasing by the year. The management also arekeenly aware of the issue and we are seeing a certain level ofsuccess. As Ms. Saeki pointed out, promotion of external humanresources is also an effective option. It will be a major advantage
for female employees who joined Nikko as new graduates tohave a familiar role model they can relate to.

Saeki : When thinking of Nikko’s sustainability, it is very
important to have the perspective of whether or not it can be
the “company of choice” of its stakeholders. Along with being
chosen by the customers by offering new values such as ourcontribution to the realization of carbon neutrality, we need tokeep asking ourselves what is necessary for constantly being
chosen by the employees, suppliers, investors, job seekers, andlocal communities.
Ishii : What I felt through the discussions at Nikko’s Board of

Directors Meetings this one year is that the company has vitality,
ideas, and technical prowess, and all the necessary elements
for supporting sustainability. In my second year, I would liketo confirm what I felt in the Board of Directors Meetings
through the exchange of opinions with those working on-site.
I am also paying attention to the process through which thenew personnel system becomes established by winning theunderstanding of the employees.

Ishii : There are two themes I would like to discuss at the Boardof Directors Meetings. One is the measures to enhance thehuman resource pipeline upon expanding the overseas business.
It is necessary to hire overseas-oriented human resources,develop nurturing programs including on-the-job training, andestablish career paths centered on overseas business fields.
Nikko will have to start preparing from here on forth so thatN i kko C o r p o rate R ep o r t 2 0 2 2 82

FY 2021 Business Summary and FY 2022 Outlook

Business overview of FY 2021

CORPORATE DATA

of waterproof boards and floodgates continued to be strong,
posting a 0.3% decline, and those of the mobile plant business,where demand remains strong, grew significantly by 35.3%.
Operating income of the other business decreased 8.3% year
on year to 1,073 million yen, and operating margin fell 1.1 pp to16.1%. The main factors behind the decline in profit include theworsened profitability of the mobile plant business caused by
the continued deprecation in yen’s value.

In FY 2021, new orders remained flat at 39,852 million
yen compared with a year earlier, while net sales rose 2.6% to38,846 million yen, and BB ratio (new orders received / net
sales) was 1.03 times. As a result, order backlog at the end of

In the AP-related business, new orders in FY 2021
declined 10.4% from a year earlier to 18,180 million yen, net
sales fell 5.9% to 18,328 million yen, and BB ratio, derived
by dividing orders with net sales, came to 0.99. Orders fromoverseas led by the Chinese market remained strong but wereaffected by delays in large-scale projects in Japan and a decline

in appetite for capital investment due to surging asphalt price.
Net sales also increased 27.1% overseas led by the strong
Chinese market, while those in Japan declined 13.5% owing todelays in procurement of various parts. We had order backlog of
7,725 million yen (about 5.0 months worth of annual business).
Operating income decreased 54.6% year on year to 562 million
yen, and operating margin decreased 3.3 pp to 3.1%. The large
profit decline was unavoidable both in Japan and abroad given
the soaring prices of various steel materials and parts and the
difficulties in obtaining them as well as the rising personnel
expenses in China among other reasons.
The BP-related business recorded new orders of 12,086 million
yen, up 21.3% year on year, and net sales of 10,839 million yen,
up 17.7% year on year. Its BB ratio came to 1.12 times, largely
exceeding 1. While the volume of ready-mixed concrete shipment
is on a declining trend, the market is showing signs of recovery
and users’ appetite for replacement investment continues to behigh. Operating income of the segment increased 27.8% year
on year to 1,123 million yen, and operating margin improved 0.9
pp to 10.4%. Sales increase and cost reduction through planned
production made contributions.
In the environment- and conveyor-related business, new orders
increased 4.8% year on year to 3,014 million yen, net sales rose
26.3% year on year to 3,018 million yen, and order backlog at
the end of the fiscal year totaled 631 million yen. Conveyors,which account for about 73% of net sales, recorded sales
increase of 5.0%, and sales of large-scale projects such as
circulating conveyors for bullet train ballast for the West Japan
Railway Company and turbine mixer for glass manufacturing also
contributed. Operating income of the segment increased 21.7%
year on year to 588 million yen. Operating margin declined 0.7
pp to 19.5%, maintaining a high level.
In the other business, new orders declined 4.7% year on year
to 6,572 million yen and net sales fell 1.9% to 6,660 million
yen. Order backlog totaled 2,377 million yen partly due toconsolidation of Ube Kohki (1,450 million yen). Sales of temporary
construction materials decreased 26% as the appetite ofcustomers such as temporary construction material rental
services declined due to surging steel prices. Nevertheless, sales● Amount of construction investment and number● Net sales by segment and consolidated orders● Operating income and margin, ROE, and ROIC

● Net assets and equity ratio

Construction investment in FY 2021 (fiscal year ended
March 2022) is expected to have risen 2.6% compared to theprevious fiscal year to 62.6 trillion yen. This is about 75% of the84 trillion-yen peak recorded in FY 1992. Private construction
investment, which account for 59% of the investment, is
expected to have risen 3.0% to 38.1 trillion yen, while government
investment, which accounts for 38%, is expected to have increased
2.1% to 24.5 trillion yen. By region, Kanto is expected to haveseen a 4.7% increase in investment. It probably has gone up by
0.9% in Chubu, 5.7% in Tohoku, and 1.6% in other regions, while
declining 1.3% in Kinki. While the Tohoku region had witnessed
an increase in investment since FY 2011 due to the recovery andreconstruction demand for the Great East Japan Earthquake, theratio in the Kanto region began increasing as investments grew for
urban redevelopment and Tokyo Olympics-related construction.
Going forward, we expect increased investment in construction
related to the EXPO 2025 in Osaka, Kansai.
While construction investments grew on one hand, the numberof workers in the construction industry decreased on the otherby 1.4% from a year earlier to 4.92 million people in 2020, fallingto 72% of the 1997 peak of 6.85 million. Of that, those above 55
years in age accounted for a record 36% (in comparison, it was
24% in 2001). With construction investment expected to remain
steady, the aging of workers in the industry coupled with thelabor shortage is becoming a structural issue in the medium- tolong- term. We can expect increasing requirements for workstylereforms in the construction industry as well as for automation andlabor-saving in various construction equipment and plants. At thesame time, we are looking at procurement difficulties and cost
increases of various raw materials led by asphalt in the short term,with potential impact on not only customers but also on the supply
chain and by extension on our business performance.

