JGC Corporation Annual Report 2013

Program Management Contractor

2-3-1, Minato Mirai, Nishi-ku, Yokohama 220-6001, Japan
TEL. 81-45-682-1111 FAX. 81-45-682-1112
www.jgc.co.jp

Annual Report 2013
April 1, 2012 — March 31, 2013

Printed in Japan&

Investment Partner

Contents

01 Profile

24 Environmental Activities and Contribution to Society

02 Corporate Philosophy / Principles of Business Conduct /Management Vision

27 Corporate Governance

07 Financial Highlights

30 JGC’s Top Management
Board of Directors, Auditors, and Executive Officers

08 To Our Stakeholders

31 Financial Section

11 Special Feature

75 JGC Group

Meeting the challenge of receiving orders
for large-scale EPC projects in North America

76 Outline of JGC

14 Review of Operations
20 Performance Highlights by Business Sector
21 Performance Highlights by Region
22 Major Projects
23 Major Contracts Awarded

Caution regarding Forward-Looking Statements
This annual report contains information about forward-looking statements related to suchmatters as the plans, strategies, and business results of JGC and the JGC Group.
These forward-looking statements represent judgments made by the Company based on
information available at present and are inherently subject to a variety of risks (see page 37)
and uncertainties. The Company’s actual activities and business results could differ significantly
due to factors including, but not limited to, changes in the economic environment, businessenvironment, demand, and exchange rates.

Profile
JGC Corporation was founded in 1928 and has since completed over 20,000 projects inapproximately 70 countries, making it one of the world’s top engineering contractors.
The Company has developed proprietary engineering technology and displayed unsurpassed
project management capabilities in the fields of petroleum refining and gas processing, LNG,
petrochemicals and other hydrocarbons as well as those involving non-ferrous metals, nuclear
power, pharmaceuticals, hospitals, and numerous other sectors.
In order to respond to the diverse needs of its clients, JGC has moved beyond its role as anengineering contractor to expand its investment business into such domains as power generationand desalination, water, the environment, renewable energy, and resource development. At thesame time, JGC provides planning and management services in the urban development domain.
JGC recently launched its medium-term management plan, “New HorIzoN 2015,” under which
it has charted a course to become a “Program Management Contractor & Investment Partner.”

JGC CORPORATION Annual Report 201301

Corporate Philosophy
The JGC Group, with its core business of engineering-basedCore Values

services, reaffirms its corporate policy of pursuing the highest

each and every person working in the JGC Group, fromstandards of performance and achieving enduring growth as adirector to employee, full-time or part-time, understands andglobally active company, while contributing to world economic

adheres to the core values stated below as integral to realizing

and social prosperity as well as to the conservation of thecorporate policy:

earth’s environment.

1. Decision-making: Highest ethical standards and sense oflegal responsibility
2. Conduct: Fairness and transparency
3. Corporate atmosphere: Progressive spirit and open mind
4. Corporate direction: Customer satisfaction and trust ofsociety, as well as corporate growthin harmony with society02

Management Policies

Responsibilities

Sharing these core values, the JGC Group seeks to continu-

As a globally active entity with engineering-based services

ously provide services and products based on the highest

as its core business, the JGC Group makes the maximum effort

standards of technology and in compliance with the following

to enhance its corporate values and, in doing so, realize

management policies:

its corporate policy, with the fullest level of recognition given

1. Secure profit and realize continuous growth

to social responsibilities:

2. Strengthen power of JGC Group technologies and establish

1. Conservation of the earth’s environment and engagement

innovative technologies, as well as develop lines of businesswith vertical and horizontal diversification
3. Accumulate and utilize capital and resources with provision
for the future

in corporate activities beneficial to society
2. Accountability and integrity
3. Fair trade and fostering mutually beneficial relationships
4. Shareholders’ confidence

4. Maintain fair personnel policy and develop capabilities aswell as vitality of individuals

JGC CORPORATION Annual Report 201303

Principles of Business Conduct
For the long-term stability of the JGC Group and for its further
growth, each person working, from director to employee,
full-time or part-time, is required to keep in mind clear principles of business conduct and perform his or her daily activities

1. Decision-making: Highest ethical standards andsense of legal responsibility• Behave in accordance with the highest ethical standards
and in a socially acceptable manner.

in compliance with such principles. Through continued stable• Understand the requirements, and observe the laws,

operations, the JGC Group achieves its corporate philosophy

regulations and rules of the business conducted.

by maintaining and honoring the following principles derived
from the previously stated “Core Values”:

2. Conduct: Fairness and transparency• Be fair, honest and transparent at all times in conducting
business.
• Maintain integrity in all the relationships that constitute thebusiness being conducted.

04

3. Corporate atmosphere: Progressive spirit and open mind
• Maintain a progressive spirit not restricted merely toestablished business practices, and behave at all times
with a sense of innovation and improvement not limited to
traditional practices.
• Based on a will to achieve objectives, devote oneself to the
maximum extent possible as an individual and to the team.
• Through free and aggressive exchanges, strive to enhance
the intelligence of the organization.

4. Corporate direction: Customer satisfaction and trustof society, as well as corporate
growth in harmony with society• Gain the trust of clients and shareholders by performing
faithfully and by providing an adequate level of information.
• Direct efforts at providing reliable services and productsthat satisfy the client’s needs.
• Seek corporate growth together with the development ofsociety, in the knowledge that without prosperity of society
the JGC Group will not grow.

JGC CORPORATION Annual Report 201305

Management Vision
The first principle at JGC is to have an accurate grasp of customer needs and to bring theCompany’s unique intellectual capital to bear on these needs, thereby contributing to prosperity
by providing customer satisfaction.
Next, while moving forward with vertical integration and horizontal expansion, the Company
is responding to changing customer requirements by using its operational assets in unlimited
innovation, striving to remain a trusted partner for success and a solutions provider.

06

Financial Highlights
For the years ended March 31.
Yen amounts are in millions except per share data.

Consolidated

Millions of yen

Thousands of
U.S. dollars

2013

2012

2011

2013

¥ 624,637¥ 556,967¥ 447,223$ 6,641,542

Operating Income

64,12367,05463,559681,797

Income before Taxes on Income and Minority Interestsin Earnings of Consolidated Subsidiaries

62,31371,47952,771

662,552

Net Income

46,17939,111

25,478491,005

Net Income per Share (in yen and U.S. dollars)

182.91154.90100.83

1.94

New Contracts

594,091

793,278

618,2036,316,757

1,514,108

1,506,146

1,163,256

16,098,969

Millions of yen

Thousands of
U.S. dollars

Net Sales

Outstanding Contracts

Non-Consolidated

2013

2012

2011

2013

¥ 454,261¥ 451,724¥ 359,561$ 4,829,995

Operating Income

48,94654,21851,918520,426

Income before Taxes on Income

56,25060,70845,205598,086

Net Income

44,14734,30422,853

469,399

Net Income per Share (in yen and U.S. dollars)

174.86135.86

90.44

1.86

New Contracts

468,427

342,983

569,128

4,980,617

1,019,426

1,005,260

1,114,182

10,839,192

Net Sales

Outstanding Contracts

Notes: 1. U.S. dollar amounts represent translations of Japanese yen, for convenience only, at the rate of ¥94.05 = $1.00, the prevailing rate of exchange at March 31, 2013.
2. Net income per share is computed based on the average number of shares of common stock outstanding during the period.

Net Sales

Net Income

New Contracts

Outstanding Contracts(Billions of yen)(Billions of yen)(Billions of yen)(Billions of yen)

800

50

900

1,600
1,506.1

46.1
44.1
624.6

600

40

447.2

451.7

454.2

30

25.4
21.2

317.5

1,163.2
1,114.1

594.0

569.1

982.5
953.5

506.1

27.1

359.5

349.9

1,200
618.2

600

30.2

414.2

400

675.5
34.3

31.5
450.9

733.5

39.1

556.9

1,514.1

793.2

468.4

440.5

22.8

800
671.3

20

1,019.4

1,005.2

342.9

641.7

300
200

0

400

10

2009

2010

n Consolidated
n Non-consolidated

2011

2012

2013

0

2009

2010

n Consolidated
n Non-consolidated

2011

2012

2013

0

2009

2010

n Consolidated
n Non-consolidated

2011

2012

2013

0

2009

2010

2011

2012

2013

n Consolidated
n Non-consolidated

JGC CORPORATION Annual Report 201307

To Our Stakeholders

Keisuke Takeuchi

Chairman and Representative Director

Koichi Kawana

President and Representative Director

Program Management Contractor& Investment Partner
In fiscal 2012, ended March 31, 2013, JGC received a large volume of orders, primarily in the Middle East and Southeast Asia.
Furthermore, due to steady progress in our projects in hand, we achieved our highest level of earnings ever. In fiscal 2013,in addition to further strengthening our cost-competitiveness, technological capabilities, and project execution capabilities,
we intend to continue to fully respond to the high expectations of our clients in not only existing markets but also the“new frontiers” that hold the promise of additional growth.

08In our consolidated results for fiscal 2012, thanks to the support of our stakeholders and ourclients, as well as the efforts of the directors and employees of JGC and the JGC Group, werecorded net sales of ¥624.6 billion, gross profit of ¥84.4 billion, operating income of ¥64.1
billion, and net income of ¥46.1 billion. In fact, net sales and net income were our highest on
record. We paid a dividend to shareholders of ¥45.5 per share. Consolidated orders received
were ¥594.0 billion, nearly achieving the fiscal 2012 target of ¥600.0 billion. In our consolidated
earnings forecast for fiscal 2013, we have projected net sales of ¥690.0 billion, gross profit of¥90.0 billion, operating income of ¥69.5 billion, and net income of ¥47.0 billion. We plan to pay
a dividend of ¥46.5 per share. With respect to orders, taking into account the strong market
conditions, we have raised our full-year target from ¥600.0 billion in fiscal 2012 to ¥650.0 billion
for the current year, and we intend to make every possible effort in our sales activities toachieve that target.
Looking back on fiscal 2012, crude oil prices moved at high levels on increasing demandfor energy in emerging countries due to population growth and ongoing urbanization. In
response to rising LNG demand in Asia, and especially in Japan, capital investment plans wereseen for oil, petrochemicals, gas processing, and LNG, mainly in the Middle East, Asia, andOceania. Amid such market conditions, we were successful in fierce competition in our engineering business, receiving orders overseas for an oil refinery project in Saudi Arabia, for a
petroleum refining and petrochemicals complex project in Vietnam, and for an LNG plant
expansion project in Malaysia.
In Japan, we received plant construction project orders that included an Integrated coalGasification Combined Cycle (IGCC) demonstration plant, a Carbon Dioxide Capture andStorage (CCS) demonstration plant, and for fiscal 2013 a solar power plant. We also received
orders for the provision of FEED (Front End Engineering and Design) services for a floating LNG
project in Malaysia, an LNG project in Mozambique, and a floating LNG plant in Indonesia.
We thereby secured a foothold for receiving EPC (Engineering, Procurement and Construction)orders from fiscal 2013 onward. In fiscal 2012, a significant achievement was the receipt by
JGC Gulf International Co. Ltd., a Saudi Arabia-based consolidated subsidiary of JGC, of two
important orders: a project to build an aromatics production plant and the expansion of an
ethylene plant.
Meanwhile, in our investment business, in fiscal 2012 JGC made the decision to acquire
100% of a solar power generation project in Japan, with operation of the plant beginning inMay 2013. We also committed to participating in a business park project in Chongqing City, in
China. In fiscal 2013, we plan to continue to invest in quality projects in such fields as resource
development, power generation, desalination, photovoltaic power generation, solar thermoelectric power generation, and urban infrastructure development.

JGC CORPORATION Annual Report 201309

Our outlook for the engineering market in fiscal 2013 is as follows. Continuing from fiscal
2012, against a backdrop of increasing energy demand in emerging countries due to population growth and ongoing urbanization, projects—on a scale equal to or larger than that in fiscal
2012—will be executed by the oil majors and national oil companies of resource-rich countries,
mainly in the Middle East, North Africa, Southeast Asia, North America, and Russia. Particularlyin the United States and Canada, planning is under way for the construction of numerous LNG
projects and ethylene projects that use cheap shale gas as feedstock, and there are also plansfor GTL (Gas-to-Liquids) projects to produce a variety of petroleum products from shale gas.
We recognize that North America and Russia—where LNG plans are progressing on the Arctic
Ocean side as well as the Far East side—are new and very promising markets for JGC.
In fiscal 2013, we believe that our most important issue is how to break into these markets
and receive large numbers of project orders. Fortunately, in early fiscal 2013, by receiving anorder for some of the services on the Yamal LNG project in Russia and for the FEED work on
the Pacific Northwest LNG project in Canada, we marked our first steps into these “new frontiers”. In fiscal 2013, we will continue to devote our efforts toward receiving orders for projects
in such new frontiers. In the course of broadening JGC’s target market to become worldwide inscope, there is expected to be an increase in instances where project execution will facechallenging climate conditions. We acknowledge that in undertaking those projects we will be
required to carry out schedule management more carefully than ever before. In an era that requires
contractors to excel not only in cost-competitiveness but also in technological capabilities andproject execution capabilities, JGC intends to respond fully to the high expectations of its clients.
As a final point, we have the sad duty of reporting on the attack by an armed group on a
JGC construction site in Algeria in January 2013. This was an event that was beyond anythingthat the Company imagined could occur. In the future, while receiving support from the governments and relevant ministries and agencies of the countries concerned, as well as frombusiness partners and clients, all companies in the JGC Group will work together to strengthen
their security measures.
Throughout the coming year, the entire JGC Group will strive to achieve its consolidated
orders target and consolidated earnings forecast. We ask our stakeholders for their continued
support as we work toward reaching our goals.
July 2013

Keisuke Takeuchi

Chairman and Representative Director

Koichi Kawana

President and Representative Director
10Special Feature

Meeting the challenge of receiving
orders for large-scale EPC projects
in North America
Focusing on the expanding EPC market in North America
In May 2013, JGC jointly received an order with KBR for Front End Engineering and Design (FEED) services on an LNG
plant construction project promoted in British Columbia, Canada, by Petroliam Nasional Berhad (PETRONAS), Malaysia’snational oil company, and Japan Petroleum Exploration Co., Ltd. (JAPEX).
As exemplified by this project, at present in North America, many projects that use abundant and cheap shale gas as
feedstock are planned, and expectations for North America as a promising EPC market are high.

JGC CORPORATION Annual Report 201311

Meeting the challenge of receiving orders
for large-scale EPC projects in North America
Focusing on the expanding EPC market in North America

With the revolution in drilling technology, shale gas develop-

destinations for its natural gas, new construction of multiple

ment succeeded in the United States in the early 2000s. FromLNG plants on the Pacific coast of the country is planned.

2007 onward, about the same time that full-scale shale gas

JGC takes pride in having constructed LNG plants that

production began to expand, U.S. natural gas production

account for more than 30% of the world’s LNG production

capacity increased sharply. While the United States had previ-

capacity. Similarly, in the ethylene field, JGC is proud of having

ously been importing natural gas, with the expansion in shalecompleted 44 projects, mainly in the Middle East. In the GTL

gas production, the country became able to meet its natural

field, moreover, for Shell MDS in Malaysia, we constructed thegas demand through its own production. Consequently, theworld’s first commercial GTL plant, and, for Qatar Shell GTL

balance between supply and demand in the natural gas

Ltd in Qatar, we constructed a GTL plant boasting the world’s

market in the United States collapsed, and natural gas prices

largest production capacity. Now, in North America, the oil

fell sharply. Thus, in the United States, there are now plans formany projects that will use abundant and cheap shale gas asRanking of Countries by Technically Recoverable Shale Gas Reserves

feedstock to make LNG and ethylene (gas chemical) as well

(TCF: trillion cubic feet)

Country

Reserves

Specifically, in addition to plans for roughly a dozen LNG

China

1,115

Argentina

802

projects, there are also plans for roughly a dozen projects toAlgeria707

construct or expand ethylene plants, as well as plans for mul-

United States

665

Canada573

Meanwhile, as for Canada, the natural gas it produced

Mexico545

Australia

437

until now had been exported by pipeline to the United States.

South Africa

390

Russia285

as GTL for higher value-added products.

tiple GTL production projects.

However, because the United States has seen its natural gas
demand fall sharply as its shale gas production has moved
into full swing, in order for Canada to find new export
12

Brazil

245

Total

7,299

Source: U.S. Energy Information Administration

majors and other customers are advancing plans for proj-

execution system by forming joint ventures with U.S. contrac-

ects—in LNG, ethylene, GTL, and other fields—that use

tors that have abundant project execution experience in theabundant and cheap shale gas as feedstock. We believe that,

region. On another front, while giving consideration to estab-by utilizing our abundance of past achievements, in primarily

lishing our own EPC subsidiary, we will strive to strengthen

the Middle East, as well as our superior project management

our presence in North America.

capabilities for large projects, we will definitely produce good

JGC regards fiscal 2013 as a year to take up the challenge

results in the plant market in North America.

of expanding its market and will actively work to increase its

To that end, JGC will establish a North American projectorders in North America.

World Natural Gas Production Forecasts by Region(BCM: billion cubic meters)

World Conventional and Unconventional
Gas Production Forecasts

856
657

(BCM: billion cubic meters)
800

188

160

4,955

5,000

604

26%

CanadaRussia

4,000

318

3,284

95
United States

147

80

14%

China

97

51

75

86%
1,000

India

Mexico16149n 2010 Actualn 2035 Forecast

74%

2,000

Algeria50

3,000

Australia

02010 Actual2035 Forecast

n Conventional gas n Unconventional gas
Source: World Energy Outlook 2012

JGC CORPORATION Annual Report 201313

Review of Operations

The market environment for total engineering projects in fiscal 2012 saw capital investments in oil and gas-related projects growsteadily, particularly in oil and gas producing countries. Against the backdrop of continued increases in the world population andeconomic growth in emerging nations, such capital investments resulted from increasing demand for energy as well as continuing
high prices for crude oil. In addition, in North America, numerous planned projects based on abundant and cheap natural gas,
particularly those to produce LNG, gas chemicals, or GTL (Gas-to-Liquids) products, continued to progress toward realization.
In this positive climate, while continuing to work to strengthen cost-competitiveness throughout the whole organization,
the JGC Group implemented aggressive sales activities aimed at achieving its target for orders. Furthermore, for projects that werealready under way, we strove to maximize the reliability of our project execution by paying the closest possible attention to thematter of risk.
Meanwhile, due to the attack on a JGC construction site that occurred in Algeria in January 2013, we temporarily suspended
construction work on the three projects that we had been executing in the country until site safety could be guaranteed. However,construction work for the Gassi Touil gas processing plant was recommenced in April after security had been guaranteed, and thatfor the crude oil processing plant in the Bir Seba area was begun again in June.

Total Engineering Business
Oil and Gas Development Projects
In the field of oil and gas development, supported bycontinuing high crude oil prices and robust demand for crude
oil and natural gas, aggressive capital investments continued
to be made by the oil majors, major state-run oil companies,
and other players.
In the Ras Laffan area of Qatar, JGC is carrying out
a large-scale gas processing plant construction project
promoted by the state-run oil company and ExxonMobil tomeet the rapidly growing demand for natural gas for domestic
consumption in Qatar.
In the Emirate of Abu Dhabi in the United Arab Emirates,
JGC is executing a large-scale gas processing plant
construction project in the Habshan area for Abu Dhabi Gas
Industries Ltd., with completion targeted in fiscal 2013.

In Saudi Arabia, for Saudi Aramco, the state-owned oilcompany, JGC executed through to successful completion a
project for off-site facilities, including an oil-field water injection system, crude oil storage tanks, and shipping equipment,
for a large-scale crude oil processing plant in the Manifa region.

A large gas processing plant under construction for Abu Dhabi Gas Industries (Emirate of
Abu Dhabi, United Arab Emirates)

14

Petroleum Refining Projects
In the petroleum refining field, oil companies, including the
majors, are proceeding with downsizing and separating
slumping downstream businesses by closing aging refineries
with high maintenance costs in developed countries, among
other measures. At the same time, oil companies are concentrating their management resources on upstream businesses,
especially the development and production of crude oil andnatural gas. Meanwhile, in China, India, and emerging
countries in Southeast Asia, with remarkable economic
growth as a backdrop, oil companies, including the majors,plan to continue constructing or expanding oil refineries.
In Vietnam, in January 2013, JGC was awarded an EPC
contract for the country’s second oil refining and petrochemicals complex from a joint venture group led by Idemitsu
Kosan Co., Ltd.
In Saudi Arabia, in November 2012, the company wasawarded a contract to construct the core facilities for a largescale oil refinery owned by Saudi Aramco, in the Jazan area.
This refinery will produce 400,000 barrels per day, andcompletion is targeted for the second half of 2016. Additionally,in September 2012, JGC Gulf International Co. Ltd., a Saudi
Arabian subsidiary of JGC, received an EPC order from
Sadara Chemical Company, a joint venture between Saudi
Aramco and The Dow Chemical Company, to construct anaromatics production plant.

Likewise, in Venezuela, JGC is carrying out a project toexpand an oil refinery for PDVSA Petroelo, S.A. (PDVSA), thecountry’s state-run oil company. This is a project to build aheavy oil processing plant that employs the HDH Plus® heavy
crude oil cracking process. The plant will be the first commercial plant to utilize the process.
Meanwhile, in Singapore, JGC is carrying out a project
to construct a diesel hydrotreater plant for ExxonMobil Asia
Pacific Pte. Ltd., aiming for completion in 2014.
Finally, in Japan, JGC is carrying out renovation and otherwork on oil refinery facilities for a number of oil companies.