Business performance in FY 2021

of people engaged in the construction industry
522(trillion yen)

70

Public construction investment
Private construction investment
Number of people engaged in the construction industry

504 502 503 500

507

502

495 498

503 499

530
520
510
500
490

492

(10,000
people)6050
38.1
38.5 40.2 39.8 37.0
36.4 37.7

40
30 25.0 23.9 25.8 26.4

29.9 28.9

Business overview by segment

AP-related business
BP-related business
Environment- and conveyor-related business
Consolidated orders
Other business(million yen)

50,00040,00035,00033,06934,13433,61730,000

4,301
2,289

4,133
2,267

4,481
3,932

9,356

9,522

25,00010,26735,104 33,916
4,677
2,775
7,893

24.0 24.5
10 18.0 18.0 16.3 16.0 18.4 18.6 20.2 21.0 21.8 21.6 22.7
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 (ﬁscal

Outlook year)

9,158

6,790
2,390

3,018

9,212

10,8392,500
10,50017,252

16,58017,18016,434

17,51819,467

2015

2016

2017

2018

2019

2020

18,32820,000

5,000
0

5.0

6.7

2021

5.9

2022 (ﬁscal
Company year)
forecast

5.4
4.8
4.7

4.0
1,944
3.0
2.0

Note: The number of people engaged in the industry is on a calendar year basis and its source is the Construction Handbook .

83 N ikko Corpo ra te R epo r t 2 0 2 2

5,840
2,634

6,660

9,000

15,00010,000

7.0

6.0

40,009 39,852

Operating margin
Operating income（％）

46,00045,00020,000

20

0

the fiscal year increased 14.8% to 16,490 million yen (about 5.1
months’ worth of the annual sales). Despite increased revenues,
operating income decreased 10.8% year on year to 2,053
million yen, and operating margin fell 0.7 pp to 5.3%. The main
factors behind the decrease are the expenses of the launch of
the Thailand subsidiary, increases in sales and administrative
expenses such as R&D expenses, and recording of sales of
unprofitable projects in the AP-related business. Ordinary
income declined 23.5% from a year earlier to 2,274 million yen
due to the absence of the 340 million yen in special dividends
from Maeda Road Construction Co., Ltd. recorded in FY 2020.
Net income attributable to owners of parent declined 20.8%
from a year earlier to 1,649 million yen, partly reflecting the
326 million yen in proceeds from sale of investment securities
recorded as an extraordinary income.
FY 2021 was the final fiscal year of the three-year MediumTerm Management Plan. Orders received exceeded the forecast
for FY 2021 of 38,800 million yen by about 3%. While net sales
exceed the medium-term plan target of 38,000 million yen,they slightly underperformed the FY 2021 forecast of 39,000
million yen. By contrast, operating income fell short of both themedium-term plan target of 3,000 million yen and the FY 2021
forecast of 2,300 million yen. It was primarily attributable to theshortfall at the AP-related business due to soaring raw material
prices and recording sales of unprofitable projects. Regarding
shareholder returns, the dividend of 30 yen per share (midterm dividend of 15 yen and year-end dividend of 15 yen), whichtranslates to a dividend payout ratio of 69.5% given the 1,649
million yen in net income attributable to owners of parent (43.16
yen per share). The payout ratio exceeded the target of 60% or
higher presented in the previous medium-term plan.

6.0
5.0
4.9

5.8
4.5
4.4

2,103

5.2

ROE

2.5

2015

2016

2017

2018

5.9

35,000

5.3
5.2

2,302

4.1

4.0

2,053

2020

2021

Net assets(million yen)

40,000

1,700

2019

In FY 2021, ROE declined 1.6 pp to 5.2% froma year ago. The Group had aimed for 6.5% in ROE (netincome attributable to owners of parent of 2,100 million
yen and net asset of 32,334 million yen) in FY 2021. It
succeeded in compressing net assets to 32,050 million
yen through purchase of treasury shares and othermeans, but net income attributable to owners of parent
was limited to 1,649 million yen, and ROE fell short of
the target. Return on invested capital (ROIC) declined
2.3 pp to 3.6% from a year earlier. NOPAT declined
35.0% to 1,227 million yen from a year ago due to afall in operating income and absence of the temporary
dividends recorded in the previous fiscal year, while
invested capital increased 5.4% to 33,900 million yen.

6.1

1.0
0

ROE and ROIC

45,000

3.3
1,427

1,629

Net sales of maintenance service of the AP- andBP-related businesses in Japan, which is one of Nikko’s
features, declined 2.7% year on year to 13,036 million
yen. Amidst soaring asphalt prices, sales of the AP-related
business declined 6.0% partly due to the postponement of
capital investment, while those of the BP-related businessincreased 4.8%. As a result, the ratio of maintenance service
to net sales of AP- and BP-businesses in Japan declined
0.4 pp to 53.8%. For FY 2022, the Group expects net salesof the maintenance service business to increase 1.6% to13,250 million yen, boosted by new measures including
flat-rate maintenance service. Its ratio to net sales is also
expected to post an increase of 54.9%.