Signing ceremony with Saudi Aramco for the Jazan oil refinery (Saudi Arabia)

LNG Projects
In the LNG field, in addition to stable demand from suchtraditional LNG importers as Japan, South Korea, andTaiwan, demand for LNG in the medium-to-long term in
China, India, and emerging countries in Southeast Asia is
expected to increase. Against this backdrop of brisk demandfor LNG, plans to construct or expand LNG plants in a wide
range of regions worldwide, such as Southeast Asia, North
America, Russia, and East Africa, progressed toward project
implementation.
In Malaysia, in March 2013, JGC was awarded a contract
for an LNG expansion project by PETRONAS, the country’s
state-owned oil and gas company. Beginning in the 1980s,
for more than 30 years, JGC has carried out not only all
construction work for the eight existing LNG trains but also,
on a continuing basis since the plants’ completion, production capacity increases and renovation work. In the current

expansion project, a ninth train will be added to the existingeight trains, and we are aiming for completion by the end of
2015. Likewise, in September 2012, we received an orderfrom PETRONAS for the FEED (Front End Engineering and
Design) work for a project to build a floating LNG plant for theoffshore gas fields of Sabah, Malaysia.
In January 2013, JGC also received an order for the FEED
work for a floating LNG project, promoted by INPEXCORPORATION and others in Indonesia.
In the Republic of Mozambique, JGC received an orderfor the FEED work for a project promoted mainly by Anadarko
Petroleum Corporation to construct an LNG plant. The planfor this project, a large LNG plant using natural gas supplied
from the country’s huge offshore gas fields as feedstock, callsfor exports to Asian markets, including Japan.

JGC CORPORATION Annual Report 2013

15

Additionally, since January 2012 in Australia, JGC has
been executing a project to construct an onshore LNG plantfor Ichthys LNG Pty Ltd, a consortium headed by INPEXCORPORATION. Completion is scheduled for the end of
2016. Furthermore, on Barrow Island off the northwest coastof the country, JGC is carrying out a project to build an
onshore LNG plant for the Gorgon Project, which comprises
companies that include Chevron Corporation.
In Sulawesi, Indonesia, JGC is executing a construction
project to build an LNG plant for Sulawesi LNG Development,
which comprises companies that include Mitsubishi
Corporation. Completion is targeted in 2014.
In Papua New Guinea, JGC is executing a project to build
an LNG plant for Esso Highlands Limited, which comprises
companies that include ExxonMobil.
Moreover, in Japan, JGC is carrying out a project to build
an LNG receiving terminal for JX Nippon Oil & Energy
Corporation in Hachinohe City, Aomori Prefecture.
In fiscal 2013, in Russia, JGC received from a joint venture
between Novatek, a Russian company, and Total, a French
company, an order that mainly comprises the detailed
engineering services for a large-scale LNG plant. Furthermore,

An LNG plant under construction for Sulawesi LNG Development (Indonesia)

we also received a FEED contract for a project promoted by
PETRONAS and other companies in British Columbia,
Canada, to build a large LNG plant.
As of the end of May 2013, JGC was not only executing a
total of six projects to build LNG plants but also participating
in four projects by providing FEED services. As the top
contractor for the construction of LNG plants, JGC continues
to be busily engaged in projects throughout the world.

Chemical Projects
In the area of petrochemical and chemical products, due tofalling domestic demand and declining price-competitiveness,the production of basic petrochemical products, such as
ethylene and propylene, is contracting in developed
countries, including Japan. Furthermore, production bases
are shifting to oil and gas producing countries in the Middle
East as well as to China, India, and other emerging countries.
In particular, in the Middle East, to increase the added valueof energy resources and improve local industrial diversification, many new projects continue to be planned under theleadership of national governments. Although the projects are
based on cost-competitive feedstock, they utilize the capital,technical capabilities, and project management know-how of

16

foreign companies. Additionally, in North America, there areplans to build various chemical plants for such products as
ethylene, with the goal of realizing a highly cost-competitivegas chemicals business that uses cheap and abundant shale
gas as feedstock.
In October 2012, JGC Gulf International received an order
for a project to expand an ethylene plant in Saudi Arabia fora joint venture comprising Saudi Aramco and Sumitomo
Chemical Co., Ltd. The project calls for completion in thesecond half of 2014.
In addition, for several chemical companies in Japan, JGC
is carrying out renovation and other work on plants producing
petrochemical and chemical products.

Power Generation, Nuclear Power, and New Energy Projects
In the domestic power generation field in fiscal 2012, amid
challenging conditions for the resumption of operations at allof the nuclear power plants in Japan following the Great East
Japan Earthquake, various initiatives were undertaken. With aview toward achieving the diversification of energy supply
sources as well as a low-carbon society, the initiatives include
demonstration testing of Integrated coal Gasification Combined
Cycle (IGCC) plants as well as the implementation of plans
for many large-scale solar photovoltaic (“mega-solar”)
power plants.
Under such circumstances, in August 2012, JGC won an
EPC order for gas purification facilities that will be the corefacilities of the oxygen-blown coal IGCC Demonstration Plant
advanced by Osaki CoolGen Corporation. With the goal ofachieving revolutionary zero-emission thermal power generation, this project—led by the Ministry of Economy, Trade andIndustry—involves the construction of Japan’s first oxygenblown IGCC plant, with work completion targeted by 2016.
In March 2013, JGC received an EPC order for the construction of a mega-solar power plant in Futtsu City, Chiba
Prefecture, promoted by Futtsu Solar Inc., a joint venture comprising Mitsuuroko Green Energy Co., Ltd., Recycle One, Inc.,and other partners. This project, which calls for the construction of a mega-solar power plant with a generating capacityof 40,000 kW, the largest in the Kanto region, is scheduled
for completion in 2014.
In Iraq, JGC had been executing a project to reconstructcooling water systems and other facilities for the Nassiriyah
thermal power station, and the project was brought to successful completion in July 2013.

Conceptual drawing of the completed IGCC Demonstration Plant for Osaki CoolGen

Living and General Production Projects
In the field of pharmaceuticals, capital investments in facilities
for the production of antibody drugs and facilities for
manufacturing high potency active pharmaceutical ingredientswere continuously and aggressively carried out, and suchinvestments will likely continue in the future.
In fiscal 2012, in addition to receiving an EPC order forthe construction of pharmaceutical manufacturing facilities in
Yamaguchi Prefecture for Terumo Yamaguchi Corporation,
JGC also won a number of orders from multiple majordomestic pharmaceutical companies for the construction ofsimilar facilities, and work is currently under way. Further,in fiscal 2013, JGC completed the construction of a sterile
products plant for TOYAMA CHEMICAL Co., Ltd. in
Toyama Prefecture.

In the field of non-ferrous metal refining, JGC has executedand completed, in June 2013, a nickel refinery construction
project promoted by Sumitomo Metal Mining Co., Ltd., in
Taganito on the island of Mindanao in the Philippines.

A sterile products plant for TOYAMA CHEMICALJGC CORPORATION Annual Report 201317

Environmental Protection, Social Development, and IT Projects
In the field of environmental protection, in recent years,
against the backdrop of rapid economic growth in emerging
countries, increased greenhouse gases in the atmospherehave prompted growing concerns over worsening global
warming. As a measure to address global warming in themedium-to-long term, Carbon Dioxide Capture and Storage(CCS) technology is gathering worldwide attention, and there
are widespread hopes that the technology will become wellestablished and achieve economic efficiency. In Japan, with
the Ministry of Economy, Trade and Industry at its center, an
initiative that aims at putting CCS technology to practical use
after 2020 has been launched.
Against this backdrop, in November 2012, for the CCS
demonstration project promoted by Japan CCS Co., Ltd., in
Tomakomai City, Hokkaido, JGC received an EPC order forthe construction of facilities to separate, capture, andcompress carbon dioxide as well as for the construction ofvarious facilities to transport carbon dioxide to injection wells.
The project calls for completion in 2016.

In the medical field, throughout Japan, JGC has constructedhigh-quality medical facilities and provided project management services, receiving high accolades from many clients.
In fiscal 2012, JGC received an order from SHONANDAIICHI HOSPITAL, in Kanagawa Prefecture, for construction
work associated with the hospital’s refurbishment plan.
In addition, JGC completed a project to develop a
medical facility on the former site of a company housing
facility in Onazuka, Tokyo, for Japan Freight Railway Company;a project to refurbish Kano Hospital for the Houshikai Group,
a medical corporation, in Fukuoka Prefecture; construction
work on a new hospital ward in a hospital facility for Medical
Co. LTA.; and a project to rebuild Ushioda Clinic for the
Yokohama Labor Welfare Association, in Kanagawa Prefecture.
Additionally, as the operator under the Private Finance Initiative(PFI) system, JGC is conducting maintenance, operations,and procurement at Tokyo Metropolitan Matsuzawa Hospital
under a long-term contract. A further project awarded to thecompany called for the improvement of treatment facilities fordehydrated and separated effluent for Osaka City.

Enterprise Investment Business
Under “NEW HORIZON 2015,” JGC’s medium-term management plan launched in fiscal 2011, JGC aims to further increase
its enterprise investment business. In the fields of conventional power generation, renewable energy, the environment,water, and resource development, as well as in new areas,
the company intends to actively invest in businesses in which
it can utilize its advantages. In fiscal 2012, as in the previous
fiscal year, we carried out aggressive business investments.
In May 2012, the construction and trial operation of ademonstration plant for producing new liquid fuel fromlow-rank coal as feedstock was completed, with the demonstration operation commenced. The fuel bears the trademarked name JGC COAL FUEL (JCF®), and the yearly outputof the plant is approximately 10,000 tons. In August 2012, in
British Columbia, Canada, JGC formally acquired an interestin shale gas assets owned by Nexen Inc., a Canadian oil andnatural gas development company. In the same month, on
land owned by Nissan Motor Co., Ltd., in Oita Prefecture,
JGC joined a mega-solar power generation project, and thesale of electric power began in May 2013. With a generating
capacity of 26,500 kW, as of May 2013, when the sale of18

A ceremony for the completion of the mega-solar power plant in Oita

electricity commenced, this was the largest mega-solar
power plant in Japan.
Additionally, in the licensing business, JGC jointly developed with MITSUBISHI GAS CHEMICAL COMPANY, INC., aprocess for producing dimethyl ether (DME). Both companies
had jointly licensed the process to a German chemical manufacturer, and, in October 2012, a plant utilizing the licensed
process was completed.

Catalysts and Fine Products BusinessIn fiscal 2012, due to a contraction in domestic demand andfierce price competition with other companies in the same
industry, the market environment of the catalysts and fine
products business remained challenging.
Although JGC Group companies in the catalysts and fine
products business pursued various measures, including pricenegotiations with customers and reductions of product unit
costs, the diversification of feedstock suppliers, reductionsof fixed costs, and overseas business expansion, sales andprofits both decreased from the previous fiscal year.
In its catalysts operations, sales of fluid catalytic cracking(FCC) catalysts, for which JGC boasts the top market sharein Japan, declined. This was due to such factors as decreased
usage resulting from the delayed resumption of refinery
operations following the Great East Japan Earthquake andincreased competition from overseas companies in the same
industry as they leveraged the stronger yen. Furthermore,sales of hydrotreating and chemical catalysts also decreased,in response to falling domestic demand and intensifying
competition in international product pricing.
Meanwhile, sales of JGC’s fine products increased overall
compared with the previous fiscal year. While sales of cathodematerials for lithium-ion batteries used in eco-cars and salesof materials for cosmetics both decreased, positive factors
included our launch of a business for optical materials forglasses, targeting China and South Korea, as well as large
increases in demand for glass-grinding silica sol and antiglare film for smartphones and tablets.

In fiscal 2013, the market environment for the catalysts
and fine products business will likely continue to see challenging
conditions, including stagnation of the markets in Europe andJapan, slowdowns in the growth of such markets as China,
as well as those of emerging countries, and continually highprices of raw materials and fuel.
In this operating environment, while promoting continuous
cost-cutting, in its catalysts operations the JGC Group willconcentrate on enhancing competitiveness by winning steadydomestic project orders and expanding overseas sales for
petroleum refining and DeNOx catalysts; developing sophisticated products in the area of hydrotreating catalysts; andestablishing a recycling system for rare metals, as the raw
materials for hydrotreating catalysts. In addition, we will strive
to be responsive through our chemical catalysts operations tooverseas expansion by our customers as well as to theintegration of petroleum and petrochemical operations by
petroleum refinery companies.
In its fine products operations, JGC will aggressively carryout such activities as establishing the mass production of harddisk abrasives and other new abrasives; expanding sales
channels to overseas markets for optical materials for glasses
and materials for cosmetics; increasing sales of such products
as functional optical film material for smartphones andtablets; and accelerating the development of next-generationand generation-after-next products in the area of positiveelectrode materials for lithium-ion secondary batteries.

JGC CORPORATION Annual Report 201319

Performance Highlights by Business Sector
All figures are on a consolidated basis.

(Millions of yen)(Billions of yen)800

Net Sales (Years ended March 31)

2013

2012

2011

2010

2009

n Oil and Gas Development

Total Engineering Businessand Other Business(Overseas)incl. Total Engineering Businessincl. Other Businessn Catalysts and Fine Products
Total

232,554(232,042)
48,012(22,297)
185,649(178,439)
32,707(14,209)
19,536(471)
43,022(13,738)
15,517(101)
9,129(4,954)

219,574(219,123)
42,191(14,682)
103,299(97,435)
51,426(29,338)
24,825(4,613)43,059(18,693)
21,570(176)
8,974(4,682)

150,688(149,895)
40,292(8,711)
61,512(58,969)
84,377(64,049)
20,869(12,621)
17,255(7,938)25,344(46)
10,851(6,937)59,382(58,753)
110,566(31,894)
42,428(41,122)
111,216(87,611)
20,391(12,359)
8,128(1,502)
16,488(15)
7,827(3,578)51,304(48,470)
89,838(36,182)
36,261(35,627)
145,769(102,095)
25,281(16,230)
35,743(7,836)
20,788(1)
6,654(2,059)586,129(466,254)
576,627
9,501
38,508624,637

514,922(388,746)
506,177
8,745
42,045556,967

411,191(309,170)
401,198
9,992
36,031
447,223

376,430(236,837)——
37,828414,258

411,642(248,503)——
39,270450,912

New Contracts (Years ended March 31)

2013

2012

2011

2010

2009

7,341
(7,004)
214,388(192,197)
249,887(242,363)
46,557(36,137)
43,081
(149)
7,327
(604)
17,258(44)
8,248(4,378)594,091(482,879)
584,450
9,640

53,909(53,322)62,672(34,935)
570,988(569,583)
33,865(10,539)
21,490(5,069)21,472(3,034)
19,610(176)
9,267(5,108)793,278(681,768)
784,642
8,636

264,042(263,483)
67,188(52,129)
180,096(157,267)
24,838(9,288)23,575(8,463)29,255(79)
11,280(94)
17,924(13,351)
618,203(504,157)
608,288
9,914

352,087(351,358)
39,358(13,228)
233,553(233,382)
25,492(6,495)15,038(2,249)48,902(34,325)
11,046(34)
8,069(3,844)
733,549(644,918)——

268,868(268,519)
50,826(7,716)
31,284(21,963)
78,492(60,685)
20,373(13,349)
6,759
(463)
43,376(1)
6,153(1,493)506,135(374,193)
—
—

2013

2012

2011

2010

2009

206,969(206,929)
251,068(235,259)
941,815(918,147)
37,067(35,275)
39,047(2,387)
17,665(11,062)
19,307
(10)
1,168
(367)
1,514,108(1,409,438)
1,512,356
1,752

432,181(431,966)
84,692(65,358)
877,577(854,223)
23,217(13,347)
15,502(2,709)53,361(24,196)
17,565
(67)
2,048
(943)
1,506,146(1,392,813)
1,504,533
1,613

599,271(599,192)
63,830(44,724)
343,687(315,875)
41,055(32,424)
19,681(2,804)
68,137(33,045)
19,532(67)
8,060(6,815)
1,163,256(1,034,949)
1,161,323
1,932

501,414(501,034)
38,024(2,354)
232,881(225,311)
106,953(93,548)
19,541(9,035)49,029(33,449)
33,597
(19)
1,149
(596)
982,594(865,351)
980,664
1,929

227,740(227,460)
110,037(21,798)
44,960(36,255)
212,230(194,217)
27,677(21,927)
9,040(1,410)39,040(0)613(42)
671,341(503,112)——n Petroleum Refining
600

n LNG
n Chemical

400

n Power Generation, Nuclear Power,and New Energy
n Living and General Production

200

0n Environmental Protection,
Social Development, and IT
n Others
2009

2010

2011

2012

2013

(Millions of yen)(Billions of yen)n Oil and Gas Development

900

n Petroleum Refining
n LNG
600

n Chemicaln Power Generation, Nuclear Power,and New Energy
n Living and General Production

300

n Environmental Protection,
Social Development, and IT
n Others
0

2009

2010

2011

2012

2013

Total
(Overseas)incl. Total Engineering Businessincl. Other Business(Millions of yen)(Billions of yen)

Outstanding Contracts (Years ended March 31)

1,600

n Oil and Gas Developmentn Petroleum Refining

1,200

n LNG
n Chemical

800

n Power Generation, Nuclear Power,and New Energy
n Living and General Production

400

0

20

n Environmental Protection,
Social Development, and IT
n Others
2009

2010

2011

2012

2013

Total
(Overseas)incl. Total Engineering Businessincl. Other BusinessPerformance Highlights by Region
All figures are on a consolidated basis.

(Millions of yen)(Billions of yen)

Net Sales (Years ended March 31)

2013

2012

2011

2010

2009

n Japan

119,874

126,176

102,020

139,592

163,138n Asia73,32960,686

31,24028,19764,730500

n Middle East

204,899

205,161

181,683

141,355

175,392

400

n Africa

34,672

44,34240,89930,5337,068

300

n North and South America

12,003

5,140

4,633

18,42576

200n Europe and CIS

1,465

2,122

1,342

5

38

139,884

71,291

49,372

18,3201,196

Total Engineering Businessand Other Business

586,129514,922411,191

376,430

411,642n Catalysts and Fine Products

38,50842,04536,03137,82839,270624,637

556,967

447,223

414,258

450,912

2013

2012

2011

2010

2009

n Japan111,211

111,509

114,045

88,630131,942n Asia293,356

22,333

189,61445,547

14,327n Middle East

122,601

20,339264,921228,985299,650n Africa

1,266

37,883

13,504

134,106

47,609n North and South America

2,802

33,09023,100

9,305

85

330

2,617

2,391

142

38

n Oceania

62,521

565,505

10,625

226,831

12,483

Total

594,091

793,278

618,203

733,549

506,135

2013

2012

2011

2010

2009

n Japan104,670

113,333

128,306

117,243

168,228n Asia391,459

171,432

207,01443,89628,170n Middle East

264,006

346,304

530,201

461,257

409,148n Africa

59,63793,043

102,769

138,964

41,250n North and South America

37,39946,59918,861

349

9,298

298

1,432

1,187

137

0

n Oceania

656,637

734,001

174,914

220,746

15,244

Total

1,514,108

1,506,146

1,163,256

982,594

671,341700
600

n Oceania

100

0

2009

2010

2011

2012

2013

Total

(Millions of yen)(Billions of yen)

New Contracts (Years ended March 31)

800

600

400

n Europe and CIS

200

0

2009

2010

2011

2012

2013

(Millions of yen)(Billions of yen)

Outstanding Contracts (Years ended March 31)

1,600

1,200

800

n Europe and CIS
400

0

2009

2010

2011

2012

2013

JGC CORPORATION Annual Report 201321

Major Projects

Business Sector
Petroleum Refining Projects

ClientPetroleum Refining andPetrochemicals Complex

Nghi Son/Vietnam

Saudi Arabian Oil Co. (Saudi Aramco)

Petroleum Refining

Jazan/Saudi Arabia

Petroliam Nasional Bhd. (PETRONAS)LNG Plant

Bintulu/Malaysia

INPEX Masela, Ltd.

FEED Service for Floating LNG Plant —Petroliam Nasional Bhd. (PETRONAS)

FEED Service for Floating LNG Plant —Anadarko Moçambique Área 1, Limitada

FEED Service for LNG Plant

Cabo Delgado/MozambiquePower Generation, Nuclear Power,and New Energy Projects

Osaki CoolGen Corporation

Integrated coal Gasification
Combined Cycle (IGCC)
Demonstration Plant

Hiroshima/Japan

Living and General Production Projects

Terumo Yamaguchi Corporation

Pharmaceutical-Related Facilities

Yamaguchi/Japan

Environmental Protection,
Social Development, and IT Projects

Japan CCS Co., Ltd

Carbon Dioxide Capture, Storage,
and Compression Facilities

Hokkaido/JapanSHONAN DAIICHI HOSPITAL

Hospital

Kanagawa/Japan

Ras Gas Company Limited

Gas Processing Plant

Ras Laffan/Qatar

Abu Dhabi Gas Industries Ltd.

Gas Processing Plant

Habshan/Abu Dhabi

Sonatrach

Gas Processing Plant

Gassi Touil/Algeria

Groupement Bir Seba

Crude Oil Processing Facilities

Bir Seba/Algeria

PDVSA Petroleo, S.A. (PDVSA)

Heavy Crude Oil Upgrading Facilities Puerto La Cruz/Venezuela

ExxonMobil Asia Pacific Pte. Ltd.

Petroleum Refining-Related Plant

Jurong/Singapore

Chevron Australia Pty Ltd

LNG Plant

Barrow Island/Australia

Sulawesi LNG Development

LNG Plant

Luwuk/Indonesia

JX Nippon Oil & Energy Corporation

LNG Receiving Terminal

Aomori/Japan

Ichthys LNG Pty Ltd

LNG Plant

Darwin/Australia

Esso Highlands Limited

LNG Plant

Port Moresby/Papua New Guinea

General Directorate of Electric Energy
Production in Nassiriyah

Cooling Water Facility

Nassiriyah/Iraq

ContractsAwardedOil and Gas Development Projects

Petroleum Refining Projects

LNG Projects
Contracts
Under WayPower Generation, Nuclear Power,and New Energy Projects

Japan Nuclear Fuel Limited

Vitrification Facility

Aomori/Japan

Living and General Production Projects

TOYAMA CHEMICAL CO., LTD.

Pharmaceutical-Related Facilities

Toyama/Japan

Environmental Protection,
Social Development, and IT Projects

Ibaraki Resident Co-operative Union

Headquarters Building

Ibaraki/Japan

Medical Management Matsuzawa Co., Ltd.

Hospital

Tokyo/Japan

Saudi Arabian Oil Co. (Saudi Aramco)

Utilities, Storage, and Shipping
Facilities for the Central Processing
Facilities

Manifa/Saudi Arabia

Oil and Gas Development Projects

22

Location

Nghi Son Refinery Petrochemical Limited
Liability Company

LNG Projects

Contracts
Completed

Project

Sonatrach

Gas & Oil Separation Facilities

Rhourde Nouss/Algeria

LNG Projects

Petroliam Nasional Bhd. (PETRONAS)

FEED Service for LNG Plant

Bintulu/Malaysia

Chemical Projects

Saudi Polymers Company

Petrochemical Plant

Al Jubail/Saudi Arabia

Living and General Production Projects

DENKA SEIKEN Co., Ltd.

Pharmaceutical-Related Facilities

Niigata/Japan

Environmental Protection,
Social Development, and IT Projects

Japan Freight Railway Company

Hospital

Tokyo/Japan

Houshikai Group

Hospital

Fukuoka/Japan

Medical Co. LTA.

Hospital

Kumamoto/Japan

I. P. C Ltd.

Senior Citizen Complex

Ibaraki/Japan

Major Contracts Awarded

Announced as of March 31, 2010
Business Sector*

ClientProject

Location

Completion

OGD

Abu Dhabi Gas Industries Ltd.

Gas Processing Plant

Habshan/Abu Dhabi

2013

OGD

Sonatrach

Gas Processing Plant

Gassi Touil/Algeria

2013

LNG

Chevron Australia Pty Ltd.

LNG Plant

Barrow Island/Australia—

LNG

Esso Highlands Limited

LNG Plant

Port Moresby/Papua New Guinea—

CHM

Saudi Arabian Oil Co. (Saudi Aramco) and
Sumitomo Chemical Co., Ltd.

Engineering and Project Management Services for the
Feasibility Study

Rabigh/Saudi Arabia—

LIV

DENKA SEIKEN Co., Ltd.

Pharmaceutical-Related Facilities

Niigata/Japan

2011

ENV

I. P. C Ltd.

Senior Citizen Complex

Ibaraki/Japan

2012

ENV

Yushinkai Foundation

Hospital

Kanagawa/Japan

2011

ENV

YASUHARA CHEMICAL Co., Ltd.

Research Center

Hiroshima/Japan2010

Announced as of March 31, 2011
Business Sector*

ClientProject

Location

Completion

OGD

Ras Gas Company Limited

Gas Processing Plant

Ras Laffan/Qatar—

PET

ExxonMobil Asia Pacific Pte. Ltd.

Petroleum Refining-Related Plant

Jurong/Singapore

2014

LNG

Sulawesi LNG Development

LNG Plant

Luwuk/Indonesia

2014

LNG

JX Nippon Oil & Energy Corporation

LNG Receiving Terminal

Aomori/Japan

2015

ENV

Ibaraki Resident Co-operative Union

Headquarters Building

Ibaraki/Japan

2012

ENV

Medical Co. LTA.

Hospital

Kumamoto/Japan

2012

ENV

Hokuyokai Group

Hospital

Hokkaido/Japan2012

Announced as of March 31, 2012
Business Sector*

ClientProject

Location

Completion

OGD

Groupement Bir Seba

Crude Oil Processing Facilities

Bir Seba/Algeria

PET

PDVSA Petroleo, S.A. (PDVSA)

Heavy Crude Oil Upgrading Facilities

Puerto La Cruz/Venezuela—

LNG

Ichthys LNG Pty Ltd

LNG Plant

Darwin/Australia

2016

—

LNG

Petroliam Nasional Bhd. (PETRONAS)

FEED Service for LNG Plant

Bintulu/Malaysia

2013

PWR

Japan Nuclear Fuel Limited

Vitrification Facility

Aomori/Japan

2013

PWR

General Directorate of Electric Energy
Production in Nassiriyah

Cooling Water Facility

Nassiriyah/Iraq

2013

LIV

TOYAMA CHEMICAL CO., LTD.

Pharmaceutical-Related Facilities

Toyama/Japan

2013

ENV

Japan Freight Railway Company

Hospital

Tokyo/Japan

2012

ENV

Houshikai Group

Hospital

Fukuoka/Japan2013* Business Sector

OGD: Oil and Gas Development Projects

PET : Petroleum Refining Projects

LNG :LNG Projects

CHM: Chemical Projects

PWR:
ENV :

Power Generation, Nuclear Power, and New Energy Projects
Environmental Protection, Social Development, and IT Projects

L I V : Living and General Production Projects

JGC CORPORATION Annual Report 201323

Environmental Activities and Contribution to Society

In accordance with the JGC CSR Basic Policy, the JGC Group willcontinue to involve itself in activities that contribute to the well-being
and prosperity of society.
JGC CSR (Corporate Social Responsibility) Basic Policy
JGC is committed to fulfilling its role as a member of society(Corporate Citizenship). We recognize that the foundation of ourbusiness is strengthened by contributing to the prosperity of theworld economy and society; to the healthy preservation of the
global environment; and to sustainable development of society
in harmony with nature.
To meet this commitment, JGC hereby establishes the following principles, which shall be applied, throughout its operations.
1. we shall conduct our business with a full understandingof the importance of quality, safety, and the environment.
2. we shall make contributions to society that draw on theunique strengths of the JGC Group.
3. we shall comply with all legal requirements, both within
Japan and internationally, and conduct our business in afair and transparent manner under a proper corporate
governance system.
4. we shall disclose necessary information to our stakeholders
in a timely and appropriate manner.
5. we shall endeavor to maintain and further improve fairhuman resource management to develop the abilities of ourpersonnel based on mutual trust and responsibility.
6. we shall promote CSr awareness and further develop our
CSr contributions, reﬂecting input from stakeholders.

testing various techniques and improvements at each stage of
our EPC business, and our methods have been evaluated highly
by our clients.
Measures taken to lessen the environmental impact ofoperations at both our head office and the construction sites of
our EPC projects constitute the foundation of JGC’s environmental
management efforts. We have been improving our records every
year for CO2 reductions at the head office and reduction/
recycling of waste products at construction sites.

Considering HSE in Business Activities
The JGC Group executes projects around the world, in sectors
ranging from resource development, oil, natural gas, and petrochemicals to the environment, catalysts and fine chemicals,
pharmaceuticals, water resources, and new energy. Through allthese projects, the JGC Group always strives to fully account forfactors concerning health, safety, and the environment (HSE).
HSE aspects must of course be considered in EPC services, butthey must also be considered in marketing and at all project stages,
from feasibility studies to maintenance and plant decommissioning,as well as in our investment and services businesses. The JGCGroup has added HSE factors to its engineering and management capabilities, as it aims to help create a sustainable society.
In this section, we look at some examples of how the JGCGroup considers the environment at the construction planningand construction stages of project execution.

Environmental Activities
JGC’s Engineering & Construction (E&C) business, which provides
Engineering, Procurement and Construction (EPC) services forenergy-related plants, such as those for oil and natural gas,is closely related to environmental protection in and of itself.
Since the 1960s, JGC has worked on environmental issues
as an engineering contractor, striving to develop cleaner petroleum
products, make its plants more energy-efficient, and eliminate theproduction of hazardous waste. Through to today, our understanding that our business activities can themselves contribute toenvironmental protection has not changed, and it is symbolically
expressed in our corporate philosophy.
Furthermore, we are expanding our environmental protection activities into a wider range of fields outside of our EPC business, including
our new clean development mechanism (CDM) business, which we aredeveloping as part of our enterprise investment initiatives.
Working to provide our clients with plants that place aminimum burden on the environment is also an important partof JGC’s environmental management approach. We engage in

24

n Construction Planning Stage
Meticulous concern for sustainability at plant construction sites
is essential. In many countries, the construction of new plants
requires submission of an environmental impact assessment (EIA)
report for the purpose of minimizing environmental impacts wherever possible. The EIA report describes in detail the impacts that
construction work will have on the air, water, soil, flora, fauna,and marine life. JGC applies environmental management systems
to construction work to ensure that it demonstrates consideration
for the environment in compliance with EIA reports, emphasizing
the following points:
1 We practice strict legal compliance and environmental risk
management by identifying environmental laws and regulations
and environmental considerations that have a bearing on
construction work.
2 We endeavor to increase customer satisfaction and reinforce
communication with stakeholders.
3 We manage environmental risks and endeavor to minimize thepossibility of incidents that may have a negative impact on
the environment by anticipating, preparing for, and speedily
responding to emergencies.
Before starting construction work, we consider the above
matters and unfailingly perform the following preliminary work:
1 Identifying environmental impacts of the construction work
2 Setting environmental objectives and targets for theconstruction work
3 Preparing an environmental management plan for theconstruction work
4 Providing new workers with environmental educationand training
We incorporate the Zero Emissions Initiative 2015, a JGCGroup independent environmental conservation initiative, into thispreliminary work and thoroughly confirm environmental conservation measures before starting construction.

their primary work and review target-setting procedures.
These discussions established the following shared awareness:
It is important to strive for the development of a sustainable
society by addressing environmental problems through ourcore business and to link this with the creation of corporate
value and greater competitiveness.
Amid rising global concern over environmental problems, JGC
has been helping to address environmental issues directly andindirectly through its core business activities. JGC recognizes
that its pursuit of sustainability must be undertaken in its corebusiness.
JGC is mindful of the following points for achieving continuous
development.
1 Maintaining and managing operations so as not to cause
environmental problems.
2 Making continuous improvements so as to raise earnings
while taking environmental concerns into consideration.

n Construction Stage
Construction work by JGC is preceded by thorough considerationof possible effects on the environment at the planning stage.
Matters decided in the Construction Environmental
Management Plan include the project environmental policy, whichorganizations and persons will be responsible for environmentrelated work, what environmental protection measures will be put
in place, guidelines for environmental performance monitoringand measurement, emergency prevention and mitigation procedures, environmental monitoring, and monthly reporting. Following
the start of construction, a review of the environmental aspectsof the project (the relationship between construction work and theenvironment) is conducted to confirm whether the construction
work differs from the plan. If any deviations are found, the plan isrevised to ensure that there are no omissions in the environmental
considerations included in the environmental management
framework.

Continuous Improvement of Environmental
Management Systems
In December 2003, JGC obtained international standard ISO
14001 certification for its environmental management systems
from Lloyd’s Register Quality Assurance (LRQA).
After two renewals, JGC completed the fiscal 2011 maintenanceexamination in September 2011, which included overseas sites.

n Making Environmental Improvement Activities
More Applicable to Core BusinessIn the past, environmental improvement activities at JGC’s headquarters have tended to center on the reduction of waste, paper,and electricity consumption. For this reason, the challenge for
JGC has been to shift focus to environmental improvement activities more related to its core business. In order to address thischallenge, all department heads took part in discussions about
how to identify opportunities for environmental conservation in

Based on this shared understanding, JGC has continued to
explore the significance of environmental targets and goals, andit has promoted environmental management activities along thefollowing lines:
Environmental management activities based on environmental
targets and goals are business operations in themselves, rather
than separate activities.
The operating policies of divisions and departments are set
with the aim of raising the actual performance of the organization and business operations.
The environmental targets are to be considered as quality targets.
In this way, JGC’s environmental management systems areloosely linked to the quality management system, and JGC promotes environmental improvement activities that are applicable
to its core businesses.

Environmental Management Systems
ChairmanPresident
HSE Committee
Division Division

Quality
Assurance, Safety& Environment
OfficeEngineering

EMS Working Group

Working Group

Project Execution

Office Activities

Procurement

Constructionn Construction Waste Recycling
JGC aims to minimize its final disposal amount of waste throughrigorous implementation of the Zero Emissions Initiative 2015. In
fiscal 2012, the final disposal rate for construction work in Japanwas 4.2%. Each site uses industrial waste management survey

JGC CORPORATION Annual Report 201325

forms prescribed by JGC to confirm the recycling rate with companies taking charge of intermediate waste disposal before contracting with them. Because there is a large difference among
waste disposal companies in terms of the disposal method forconstruction sludge and the recycling rate in particular, an
extensive comparative analysis of each company is conducted
regarding the disposal methods and disposal costs. Furthermore,
appropriate plans for separating waste are drawn up before thecommencement of construction based on the nature of thewaste generated. During construction, efforts are made to
improve the recycling rate by rigidly enforcing waste separationin accordance with the plan.
Donation of collected foreign coins to UNICEF

Social Contribution Activitiesn Basic Policy for Social Contribution Activities

Participating in the Post-Tsunami Monitoring Project

The JGC Group has declared that it will contribute to thesustainable development of society and the global environment
in the JGC CSR Basic Policy. The Group has specified four key
fields for realizing this and for conducting suitable social
contribution activities.

In order to enable effective contributions in the fields of theenvironment, education, science and technology, and community
contribution, JGC has begun carrying out collaborative activities
with NGOs that suit particular objectives. As a part of thisinitiative, JGC is cooperating with Earthwatch Japan as amember company. In the Tohoku region of Japan, which wasdevastated by the Great East Japan Earthquake in March 2011,
Earthwatch Japan launched the Post-Tsunami Monitoring
Project, which is intended to give due consideration to thenatural environment by promoting biodiversity.
In the project, Tohoku University, NPOs, companies, andprivate citizens are collaborating to monitor the ecosystems in
the tsunami-devastated region. Looking ahead to the futurebounty of the ecosystems, which the local agriculture, forestry,
and fisheries industries should enjoy, the goal is to achieve asustainable regional recovery.
In fiscal 2012, as in fiscal 2011, JGC strongly endorsed thisactivity. In August 2012, one of our employees participated ina “living nature survey of devastated wetlands” that was held
in Ishinomaki City and on Sabusawa Island, which is part of
Shiogama City, in Miyagi Prefecture. In the survey, participants
searched for living matter on the surface and in the subsoil of thewetlands, and they recorded the species that appeared. By comparing the data with pre-disaster data, the data will be put togood use in impact assessments and enable the preservationof places with high species diversity as well as the protection ofplaces where there are many rare species. The Company’s participant in the project commented that the experience was very
worthwhile. In particular, through the activity, he was able tounderstand the importance of ecosystems and sensed the needto carry out recovery measures that do not emphasize only
short-term efficiency but that give due consideration to long-term
and multifaceted perspectives as well as to biodiversity.
As this project will be carried out over a span of 10 years,
JGC certainly intends to continue its active support.

1. environment
Actively contribute to environmental conservation
2. education
Support the professional development of future engineers
3. Science and Technology
Support science and technology as the basis for sustainable development
4. Community Contribution
Contribute to the sustainable development of the communities
where we conduct business

Here, we introduce actual activities in the areas of education,science and technology, and community contribution.

Campaign for Donating Foreign Coins and Used Stamps
As a social contribution activity that employees can undertakethemselves while working, JGC has permanently installed
donation boxes for the collection of foreign coins left over fromoverseas business trips as well as used stamps from materials
received in the mail.
Coins from a variety of countries are contained in the donation box for foreign coins, which shows that our employees are
doing business throughout the world. We donate the collectedcoins to UNICEF in lump sums, and, after donating such coins
to the Japan Committee for UNICEF in November 2012, wereceived a letter of thanks for our efforts.
Similarly, used stamps in all kinds of designs received fromaround the world are donated to the Make-A-Wish Foundation,
an international volunteer group, thereby being put to good use
in activities that support children stricken with serious diseases.

26

Corporate GovernanceImproving Our Corporate Value by Fulfilling Our Social Responsibilities
JGC is keenly aware of the importance of proper corporate governance. Recognizing the need to foster that awareness inour corporate culture and climate, we have formulated the JGC Corporate Philosophy. Through awareness-raising, education, and training, we will work to win the public’s trust and maintain harmony with society in our corporate activities.
Under the JGC Corporate Philosophy, we are working to increase corporate value and realize the principles set out inthis philosophy while keeping corporate social responsibility in mind. At the same time, we make it a rule to strive forfairness and transparency in our corporate activities, in accordance with our Code of Conduct.

Corporate Governance Frameworkn Board of Auditors

n Executive Officer System

JGC has adopted the “company with internal auditors” model topreserve the effectiveness of corporate governance by strengthening the framework of conducting audits by corporate auditors.
At present, the Board of Auditors has four corporate auditors,
including two outside appointments. In collaboration with theInternal Audit Department and the accounting auditor, corporate
auditors attend meetings of the Board of Directors and otherimportant meetings, offer necessary comments when appropriate, and further improve corporate governance through hearings
regarding the business execution of the Company’s divisions andthrough surveys of domestic and overseas offices and plants.

JGC has introduced an executive officer system, which clarifies
the division of management decision-making and oversightfunctions from executive functions. This has further enhanced
management efficiency and strengthened our executive
accountability system.

n Board of Directors
The Board of Directors is headed by the Chairman of the Boardof Directors and comprises 15 board members, including one
outside board member, and four corporate auditors, including
two outside corporate auditors. In principle, the Board of
Directors meets twice a month.

n Meetings for the Execution of Business Operations
JGC has the Director and Executive Officer Committee, whichmeets once a month in principle for the purposes of sharing
information regarding the status of management policies andreporting/confirming the status of operations. The Chairman of
the Board of Directors heads this committee, which is composedof directors, executive officers, and corporate auditors.
The Management Strategy Committee meets once a week
in principle to examine important matters for JGC and the JGCGroup relating to management strategy. The Chairman Emeritusof the JGC Group heads this committee, which is comprised of
directors, corporate auditors, and other members.
JGC has also established the Operations Steering Committee
to consult and make decisions related to the execution of operations of JGC Corporation and the JGC Group. Chaired by the
President, this committee includes corporate auditors and otherindividuals selected by the President. The committee meets twicea month in principle.
In addition, the Nominating Committee and the Assessment
Committee have been established to enhance fairness andtransparency in the selection of executive personnel and in thedetermination of compensation issues. The Nominating Committee
and the Assessment Committee each meet once a year in principle.

n Independent Auditor
The certified public accountants who audit JGC’s accounts are
Kazutoshi Isogai, Yoshihisa Uchida, and Yoshinori Saito of KPMG
AZSA LLC. Eight other CPAs and nine other individuals assist in
carrying out these audits.

Status of the Internal Control Systemn Internal Control System
At the meeting of the Board of Directors held on March 27, 2006,
the Basic Policy on Internal Control Systems was adopted byresolution, and it has been amended as necessary thereafter.
JGC has established the Internal Auditing Office to monitor,
evaluate, and improve the effectiveness of the internal control
systems of JGC and of the Group as a whole as well as to carryout individual audits where necessary. Additionally, JGC has
created management authority regulations that specify theauthority and responsibilities of all management personnel,
thereby clarifying the system of accountability for corporate
management and executive functions. JGC has also establishedGroup management regulations for each Group member firm.

JGC CORPORATION Annual Report 201327

n Compliance
In order to conduct sustainable business development as amember of the international community, JGC believes that it isessential for each and every employee to conduct business inconformity with corporate ethical standards as well as to observe
local laws and regulations not only in Japan but also overseas.
To this end, JGC has formulated the Corporate Philosophy forthe entire JGC Group, the Principles of Business Conduct, andthe Code of Conduct manual as well as anti-bribery and otherrules and policies. Furthermore, by providing regular opportunities
for education and training on the various laws and regulations,
JGC has raised the compliance awareness of each of its employees.
JGC recognizes that the level of compliance demanded of
global companies will increase even more in the future. In orderto respond to demands like this from international society, JGC
is strengthening its internal compliance system by expanding its
specialist departments responsible for compliance and constantly
developing, implementing, monitoring, and improving its
compliance programs.
In addition, based on our recognition of the importanceof building a compliance system that also encompasses JGCGroup companies in Japan and overseas, while fostering close
coordination with the compliance officers of each company, JGC
constantly develops, implements, monitors, and improves compliance programs that are uniform and consistent throughout theentire JGC Group.

n Corporate Information Disclosure
JGC discloses information in accordance with the statutory
disclosure system based on the Japanese Financial Instruments
and Exchange Act. In addition, in accordance with the timely
disclosure system at Japanese financial instruments exchanges,
JGC promptly discloses important company information throughits Public Relations & Investor Relations Department. JGC also
proactively discloses corporate information falling outside thescope of such regulations and system through news organizations
and other media, in cases where it determines that disclosure
is desirable.

n Status of the Risk Management System<Corporate Risk Management>
JGC has established the Risk Management Committee as part ofa comprehensive risk management system designed to systematically identify risks throughout the Group, particularly company
risk related to management, disasters, incidents, and society.
The Risk Management Committee meets as necessary.
<Project Risk Management>
Project risk management is conducted in three broad stages:
1 the project selection stage, 2 the estimate and bidding stage,and 3 the execution stage.