6.8

4.3
2,053

ROIC

Net sales of the maintenance service business(million yen)

30,000

66.4

66.1

64.7

29,08927,845 28,528

67.5

69.2

66.3

30,286 30,414 30,293

Equity ratio

80.0
70.0

64.5

61.5
31,451 32,050

60.0
50.0

2,500

25,0002,000

20,0001,500

15,0001,000

10,000

500

5,000

10.0

0

0
2014 2015 2016 2017 2018 2019 2020 2021 (ﬁscal （％）

02022 (ﬁscal
Company year)
forecast

40.0
30.0
20.0

year)

N i kko C o r p o rate R ep o r t 2 0 2 2 84

CORPORATE DATA

Financial position

Net assets as of the end of FY 2021 increased 3,382
million yen year on year to 52,079 million yen. Net assets asof the end of FY 2021 was 32,050 million yen, and equity
excluding non-controlling interests of 46 million yen was
32,003 million yen, which resulted in equity ratio of 61.5%,
derived by dividing equity with total assets, down 3.0 pp froma year earlier. Equity ratio, which declined for three consecutive
years after peaking at 69.2% in FY 2018, has been maintaininga high level over the past five years. Current assets came to34,127 million yen, and non-current assets totaled 17,951
million yen. Main items that increased include inventories,
which rose 3,276 million yen to 9,667 million, property, plantand equipment, which increased 1,486 million yen to 10,669
million yen, and intangible assets, which rose 376 million yen to
1,036 million yen (including 266 million yen in goodwill). Main
items that decreased include notes and accounts receivabletrade (including electronically recorded monetary claims),
which fell 975 million yen to 11,032 million yen, and investment
securities, which declined 192 million yen to 4,336 million yen.
Current liabilities were 15,774 million yen, and non-current
liabilities were 20,029 million yen. Main items that increased
include newly added contract liabilities of 4,405 million yen and
1,583 million yen in long-term loans payable, which increased
1,279 million yen. Main items that recorded a decline include
down payments of 17 million yen, down 2,932 million yen. Cashand cash equivalents as of the end of FY 2021 declined slightly
to 12,436 million yen and net cash derived by subtracting
interest-bearing debts of 3,812 million yen (1,229 million yen
in short-term loans payable and 1,583 million yen in long-termloans payable) from cash and cash equivalents came to 8,624
million yen (9,999 million yen as of the end of FY 2020).

yen, contract liabilities in 1,172 million yen, inventories
increased 1,583 million yen and gain on sale and valuationof investment securities came to 325 million yen.
Cash used in investing activities totaled 2,165 million yen,
up 298 million yen. Main items in cash flow from investing
activities include 1,697 million yen in payment for
acquisition of tangible and intangible non-current assets,
expenditure of 733 million yen for purchase of shares in
Ube Kohki, and proceeds from sale and redemption of
investment securities of 754 million yen. As a result, free
cash flow derived by subtracting investing cash flow fromoperating cash flow came to 59 million yen, comparedwith 917 million yen in FY 2020.
Cash used in financing activities totaled 282 million yen.
Main items included 1,099 million yen in proceeds fromlong-term loans payable and 1,260 million yen in cash
dividends paid. The balance of cash and cash equivalents
at the end of FY 2021 was 12,389 million yen, slightly
less than a year ago.

Trends in capital investment, depreciation andamortization, R&D expenses

Cash provided by operating activities in FY 2021
decreased 560 million yen from FY 2020 to 2,224 million
yen. While net income before income taxes came to 2,599
million yen, depreciation and amortization totaled 745
million yen, and trade receivables declined 1,653 million

In FY 2021, the Group made capital investment of 1,907 million
yen, down 841 million yen from a year earlier, and the ratio of
capital investment to net sales was 4.9%. Main investments in
the AP- and BP-related businesses included 798 million yen for
construction of a new building of a subsidiary, expansion andrenovation of factories, and acquisition and update of production
facilities. Those of the other business came to 281 million yen,while purchase of computer equipment and software came to
107 million yen and acquisition of land cost 205 million yen.
Depreciation and amortization totaled 759 million yen, up 82
million yen from a year earlier, and its ratio to sales was 2.0%.
R&D expenses came to 449 million yen, up 57 million yen froma year earlier, and its ratio to net sales was 1.2%. The AP-related
business spent 216 million yen and the BP-related business used
157 million yen. In the AP-related business, Nikko focused on thedevelopment of combustion burner using ammonia and hydrogenas fuel for heating and drying aggregates and improvement and● Cash flow and cash and cash equivalents● Net sales and sales share of AP and BP

Cash flows

Operating CF
Investing CF
Cash and cash equivalents(million yen)

7,000

12,622

5,000

8,796

9,630

5,064

10,300
3,809

4,000

2,784

3,000

0
-1,0001,001
274-305 -430 -264 -316
-867
-1,690-2,000-3,00020,00012,00018,00010,00016,0008,000

14,000

4,000
2,000

41
-218
-526
-883 -1,021 -609-868

0-282 (million-1,129-1,867yen)

12,00062.8
51.5

12,511 12,286 12,050

Share of maintenance services
in the AP- and BP-related
70.0
businesses in Japan54.7 54.2

53.9 54.2
12,65012,03353.8-2,16554.9

13,402 13,036 13,250

year)

60.0
50.0
40.0

10,000
8,000
6,000
4,000

0

2016

2017

2018

2019

2020

2021

FY 2022 is the first fiscal year of the new MediumTerm Management Plan (FY 2022–FY 2024) with FY 2024
(fiscal year ending March 2025) as the final fiscal year. In the
final fiscal year of the plan, Nikko Group expects net salesof 50,000 million yen, operating income of 3,000 million yen,and operating margin of 6.0%. For FY 2022, it expects orders
to increase 11.3% from a year earlier to 46,000 million yen
and net sales to rise 8.1% to 42,000 million yen. It expects
operating income to decline by 17% to 1,700 million yen,operating margin of 4.0%, down 1.3 pp, ROE of 3.7%, anddividend of 30 yen per share (payout ratio of 95.6%).
When broken down, it expects net sales of 20,000 million
yen in the first half and 22,000 million yen in the second half;
operating income of 400 million yen in the first half (operating
margin of 2.0%) and 1,300 million yen in the second half
(operating margin of 5.9%). While we expect increases in raw
material prices and heavy burden from personnel and R&D
expenses in the first half, we anticipate impacts from productprice revisions and increased sales in the second half.