28

1 Project Selection StageThe Global Marketing Division is constantly gathering a wide
range of project information based on various factors, such as
region, client, and technical field, and activities to obtain orders
are conducted based on the study and evaluation of thefollowing points:• Project size (value)• Technical expertise and experience required• Country risk
• Allocation of engineers• Competitive environment, etc.
The results of these studies and evaluations are used indetermining JGC’s level of interest in the respective projects.
2 Estimate and Bidding Stage
The Project Risk Review Meeting analyzes project-specific risks.
The main risk management items are as follows:• Clarity of the project plan and scope of responsibility• Client’s project funding plan and project execution policy• Level of technology required and degree of difﬁculty• Price and supply-demand trends for materials, machinery,and labor• Degree of difﬁculty in meeting deadlines• Existence of excessive contractual obligations• Competitiveness of bidding environment• Appropriateness of the project execution plan
A detailed estimate policy is drawn up and an estimate is
created based on this risk analysis.
3 Execution Stage
Problems and other matters affecting the budget and timing that
occur during execution of the project are reported in a timely
manner, and problem areas are analyzed.
If improvement is needed, quick and smooth project
management is supported through instructions and assistancedesigned to bring about appropriate improvements.
<Crisis Management>
Regarding crisis management, based on its Basic Procedures
for Crisis Management and on cooperation with all interested
parties, including the government and government offices, with
the Security Management Section playing a central role, JGC
strives to strengthen the information collection and analysis thatit conducts at ordinary times to improve its various preventive
measures and further strengthen its security functions, especiallythose for responding to emergency situations.
<Handling of Personal Information>
The JGC Group has established the Personal Information
Protection Policy and the Personal Information Protection
Regulations to build a system for managing personal information
centered on those employees with duties that involve thehandling of this information.

n Executive Compensation
JGC’s basic policy on executive compensation is to secure themanagement personnel necessary for enhancing the global
competitiveness of JGC as an engineering contractor andcontinuously raising its corporate value. Executive compensationis set within the bounds of the remuneration cap stipulated by aresolution passed at the 113th General Meeting of Shareholders
held on June 26, 2009.
Compensation for the Company’s directors comprises fixedamount remuneration and performance-based remuneration.
Furthermore, this remuneration framework is structured so that
directors can approach their responsibilities from a medium-tolong-term perspective, considering that a number of years are
required from winning an order through to project completionin the EPC business, JGC’s main business. The fixed-amountremuneration is determined according to the position andresponsibilities of each director. The total amount of the performance-based remuneration is limited to a maximum of 1% of the
net income of the fiscal year under review, and each director’s
remuneration is determined by reflecting the contributions of thedirectors to the successful accomplishment of their responsibilities
and the fiscal year performance and to provide an incentive forthe improvement of business performance. Each director’s
contribution is determined after deliberation by the Assessment
Committee to ensure the objectivity of the evaluation.

Corporate Governance System*

The compensation for corporate auditors is determined withina framework centered on fixed-amount remuneration in order tohelp guarantee the appropriateness of audits as an independent
mechanism that ensures suitable corporate governance.
JGC abolished the retirement benefit system for directors andcorporate auditors with the close of the 108th General Meetingof Shareholders held on June 29, 2004. It was also resolved that
directors and corporate auditors who remained in office after
the close of the same meeting would be paid retirement benefit
allowances when they retire for their period in office throughto the abolition of the retirement benefit system.

Remuneration breakdown
Fixed-amountremuneration

Total
remuneration
available

Category

Numberofrecipients

Performance-based
remuneration

Total
remuneration
paid

Numberofrecipients

Total
remuneration
paid

18 directors¥591.20 million

18¥466.80 million

15¥124.40 million

3 auditors(excluding outside
auditors)¥33.20 million

3¥31.20 million

2¥2.00 million

3 outside executive
personnel(3 outside auditors)¥31.28 million

3¥29.28 million

3¥2.00 million

Note: The annual compensation limit for directors is ¥690.00 million; the annualcompensation limit for auditors is ¥88.00 million.

denotes “Direct” and “Report”

General Meeting of Shareholders
Appoint / Dismiss
Disclose / Explain

Appoint / Dismiss

Board of Auditors

Independent Auditor

Audit
Nominating Committee

Appoint / Dismiss

Audit

Board of Directors

Assessment Committee

Director and Executive Officer Committee
Management Strategy Committee
Operations Steering Committee

Business Divisions / Sections

Internal Auditing Office
Legal & Compliance Office
Risk Management Committee
Security Management Section

Subsidiaries and Affiliates

JGC CORPORATION Annual Report 2013

29

JGC’s Top Management
Board of Directors, Auditors, and Executive Officers
As of July 2013

Chairman emeritus of JGC Group

Chairman and representative Director

President and representative Director

Yoshihiro Shigehisa

Keisuke Takeuchi

Koichi Kawana

executive Vice President

executive Vice President and Chief Financial
officer and Senior General Manager,
Corporate Administrative& Financial Affairs Division

executive Vice President

Tadashi Ishizuka

Yutaka Yamazaki

Masayuki Sato
Senior Managing Director

Tsutomu Akabane
Senior General Manager,
No. 2 Project Division

Managing Directors

Hiroyuki Miyoshi
General Manager,
No. 1 Project Division

Shigeru Endo
Outside Director

executive officers

Tadao Takahashi

President,
JGC Gulf International Co. Ltd.

Shigeru Abe

Kazuyoshi Muto

General Manager, No.1 Project Division

Takahiro Kobori

General Manager, No. 1 Project Division

Managing Director,
JGC (MALAYSIA) SDN. BHD.

Takashi Yasuda

Yasutoshi Okazaki

Toru Kikuchi

Masato Kato

Yasumasa Isetani

Yutaka Yamanaka

Nobuhiro Kobayashi

Hiroyasu Fukuyama

Hiroshi Bunazawa

Kenichi Yamazaki

Hitoshi Kitagawa

Tokutaro Nomura

Hideaki Miura

Senior General Manager,
Engineering Division

Satoshi Sato

Senior General Manager,
No. 1 Project Division

Directors
Senior General Manager,
Business Promotion & Execution Division

Senior General Manager,
Global Marketing Division

Senior General Manager,
No. 3 Project Division

Yasushi Momose

General Manager,
Global Marketing Division

Takehito Hidaka

General Manager,
Global Marketing DivisionCorporate Auditors

Yukihiko Shimizu
Minoru Sakuma*
Toyohiko Shimada
Masao Mori** Outside Auditor

Senior General Manager,
Technology Innovation Center

General Manager,
Global Marketing Division

General Manager,
Engineering Division

Senior Manager, Business Strategy Office,No. 1 Project Division

President,
JGC Energy Development (USA) Inc.

Executive Vice President,
JGC Gulf International Co. Ltd.

General Manager, No. 2 Project Division

Yasuhiro Okuda

General Manager, No. 2 Project Division

Senior General Manager, Quality Assurance,
Safety & Environment Office

Shigeo Kobayashi

Nobutaka Nohara

General Manager, No. 2 Project Division

Yoshikatsu Nishida

General Manager,
Business Promotion & Execution Division

Hisakazu Nishiguchi
Senior General Manager,
Legal & Compliance Office30

Project Director,
NSRP Project, No. 1 Project Division

General Manager, Corporate Administrative& Financial Affairs Division

Akio Yoshida

General Manager,
Global Marketing Division

Toru Amemiya
General Manager,
Engineering Division

Financial Section

Contents
32 Six-Year Summary—Consolidated

61 Internal Control Report

33 Analysis of Performance and Financial Position

62 Independent Auditor’s Report

37 Risks Impacting Operations

63 Six-Year Summary—Non-Consolidated

38 Consolidated Balance Sheets

64 Non-Consolidated Balance Sheets

40 Consolidated Statements of Income

66 Non-Consolidated Statements of Income

41 Consolidated Statements of Comprehensive Income

67 Non-Consolidated Statements of Changes in Net Assets

42 Consolidated Statements of Changes in Net Assets

68 Notes to Non-Consolidated Financial Statements

43 Consolidated Statements of Cash Flows

74 Independent Auditor’s Report

44 Notes to Consolidated Financial Statements

Program Management Contractor&

Investment Partner

JGC CORPORATION Annual Report 201331

Six-Year Summary—Consolidated
For the six years ended March 31.
Yen amounts are in millions except per share data.

2013

2012

2011

2010

2009

2008

¥ 624,637¥ 556,967¥ 447,223¥414,258¥450,912¥551,062

Operating Income

64,12367,05463,55941,91952,00344,896Net Income

46,17939,111

25,478

27,112

31,54330,020Total Current Assets

460,232

376,173

319,464

283,538

335,220324,617

Total Current Liabilities

262,439

205,772

174,293

137,728208,023

217,339

Working Capital

197,793

170,401

145,171

145,810

127,197

107,278

Current Ratio

175.4%

182.8%

183.3%

205.9%

161.1%

149.4%Net Property and Equipment

71,70864,88764,634

66,05866,50968,450Total Assets

628,758

526,169

468,503430,176

480,279

466,773

9,363

7,591

6,624

21,92623,25517,300Total Net Assets

336,084

291,042

264,483

246,141

224,488

207,537

New Contracts

594,091

793,278

618,203

733,549

506,135

402,352

1,514,108

1,506,146

1,163,256

982,594

671,341

632,827

182.91154.90100.83107.25124.76118.33

Cash Dividends per Share (in yen)

45.5

38.5

30.0

21.0

30.0

21.0

Number of Employees

6,721

6,524

5,826

5,795

5,739

4,723

Net Sales

Long-Term Debt, Less Current Maturities

Outstanding Contracts
Net Income per Share (in yen)32

Analysis of Performance and Financial Position

Our View of the Operating Environment
In the fiscal year under review, ended March 31, 2013, the Japanese economy showed signs of recovery on the strength of suchfactors as improvement in the export environment and the positive effects of economic policies and monetary measures. Nonetheless,due to such factors as the European sovereign debt crisis, which still has no solution in sight; the financial problems in the
United States; and the concerns over a growth slowdown in the Chinese economy, the world economy was in the midst of
uncertainty with continuing risk of an economic downturn.
In oil and gas producing countries, with which the total engineering business promoted by the JGC Group is most deeply
linked, due to increasing energy demand resulting from world population growth and emerging nations’ economic growth, there
continue to be many plans for investments in oil and gas resources. In particular, in the Middle East and North Africa, in addition
to oil and gas processing projects, there are many plans for petroleum refining projects and gas chemical projects aimed atincreasing the added value of oil and gas. Furthermore, in Southeast Asia, East Africa, and Russia, since demand for LNG (liquefied natural gas) is expected to increase in the future primarily in Asian markets, including Japan, there are numerous plans for
LNG projects. Meanwhile, in North America, due to the progress in shale gas development, there are many plans for mainly LNG
and gas chemical projects that use cheap and abundant shale gas as feedstock, and expectations are high for future realizationof the projects.

Results of Operations
Consolidated net sales for the Group in the year ended March 31, 2013, were ¥624,637 million, up 12.1% year on year.
Consolidated operating income decreased 4.4%, to ¥64,123 million. Consolidated net income increased 18.1%, to ¥46,179 million.

■ Net Sales
Reflecting steady progress in projects accounted for on a percentage of completion basis, consolidated net sales increased¥67,670 million year on year, to ¥624,637 million.

■ Cost of Sales and Selling, General and Administrative Expenses
Cost of sales was ¥540,164 million, increasing ¥69,937 million year on year in line with higher net sales. Selling, general andadministrative expenses increased ¥664 million, to ¥20,350 million.

■ Operating Income
Despite the increase in net sales, operating income decreased ¥2,931 million year on year, to ¥64,123 million.

■ Other Income (Expenses)
Other income (expenses) decreased ¥6,235 million, from a net gain of ¥4,425 million in the previous consolidated fiscal year, toa net loss of ¥1,810 million. This ¥6,235 million decrease is because, with regard to investments in subsidiaries and affiliates in
the previous fiscal year, JGC recorded loss on allowance for investment, which was considered necessary in view of suchfactors as financial position, to provide for losses that could arise in the future. As a result, income before taxes on income andminority interests in earnings of consolidated subsidiaries decreased ¥9,166 million year on year, to ¥62,313 million.

■ Taxes on Income
Due mainly to a tax refund, income tax and other taxes decreased ¥5,028 million year on year, to ¥20,377 million. Meanwhile,deferred taxes on income were minus ¥4,290 million, and tax expenses (net), were ¥16,087 million.

JGC CORPORATION Annual Report 201333

■ Minority Interests in Earnings (Losses) of Consolidated Subsidiaries
Minority interests, primarily consisting of earnings allocated to minority shareholders of the consolidated subsidiary JGC-ITC
Rabigh Utility Co., Ltd., decreased ¥433 million year on year to ¥47 million.

■ Net Income
As a result of the above, net income increased ¥7,068 million, to ¥46,179 million.

Segment Information■ Reporting Segment
Net sales in the total engineering business rose ¥70,450 million, to ¥576,627 million, the result of steady progress with projects
accounted for on a percentage of completion basis. Segment profit was ¥58,874 million.
Net sales in the catalysts and fine products business fell ¥3,537 million year on year, to ¥38,508 million. This occurredbecause demand for chemical catalysts decreased, even though sales in our fine products operations increased on strong
growth in hard disk abrasives. Segment profit decreased ¥2,556 million, to ¥4,291 million. The total engineering businessaccounted for 92% of net sales and 91% of operating income.

Financial Position
Consolidated total assets at March 31, 2013, totaled ¥628,758 million, a year-on-year increase of ¥102,589 million.
Total liabilities increased ¥57,547 million, to ¥292,674 million.
Total net assets were ¥336,084 million, up ¥45,042 million year on year.
The shareholders’ equity ratio was 53.4%.
Balance sheet indicators for the Group were as follows:
March 31, 2011

March 31, 2012

March 31, 2013

Current ratio (%)

183

183

175

Fixed asset ratio (%)

56

52

50

Notes: Current ratio: Current assets / Current liabilities
Fixed asset ratio: Net property and equipment + Total other assets / Total net assets* All indicators are calculated using consolidated financial figures.

Net Sales by Reporting Segment(Billions of yen)

700
600

576.6
506.1

500
400

411.6
364.8

401.1

300
200
100
0

39.2

2009

37.8

2010

42.0

36.0

2011

2012

■ Total Engineering Business■ Catalysts and Fine Products Business

34

38.5

2013
Effective from the fiscal year ended March 31, 2011, the Company adopted “Accounting Standard for Disclosures about Segmentsof an Enterprise and Related Information” and the “Guidance on Accounting Standard for Disclosures about Segments of an Enterpriseand Related Information.” Figures for the fiscal year ended March 31, 2010, have been retroactively restated.

Cash Flow
In the fiscal year under review, cash and cash equivalents increased ¥62,221 million year on year, to ¥284,777 million.
Net cash provided by operating activities was ¥85,010 million, mainly reflecting ¥62,313 million recorded in income before
taxes on income as well as customer advances for projects in hand and payment of income taxes.
Net cash used in investing activities was ¥28,371 million, primarily due to investments in new fields.
Financing activities used net cash of ¥3,695 million, mainly because of new borrowings and cash dividends paid.
Cash flow indicators for the Group are as follows:
March 31, 2011

March 31, 2012

March 31, 2013

Shareholders’ equity ratio (%)

56.3

55.2

53.4

Shareholders’ equity ratio (market basis, %)

95.5

104.9

123.1

Years to redemption of liabilities (years)

0.4

0.1

0.2

Interest coverage ratio (times)

86.2

145.3

338.6

Notes: Shareholders’ equity ratio: (Total net assets – Minority interests) / Total assets
Shareholders’ equity ratio (market basis): Total market value of shares / Total assets
Years to redemption of liabilities: Interest-bearing liabilities / Net operating cash flow
Interest coverage ratio: Net operating cash flow / Interest expenses* All indicators are calculated using consolidated financial figures.
* Interest-bearing liabilities include all liabilities reported on the Consolidated Balance Sheets on which interest was paid. Net operating cash flow is taken from cash
flows from operating activities, as reported in the Consolidated Statements of Cash Flows. Interest paid is taken from the amount of interest paid as reported in theConsolidated Statements of Cash Flows.

Analysis of New Contracts
In the fiscal year under review, orders received were ¥594,091 million, nearly achieving the initial target of ¥600 billion.
A breakdown of new contracts by business sector and region is as follows:

New Contracts by Business Sector(Billions of yen)March 31, 2012

March 31, 2013

March 31, 2013
Percentage of
New Contracts

Oil and gas development projects

53.9

7.3

1.2%

Petroleum refining projects

62.6

214.3

36.1%

LNG projects

570.9

249.8

42.1%

Chemical projects

33.8

46.5

7.8%

Other projects

71.8

75.9

12.8%

Shareholders’ Equity and Shareholders’ Equity Ratio

Free Cash Flows(Billions of yen)(Billions of yen)

(%)
57.1

400

56.3

55.2

53.4

290.4

300
245.8

45

263.9

100
79.1

80

335.5

46.6

223.8

60

60

56.6

48.3

40

200

30

20

10.1

0
–20
100

15

–40

–45.0

–60
0

2009

2010

2011

2012

2013

0

–80

2009

2010

2011

2012

2013

■ Shareholders’ Equity■ Shareholders’ Equity Ratio

JGC CORPORATION Annual Report 201335

New Contracts by Region(Billions of yen)March 31, 2012

March 31, 2013

March 31, 2013
Percentage of
New Contracts

Japan

111.5

111.2

18.7%

Asia

22.3

293.3

49.4%

Africa

37.8

1.2

0.2%

Middle East

20.3

122.6

20.6%

Oceania and Others

601.2

65.6

11.1%

Future Outlook
In the JGC Group’s total engineering business, capital investments by customers will likely remain strong in the future for thefollowing reasons. First, in plant markets, including the Group’s key markets of the Middle East, Southeast Asia, Russia (CIS),
and North America, energy demand is increasing in line with population growth and economic growth in emerging nations.
Second, LNG demand is increasing in Asian markets, especially Japan. Nonetheless, due to continuing price competition withour competitors mainly in Asia and Europe, the competitive environment is expected to continue to be challenging from the next
fiscal year onward as well. Amid these conditions, in fiscal 2013, the year ending March 31, 2014, the Group will continue its
Companywide initiatives to strengthen its cost-competitiveness in all processes of the EPC business. At the same time, theGroup will maintain a solid competitive position in fields where it has a highly competitive edge, such as LNG, develop newmarkets, and steadily execute sophisticated projects, such as those that apply modular construction. As for the Company’s
consolidated subsidiaries, as of July 2013, JGC Plant Solutions Co., Ltd., and JGC PLANTECH Co., Ltd., merged to establish
JGC Plant Innovation Co., Ltd. By integrating our EPC and plant maintenance business and our facilities inspection and QC(quality control) technology, we will construct a framework for providing consistent services to our clients, thereby promoting the
JGC Group’s business expansion domestically and overseas. Furthermore, we will carry out business investments not only in thefields of power generation, new energy, desalination, water, the enviroment, and resource development but also in such new
fields as urban infrastructure development.
With regard to the catalysts and fine products business, over the past few years, the business environment has changed
markedly, largely due to such factors as the stagnation of markets in Europe and Japan, slowdowns of economic growth inChina and other emerging markets, continually high prices of feedstock and fuel, and the actualization of risk in rare metals andrare earths.
In its catalysts operations, the JGC Group will concentrate on enhancing competitiveness by winning steady orders fordomestic projects and expanding sales to overseas markets in the areas of petroleum refining and DeNOx catalysts; developing
sophisticated products in the area of hydrotreating catalysts; and establishing a recycling system for rare metals, which are afeedstock. Furthermore, the Group will strive to respond to the overseas expansion by chemical catalyst customers as well as tothe integration of petroleum and petrochemical operations by petroleum refinery companies, with the goal of expanding its sales.
In its fine products operations, the JGC Group will aggressively carry out such activities as establishing the mass productionof lithium-ion battery polishing agents; expanding sales channels to overseas markets for optical materials for glasses andmaterials for cosmetics; increasing sales of products for smartphones and tablets; and accelerating the development of
next-generation and generation-after-next products in the area of cathode (positive-electrode) materials.

36

Risks Impacting Operations

The following matters regarding risks associated with the businesses of the JGC Group could potentially have an effect on the
judgments and decisions of investors.
Forward-looking statements are based on the best information available and give consideration to the overall activities of the
JGC Group as of March 31, 2013.

1. Risks with Overseas Causes
Overseas businesses generate more than 80% of the JGC Group’s total net sales. Such businesses are subject to country risks,
including political unrest, wars, revolutions, civil strife, terrorism, changes in economic policy, default on foreign debts, andchanges in exchange and taxation systems. To minimize the effects on its businesses arising from these risks, the JGC Group
continuously reviews and reinforces its risk management system, carries trade insurance, recovers receivables as early in a
project as possible, forms joint ventures, and takes various other steps. However, when changes in the business environment
are more radical than anticipated, and projects are canceled, suspended, or delayed, the possibility of a negative impact on
JGC’s performance arises.

2. Risks Affecting Project Execution
Almost all contracts for projects in which the JGC Group participates are lump sum, full-turnkey contracts. However, to enable
hedging of some of the risks in these contracts, the Group uses cost-plus-fee contracts and contracts based on the cost
disclosure estimate method, depending on the project. The Group draws fully upon its past experience to anticipate andincorporate into each contract provisions for dealing with the risks that threaten to arise during its execution. When confronted
with unforeseen impediments to the execution of a project, including sudden steep rises in the costs of materials, equipment,machinery and labor, outbreaks of disease, and natural disasters, or if the JGC Group’s actions or a problem during project
execution should cause a major accident, the economics of a project can be adversely affected, which can have a negative
impact on the JGC Group’s performance.

3. Risks Affecting Investing Activities
The JGC Group primarily invests in resource development businesses, especially those for oil and gas; new fuels businesses;
and water and power generation businesses; as well as urban development and infrastructure development businesses.
In executing new investments and reinvestments, the Group carries out risk assessments, as well as the monitoring of existing
businesses, thereby conducting appropriate risk management.

4. Risks of Changes in Exchange Rates
Almost all of the income from JGC Group sales generated by overseas businesses is paid in foreign currencies. To hedge theassociated exchange rate risk, we have introduced countermeasures, including signing project contracts denominated in
multiple currencies, conducting overseas procurement, ordering in overseas currencies, and entering into foreign exchange
contracts. However, sudden exchange rate fluctuations could negatively affect the JGC Group’s performance.

JGC CORPORATION Annual Report 201337

Consolidated Balance Sheets
JGC CORPORATIONMarch 31, 2013 and 2012

Millions of yen

Thousands of
U.S. dollars(Note 1)

2013

2012

2013

Cash and deposits (Notes 3, 13 & 18)¥259,777¥195,056$2,762,116

Marketable securities (Notes 9, 13 & 18)

25,00027,500265,816

Notes and accounts receivable (Notes 2, 15 & 18)

96,57087,2481,026,794

Inventories (Note 4)

44,38536,862471,930

Deferred tax assets (Note 12)

15,06911,516160,223

Other current assets (Notes 2, 10 & 18)

19,52318,097

207,581

(92)

(106)

(978)

460,232

376,173

4,893,482

Land (Notes 14, 17 & 19)

25,97725,998276,204

Buildings and structures (Note 17)62,31658,516

662,584

Machinery and equipment

52,52351,052

558,458

Construction in progress

7,720

2,430

82,084

Other

2,573

1,655

27,358151,109

139,651

1,606,688(79,401)(74,764)(844,242)

71,70864,887

762,446

Investments in unconsolidated subsidiaries and affiliates (Note 9)33,32436,920354,322

Marketable and investment securities (Notes 9 & 18)

44,57829,952473,982Long-term loans receivable (Notes 2 & 18)

1,412

1,598

15,013

Deferred tax assets (Note 12)

2,667

4,486

28,357

Other

14,837

12,153

157,757

96,818

85,1091,029,431¥628,758¥526,169$6,685,359

AssetsCurrent Assets:

Allowance for doubtful accounts
Total Current Assets

Property and Equipment (Note 3):Less accumulated depreciation
Net Property and Equipment

Other Assets:

Total Other Assets
Total Assets
The accompanying notes are an integral part of these statements.

38

Liabilities and Net Assets

Millions of yen

Thousands of
U.S. dollars(Note 1)

2012

2013

2013

Current Liabilities:
Short-term loans and current maturities of long-term debt (Note 3)

¥

6,686

¥

1,498

$

71,090Notes and accounts payable (Notes 2 & 18)

93,33582,376992,398

Advances received on uncompleted contracts

87,711

66,035

932,600

Reserve for job warranty costs

1,863

2,176

19,809Reserve for losses on contracts

22,031

5,089

234,248

Income taxes payable

18,75914,662

199,458

Provision for loss on guarantees

2,417

—

25,699Other current liabilities (Notes 2, 10 & 18)

29,63733,936315,119

262,439

205,772

2,790,421

Total Current Liabilities
Long-Term Debt, Less Current Maturities (Notes 3 & 18)

9,363

7,591

99,553Retirement and Severance Benefits (Note 6)

12,627

13,695

134,258

Deferred Tax Liabilities for Land Revaluation (Notes 12 & 14)

3,692

3,692

39,256

Other Non-Current Liabilities (Notes 2 & 12)

4,553

4,377

48,410292,674

235,127

3,111,898

249,984

Total Liabilities
Contingencies (Note 7)
Net Assets (Note 8):
Shareholders’ Equity
Common stock
Authorized — 600,000,000 shares,

23,511

23,511

Capital surplus

Issued — 259,052,929 shares in 2013 and 2012

25,60325,603

272,228

Retained earnings

291,782

255,323

3,102,414

Treasury stock, at cost

(6,330)(6,257)(67,305)

334,566

298,180

3,557,321

Net unrealized holding gains on securities (Notes 9 & 18)

5,418

2,319

57,608Deferred gains on hedges (Note 10)

1,606

39

17,076

Land revaluation, net of deferred tax portion (Note 14)(6,542)(6,542)(69,559)

487(3,581)

5,178

969

(7,765)

10,303

Total Shareholders’ Equity
Accumulated Other Comprehensive Income (Loss)

Foreign currency translation adjustments
Total Accumulated Other Comprehensive Income (Loss)

549

627

5,837

Total Net Assets

336,084

291,042

3,573,461

Total Liabilities and Net Assets¥628,758¥526,169$6,685,359

Minority Interests

JGC CORPORATION Annual Report 201339

Consolidated Statements of Income
JGC CORPORATION
Years ended March 31, 2013, 2012 and 2011

Millions of yen

Thousands of
U.S. dollars(Note 1)

2013

2012

2011

2013

Net Sales (Note 11)¥624,637¥556,967¥447,223$6,641,542

Cost of Sales

540,164

470,227

365,824

5,743,371

Gross profit

84,47386,74081,399898,171

20,35019,686

17,840216,374

64,12367,05463,559681,797

Selling, General and Administrative Expenses
Operating income
Other Income (Expenses):
Interest and dividend income

4,497

4,681

2,672

47,815Interest expense

(238)

(502)

(659)

(2,531)

Loss on sales and disposal of property and equipment

(23)

(688)

(109)

(245)

Loss on impairment of fixed assets (Note19)

(94)

(420)

—

(999)

Loss on devaluation of marketable and investment securities

—

—

(197)

—

2,944

(686)

(4,707)31,302Equity in earnings of affiliates

657

1,177

2,153

6,986

Gain on sales of marketable and investment securities

91

16

10,593968

Loss on allowance for investment(6,286)——(66,837)

Loss on provision of guarantees(2,417)——(25,699)

Provision for doubtful accounts

—

—

44

—

(1,343)——(14,279)

Exchange (loss), net

Loss on disposition of foreign currency translation adjustments
Other, net
Income before taxes on income and minority interests in earningsof consolidated subsidiaries

402

847

(20,578)

4,274(1,810)

4,425(10,788)(19,245)

62,31371,47952,771

662,552

216,661

Taxes on Income (Note 12):Current

20,37725,40523,493

Deferred(4,290)

6,483

3,520

(45,614)

Income before minority interests

46,226

39,59125,758491,505

Minority Interests in (Earnings) Losses of Consolidated Subsidiaries
Net Income

(47)

(480)

(280)

(500)

¥ 46,179¥ 39,111¥ 25,478$ 491,005

Yen

U.S. dollars(Note 1)

Amounts Per Share of Common Stock
Net income¥182.91¥154.90¥100.83$1.94

Cash dividends applicable to the year

¥ 45.50¥ 38.50¥ 30.00$0.48

The accompanying notes are an integral part of these statements.

40

Consolidated Statements of Comprehensive Income
JGC CORPORATION
Years ended March 31, 2013, 2012 and 2011

Millions of yen

Income Before Minority Interests

Thousands of
U.S. dollars(Note 1)

2013

2012

2011

2013

¥46,226¥39,591¥25,758$491,505

Other Comprehensive Income (Loss) (Note 20)
Net unrealized holding gains on securities (Notes 9 & 18)

3,099(1,019)(1,750)32,950

Deferred gains (losses) on hedges (Note 10)

1,567(2,480)(193)

16,661

Land revaluation (Note 14)
Translation adjustments
Share of other comprehensive income of associates accounted
for using equity method
Total Other Comprehensive Income (Loss)
Total Comprehensive Income

—

63

—

—

4,068

(968)

(862)

43,254

(0)

(1)

1,230

(0)

¥ 8,734¥ (4,405)¥ (1,575)$ 92,865¥54,960¥35,186¥24,183$584,370

Comprehensive Income attributable to JGC Corporation¥54,913¥34,706¥23,903$583,870

Comprehensive Income (loss) attributable to minority interest

¥

¥

¥

$

47

480

280

500

The accompanying notes are an integral part of these statements.

JGC CORPORATION Annual Report 201341

Consolidated Statements of Changes in Net Assets
JGC CORPORATION
Years ended March 31, 2013, 2012 and 2011

Thousands ofsharesMillions of yen
Common stock

Balance at April 1, 2010

SharesAmountCapitalsurplusRetainedearnings

259,053¥23,511¥25,601¥204,177

Net income for the year

Net unrealized
holding gains
Treasury(losses) on
stock,
securities
at cost (Notes 9 & 18)¥(5,735)¥ 5,087

Land
Deferred
revaluation,
gains (losses) net of deferredon hedges
tax portion(Note 10)(Note 14)

¥ 2,712¥(6,553)

Foreigncurrencytranslation
adjustments

Minority
interests¥(2,980)¥321

25,478

Effect of change in scope of consolidation

1,229

Cash dividends(5,308)Gain on disposal of treasury stock2

2

Net unrealized holding losses on securities(1,749)Net deferred losses on hedges(193)

Foreign currency translation adjustments(862)

Increase of treasury stock(436)

Net changes during the year
Balance at March 31 and April 1, 2011

179
259,053¥23,511¥25,603

Net income for the year

¥224,347¥(6,169)¥ 3,338¥ 2,519¥(6,553)¥(2,613)

39,111

Effect of change in scope of consolidation(611)

Cash dividends(322)(7,576)

Gain on disposal of treasury stock

0

Land revaluation, net of deferred tax portion

0
52

11

Net unrealized holding losses on securities(1,019)Net deferred losses on hedges(2,480)Foreign currency translation adjustments(646)

Increase of treasury stock(88)

Net changes during the year
Balance at March 31 and April 1, 2012

127
259,053¥23,511¥25,603

Net income for the year

¥255,323¥(6,257)¥ 2,319¥39¥(6,542)¥(3,581)¥627

46,179Effect of change in scope of consolidation

1,343

Cash dividends(9,720)Net unrealized holding gains on securities

3,099

Net deferred gains on hedges

1,567

Foreign currency translation adjustments

2,725

Increase of treasury stock(73)

Net changes during the year
Balance at March 31, 2013

¥500

(78)
259,053¥23,511¥25,603¥291,782¥(6,330)¥ 5,418¥ 1,606¥(6,542)

¥

487

¥549

Thousands of U.S. dollars (Note 1)

Commonstock

Balance at April 1, 2012

$249,984

Net income for the year

CapitalsurplusRetainedearnings$272,228 $2,714,758

Net unrealized
holding gains
Treasury(losses) on
stock,
securities
at cost (Notes 9 & 18)$(66,528)$24,658

Land
Deferred
revaluation,
gains (losses) net of deferredon hedges
tax portion(Note 10)(Note 14)$415$(69,559)

Foreigncurrencytranslation
adjustments

Minority
interests$(38,076)$6,667491,005

Effect of change in scope of consolidation

14,280Cash dividends(103,349)

Net unrealized holding gains on securities

32,950Net deferred gains on hedges

16,661

Foreign currency translation adjustments

28,974

Increase of treasury stock(777)

Net changes during the year
Balance at March 31, 2013
The accompanying notes are an integral part of these statements.

42

(830)
$249,984$272,228 $3,102,414$(67,305)$57,608$17,076$(69,559)$ 5,178$5,837

Consolidated Statements of Cash FlowsJGC CORPORATION
Years ended March 31, 2013, 2012 and 2011

Cash Flows from Operating Activities:
Income before taxes on income and minority interests in earningsof consolidated subsidiaries
Adjustments to reconcile income before taxes on income and minority
interests in earnings of consolidated subsidiaries to net cash provided
by operating activities:
Depreciation and amortization
Amortization of goodwill
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in reserve for losses on contracts
Decrease in retirement and severance benefits
Interest and dividend income
Interest expense
Exchange (gain) loss
Equity in earnings of affiliates
Gain on sales of marketable and investment securities
Loss on devaluation of marketable and investment securities
Loss on sales and disposal of property and equipment
Loss on impairment of fixed assets (Note 19)
Decrease (increase) in notes and accounts receivable
Decrease (increase) in inventories
Decrease (increase) in other assets
Increase (decrease) in notes and accounts payable
Increase (decrease) in advances received on uncompleted contracts
Other
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net Cash Provided by Operating Activities
Cash Flows from Investing Activities:
Payments for purchases of property and equipment
Proceeds from sales of property and equipment
Payments for purchase of marketable and investment securities
Proceeds from sales of marketable and investment securities
Other
Net Cash Used in Investing Activities
Cash Flows from Financing Activities:
Increase (decrease) in short-term loans
Proceeds from long-term bank loans
Repayments of long-term bank loans
Payments for purchase of treasury stock
Cash dividends paid
Cash dividends paid to minority shareholders
Other
Net Cash Provided by (Used in) Financing Activities
Effect of Exchange Rate Changes on Cash and Cash Equivalents
Net Increase (Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Year
Increase in Cash and Cash Equivalents from Newly Consolidated
Subsidiaries
Cash and Cash Equivalents at End of Year (Note 13)

Millions of yen

Thousands of
U.S. dollars(Note 1)

2013

2012

2011

2013

¥ 62,313¥ 71,479¥ 52,771$ 662,552

8,264
0
2,222
16,842(1,055)(4,497)238(6,403)
(657)
(91)
—
23
94
(8,517)(5,843)
2,957
8,894
17,9794,114
96,877
4,947(251)(16,563)
85,010

7,795
0
(208)
4,572
(954)
(4,681)502
1,211(1,177)
(16)
—
689
420
22,433(12,158)(6,425)
9,678
38,408(9,096)
122,4725,537(673)(29,488)
97,8487,517(6)(2,271)380(1,056)(2,672)659
3,788(2,153)(10,593)
197
109—(21,343)
12,451
4,474
11,450(20,948)
21,63354,387
6,783(559)(12,396)
48,21587,8680
23,626
179,075(11,218)(47,815)2,531(68,081)(6,986)
(968)
—
245
999
(90,558)(62,127)
31,441
94,567
191,164
43,743
1,030,058
52,600(2,669)(176,108)
903,881(12,164)
172(12,814)
1,069(4,634)(28,371)(8,055)732(3,989)443(7,877)(18,746)(3,252)57(8,652)
13,740(1,777)
116(129,335)
1,829(136,247)
11,366(49,272)(301,659)

(204)
7,634
(987)
(74)
(9,723)(124)(217)(3,695)
9,277
62,221
222,556541
1,600(14,414)(88)(7,572)(353)(250)(20,536)(1,442)
57,124
161,894——(1,339)(432)(5,296)(16)(234)(7,317)(2,928)38,086
123,808(2,169)81,169(10,494)(787)(103,381)(1,318)(2,307)(39,287)
98,639661,574
2,366,358

—

3,538

—

—

¥284,777¥222,556¥161,894$3,027,932

The accompanying notes are an integral part of these statements.

JGC CORPORATION Annual Report 201343

Notes to Consolidated Financial Statements

Note 1 — Summary of Accounting Policies(a) Basis of Presenting Consolidated Financial Statements
The accompanying consolidated financial statements of JGC
Corporation (Nikki Kabushiki Kaisha, the Company) and its consolidated subsidiaries have been prepared in accordance with the provisions set forth in the Japanese Financial Instruments and Exchange
Law and its related accounting regulations, and in conformity withaccounting principles generally accepted in Japan (“Japanese
GAAP”), which are different in certain respects as to application anddisclosure requirements from International Financial ReportingStandards.
Prior to the year ended March 31, 2009, the accounts of consolidated overseas subsidiaries were based on their accounting records
maintained in conformity with generally accepted accounting principles prevailing in the respective countries of domicile. As discussed
in Note 1 (e), the accounts of consolidated overseas subsidiaries areprepared in accordance with either International Financial ReportingStandards or U.S. generally accepted accounting principles, withadjustments for the specified five items as applicable. The accompanying consolidated financial statements have been restructured andtranslated into English (with some expanded descriptions) from theconsolidated financial statements of the Company prepared in accordance with Japanese GAAP and filed with the appropriate Local
Finance Bureau of the Ministry of Finance as required by theJapanese Financial Instruments and Exchange Law. Certain supplementary information included in the statutory Japanese language
consolidated financial statements, but not required for fair presentation, is not presented in the accompanying consolidated financial
statements.
The translation of the Japanese yen amounts into U.S. dollars is
included solely for the convenience of readers outside Japan, using
the prevailing exchange rate at March 31, 2013, which was ¥94.05
to U.S.$1. The convenience translations should not be construed as
representations that the Japanese yen amounts could be converted
into U.S. dollars at this or any other rate of exchange.

(b) Reporting Entity
The consolidated financial statements include the accounts of theCompany and its significant subsidiaries that include less than 50%
owned affiliates controlled through substantial ownership of majority
voting rights or existence of substantial control. All significant intercompany transactions and account balances are eliminated inconsolidation.
Investments in non-consolidated subsidiaries and affiliates overwhich the Company has the ability to exercise significant influence
over operating and financial policies of the investees are accounted
for by the equity method.
The number of consolidated subsidiaries and affiliates accounted
for using the equity method at March 31, 2013, 2012 and 2011, was
as follows:

2013

2012

2011

Consolidated subsidiaries

17

16

14

Affiliates under the equity method

2

2

2

Investments in non-consolidated subsidiaries and affiliates notaccounted for by the equity method are carried at cost, adjusted forany substantial and non-recoverable decline in value. The effect on
net income (loss) and retained earnings from those investments notaccounted for under the equity method is immaterial.
At the year ended March 31, 2013, two of the subsidiaries, JGC
Mirai Solar Co. Ltd., and JGC EXPLORATION CANADA LTD. were
included in the scope of consolidation because their effect on the
consolidated financial statement became significant and JGC
Corporation Europe B.V. was excluded from the scope of consolidation because the company liquidated during the period.
At the year ended March 31, 2012, three of subsidiaries, JGC
Gulf International Co. Ltd., JGC Exploration Eagle Ford LLC, andJGC OCEANIA PTY LTD were included in the scope of consolidation
because their effect on the consolidated financial statement became
significant and Nikki Construction Co., Ltd. was excluded from thescope of consolidation because the company merged into JGC
Project Services Co., Ltd. (The company name after the merger: JGC
PLANT SOLUTIONS., LTD.) and liquidated during the period.
At the year ended March 31, 2011, one of affiliates, M. W.
Kellogg Limited was excluded from the scope of equity method
because the Company sold out all securities.
However, equity in earnings of M. W. Kellogg Limited before
selling date was included in consolidated statements of income forthe year ended March 31, 2011.
On March 10, 2008, the Accounting Standards Board of Japanissued ASBJ Statement No.16 “Accounting Standard for Equity
Method of Accounting for Investments’’ and PITF No. 24 “Practical
Solution on Unification of Accounting Policies Applied to Associates
Accounted for Using the Equity Method”. This standard is effectivefrom the year ended March 31, 2011. There were no effects of thischange on the consolidated financial statements for the year ended
March 31, 2011.

(c) Consolidated Statements of Cash Flows
In preparing the consolidated statements of cash flows, cash on
hand, readily available deposits and short-term highly liquid investments with negligible risk of changes in value, and maturities notexceeding three months at the time of purchase are considered to be
cash and cash equivalents.

(d) Conversion of Foreign Currencies and Translationof Statements
Receivables and payables denominated in foreign currencies aretranslated into Japanese yen at the year-end rates.
Balance sheets of consolidated overseas subsidiaries are translated into Japanese yen at the year-end rates except for net assets
accounts, which are translated at the historical rates. Income statements of consolidated overseas subsidiaries are translated at44average rates except for transactions with the Company, which aretranslated at the rates used by the Company.

(2) Treatment in the consolidated statements of income and thestatements of comprehensive income
The revised accounting standard would not change how to(e) Unification of Accounting Policies Applied to Foreign
Subsidiaries for Consolidated Financial Statements

recognize actuarial gains and losses and past service costs in

On March 17, 2006, the Accounting Standards Board of Japan

loss over a certain period no longer than the expected average

issued ASBJ Practical Issues Task Force No. 18 “Practical Solution

remaining working lives of the employees. However, actuarial

on Unification of Accounting Policies Applied to Foreign Subsidiaries

gains and losses and past service costs that arose in the current

for Consolidated Financial Statements” (“PITF No. 18”). PITF No. 18

period and are yet to be recognized in profit or loss shall be

requires that accounting policies and procedures applied by a parent

included in other comprehensive income and actuarial gains andcompany and its subsidiaries to similar transactions and events

losses and past service costs that were recognized in other

under similar circumstances should, in principle, be unified for thecomprehensive income in prior periods and then recognized in profit

preparation of the consolidated financial statements. PITF No. 18,

or loss in the current period shall be treated as reclassification

however, as a tentative measure, allows a parent company to prepare

profit or loss. Those amounts would be recognized in profit oradjustments.

consolidated financial statements using foreign subsidiaries’ financial

The Company and its consolidated subsidiaries expect to apply thestatements prepared in accordance with either International Financial

revised accounting standard from the end of fiscal year beginning on

Reporting Standards or U.S. generally accepted accounting princi-

April 1, 2013 and are in the process of measuring the effects ofples. In this case, adjustments for the following five items are required

applying the revised accounting standard.

in the consolidation process so that their impacts on net income areaccounted for in accordance with Japanese GAAP unless the impact(g) Allowance for Doubtful Accounts

is not material.