2022● Analysis of factors contributing to changes in● Dividend per share, payout ratio, total return ratio

Ordinary income
for FY 2020

70

2,973

Contribution to
sales

Dividend per share
Total return ratio

Dividend payout ratio

97.6
97.6

95.6

100

95.6

80

60

-336

120

79.7
69.5

50

Decline incost rate

381

30

-423

Other non-operating
proﬁt and loss

-47

10
2,274

-500

0

22.2

34.1

31.9
30.8

34.1

10

11

12

12

2015

2016

2017

2018

22.1

60.5
33

69.5

30

500

1,000 1,500 2,000 2,500 3,000 3,500

0

60
30

40
20
0

20

20

Ordinary income
for FY 2021
(million yen) -1,000

40

47.3

40

Increase in sales andadministrative expenses -558

20.0

(yen)

106.9

264

Risingraw materials cost

Foreign exchange gains/ lossesCompany (ﬁscal
forecast year)

Analysis of factors contributing tochanges in ordinary income

By segment, we expect new orders for the AP-related
business to increase 15.5% from a year earlier to 21,000 million yen,
net sales of the segment to increase 9.1% to 20,000 yen (9,520
million yen in the first half and 10,480 million yen in the second half).
Operating income is expected to increase 51% on year to 850 million
yen (200 million yen in the first half and 650 million yen in the secondhalf) with operating margin of 4.3%.
For the BP-related business, orders are expected to decline by 0.7%
from a year earlier to 12,000 million yen and net sales are expected

Outlook of business segments

Lower dividends
income0（％）

to fall 3.1% to 10,500 million yen (5,000 million yen in the first half
and 5,500 million yen in the second half). The segment expects
operating income to decline 6.5% to 1,050 million yen (460 million
yen in the first half and 590 million yen in the second half) with
operating margin of 10.0%.
The environment- and conveyor-related business expects orders to
decline 0.5% from a year earlier to 3,000 million yen and net income
to fall 17.2% to 2,500 million yen (1,190 million yen in the first halfand 1,310 million yen in the second half). Operating income of thesegment is expected to decline 15.0% to 500 million yen (220 million
yen in the first half and 280 million yen in the second half).
Operating income at the other business is expected to decline 25%
from a year earlier to 800 million yen (180 million yen in the first half
and 620 million yen in the second half) with operating margin of 8.9%.
The Group expects consolidated operating income of 1,700 million
yen by subtracting corporate expenses of 1,500 million yen from theabove segment income of 3,200 million yen.

In FY 2021, ordinary income declined 699 million yen year on
year to 2,274 million yen. Factors that boosted income include
264 million yen in the impact of sales increase, 381 million
yen in the impact of reduced cost rate, and 20 million yen inforeign exchange gains. The decrease in income was mainly
due to a rise of 336 million yen in raw material prices (including
251 million yen for steel and 57 million yen for copper wires),558 million yen in sales and administrative expenses (including
143 million yen in personnel expenses and 76 million yen in
M&A expenses), a 423 million yen decline in dividends income,and other non-operating balance worsening by 47 million yen.
For FY 2022, the Group expects operating income to decline
424 million yen to 1,850 million yen. While an 880 million yen
increase in sales is expected to boost operating income, weare expecting cost rate to worsen by 525 million yen (including
a 160 million yen increase in personnel expenses), a 301
million yen increase in R&D expenses, a 41 million yen risein depreciation and amortization, and an absence of foreignexchange gains worth 77 million yen.

30.0

10.0

2015

FY 2022 performance outlook

ordinary income

2,0002014 2015 2016 2017 2018 2019 2020 2021 (ﬁscal

85 N ikko Corpo ra te R epo r t 2 0 2 2

MS net sales(million yen)

14,000

6,000

2,224

1,978

2,000
1,000

Financing CF

12,575 12,444 12,389

12,1106,000

maintenance services in Japan

commercialization of foamed asphalt generation equipment,
which contributes to low-carbonization of pavement work. In the
BP-related business, the Company proceeded with developmentof high-precision mixers in an industry-academia collaboration.
In FY 2022, the Group plans 2,000 million yen in capital investment,
800 million yen in depreciation and amortization, and 750 million
yen in R&D expenses.

（％）

2019

2020

2021

2022 (ﬁscal
Company year)
forecast

N i kko C o r p o rate R ep o r t 2 0 2 2 86

Financial Data of the Past 10 Years

Key results

Segment results

Net sales by business

Operating income (loss)

OrdersFinancial position

Dividends

Capitalinvestment, etc.