Notes and accounts receivable, including loans and other receivable,(1) Goodwill not subjected to amortization

are valued by providing individually estimated uncollectible amounts(2) Actuarial gains and losses of defined benefit plans recognizedplus the amounts for probable losses calculated by applying aoutside profit or loss
(3) Capitalized expenditures for research and development

percentage based on collection experience to the remaining
accounts.

activities(4) Fair value measurement of investment properties, and revaluation of property, plant and equipment, and intangible assets(5) Accounting for net income attributable to minority interests(h) Marketable Securities, Investments in Unconsolidated
Subsidiaries and Affiliates, and Marketable and Investment
Securities
The company and its consolidated subsidiaries are required to examine(f ) Recently Issued Accounting Standards

the intent of holding each security and classify those securities as

On May 17, 2012, the Accounting Standards Board of Japan issued(1) securities held for trading purposes, (2) debt securities intended

ASBJ Statement No. 26 “Accounting Standard for Retirement

to be held to maturities, (3) equity securities issued by subsidiaries

Benefits”, and ASBJ Guidance No. 25, “Guidance on Accounting

and affiliates, and (4) all other securities that are not classified in any

Standard for Retirement Benefits”, which replaced the Accountingof the above categories (hereafter, “available-for-sale securities”).

Standard for Retirement Benefits that was issued by the Business

The Company and its consolidated subsidiaries did not have the

Accounting Council in 1998 with effective date of April 1, 2000 andsecurities defined as (1) and (2) above in the years ended March 31,

other related practical guidance.

2013 and 2012.

Major changes are as follows:

Available-for-sale securities with available fair market values arestated at fair market value. Unrealized gains and losses on these(1) Treatment in the consolidated balance sheets

securities are reported, net of applicable income taxes, as a separate

Under the current requirements, actuarial gains and losses andcomponent of net assets. Realized gains and losses on the sale ofpast service costs that are yet to be recognized in profit or loss

such securities are computed using the moving-average method.

are not recognized in the balance sheet, and the difference

Other securities with no available fair market value are stated at

between retirement benefit obligations and plan assets (herein-

moving-average cost. Equity securities issued by subsidiaries andafter, “deficit or surplus”), adjusted by such unrecognizedaffiliates, which are not consolidated or accounted for using theamounts, is recognized as a liability or asset.

equity method, are stated at moving-average cost.

Under the revised accounting standard, actuarial gains andIf the market value of available-for-sale securities declines

losses and past service costs that are yet to be recognized insignificantly, such securities are restated at fair market value and the

profit or loss shall be recognized within equity (accumulated other

difference between fair market value and the carrying amount iscomprehensive income), after adjusting for tax effects, and therecognized as loss in the period of decline (See Note 9). For equity

deficit or surplus shall be recognized as a liability or asset.

securities with no available fair market value, if the net asset value of

JGC CORPORATION Annual Report 201345

the investee declines significantly, such securities are required to be
written down to the net asset value with the corresponding losses in(n) Property and Equipment, Depreciation and Finance Leases
Property and equipment are stated at cost, except for certain

the period of decline. In these cases, such fair market value or therevalued land as explained in Note 14. Depreciation of property andnet asset value will be the carrying amount of the securities at theequipment is calculated primarily using the straight-line method forbeginning of the next year.

buildings used for business operation, and the declining-balance(i) Allowance for Losses on Investment
To prepare for estimated losses to be incurred in the future, allowancemethod for other property and equipment over the estimated useful
lives of the assets based on the Corporate Tax Code of Japan.
Effective as of the consolidated accounting period ended Marchfor losses on investment is stated in amounts considered to be

31, 2013, the Company and its domestic subsidiaries have changed

appropriate based on financial condition of investments. The amounttheir depreciation procedure based on an amendment in corporationof ALLOWANCE FOR LOSSES ON INVESTMENT is deducted fromtax law for the tangible assets acquired on and after April 1, 2012.

long-term loans receivable.

The effect of this change on the financial statement result is immaterial.

(j) Provision for Losses on Guarantees

finance leases which commenced prior to April 1, 2008 and have

To provide for losses on guarantees, the Company makes a provision

been accounted for as operating leases, and continue to be

for potential losses at the end of the fiscal year.

accounted for as operating leases with disclosure of “as if

All finance leasing transactions were capitalized except forcapitalized” information.

(k) Recognition of Sales, Contract Works in Progress andAdvances Received on Uncompleted Contracts

increase the useful lives of existing property and equipment are

Sales on contracts for relatively large projects, which require longcapitalized. Maintenance, repair and minor renewals are charged toperiods for completion and which generally include engineering,

expenses as incurred.

Expenditures for new facilities and those that substantiallyprocurement (components, parts, etc.) and construction on a full-

The cost and accumulated depreciation applicable to assets

turnkey basis, are recognized on the percentage-of-completion

retired or otherwise disposed of are eliminated from the related accounts

method, primarily based on contract costs incurred to date

and the gain or loss on disposal is credited or charged to income.

compared with total estimated costs for contract completion.
Contract works in progress are stated at cost determined by aspecific identification method and comprised of direct materials,(o) Impairment of Fixed Assets
The Company and its consolidated subsidiaries review their long-lived

components and parts, direct labor, subcontractors’ fees and otherassets for impairment whenever events or changes in circumstances

items directly attributable to the contract, and job-related overheads.

indicate the carrying amount of an asset or asset group may not be

Selling, general and administrative expenses are charged to opera-

recoverable. An impairment loss would be recognized if the carrying

tions as incurred and are not allocated to contract job work costs.

amount of an asset or asset group exceeds the sum of the undis-

The Company normally receives payments from customers on acounted future cash flows expected to result from the continued use

progress basis in accordance with the terms of the respective

and eventual disposition of the asset or asset group. The impairment

construction contracts.

loss would be measured as the amount by which the carrying amount(l) Inventories
Inventories of the Company and its consolidated subsidiaries areof the asset exceeds its recoverable amount, which is the higher of the
discounted cash flows from the continued use and eventual dispositionof the asset or the net selling price at disposition.

stated at cost determined using the moving-average method (which
writes off the book value of inventories based on decreases in profitability) except for contract works in progress as stated in Note 1(k).

(m) Operating Cycle(p) Retirement and Severance Benefits and Pension Costs(1) Employees’ severance and retirement benefits
The Company and its consolidated subsidiaries provide two
types of post-employment benefit plans, unfunded lump-sum

Assets and liabilities related to long-term contract jobs are included

payment plans and funded non-contributory pension plans,in current assets and current liabilities in the accompanying consoli-

under which all eligible employees are entitled to benefits based

dated balance sheets, as they will be liquidated in the normal courseon the level of wages and salaries at the time of retirement orof contract completion, although it may require more than one year.

termination, length of service and certain other factors.
Some consolidated subsidiaries also have a defined contribution pension plan, which was transferred from a portion ofdefined benefit pension plan.
The Company and its consolidated subsidiaries provided
allowance for employees’ severance and retirement benefits at
March 31, 2013 and 2012, based on the estimated amounts of46

projected benefit obligation, actuarially calculated using certain

basis of assets and liabilities. The asset and liability approach is usedassumptions and the fair value of the plan assets at that date.

to recognize deferred tax assets and liabilities for the expected future

The estimated amount of all retirement benefits to be paid at

tax consequences of temporary differences.

the future retirement date is allocated equally to each service
year using the estimated number of total service years.
The Company and its consolidated subsidiaries recognize(s) Reserve for Job Warranty Costs
A reserve for the estimated cost of warranty obligations is provided

prior service costs as expenses in equal amounts over thefor the Company’s engineering, procurement and construction work

average of the estimated remaining service lives of the employees,

at the time the related sales on contracts are recorded.

and actuarial gains and losses as expenses using the decliningbalance method over the average of the estimated remaining(t) Reserve for Losses on Contracts

service lives commencing in the following period.

A reserve for losses on contracts is provided for an estimatedHowever, some consolidated subsidiaries recognized, priorservice costs, and actuarial differences as expenses in the periodamount of probable losses to be incurred in future years in respect ofconstruction projects in progress.

incurred.
On July 1, 2011, one consolidated domestic subsidiary trans-(u) Per Share Information

ferred its employees’ severance and retirement benefits to the

Cash dividends per share have been presented on an accrual basis

defined contribution pension plan. And one consolidated domestic

and include dividends to be approved after the balance sheet datesubsidiary terminated its defined benefit pension plan due to thebut applicable to the year then ended.

merger. These transfers are accounted for in accordance withthe “Guidance on Accounting Standard for Transfer between(v) Amortization of Goodwill

Retirement Benefit Plans” (Accounting Standards Board of Japan

Goodwill is amortized over five years on a straight-line basis.

Guidance No. 1).
On July 1, 2013, one consolidated subsidiary transferred its(w) Derivatives and Hedge Accounting

employees’ severance and retirement benefits to the defined

The accounting standard for financial instruments requires companies

contribution pension plan. The transfer is accounted for in accor-

to state derivative financial instruments at fair value and to recognize

dance with the “Guidance on Accounting Standard for Transfer

changes in the fair value as gains or losses unless the derivative

between Retirement Benefit Plans” (Accounting Standards Board

financial instruments are used for hedging purposes.

of Japan Guidance No. 1) and “Practical Solution on Accounting

If derivative financial instruments are used as hedges and meetStandards for Transfer between Retirement Benefit Plans”

certain hedging criteria, the Company and its domestic consolidated(Practical Issue Task Force No. 2).

subsidiaries defer recognition of gains or losses resulting fromThe effect of these changes on the financial statement result
is immaterial.

changes in fair value of derivative financial instruments until the
related losses or gains on the hedged items are recognized.
However, in cases where forward foreign exchange contracts are(2) Officers’ severance and retirement benefits

used as hedges and meet certain hedging criteria, forward foreign

Domestic consolidated subsidiaries provide for liabilities inexchange contracts and hedged items are accounted for in therespect of lump-sum severance and retirement benefits to direc-

following manner (Allocation Method):

tors and corporate statutory auditors computed on the assump-(1) If a forward foreign exchange contract is executed to hedge antion that all officers retired at a year-end.

existing foreign currency receivable or payable,(i) The difference, if any, between the Japanese yen amount of(q) Research and Development Costs

the hedged foreign currency receivable or payable translated

Research and development costs for the improvement of existing

using the spot rate at the inception date of the contract andskills and technologies or the development of new skills and technol-

the book value of the receivable or payable is recognized inogies, including basic research and fundamental development costs,

the statement of income in the period which includes theare charged to operations in the period incurred. The total amount of

inception date, andresearch and development expenses, included in Cost of Sales and(ii) The discount or premium on the contract (that is, the differ-

Selling, General and Administrative expenses, was ¥4,527 million

ence between the Japanese yen amount of the contract($48,134 thousand), ¥5,042 million, and ¥4,998 million, respectively,translated using the contracted forward rate and that trans-in 2013, 2012 and 2011.

lated using the spot rate at the inception date of the contract)
is recognized over the term of the contract.

(r) Taxes on Income
The Company and its consolidated subsidiaries provide tax effects of
temporary differences between the carrying amounts and the tax

JGC CORPORATION Annual Report 201347

(2) If a forward foreign exchange contract is executed to hedge afuture transaction denominated in a foreign currency, the futuretransaction will be recorded using the contracted forward rate,
and no gains or losses on the forward foreign exchange contract

Note 2 — Receivables from and Payables to Unconsolidated
Subsidiaries and Affiliates
Significant receivables from and payables to unconsolidated subsidiaries and affiliates at March 31, 2013 and 2012 were as follows:

are recognized.

Thousands of
U.S. dollars(Note 1)Millions of yen

Also, where interest rate swap contracts are used as hedges andmeet certain hedging criteria, the net amount to be paid or received

March 31,

2013

2012

2013

under the interest rate swap contract is added to or deducted from

Notes and accounts receivable¥ 786¥7,039$ 8,357

the interest on the assets or liabilities for which the swap contract

Other current assets

2,063

2,731

21,935was executed (Special method for interest rate swap).

Long-term loans receivable

1,350

1,400

14,354

Notes and accounts payable

774

940

8,230

(x) Accrued Bonuses to Directors and Corporate Auditors

Other current liabilities

135

796

1,435

The Company and consolidated subsidiaries recognize directors’ andOther non-current liabilities

11

11

117

corporate auditors’ bonuses as expenses when incurred.

(y) Accounting Changes and Error Corrections
On December 4, 2009, the Accounting Standards Board of Japanissued ASBJ Statement No. 24, “Accounting Standard for
Accounting Changes and Error Corrections” and ASBJ Guidance
No. 24, “Guidance on Accounting Standard for Accounting Changes
and Error Corrections”. Accounting treatments under the newNote 3 — Borrowings and Assets Pledged as Collateral
Short-term loans consisted mainly of unsecured notes and bankoverdrafts and bore interest at the annual rates of 0.70% and 0.80%
at March 31, 2013 and 2012, respectively. Such loans are generally
renewable at maturity.
Long-term debt consisted of the following:Thousands of
U.S. dollars(Note 1)Millions of yen

accounting standard are as follows:(1) Change in Accounting Policies
When a new accounting policy is applied with revision of
accounting standards, the new policy is applied retrospectively
unless revised accounting standards include specific transitional
provisions. When revised accounting standards include specific

March 31,

2013

2012

2013

Secured Loans
1.49% – 2.03% loans from banks
and a governmental institution due
serially through 2029

¥ 4,460¥ 402 $ 47,421

10,812

8,176

114,960

15,272

8,578

162,381(5,909)(987)(62,828)transitional provisions, an entity shall comply with the specifictransitional provisions.
(2) Changes in Presentations
When the presentation of financial statements is changed, priorperiod financial statements are reclassified in accordance with thenew presentation.
(3) Changes in Accounting Estimates
A change in an accounting estimate is accounted for in the periodof the change if the change affects that period only, and is

Unsecured Debt
0.74% – 3.00% loans from banks
and insurance companies due
serially through 2023
Less current maturities
Long-term debt due after one year

¥ 9,363

Assets pledged as collateral for short-term loans, long-term debt

accounted for prospectively if the change affects both the period

and other non-current liabilities at March 31, 2013 and 2012 were asof the change and future periods.

follows:
Thousands of
U.S. dollars(Note 1)Millions of yen(4) Corrections of Prior Period Errors
When an error in prior period financial statements is discovered,those statements are restated.

March 31,This accounting standard and the guidance are applied toLandaccounting changes and corrections of prior period errors which are
made from the beginning of the fiscal year that begins on or after
April 1, 2011.

2013¥ 5,071

2012

2013

¥ 5,071 $ 53,918

Buildings and structures, at net
book value

3,087

3,248

32,823

Machinery and equipment, at net
book value

2,025

2,522

21,531

256

—

2,722

Cash and deposits
Total

48

¥7,591 $ 99,553¥10,439¥10,841 $110,994

The annual maturities of long-term debt outstanding at March 31,(2) Lease commitments

2013 were as follows:

Thousands of
U.S. dollars(Note 1)Millions of yen

AmountThousands of
U.S. dollars(Note 1)Millions of yen

Year ending March 31,

2014¥ 5,909 $ 62,828

2015

703

7,474

2016

775

8,240

2017

695

7,390

7,190

76,4492018 and thereafter
Total¥15,272 $162,382

March 31,

2013

2012

2013

Due within one year

¥ 56

¥ 58

$ 596

Due after one year

81

137

861

¥137

¥195

$1,457

Total

Lease commitments as lessee are calculated using the inclusiveof-interest method.
(3) Lease payments and depreciation equivalents
Thousands of
U.S. dollars(Note 1)Millions of yen

Note 4 — Inventories
Inventories at March 31, 2013 and 2012 were summarized asYear ended March 31,

2013

2012

2011

2013

follows:

Lease payments

¥59

¥81

¥151

$627

Depreciation equivalents

59

81

151

627

Thousands of
U.S. dollars(Note 1)Millions of yen

March 31,

2013

2012

2013

Inventories:
Contract works in progress¥35,840¥25,705 $381,074

Finished goods and merchandise

4,514

5,630

47,996

Works in process

1,912

1,991

20,330Raw materials and others

2,119

3,536

22,530Total¥44,385¥36,862 $471,930

Note 5 — Lease Transactions
A. Lessee Leases(a) Finance Lease Transactions Without Ownership Transfer
to Lessee(4) Calculation method of depreciation equivalents
Depreciation equivalents are computed by the straight-line method
over the lease period without considering residual value.

(b) Operating Lease Transactions
Lease commitments under non-cancelable operating leases:
Thousands of
U.S. dollars(Note 1)Millions of yen

March 31,

2013

2012

2013

Due within one year

¥399

¥594

$4,242

Due after one year
Total

202

364

2,148

¥601

¥958

$6,390Finance leases commenced prior to April 1, 2008 which do nottransfer ownership of leased assets to lessees are accounted for as
operating leases.
Assumed amounts of acquisition cost and accumulated
depreciation at March 31, 2013 and 2012 were as follows:

B. Lessor Leases(a) Finance Lease Transactions Without Ownership Transfer toLessee, Whose Transaction Date Was after April 1, 2008
(1) Details of Investment in Leased assets(1) Purchase price equivalents, accumulated depreciation

Thousands of
U.S. dollars(Note 1)Millions of yen

equivalents, and book value equivalents
Thousands of
U.S. dollars(Note 1)Millions of yen

March 31,

2013

2012

2013

Machinery and equipment andothers:Purchase price equivalents

¥ 498

¥ 527

$ 5,295

Accumulated depreciationequivalents

(361)

(332)

(3,838)Book value equivalents

¥ 137

¥ 195

$ 1,457

March 31,

2013

2012

2013

Lease payment receivable

¥61

¥80

$649

Estimated residual value

—

—

—

Interest Income

—

—

—

Book value

¥61

¥80

$649

Purchase price equivalents are calculated using the inclusive-ofinterest method.

JGC CORPORATION Annual Report 201349

(2) The investment in leased assets due in each of the next five years
at March 31, 2013 was as follows:

Note 6 — Retirement and Severance Benefits
The liabilities for employees’ severance and retirement benefits

Year ending March 31,

Amountincluded in retirement and severance benefits in the liability section

Thousands of
U.S. dollars(Note 1)Millions of yenof the consolidated balance sheets as of March 31, 2013 and 2012
consisted of the following:

2014

¥22

$234

2015

18

191

2016

14

149

March 31,

2017

6

64

Projected benefit obligation¥ 44,180¥ 44,500 $ 469,750

1

11Less fair value of pension assets(30,740)(27,555) (326,847)

¥61

$649

Unfunded projected benefit
obligation

13,44016,9452018
Total(b) Finance Lease Transactions Without Ownership Transfer toLessee, Whose Transaction Date Was before March 31, 2008
Finance leases commenced prior to April 1, 2008 which do nottransfer ownership of leased assets to lessees are accounted for as
operating leases.
Assumed amounts of acquisition cost and accumulated depreciation at March 31, 2013 and 2012 were as follows:(1) Purchase price, accumulated depreciation and book value
Thousands of
U.S. dollars(Note 1)Millions of yen

March 31,

2013

2012

2013

Machinery and equipment andothers:Thousands of
U.S. dollars(Note 1)Millions of yen

2013

Less unrecognized net transition
obligation

2012

2013

142,903

—

(13)

—

Unrecognized actuarial differences(1,919)(4,664)(20,404)

Unrecognized prior service costs

835

1,093

8,878

Net liability for employees’ severance and retirement benefits

12,356

13,361

131,377

Allowance for officers’ lump-sum
severance benefits

271

334

2,881

Retirement and severance
benefits¥ 12,627¥ 13,695 $ 134,258

Included in the consolidated statements of income for the years
ended March 31, 2013 and 2012, were severance and retirement

Purchase price

¥—

¥4

$—

Accumulated depreciation

—

(3)

—

Book value

¥—

¥1

$—

benefit expenses comprising the following:Thousands of
U.S. dollars(Note 1)Millions of yen

March 31,

Service costs—benefits earned
during the year

(2) Lease commitments
Thousands of
U.S. dollars(Note 1)Millions of yen

2013

2012

2013

¥1,748¥1,667$18,586

Interest cost on projected benefit
obligation

666

691

7,081

Expected return on plan assets

(392)

(384)

(4,168)March 31,

2013

2012

2013

Due within one year

¥—

¥ 1

$—

Amortization of net transition
obligation

3

3

32

Due after one year

—

—

—

Amortization of actuarial differences

766

936

8,145

¥—

¥ 1

$—

Amortization of prior service costs

(223)

(217)

(2,371)

Contribution for defined contribution
pension plan

145

141

1,541

Severance and retirement benefit
expenses¥2,713¥2,837$28,846

Total

Lease commitments as lessor were calculated using theinclusive-of-interest method.

The discount rate used by the Company and its domestic(3) Rental income and depreciation
Thousands of
U.S. dollars(Note 1)Millions of yen

Year ended March 31,

2013

2012

2011

2013

Rental income

¥1

¥2

¥14

$11

Depreciation

1

2

9

11

consolidated subsidiaries was 1.43%–1.5% and 1.5%–2.0% at
March 31, 2013 and 2012, respectively. However, one overseas
consolidated subsidiary used the rate of 5.7% and 6.5% at March
31, 2013 and 2012, respectively. The rate of expected return on plan
assets used by the Company and its domestic consolidated subsidiaries was 1.5% for March 31, 2013 and 2012. However, someoverseas consolidated subsidiaries used the rate of 5.0% and 7.0%
at March 31, 2013 and 2012, respectively. Actuarial differences arerecognized in the consolidated statements of income using thedeclining-balance method over 12 years to 15 years for the years

50ended March 31, 2013 and 2012, respectively, beginning the following(2) Securities with book values not exceeding acquisition costs:

fiscal year of recognition. Prior service costs are recognized using theMillions of yen

straight line method over 12 years to 15 years for the years ended

March 31, 2013

March 31, 2013 and 2012, respectively from the fiscal year incurred.

Equity securities

Acquisition cost

Book value

Difference¥2,407¥2,049¥(358)

Acquisition cost

Book value

Difference¥4,032¥3,168¥(864)Net transition obligation is amortized over 15 years.
Millions of yen

March 31, 2012

Note 7 — Contingencies(1) It is a business practice in Japan for a company to guarantee theEquity securities

indebtedness of certain of its trading agents, suppliers, subcontractors and certain subsidiaries and affiliates. The aggregate
amount of such guarantees were ¥14,695 million ($156,247
thousand) and ¥15,520 million at March 31, 2013 and 2012,

Thousands of U.S. dollars (Note 1)

March 31, 2013

Equity securities

Acquisition cost

Book value

Difference$25,592$21,786$(3,806)

respectively.
B. The following tables summarize book values of securities with no(2) The Company and one consolidated subsidiary have guaranteed
employees’ housing loans and others from banks in the amount of¥7 million ($74 thousand) and ¥5 million at March 31, 2013 and2012, respectively.

available fair values or securities not valued by fair market prices
as of March 31, 2013 and 2012.

(a) Available-For-Sale Securities With No Available
Fair Values:

Note 8 — Net Assets
Dividends

Thousands of
U.S. dollars(Note 1)Millions of yen

At the annual shareholders’ meeting of the Company held on

March 31,

June 27, 2013, the shareholders approved cash dividends amounting

Non-listed equity securities

to ¥11,486 million ($122,127 thousand). Such appropriations have

Subscription certificate

not been accrued in the consolidated financial statements as of

Negotiable certificate of deposit

March 31, 2013. Such appropriations are recognized in the period in

Total

2012

2013

¥23,5052013¥11,659 $249,920

38

38

404

25,00027,500265,816¥48,543¥39,197 $516,140

which they are approved by the shareholders.

(b) Unconsolidated Subsidiaries and Affiliates:

Note 9 — Information on Securities

Thousands of
U.S. dollars(Note 1)Millions of yen

A. The following tables summarize acquisition costs and bookvalues stated at the fair value of securities with available fairvalues as of March 31, 2013 and 2012.

Available-for-Sale Securities With Available Fair Values:(1) Securities with book values exceeding acquisition costs:

March 31,

2013

2012

2013

Securities of unconsolidated
subsidiaries¥ 2,648¥ 5,886 $ 28,155

Securities of affiliates

30,67631,034¥33,324¥36,920 $354,322

Total

326,167

Millions of yen

March 31, 2013

Equity securities

Acquisition cost

Book value

Difference¥10,501¥18,986¥8,485Acquisition cost

Book value

Difference¥9,490¥15,087¥5,597

Millions of yen

March 31, 2012

Equity securities

Thousands of U.S. dollars (Note 1)

March 31, 2013

Acquisition cost

Book value

Difference

Equity securities$111,654$201,872$90,218JGC CORPORATION Annual Report 2013

51

Hedging instruments:

C. Available-for-sale securities with maturities are as follows:
Millions of yen

March 31, 2013

Withinone yearOver
one year
but within
five years

Negotiable certificate
of deposit¥25,000¥—

Over
five years
but within
ten years¥—Overten years

Total

Hedged items:

Foreign currency forward

Foreign currency trade receivable,

contractspayable and future transactions
denominated in a foreign currency

Foreign currency deposit

Foreign currency trade receivable,
payable and future transactions¥— ¥25,000

denominated in a foreign currency
Millions of yen

Withinone yearOver
one year
but within
five years

Overfive years
but within
ten years

Negotiable certificate
of deposit¥27,500¥—¥—

March 31, 2012Over
ten years

Withinone yearOverfive years
but within
ten years

Negotiable certificate
of deposit$265,816$—$—

March 31, 2013¥— ¥27,500

Over
ten years

Interest on loans payable

The Company evaluates hedge effectiveness semi-annually by
Total

Thousands of U.S. dollars (Note 1)Over
one year
but within
five years

Interest rate swap contracts

comparing the cumulative changes in cash flows from or the changes infair value of hedged items and the corresponding changes in thehedging derivative instruments. However, where the principal conditions
underlying the hedging instruments and the hedged assets or liabilities
are similar, the evaluation of hedge effectiveness is not performed.
The Company’s financial instrument counter-parties are all prime

Total$— $265,816

The Company and its domestic consolidated subsidiaries follow

banks operating domestically in Japan, and the Company does notexpect non-performance by the counter-parties.

(a) Fair Value of Undesignated Derivative Financial Instrumentsa policy of devaluation of available-for-sale securities. The policy of

Fair value of undesignated derivative financial instruments as ofdevaluation for the Company and its domestic consolidated subsid-

March 31, 2013 and 2012 is summarized as follows:

iaries is that if the available fair value of the securities declines by

Millions of yen

50% or more, compared with acquisition cost, all the corresponding
securities are devalued as such decline is considered to be substantial
and non-recoverable decline in value. In addition, in the case whereby

Contract amounts

March 31, 2013

Due within
one year

Total

Fair value

Profit orloss
evaluation¥— ¥23,827¥(741)¥(741)

Due after
one year

the available fair value of the securities declines by more than 30%

Forward exchange
contracts

but by less than 50%, the Company and its domestic consolidated

Sell U.S. dollars

subsidiaries examine the recoverability of the fair value of the
securities and devaluate if those securities are considered to be

Forward exchange
contracts

non-recoverable.

Buy Chinese Yuan

521

—

521

17

17

Buy U.S. dollars

289

—

289

(2)

(2)

¥23,827

Note 10 — Derivative Transactions and Hedge Accounting
As explained in Note 1 (w), the accounting standard for financial

Millions of yen
Contract amounts

instruments requires companies to state derivative financial instruments
at fair value and to recognize changes in the fair value as gains orMarch 31, 2012

losses unless derivative financial instruments are used for hedging

Forward exchange
contracts

purposes.
The Company utilizes foreign currency forward contracts andSell U.S. dollars

Due within
one year¥23,539

Total

Fair value

Profit orloss
evaluation¥297 ¥23,836

¥(30)

¥(30)

Due after
one yearinterest rate swap contracts as derivative financial instruments only
Thousands of U.S. dollars (Note 1)

for the purpose of mitigating future risks of fluctuation of foreign

Contract amounts

currency exchange rates with respect to foreign currency receivableand payable and mitigating future risks of interest rate increases andMarch 31, 2013

lowering the financing costs with respect to borrowings.

Forward exchange
contracts

Foreign currency forward contracts and interest rate swap
contracts are subject to risks of foreign exchange rate changes andinterest rate changes, respectively.
The derivative transactions are executed and managed inaccordance with the established policies and within the specified limiton the amounts of derivative transactions allowed.
The following summarizes hedging derivative financial instruments
used by the Company and hedged items:

52

Sell U.S. dollars

Due within
one year$253,344

Due after
one year

Total

Fair value

Profit orloss
evaluation$— $253,344 $(7,879) $(7,879)

Forward exchange
contracts
Buy Chinese Yuan

5,540

—

5,540

181

181

Buy U.S. dollars

3,073

—

3,073

(21)

(21)

Fair value of forward exchange contracts is stated based on thequoted price from banks.

(b) Fair Value of Derivative Financial Instruments Designatedas Hedging Instruments

Note 11 — Segment Information

Fair value of derivative financial instruments designated as hedging

about Segments of an Enterprise and Related Information”

instruments as of March 31, 2013 and 2012 is summarized as follows:(Accounting Standards Board of Japan (“ASBJ”) Statement No. 17

Millions of yen

March 31, 2013

Contract amounts

Accounting
MethodHedgedInstruments

HedgedItem

Allocation
Method(Note 1(w))

Forward exchange contracts

Contract Portion overamounts
one year

Fair value

Accounts
Receivable ¥ 2,478¥—¥ (437)

Buy Euro

Accounts
Payable¥ 607¥3,028

Allocation
Method(Note 1(w))

Forward exchange contracts
Sell U.S. dollars
Sell Euro
Buy Euro

The reported segments of the Company are those units for which
units of the Company and regularly examined by the Chief Executive
resources and for assessing business performance. The operations¥ 5,771¥5,301*

Contract amounts
HedgedItem

Information” (ASBJ Guidance No. 20, issued on March 21, 2008).

Officer (CEO) for decisions on the allocation of management

March 31, 2012
HedgedInstruments

Disclosures about Segments of an Enterprise and Related

separate financial statements can be obtained among the constituent¥12,630

Millions of yen
Accounting
Methodon March 27, 2009) and the “Guidance on Accounting Standard for(a) Overview of Reported Segments

Sell EuroSpecial method Interest rate swap contracts
for interest
Receive variable Long-Termrate swap
rate and Pay
Debt(Note 1(w))
fixed rate swap

The Company adopted the “Accounting Standard for Disclosures

Contract Portion overamounts
one yearof the Company and its consolidated subsidiaries are classified into
two reportable segments: the total engineering business and thecatalysts and fine products business.
Major activities included in the total engineering business are

Fair value

design, procurement, construction and performance test services ofmachinery and plants for petroleum, petroleum refining, petrochemi-

Accounts
Receivable ¥13,400¥—¥(246)

cals, gas, chemicals, nuclear energy, metal refining, biochemical,

Accounts
Receivable ¥ 1,643¥—¥(154)

environment conservation and pollution control. Major activities in the

Accounts
Payable¥9,112¥ 463

Special method Interest rate swap contracts
for interest
Receive variable Long-Termrate swap
rate and Pay
Debt(Note 1(w))
fixed rate swap

¥23,975

catalysts and fine products business include manufacturing anddistribution of chemical and catalyst products (FCC catalysts,
hydrotreating catalysts, deNOx catalysts, petrochemical catalysts,etc) and new functional material products (colloidal silica, coating

¥

822

¥ 411

*

Thousands of U.S. dollars (Note 1)

March 31, 2013

food, pharmaceuticals, medical, logistics, information technology,

materials for surface treatment on cathode ray tubes, material for
semiconductors, cathode materials and cosmetic products, etc.).

Contract amounts

Accounting
MethodHedgedInstruments

HedgedItem

Allocation
Method(Note 1(w))

Forward exchange contracts

Contract Portion overamounts
one year

Fair value

Sell Euro

Accounts
Receivable $ 26,348$

Buy Euro

Accounts
Payable$ 6,454 $32,196$134,290

Special method Interest rate swap contracts
for interest
Receive floating Long-Termrate swap
and Pay fixed
Debt(Note 1(w))
swap$ 61,361— $ (4,646)$56,364*

Fair value of forward exchange contracts is stated based on the quoted price from banks.
* The fair value of the interest rate swap was included in long-term debt.

JGC CORPORATION Annual Report 2013

53

The following was information about sales and profit or loss by reported segments for the years ended March 31, 2013, 2012 and 2011:
Millions of yen
Reported Segment

Year ended March 31, 2013

Total engineering

Catalysts andfine products

Sub Total

Other

Total

¥576,627¥38,508¥615,135¥ 9,502¥624,637

Adjustment

Consolidated¥¥624,637

Net sales:
External customers
Inter-segment

—

30

166

196

4,906

5,102

(5,102)—

Total¥576,657¥38,674¥615,331¥14,408¥629,739¥ (5,102)¥624,637

Segment profit¥ 58,874¥ 4,291¥ 63,165¥973¥ 64,138¥(15)¥ 64,123

Segment assets¥559,836¥37,287¥597,123¥50,656¥647,779¥(19,021)¥628,758

Depreciation and amortization

¥

4,574

¥ 2,480¥

7,054¥ 1,183

¥

8,237

¥

27

¥

Capital expenditures

¥

5,470

¥ 2,024¥

7,494¥ 8,782¥ 16,276¥(53)¥ 16,223

8,264

Millions of yen
Reported Segment

Year ended March 31, 2012

Total engineering

Catalysts andfine products

Sub Total

Other

Total

¥506,177¥42,045¥548,222¥ 8,745¥556,967

Adjustment

Consolidated¥¥556,967

Net sales:
External customers
Inter-segment

—

60

232

292

5,064

5,356

(5,356)—

Total¥506,237¥42,277¥548,514¥13,809¥562,323¥ (5,356)¥556,967

Segment profit¥ 59,420¥ 6,847¥ 66,267¥

694¥ 66,961¥

93¥ 67,054

Segment assets¥469,453¥40,769¥510,222¥35,828¥546,050¥(19,881)¥526,169

Depreciation and amortization

¥

4,134

¥ 2,572¥

6,706¥ 1,077

¥

7,783

¥

12

¥

Capital expenditures

¥

3,600

¥ 2,919¥

6,519¥ 7,274¥ 13,793¥—¥ 13,793

7,795

Millions of yen
Reported Segment

Year ended March 31, 2011

Total engineering

Catalysts andfine products

Sub Total

Other

Total

¥401,199¥36,031¥437,230¥ 9,993¥447,223

Adjustment

Consolidated¥¥447,223

Net sales:
External customers
Inter-segment

—

24

13

37

5,097

5,134

(5,134)—

Total¥401,223¥36,044¥437,267¥15,090¥452,357¥ (5,134)¥447,223

Segment profit¥ 57,688¥ 4,989¥ 62,677¥

784¥ 63,461¥

98¥ 63,559

Segment assets¥421,190¥37,135¥458,325¥28,709¥487,034¥(18,531)¥468,503

Depreciation and amortization

¥

3,660

¥ 2,480¥

6,140¥ 1,368

¥

7,508

¥

9

¥

7,517

Capital expenditures

¥

4,598

¥ 1,769

¥

6,367

¥

¥

6,725

¥

(164)

¥

6,561

358

Thousands of U.S. dollars (Note 1)
Reported Segment
Total engineering

Catalysts andfine products

Sub Total

Other

Total

$6,131,069$409,442$6,540,511$101,031$6,641,542

319

1,765

2,084

52,16454,248(54,248)—

Total$6,131,388$411,207$6,542,595$153,195$6,695,790$ (54,248)$6,641,542

Segment profit$ 625,986$ 45,625$ 671,611$ 10,345$ 681,956

$

(159)

$ 681,797

Segment assets$5,952,536$396,459$6,348,995$538,607$6,887,602$(202,243)$6,685,359

Depreciation and amortization$

48,634$ 26,369$

75,003$ 12,578$

87,581$

287$

Capital expenditures$

58,161$ 21,520$

79,681$ 93,376$ 173,057

$

(564)

$ 172,493

Year ended March 31, 2013

Adjustment

Consolidated—$6,641,542

Net sales:
External customers
Inter-segment

54$

87,868(b) Related Information
I. Information by Geography

III. Information on Impairment Loss
This information is not disclosed, as this is immaterial for the years
ended March 31, 2013 and 2011.
The following is information on impairment loss by reported(1) Net SalesYear ended March 31,

Japan

2013

2012

Millions of yen

Thousands of
U.S. dollars(Note 1)

2011

2013

¥146,326 ¥155,501 ¥130,975 $1,555,832

East and Southeast Asia

74,29332,533789,931

Middle East

204,900 205,429 181,683

2,178,629

Africa34,67344,34340,900368,666

Oceania

140,320

72,057

49,901

1,491,972

Other

24,125

18,104

11,231

256,512

Total

61,533¥624,637 ¥556,967 ¥447,223 $6,641,542*1. Net sales are classified by the place of customers’ address.
*2. Middle East includes the State of Qatar ¥105,450 million ($1,121,212 thousand),¥49,396 million, and ¥16,204 million for the years ended March 31, 2013, 2012,
and 2011, respectively.
*3. Oceania includes Australia ¥98,129 million ($1,043,371 thousand), ¥27,401 million,and ¥21,256 million for the years ended March 31, 2013, 2012, and 2011, respectively.

segments for the year ended March 31, 2012:
Millions of yen
Reported Segment

Year ended
Total
March 31, 2012 engineering
Impairment loss

¥420

Catalysts
and fineproducts

Sub Total

Other

Total

Adjustment

Consolidated

¥—

¥420

¥— ¥420¥—¥420

IV. Information on Amortization of Goodwill andAmortized BalanceThis information is not disclosed, as this is immaterial for the years
ended March 31, 2013, 2012, and 2011.

Note 12 — Taxes on Income
The statutory effective tax rates are 38.0%, 40.7%, and 36.2% for
the years ended March 31, 2013, 2012 and 2011, respectively.
(1) The following table summarizes the significant differences between(2) Property and equipment
Property and equipment information is not disclosed, as thethe statutory tax rate and the Company’s and its consolidated

Company and its consolidated subsidiaries operate mainly withinsubsidiaries’ effective tax rate for financial statement purposes forJapan for the years ended March 31, 2012 and 2011.

the years ended March 31, 2013, 2012 and 2011:

The following is information on property and equipment for the
Statutory tax rate

year ended March 31, 2013:
Thousands of
U.S. dollars(Note 1)Millions of yen

Year ended March 31, 2013

Japan
Other
Total

2013

2012

2011

38.0%

40.7%

36.2%

Non-deductible expenses

1.0

0.7

0.2

Non-taxable dividend income

(1.1)

(1.5)

(3.0)

¥61,527 $654,195

Tax credit utilized

(0.6)

(0.5)

(0.7)

10,181Other(11.5)

5.2

18.5

25.8%

44.6%

51.2%

108,251¥71,708 $762,446

Effective tax rate

II. Information by Major Customers
The following is information on major customers which account for
10% or more of the net sales on the consolidated statements ofincome for the years ended March 31, 2013, 2012 and 2011:

Year ended March 31, 2013

Thousands of
U.S. dollars(Note 1)Millions of yen

Related segments

Ras Laffan Liquefied Natural
Gas Company Limited.

104,621

1,112,398

Total engineering

Ichthys LNG Pty Ltd

68,903732,621

Total engineeringYear ended March 31, 2012
Abu Dhabi Gas Industries Ltd.
Year ended March 31, 2011

Millions of yen

Related segments

74,281

Total engineering

Millions of yen

Related segments

Saudi Polymers Company

57,730Total engineering

Abu Dhabi Gas Industries Ltd.

51,281

Total engineering

Saudi Arabian Oil Company

50,797

Total engineering

JGC CORPORATION Annual Report 201355

(2) Significant components of the Company’s and its consolidated

Note 13 — Notes to the Consolidated Statements of Cash Flows

subsidiaries’ deferred tax assets and liabilities as of March 31,

Reconciliation of cash in the consolidated balance sheets and cash2013 and 2012 were as follows:

and cash equivalents in the consolidated statements of cash flows
Thousands of
U.S. dollars(Note 1)Millions of yen

March 31,

2012

2013

was as follows:

2013

Current deferred taxes

March 31,

Deferred tax assets:

Cash and deposits

2012

Millions of yen

2011

2013

¥259,777 ¥195,056 ¥131,894 $2,762,116

Accrued employees’ bonuses¥ 2,606

Reserve for job warranty costs

667

812

7,092

Reserve for losses on contracts

7,926

1,801

84,274

Other

5,024

6,539

53,418

16,223

11,751

172,493

Note 14 — Land Revaluation(1,150)(176)(12,227)

Concerning Land Revaluation (the “Law”) effective March 31, 1998,

(4)

(59)

(43)

(1,154)(235)(12,270)

Total current deferred
tax assets¥ 2,599 $ 27,709

2013

Thousands of
U.S. dollars(Note 1)

Deferred tax liabilities:
Foreign currency hedge
Other
Total current deferred
tax liabilities
Net current deferred tax assets¥15,069¥11,516 $160,223

Marketable securities
Cash and cash
equivalents

25,00027,50030,000265,816¥284,777 ¥222,556 ¥161,894 $3,027,932

Pursuant to Article 2 of the Enforcement Ordinance for the Law
the Company recorded its owned land used for business at the fairvalue as of March 31, 2002, and the related revaluation difference,
net of income taxes, was debited to “Land revaluation, net ofdeferred tax portion” in the net assets section. The applicable income
tax portion was reported as Deferred Tax Liabilities for Land

Thousands of
U.S. dollars(Note 1)Millions of yen

March 31,

2012

2013

2013

Non-current deferred taxes

and 2012. When such land is sold, land revaluation is reversed anddebited to retained earnings.
Fair value of the revalued land as of March 31, 2013 was ¥4,177
million ($44,413 thousand) less than the book value as of March 31,

Deferred tax assets:
Employee’s retirement andseverance benefits

Revaluation in the consolidated balance sheets at March 31, 20132013, which amounts include ¥1,199 million ($12,749 thousand)relevant to rental property.

¥ 4,528¥ 4,877$ 48,145

Depreciation

384

363

4,083

Other

933

751

9,920

Note 15 — Related Party Transactions

5,845

5,991

62,148

ended March 31, 2013. Significant transactions with related parties

Total non-current deferred
tax assets

for the years ended March 31, 2012 and 2011 were as follows:

Deferred tax liabilities:
Net unrealized holding gains
on securities

Millions of yen

Other
Total non-current deferred
tax liabilities(2,995)(1,283)(31,845)

Year ended March 31,

(183)

(222)

(1,946)(3,178)(1,505)(33,791)

Net non-current deferred tax assets¥ 2,667¥ 4,486$ 28,357

Deferred tax liabilities for land
revaluation¥ 3,692¥ 3,692$ 39,256

Deferred tax liabilities for fullrevaluation of the consolidated
subsidiary

¥

290

¥

178

$ 3,083

26

32

¥

293

¥

204

$ 3,115

OthersNon-current deferred tax liabilities

This information is not disclosed, as this is immaterial for the year3

For the years ended March 31, 2013 and 2012, the valuation
allowances of ¥10,532 million ($111,983 thousand) and ¥6,166
million have been deducted from the gross amount of the
non-current deferred tax assets, respectively.