87 N ikko Corpo ra te R epo r t 2 0 2 2

2013

2014

2015

2016

2017

2018

2019

2020

2021 year)
38,846(million yen)

27,08732,07330,707

34,11032,71735,114

31,78035,151

37,866

Cost of sales(million yen)

20,17523,736

22,68325,825

24,131

26,301

23,48525,512

27,67528,346Gross profit(million yen)

6,911

8,337

8,024

8,285

8,586

8,812

8,295

9,639

10,191

10,500

Selling, general and administrative expenses(million yen)

5,725

6,087

6,192

6,655

6,641

6,708

6,868

7,585

7,889

8,447

Operating income(million yen)

1,186

2,249

1,832

1,629

1,944

2,103

1,427

2,053

2,302

2,053

Ordinary income(million yen)

1,108

1,982

1,582

1,648

1,993

2,239

1,576

2,142

2,973

2,274

Net income before income taxes(million yen)

1,228

1,987

1,800

2,940

1,878

2,299

1,933

2,440

3,045

2,599

Net income attributable to owners of parent(million yen)

881

888

1,348

1,896

1,340

1,490

1,345

1,588

2,082

1,649

(yen)

21.0

21.1

32.1

45.2

34.3

38.7

35.1

41.2

54.3

43.1

Number of consolidated subsidiaries(number)

8

8

8

8

8

8

8

9

10

10

Number of affiliates accounted for using equity method(number)

2

2

1

ー

ー

ー

ー

ー

ー

ー

Operating margin

（％）

4.4

7.0

6.0

4.8

5.9

6.0

4.5

5.8

6.1

5.3

ROA

（％）

2.4

2.2

3.2

4.4

3.0

3.3

3.1

3.5

4.3

3.2

ROE

（％）

3.6

3.4

4.8

6.6

4.6

4.9

4.4

5.2

6.8

5.2

Japan

(million yen)

24,82329,403

27,881

31,13029,761

31,14827,941

30,761

34,13034,099Overseas(million yen)

2,263

2,669

2,825

2,980

2,956

3,965

3,838

4,390

3,735

4,746

China

(million yen)

1,752

1,684

2,072

2,220

2,026

3,389

3,357

3,637

3,509

3,670

Other business(million yen)

510

984

753

760

930

576

481

1,083

226

1,076

Ratio of net sales outside Japan

（％）

8.4

8.3

9.2

8.7

9.0

11.3

12.1

12.5

10.9

13.9

Asphalt Plant-Related Business(million yen)

15,054

17,25815,071

17,252

16,58017,17916,434

17,51819,46718,328Concrete Plant-Related Business(million yen)

5,889

8,577

8,287

10,267

9,356

9,521

7,893

9,158

9,212

10,839Environment- and Conveyor-Related Business(million yen)

2,085

1,944

2,853

2,289

2,647

3,931

2,775

2,634

2,390

3,018

Other Business(million yen)

4,058

4,292

4,495

4,301

4,133

4,480

4,677

5,840

6,796

6,660

Asphalt Plant-Related Business(million yen)

1,492

2,125

1,214

1,234

1,253

1,348

963

1,118

1,239

562

Concrete Plant-Related Business(million yen)

317

678

712

878

1,006

1,015

666

761

879

1,123

Environment- and Conveyor-Related Business(million yen)

250

166

527

337

369

308

417

562

482

588

Other Business(million yen)

59

388

451

277

417

462

502

1,020

1,170

1,073

Amount after elimination of transactions between segments(million yen)

ー

ー

ー

ー

ー

ー

ー

ー

ー

ー

Corporate expenses(million yen)(933)

(1,109)(1,074)(1,097)(1,102)(1,031)(1,122)(1,409)(1,469)(1,293)

Total new orders received(million yen)

26,56433,91534,50033,284

34,13433,61635,10333,91540,00939,852

Total order backlog(million yen)

5,410

7,246

11,03910,212

11,62910,132

13,454

12,21914,361

16,490Total assets(million yen)

37,27840,34841,964

43,18944,97644,87643,96945,677

48,69752,079Net assets(million yen)

24,353

26,167

27,84528,52829,08930,28630,41430,29331,451

32,050Interest-bearing debts

3,812(million yen)

2,849

2,212

2,206

2,362

1,987

1,799

1,718

1,787

2,492

Equity ratio

（％）

65.3

64.9

66.4

66.1

64.7

67.5

69.2

66.3

64.5

61.5

Net assets per share

(yen)

580.8

624.2

664.3

680.7

749.2

791.1

793.7

780.6

823.0

837.2

Dividend per share

(yen)

7.0

7.0

9.0

10.0

11.0

12.0

12.0

40.0

33.0

30.0

(million yen)

293

293

376

418

426

458

459

1,550

1,260

1,146

Dividend payout ratio

（％）

33.3

33.1

27.9

22.0

31.9

30.8

34.2

97.6

60.5

69.5

Dividend on equity

（％）

1.2

1.1

1.4

1.5

1.5

1.5

1.5

5.1

4.0

3.6
1,907

Total dividend

Capital investment(million yen)

335

844

815

877

1,261

550

1,889

1,483

2,748

Depreciation and amortization(million yen)

389

392

419

483

478

468

508

611

677

745

R&D expenses(million yen)

256

295

276

227

271

291

211

379

392

449

（％）

0.95

0.92

0.90

0.67

0.83

0.83

0.66

1.08

1.04

1.16

Cash flow from operating activities(million yen)

2,457

2,641

1,001

(1,040)

5,064

274

(218)

3,839

2,784

2,224

Cash flow from investing activities(million yen)

(954)

(936)

(305)

2,142

(316)

41

(1,021)(639)(1,867)(2,165)R&D expenses to net sales

Cash flows(fiscal

2012
Net sales

Net income per share

Profitability

CORPORATE DATAFree cash flow

(million yen)

1,503

1,705

696

1,102

4,748

315

(1,239)

3,200

917

59

Term-end balance of cash and cash equivalents(million yen)

7,839

8,506

8,796

9,630

12,622

12,11010,30012,575

12,444

12,389N i kko C o r p o rate R ep o r t 2 0 2 2 88

Consolidated Financial Statements

CORPORATE DATA

Consolidated Balance Sheet
Assets(million yen)

2020

Liabilities

2021 (FY)

Current assets

2020

Consolidated Statement of Income
Assets2021 (FY)

Current liabilities

Cash and cash equivalents

12,491

12,436

Notes and accounts payable-trade

2,591

3,132

Notes and accounts
receivable-trade(million yen)2020

2021 (fiscal year)

Net sales

37,866

38,846

Cost of sales

27,67528,346Gross profit

10,191

10,500

Selling, general and administrative expenses

7,889

8,447

Operating income

2,302

2,053

Interest income

22

Dividends income

546

123

Insurance income

30－

Foreign exchange gains

56

77

10,5309,438Electronically recorded obligations

1,015

868

Electronicallyrecorded monetary claims

1,477

1,594

Accounts payable-factoring

2,806

2,783

Merchandise and finished goods

1,494

990

Short-term loans payable

2,188

2,229

Work in process andpartly-finished construction

4,236

6,970

Income taxes payable

586

518

Raw materials and supplies

1,470

1,695

Accounts payable-other

765

664

Other business

685

1,002

Down payments

2,949

17

Allowance for doubtful accounts

(5)

(0)

ー

4,405

32,381

34,127531

483

Outsourcing service income

49

49

Other

114

82

Total non-operating income

800

335
50

Total current assets
Non-current assets
Property, plant and equipment

Contract liabilities
Provision for bonuses
Provision for directors' bonuses

76

76

Provision for loss on order received

126

35

Buildings and structures (net)

3,839

5,227

Other

Machinery, equipment andvehicles (net)

1,078

1,256

Total current liabilities

Tools, furniture and fixtures (net)

365

399

Non-current liabilities

3,205

3,577

Lease assets (net)2

1

Right-of-use assets (net)

71

72

Construction in progress

619

134

Land

Total property,
plant and equipment

9,183

10,669Intangible assets

Long-term loans payable
Deferred tax liabilities
Provision for
directors' retirement benefits
Retirement benefit-related
liabilities

Other
Total non-current liabilities

Goodwill

ー

266

Other

660

769

Total intangible assets

660

1,036

Total liabilities

Net assets

Investments and other assets

782

559

14,41815,774

304

1,583

5

7

170

182

1,995

2,126

351

354

2,827

4,254

17,24620,0292020

2021 (FY)

Non-operating income

Non-operating expenses
Interest expenses

37

Loss on disposal of non-current assets

120Compensation for damage

64

14

Dismantlement and removal costs

－

24

Other

15

25

Total non-operating expenses

129

114

2,973

2,274

Gain on sales of investment securities

152

326

Total extraordinary income

152

326

Ordinary income
Extraordinary income

Extraordinary loss
Loss on sales of investment securities

69

0

Loss on valuation of investment securities

10－

Total extraordinary loss

79

0

Investment securities

4,528

4,336

Net income before income taxes

3,045

2,599

Investments in capital

11

15

Capital stock

9,197

9,197

Income taxes-current

1,057

944

Long-term loans receivable

118

Capital surplus

7,926

7,925

Income taxes-deferred

(94)

40

Deferred tax assets

792

864

13,366

13,755

Total income taxes

963

985

Other

1,259

1,152

Treasury stock

(805)

(784)

Allowance for doubtful accounts

(131)

(131)

Total shareholders’ equity

29,68530,093

Total investments andother assets

6,472

6,246

16,315

17,951

48,69752,079Valuation difference on
available-for-sale securities

1,592

1,453

Foreign currency translation
adjustment

264

560

Accumulated retirement
benefit-related adjustment

(114)

(104)

Total accumulated
other comprehensive income

1,742

1,910

24

46

Total net assets

31,451

32,050Total liabilities and net assets

48,69752,079Total non-current assets
Total assets

Shareholders' equity

Retained earnings

Accumulated
other comprehensive income

Non-controlling interests

Net income

2,082

1,614

Loss attributable to non-controlling interests

ー

(34)

Net income attributable to owners of parent

2,082

1,649

Consolidated Statement of Comprehensive Income(million yen)2020

2021 (fiscal year)

2,082

1,614

Valuation difference on available-for-sale securities

473

(139)

Foreign currency translation adjustment

209

290

Retirement benefit-related adjustment

120

10

Total other comprehensive income

802

161

2,885

1,775

2,884

1,804

1

(28)

Net income
Other comprehensive income

Comprehensive income(Breakdown)Comprehensive income attributable to owners of the parent
Comprehensive income attributable to non-controlling interests

89 N ikko Corpo ra te R epo r t 2 0 2 2

N i kko C o r p o rate R ep o r t 2 0 2 2 90

Stock Information

Consolidated Statement of Cash Flows(million yen)2020

2021 (fiscal year)

Net income before income taxes

3,045

2,599

Depreciation and amortization

677

745

－

14

(27)

(5)

Increase (decrease) in retirement benefit-related adjustment

80

71

Increase (decrease) in provision for directors' retirement benefits

24

(9)

(548)

(126)

37

50

Foreign exchange losses (gains)

(19)

(72)

Loss (gain) on sales and valuation of investment securities

(72)

(325)

Decrease (increase) in notes and accounts receivable-trade

(300)

1,653

Decrease (increase) in inventories(359)(1,583)

Increase (decrease) in notes and accounts payable-trade

(627)

(28)

Increase (decrease) in down payments

1,281

－

－

1,172

Other

187

(1,006)

Subtotal

Increase (decrease) in allowance for doubtful accounts

Interest and dividends income
Interest expenses

Increase (decrease) in contract liabilities

Stock overview (as of March 31, 2022)
Stock listing

Major shareholders (top 10)

Prime Market, Tokyo Stock ExchangeState of issuanceTotal number of shares authorized for issuance:
150,000,000 shares
Total number of outstanding shares:
40,000,000 shares(including 1,774,135 treasury shares)

Number of shares per unit 100 shares
Number of shareholders

12,504

Transfer agent
Mitsubishi UFJ Trust and Banking Corporation
4-5, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-8212
Fiscal year

Number of shares Shareholding
held (in 1,000)
ratio (%)

Name

Securities code 6306

Cash flow from operating activities

Amortization of goodwill

CORPORATE DATA

From April 1 to March 31

Ordinary General Shareholders’ Meeting
June (record date: March 31)

Nikko Trading-Partner Shareholding Association

5,681

14.86

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

3,799

9.94

Nikko Employees' Shareholding Association

1,753

4.59

Sumitomo Mitsui Banking Corporation

1,203

3.15

Custody Bank of Japan, Ltd. (trust account)

968

2.53

Nippon Life Insurance Company

854

2.24

Sumitomo Life Insurance Company

745

1.95

The Hyakujushi Bank, Ltd.

683

1.79

Meiji Yasuda Life Insurance Company

648

1.70

Nakanishi Electric Co., Ltd.

620

1.62

16,956

44.4

Total

Nikko holds treasury shares totaling 1,774,135, which are excluded from the above
major shareholders. Shareholding ratios are the number of shares held divided by the
total number of outstanding shares less the number of treasury shares, rounded off tofirst decimal place.

Registration deadline for year-end dividend payment:
March 31
Registration deadline for interim dividend payment:
September 30

Stock performance comparison

Composition of shareholder types (%)
Individuals and others
Financial institutions
Financial instruments business operators
Other Japanese corporations
Foreign corporations, etc.

(TSR: total shareholder return, %)

3,377

3,150

Interest and dividends income received

548

126

Interest expenses paid

(37)

(50)

(1,105)(1,002)

2,784

2,224

(47)

(47)

47

47

Purchase of investment securities

(14)

(423)

Proceeds from sales and redemption of investment securities

579

754

(2,414)(1,697)－(733)

Trend of share price and trading volume over the past 10 years (July 2012 – July 2022)

Payments for acquisition of businesses

－

(127)

● Share price

Payments of loans receivable

(2)

(4)

Income taxes paid
Cash flow from operating activities
Cash flow from investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits

Purchase of property, plant and equipment and intangible assets
Purchase of shares of subsidiaries resulting in change in scope of consolidation

Collection of loans receivable
Other
Cash flow from investing activities

（％）

100

9.26

80

16.5
0.92

16.63
0.42

60

30.73

29.84

42.6

43.44

2

7

(18)

60

(1,867)(2,165)

20
0

2017

1000

2018

28.07

28.83

26.37

49.95

52.71

53.95

2019

2020

3 years

5 years

10 years(End of Mar. (End of Mar. (End of Mar.
2021 to end 2019 to end 2017 to end 2012 to end
of Mar. 2022) of Mar. 2022) of Mar. 2022) of Mar. 2022)

2021(ﬁscal year)

Nikko
shares

-12.9

47.5

82.1

134.0

TOPIX

2.0

31.2

44.3

183.3

Machinery
index

-3.8

36.7

40.8

183.7

The above table shows total return on investment including dividends asof the end of March 2022 in the cases of investment made a year ago,
three years ago, five years ago, and 10 years ago.

(yen)

800
600
400
200
0

2012/1

2013/1

Net increase (decrease) in short-term loans payable

550

(125)

Proceeds from long-term loans payable

140

1,099

Repayment of long-term loans payable

(70)

(46)

－

51

(402)

－

600 (10,000 shares)
500
400
300
200
100
0
2012/1
2013/1● Stock-related data

Purchase of treasury stock

3.23
15.36
1.09

13.91
1.24

40

Cash flows from financing activities

Proceeds from sale of shares of subsidiaries not resulting in change in scope of consolidation

3.59
13.93
0.94

6.83

9.67

1 yearInvestment(End of Mar.
period2014/1

2015/1

2016/1

2017/1

2018/1

2019/1

2020/12021/12022/1 (ﬁscalyear)

2014/1

2015/1

2016/1

2017/1

2018/1

2019/1

2020/12021/12022/1 (ﬁscal
year)● Trading volume(0)－

Cash dividends paid

(1,345)(1,260)Cash flows from financing activities(1,129)(282)

Year-end share price (yen)

426

481

609

731

607

80

168

PER (times)

11.9

13.7

14.8

13.5

14.1

Repayments of finance lease obligations

Effect of exchange rate changes on cash and cash equivalents

2018/3

2019/32020/32021/32022/3

(131)

(54)

PBR (times)

0.6

0.6

0.8

0.9

0.7

Cash and cash equivalents at beginning of year

12,575

12,444

Dividend yield (%)

2.6

2.5

6.6

4.5

4.9

Cash and cash equivalents at end of year

12,444

12,389Year-end market cap (mil. yen)

18,48019,24024,36029,24024,280Net increase (decrease) in cash and cash equivalents

91 N ikko Corpo ra te R epo r t 2 0 2 2

N i kko C o r p o rate R ep o r t 2 0 2 2 92

Company Overview and Offices and Sites

Company Overview (as of March 31, 2022)
Japanese name

日工株式会社

English name

Nikko Co.,Ltd

Head office address

1013-1, Eigashima, Okubo-cho,Summary of Subsidiaries● Net sales breakdown by business segment (FY 2021)

Other business
17.1%

Akashi, Hyogo Prefecture 674-8585
Tel.

+81-78-947-3131

Corporate website

https://www.nikko-net.com/en/

Representative

Masaru Tsuji, President and Representative Director

Established

August 13, 1919

Capital9,197.6 million yen (as of March 31, 2022)

Environment- andconveyor-related
business
7.8%

BP-related
business
27.9%

Consolidated
net sales
37,866百万円
38,846 million yen

AP-related
business
47.2%

CORPORATE DATA

Asphalt plant related,*AP: Asphalt plant
BP: (Concrete) batching plant

concrete plant related,various environment related,various conveyor related, other

Ochanomizu, Tokyo●Factories

Head office factoryTokyo factory
Sec head office factory
Machinery head office factory
Fukusaki factory
Satte factory
Kakogawa factory
Nikko Electronics
head office factory
Maekawa Kogyosho
head office factory
Nikko Shanghai
head office factory
Machinery Kansai factory● Branches and sales offices

Akashi head office
Hokkaido branch
Tohoku branch
Hoku-shinetsu branch
Kanto branch
Chubu branch
Osaka branchChu-shikoku branch
Kyushu branch
Okinawa branch
Wangan sales office
Yokohama sales office
Shikoku sales office
Minami-kyushu sales office
Taipei branch

FY 2021

1,661

1,642

Manufacture and sale of control systems, covering
processes from circuit designing to manufacturing ofcontrol panels, switchboards and monitoring panels

Number of individuals concurrently
holding position at parent

Number of
employees

Percentage of sales to
Nikko in FY 2021

7

1

93

80.1%

Nikko Machinery Co., Ltd.

Net sales(mil. yen)

Manufacture and sale of construction equipment
and flooding preventive equipment, including
floodgates and waterproof boards

Number of
Directors

Number of individuals concurrently
holding position at parent

Number of
employees

Percentage of sales to
Nikko in FY 2021

5

0

43

32.9%

Nikko Sec Co., Ltd.

Net sales(mil. yen)

Manufacture and sale of temporary equipment andmachinery for construction work, material handlingmachines, and computer-related equipment

Number of
Directors

Number of individuals concurrently
holding position at parent

Number of
employees

Percentage of sales to
Nikko in FY 2021

5

0

30

2.2%

Tombo Industry Co., Ltd.

Net sales(mil. yen)

Manufacture and sale of soil farming tools andgardening supplies, including shovels and scoops,
and concrete mixers for mixing and kneading

Number of
Directors

Number of individuals concurrently
holding position at parent

Number of
employees

Percentage of sales to
Nikko in FY 2021

5

0

12

1.1%

Maekawa Kogyosho Co., Ltd.

Net sales(mil. yen)

FY 2018

FY 2019

FY 2020

FY 2021

1,765

2,124

2,391

2,416

FY 2018

FY 2019

FY 2020

FY 2021

1,519

1,692

1,738

1,531

FY 2018

FY 2019

688

660

FY 2020

FY 2021

690

743

FY 2018

FY 2019

FY 2020

FY 2021

439

466

361

353

Number of
Directors

Number of individuals concurrently
holding position at parent

Number of
employees

Percentage of sales to
Nikko in FY 2021

4

0

17

3.1%

● Service centers/stations
Tokyo service center
Akashi service centerTokyo mobile center
Morioka service station
Hokuriku service station
Akashi service station
Okayama service station

Group companies

Nikko Electronics Co., Ltd.
Nikko Machinery Co., Ltd.
Nikko Sec Co., Ltd.
Tombo Industry Co., Ltd.
Maekawa Kogyosho Co., Ltd.
Nikko Kosan Co., Ltd.
Ube Kohki Co., Ltd.
Nikko (Shanghai) Construction Machinery Co., Ltd.
Nikko Asia (Thailand) Co., Ltd.

Overseas bases

Taipei branch (Taiwan) Opened in February 1997
Nikko (Shanghai) Construction Machinery Co., Ltd.
Established in April 2001
Nikko Shanghai Beijing officeOpened as Nikko Beijing expatriates office in August 1998
Nikko Asia (Thailand) Co.,Ltd.
Established in February 2020
Nikko Nilkhosol Co.,Ltd Established in June 2020
Maekawa (Shanghai) Machinery Trading Co., Ltd.
Established in July 2012
(Sales base of Maekawa Kogyosho Co., Ltd.)

93 N ikko Corpo ra te R epo r t 2 0 2 2

FY 2020

1,727

Number of
Directors

Manufacture and sale of crushing plant/equipment,
etc.
● Business Division

FY 2019

1,669

Net sales(mil. yen)

Number of employees 1,038 (consolidated), 570 (non-consolidated)
Business segments

FY 2018

Nikko Electronics Co., Ltd.

FY 2018

FY 2019

FY 2020

FY 2021

471

471

420

476

Nikko Kosan Co., Ltd.

Net sales(mil. yen)

Services related to housing renovation, property
insurance agency, life insurance agent and realestateNumber of
Directors

Number of individuals concurrently
holding position at parent

Number of
employees

Percentage of sales to
Nikko in FY 2021

3

1

9

33.9%

Number of
Directors

Number of individuals concurrently
holding position at parent

Number of
employees

5

0

67

Ube Kohki Co., Ltd.
Manufacture and installation of various plantfacilities, design, manufacture and sale of gas
holders, and development, manufacture and sale ofsolar LED lightings, etc.

Nikko (Shanghai) Construction Machinery Co., Ltd.
Manufacture and sale of asphalt / recycling plants
and anti-pollution devices

Nikko Asia (Thailand) Co.,Ltd.

Nikko Nilkhosol Co.,Ltd.

Net sales(mil. yen)

FY 2018

FY 2019

FY 2020

FY 2021

3,468

3,756

3,632

3,956

Number of
Directors

Number of individuals concurrently
holding position at parent

Number of
employees

Percentage of sales to
Nikko in FY 2021

4

2

106

3.4%

Net sales in FY
2021 (mil. yen)

Number of
Directors

Number of individuals concurrently
holding position at parent

Number of
employees

162

4

2

14

Net sales in FY
2021 (mil. yen)

Number of
Directors

Number of individuals concurrently
holding position at parent

Number of
employees

28

4

0

77

N i kko C o r p o rate R ep o r t 2 0 2 2 94

Making the world a resilient and gentle place.

For inquiries about this report, please contact:

IR Team, Financial Division, Nikko Co., Ltd.

October 2022

1013-1, Eigashima, Okubo-cho,
Akashi, Hyogo Prefecture 674-8585
Tel: +81-78-947-3141
Email: IR-nikko@nikko-net.co.jp