2012

2011

Medical Management Matsuzawa Co. Ltd.,—Support management and orderacceptance for construction service¥7,653¥8,533

Solacor Electricidad Uno S.A.
(affiliated company)—guarantee obligation¥5,382¥5,763

Solacor Electricidad Dos S.A.
(affiliated company)—guarantee obligation¥5,321¥5,698The balances of the Company due to related parties as of March
31, 2012 and 2011 were as follows:
Millions of yen

March 31,

2012

2011

¥6,764¥7,837

Medical Management Matsuzawa Co. Ltd.,—Accounts receivable

The Company does not receive a guarantee charge from
Solacor Electricidad Uno S.A. and Solacor Electricidad Dos S.A..
The supporting management fee and the construction service feewere reasonably determined. No pledged assets were furnished.
56

Note 16 — Business Combinations
Transactions under common control during the year ended March
31, 2012:

Note 18 — Financial Instruments
A. Qualitative Information on Financial Instruments(a) Policies for Using Financial Instruments
The Company manages surplus capital using financial instruments(a) Outline of the Transactions

that are short-term and carry low risk. The Company uses derivatives(1) Name and business of combined entity

to mitigate the risks that are described below, and does not use

Merging company: JGC Project Services Co., Ltd, total engineering

derivatives for speculative transactions.

Merged company: Nikki Construction Co., Ltd, total engineering(b) Financial Instruments, Associated Risks
and the Risk Management System(2) Form of business combinations
Transactions under common control(3) Name of the entity after the reorganization

Notes and accounts receivable expose the Company to customer

JGC PLANT SOLUTIONS CO., LTD.

credit risk. Marketable securities are mainly negotiable certificate of(4) Outline and purpose of the transaction

deposit. Investment securities are mainly related to the business and

JGC Project Services Co., Ltd, a consolidated subsidiary of thecapital alliance companies and expose the Company to the changes

Company merged with Nikki Construction Co., Ltd, a consolidated

in market prices. Long-term loans receivable are mainly related tosubsidiary of the Company on April 1, 2011. The purpose of thissubsidiaries and affiliates.

merger was to reinforce the following:

Most notes and accounts payable are due within one year. Some[1] Increase cost competitivenessof accounts payable associated with purchasing machines and[2] Increase depth and breadth of business operations

construction contracts are denominated in foreign currencies, which[3] Expand overseas

exposes the Company to the risks of exchange rate fluctuations. The
Company generally procures capital required under its business plan(b) Accounting Method

through bank loans. Some of bank loans expose the Company to the

These transactions were accounted for as a business combination

risks of interest rate fluctuations, which the Company uses interest

among entities under common control.

rate swaps to hedge.

(c) Amounts of Assets and Liabilities Received and Incurredon the Date of Business Combination

foreign exchange contracts to hedge the risk of exchange rate fluctu-

Total assets¥7,461 million

in foreign currencies and interest rate swaps to hedge the risk of

Total liabilities¥2,845 million

interest rate fluctuations associated with loans. “Derivative and

The Company uses derivatives transactions including forward
ations associated with accounts receivable and payable denominatedHedge Accounting” in Note 1(w) and Note 10 presented earlier explain

Note 17 — Rental Property

hedge accounting issues including methods, hedging policies,

The fair value of investment and rental property on the consolidated

hedged items and recognition of gain or loss on hedged positions.

financial statements at March 31, 2013 and 2012 were as follows:Book value (net of depreciation)¥7,973

Fair value

Decrease

March 31,2012

March 31,2012¥(122)¥7,851¥6,201March 31,2012

Decrease

March 31,2013

March 31,2013

Millions of Yen¥7,851¥(108)¥7,743¥6,180Thousands of U.S dollars(Note1)$83,477$(1,148)$82,329$65,710

Millions of Yen

March 31,2011

Rental real estate assets are presented on the consolidatedbalance sheets net of accumulated depreciation and accumulated
impairment loss.
The reason of the decrease was mainly due to the depreciationof the assets.
The fair value was calculated by the Company based on “theguidance for appraising real estate”.
The Company has rental commercial properties (including land) in
Kanagawa Prefecture. The rental incomes in the Other income were¥404 million ($4,296 thousand) and ¥404 million for the years ended
March 31, 2013 and 2012, respectively.

(c) Risk Management System for Financial Instruments(1) Credit risk management (counter-party risk)
The Company has established internal procedures for receivables
under which the related divisions are primarily responsible for
periodically monitoring counter-party status. The department
manages amounts and settlement dates by counterparty andworks to quickly identify and mitigate payment risk that may result
from situations including deterioration of the financial condition ofcounterparties. Consolidated subsidiaries are subject to the samerisk management rules.
In using derivatives transactions, the Company mitigatescounterparty risk by conducting transactions with highly creditworthy financial institutions.
(2) Market risk management (risk of exchange rate and interest rate
fluctuations)
The Company monitors the balance of the foreign currency receivable and payable by each currency and every month and utilizes
foreign currency forward contracts and foreign currency deposit tohedge the risk of fluctuations. The Company uses interest rate

JGC CORPORATION Annual Report 201357

swaps to mitigate the risk of interest rate fluctuations associatedwith loans.

Millions of yen
Carrying
AmountEstimated
fair value

Difference¥195,056 ¥195,056—

March 31, 2012

Regarding marketable securities and investment securities,

Cash and deposits

the Company periodically examines fair value and the financial

Marketable securities

27,50027,500—Notes and accounts receivable

87,24887,248—Other receivable*1

13,745

13,745

Finance & Accounting Department in accordance with the estab-Marketable and investment
securities

18,255

18,255—lished policies and within the specified limit on the amounts ofLong-term loans receivable, net*2

1,598

1,659

¥61

derivative transactions allowed. The Department periodically

Total Assets¥343,402 ¥343,463¥61

provides administrative reports on the results to the financial

Notes and accounts payable¥ 82,376 ¥ 82,376

director and treasurer.

Long-term Debt

condition of the issuing entities and revises its portfolio based on
its relationships with issuing entities.
The derivative transactions are executed and managed by the(3) Management of liquidity risk associated with capital procurement(payment default risk)

7,591

Total Liabilities¥84¥ 89,967 ¥ 90,051¥84

Derivative financial instruments, net ¥33 ¥The Company manages liquidity risk by creating and updating a

Carrying
AmountCash and deposits

Difference$2,762,116 $2,762,116—

Marketable securities

265,816

Notes and accounts receivableor a reasonable estimate of fair value for instruments for whichmarket prices are not available. Estimates of fair value are subject tofluctuation because they employ variable factors and assumptions.
In addition, the contractual amounts of the derivatives transactions discussed in B (a) below are not an indicator of the market risk
associated with derivatives transactions.

265,816—

1,026,794 1,026,794—

Other receivable*1

116,661

116,661

Marketable and investment
securities

223,658

223,658—

Long-term loans receivable, net*2

15,013

15,439$ 426

Total Assets$4,410,058 $4,410,484$ 426

Notes and accounts payable$ 992,398 $ 992,398

Long-term debt
Total Liabilities

B. Fair Values of Financial Information(a) Fair Values of Financial Instruments

99,553

were summarized as follows:—

105,465$5,912$1,091,951 $1,097,863$5,912Derivative financial instruments, net $Fair values of financial instruments as of March 31, 2013 and 2012—

Estimated
fair value

March 31, 2013

The fair value of financial instruments is based on market prices,

33

Thousands of U.S. dollars (Note 1)

capital deployment plan based on reports from each division.

(d) Supplemental Information on the Fair Valueof Financial Instruments

—

7,675

19,819 $19,819—*1 Other receivable is included in Other current assets on the consolidated balance sheets.
*2 The amount of individual allowance for doubtful accounts is deducted from long-termloans receivable.

The financial instruments, whose fair value were difficult to measure,
were not included in the table below and were summarized in B (b).
Millions of yen
Carrying
AmountEstimated
fair value

Difference¥259,777 ¥259,777—

March 31, 2013

Cash and deposits

The following methods and assumptions were used to estimate
the fair value of the financial instruments.
Cash and deposits, and Marketable securities
All deposits and negotiable certificates of deposit are short-term.
Therefore, carrying amount is used for the fair value of theseMarketable securities

25,00025,000—Notes and accounts receivable

96,57096,570—

Other receivable*1

10,972

10,972Marketable and investment
securities

21,03521,035—Long-term loans receivable, net*2

1,412

1,452

¥ 40

because these amounts are essentially the same.

Total Assets¥414,766 ¥414,806¥ 40

Other receivable

Notes and accounts payable¥ 93,335 ¥ 93,335—

Other receivable are short-term. Therefore, carrying amount is

9,919

¥556

used for the fair value of short-term receivable because these¥102,698 ¥103,254¥556

amounts are essentially the same.

Long-term Debt
Total Liabilities

9,363

Derivative financial instruments, net ¥1,864 ¥

1,864

items because these amounts are essentially the same.
Notes and accounts receivable
Notes and accounts receivable are short-term. Therefore,—

carrying amount is used for the fair value of short-term receivable

Marketable and investment securities
Marketable and investment securities are the price listed on
securities exchanges for equities. In addition, Note 9 provides
information on marketable securities by holding intent.

58

Long-term loans receivableThousands of U.S. dollars (Note 1)

Fair value of long-term loans receivable are estimated asYear ending March 31,

2014

2015-20182019-2023

2024 and
thereafter

Cash and deposits$2,762,116

—

—

—

Marketable securities

265,816———

Notes and accounts payable are short-term. Therefore, carrying

Notes and accounts
receivable

1,026,794———

amount is used for the fair value of short-term payable because

Other receivable

116,661———

these amounts are essentially the same.
Long-term debt

Long-term loans
receivable, net—$10,218$4,795$—

Fair value of long-term debt is estimated as discounted present

Assets Total$4,171,387$10,218$4,795$—

discounted present value of total principal and interest using
assumed interest rates for equivalent new loans.
Notes and accounts payable

value of total principal and interest using assumed interest rates
for equivalent new loans. Interest rate swaps subject to special
method are used for long-term floating-rate loans. Principal andinterest of the loans in which these interest rate swaps are

Please see Note 3 for the maturities of Long term-debt.

Note 19 — Impairment of Fixed Assets
As discussed in Note 1 (o), the Company and its consolidated

embedded are discounted using a reasonable estimate of thesubsidiaries have applied the accounting standard for impairment ofinterest rate on the loan at the time of issue.

fixed assets.

Derivative financial instruments
Please refer to ‘Derivative Transactions and Hedge Accounting’ inNote 1(w) and Note 10.

The Company and its consolidated subsidiaries have grouped
their fixed assets principally based on their business segment, whileconsidering mutual supplementation of the cash flows.
This information is not disclosed, as this is immaterial for the(b) Financial Instruments, Whose Fair Value Were
Difficult to Measureyears ended March 31, 2013 and 2011.

The financial instruments, whose fair value were difficult to measure,
as of March 31, 2013 and 2012, were summarized as follows:
Thousands of
U.S. dollars(Note 1)Millions of yen

March 31,

2013

2012

2013

Unconsolidated subsidiaries
and affiliates¥33,324¥36,920 $354,322

Non-listed equity securities

23,505

11,659249,920

38

38

404

Subscription certificate

The following is information on impairment loss for the year
ended March 31, 2012:
Location

Use

Type of assets

Sendai (Japan)

Rental Property

Land

Carrying amount of certain assets was devalued to their recoverable amounts, since the land’s market value has significantly
declined. As a result, the Company recognized loss on impairment in
the amount of ¥420 million. The recoverable amounts were calculated according to estimated net sales value, which was real-estateappraisal.

It is difficult to measure the fair value of these financial instruments
because there is no market price available and it is not practical tocalculate future cash flow. Therefore, these financial instruments were
not included in the Marketable and investment securities describedin B (a).

(c) Maturities of Financial Instruments
The maturities of the financial instruments at March 31, 2013 were as
follows:
Millions of yen

Year ending March 31,

2014

2015–20182019–2023

2024 and
thereafter

Cash and deposits¥259,777———

Marketable securities

25,000———Notes and accounts
receivable

96,570———

Other receivable

10,972

—

—

—

—

¥961

¥451

¥—

¥392,319

¥961

¥451

¥—

Long-term loans
receivable, net
Assets Total

JGC CORPORATION Annual Report 201359

Note 20 — Other Comprehensive Income

Thousands of U.S. dollars (Note 1)

Reclassification adjustments of the Company’s and its consolidated
subsidiaries’ other comprehensive income for the years ended March
31, 2013 and 2012 were as follows:
Thousands of
U.S. dollars(Note 1)Millions of yen

March 31,

2013

2012

2013

¥ 4,818

Reclassification adjustment forgains realized in net income

(6)

10

(64)

4,812

(1,631)

51,164¥(1,641) $ 51,228

2,528(3,885)26,879Sub-total

2,528(3,885)26,879Translation adjustments
2,725

Reclassification adjustment fortranslation adjustment
Sub-total(968)

28,974

1,343—

14,280

4,068

(968)

43,254

Share of other comprehensive
income of associates accounted
for using equity method arisingduring the year

(0)

(1)

(0)

Sub-total

(0)

(1)

(0)

11,408(6,485)

121,297

2,080(28,432)

Equity for equity method affiliates(2,674)¥ 8,734¥(4,405) $ 92,865

Tax effects allocated to each component of other comprehensive
income for the year ended March 31, 2013 and 2012 were as
follows:
Millions of yen

Year ended March 31, 2013

Before–tax
amountTax benefit(expense)

Net-of-tax
amountNet unrealized holding gains
on securities¥ 4,812¥(1,713)¥3,099Deferred gains (losses) on hedges

2,528

(961)

1,567

Translation adjustments

4,068

—

4,068

(0)

—

(0)

Other comprehensive income¥11,408¥(2,674)¥8,734

Year ended March 31, 2012

Before–tax
amountTax benefit(expense)

Net-of-tax
amountNet unrealized holding gains
on securities¥(1,631)¥ 612¥(1,019)

Deferred gains (losses) on hedges(3,885)

1,405(2,480)

—

63

63

(968)

—

(968)

(1)

—

(1)

¥(6,485)¥2,080¥(4,405)

Millions of yen

Land revaluation
Translation adjustments
Equity for equity method affiliates
Other comprehensive income
60$(18,214)$32,950

26,879(10,218)

16,661

Translation adjustments

43,254—

43,254

(0)

—

(0)

$121,297$(28,432)$92,865

Equity for equity method affiliates

March 31, 2011 was not required under the accounting standard foryear of adopting that standard and not disclosed herein.

The Company’s wholly owned subsidiary JGC PLANT SOLUTIONS
Co., Ltd, made a merger contract on April 1, 2013 that it will merge
its wholly owned subsidiary, JGC PLANTECH Co., Ltd, on July 1,
2013 and surviving company name is JGC Plant Innovation Co., Ltd.

Translation adjustments arisingduring the year

Equity for equity method affiliates$ 51,164

Deferred gains (losses) on hedges

Note 21 — Subsequent Event

Deferred gains (losses) on hedges
arising during the year

Total other comprehensive income

Net-of-tax
amountpresentation of comprehensive income as an exemption for the first

Deferred gains (losses) on hedges

Tax Benefit (Expense)

Tax benefit(expense)

The disclosure of corresponding information for the year ended

Unrealized holding gains arisingduring the year

Before –tax amountNet unrealized holding gains
on securities

Other comprehensive income

Net unrealized holding gains on
securities

Sub-total

Year ended March 31, 2013

Before–tax
amountInternal Control Report

1 Framework of Internal Control Over Financial Reporting

Scope of Assessment

Keisuke Takeuchi, Chairman and Representative Director, Koichi

We have assessed our ICOFR as of March 31, 2013 in accordance

Kawana, President and Representative Director, and Masayuki Sato,with the Assessment Standards.

Chief Financial Officer of JGC Corporation (“the Company”) are

We assessed the design and operation of our company-level

responsible for establishing and maintaining adequate internal control

control and based on this assessment, we analyzed businessover financial reporting (as defined in the rule “On the Setting of theprocesses within the scope of the internal control to be assessed,Standards and Practice Standards for Management Assessment andidentified a key control that would have a material impact on the

Audit concerning Internal Control Over Financial Reporting”).

reliability of financial reporting and assessed whether the basic compo-

Because of its inherent limitations, internal control over financial
reporting may not completely prevent or detect misstatements.

nents of internal control are operating with regard to the key control.
We assessed the effectiveness of ICOFR of the Company,
consolidated subsidiaries and affiliates to the extent necessary in light

2 Assessment Scope, Timing and Procedures
Basis of Presenting Internal Control Reportof their degree of impact on the reliability of financial reporting.

The report on internal control over financial reporting of the consoli-

reasonable scope of assessment for the important businessdated financial statements of the Company (“Internal Control Report”)

processes in light of their degree of quantitative and qualitativeis prepared on the basis of generally accepted assessment standards

impact on financial reporting based on the assessment of theof internal control over financial reporting in Japan (“Assessment

company-level control.

Standards”) and is compiled from the Internal Control Report
prepared by the Company as required by the Financial Instruments
and Exchange Law of Japan (“the Law”).

In assessing the effectiveness of internal control, we decided on

Locations and business units that did not have a material effecton financial reporting were excluded from the scope of assessments.
In assessing the period-end financial reporting process, we

The Assessment Standards require management to assess thedecided on reasonable scope of assessment in light of its degree ofinternal control over financial reporting (“ICOFR”), which consists ofquantitative and qualitative impact on financial reporting in a similar

the internal control over the consolidated/parent only financial state-manner as company-level control.

ments included in the Annual Securities Report filed under the Law

In assessing the business processes other than described above,and the internal control over disclosure information and others

based on the assessment of the company-level controls, we

included in the Annual Securities Report that materially affects theassessed the significant business locations based on the their sales

reliability of the financial statements.

levels until their combined sales amounts reaches approximately

The scope of management’s assessment of ICOFR in this annual

two-thirds on a consolidated basis and the business processes

report is different from the scope required by the Assessment

which impact the accounts (sales, accounts receivable and inventory)

Standards. Management assessment of ICOFR for this annual reportthat were closely associated with the significant business locations’covers the ICOFR with respect to the accompanying consolidated

business objectives.

financial statements only. In addition, as explained in Note 1 on thebasis of presenting consolidated financial statements, the accompa-

3 Results of Assessment

nying consolidated financial statements are reclassified and modified

Based on the above assessments, the Company’s management hasfrom the consolidated financial statements prepared for the purpose

concluded that, as of March 31, 2012, the Company’s internalof the Law. Supplementary information is also added to the consoli-

control over financial reporting was effective.

dated financial statements. The process of making reclassifications
and modifications and the addition of certain information is for the

4 Supplementary Information

convenience of readers outside Japan. Management voluntarily

Not applicable.

includes the process in its assessment of ICOFR, even though it isoutside the scope of the Assessment Standards.

5 Other
Not applicable.

Keisuke Takeuchi
Chairman and Representative Director
June 27, 2013

JGC CORPORATION Annual Report 201361

Independent Auditor’s Report
JGC CORPORATION

To the Board of Directors of JGC Corporation

Report on the Consolidated Financial Statements
We have audited the accompanying consolidated financial statements of JGC Corporation and its consolidated subsidiaries, which
comprise consolidated balance sheets as of March 31, 2013 and2012, and consolidated statements of income, consolidated
statements of comprehensive income, consolidated statements ofchanges in net assets and consolidated statements of cash flows forthe years ended March 31, 2013, 2012 and 2011, and a summary ofsignificant accounting policies and other explanatory information.
Management’s Responsibility for the Consolidated Financial
Statements
Management is responsible for the preparation and fair presentationof these consolidated financial statements in accordance withaccounting principles generally accepted in Japan, and for suchinternal control as management determines is necessary to enable
the preparation of consolidated financial statements that are free frommaterial misstatements, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. We conducted our audits inaccordance with auditing standards generally accepted in Japan.
Those standards require that we comply with ethical requirements
and plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on our judgement,
including the assessment of the risks of material misstatement of theconsolidated financial statements, whether due to fraud or error. In
making those risk assessments, we consider internal control relevantto the entity’s preparation and fair presentation of the consolidated
financial statements in order to design audit procedures that areappropriate in the circumstances, while the objective of the financial
statement audit is not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and thereasonableness of accounting estimates made by management, as
well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion.
OpinionIn our opinion, the consolidated financial statements present fairly, inall material respects, the financial position of JGC Corporation and its
consolidated subsidiaries as of March 31, 2013 and 2012, and theirfinancial performance and cash flows for the years ended March 31,
2013, 2012 and 2011, in accordance with accounting principles
generally accepted in Japan.

62

Convenience Translation
The U.S. dollar amounts in the accompanying consolidated financial
statements with respect to the year ended March 31, 2013 arepresented solely for convenience. Our audit also included the translation of yen amounts into U.S. dollar amounts and, in our opinion,such translation has been made on the basis described in Note 1 tothe consolidated financial statements.

Report on the Internal Control Report
We also have audited the accompanying report on internal control
over financial reporting of the consolidated financial statements of
JGC Corporation as of March 31, 2013 (“Internal Control Report”).
Management’s Responsibility for the Internal Control ReportManagement is responsible for the design and operation of internal
control over financial reporting and the preparation and fair presentation of the Internal Control Report in conformity with assessment
standards for internal control over financial reporting generally
accepted in Japan. Internal control over financial reporting may notcompletely prevent or detect financial statement misstatements.
Auditor’s Responsibility
Our responsibility is to express an opinion on the Internal Control
Report based on our internal control audit. We conducted our internal
control audit in accordance with auditing standards for internal control
over financial reporting generally accepted in Japan. Those standards
require that we comply with ethical requirements and plan and performthe audit to obtain reasonable assurance about whether the Internal
Control Report is free from material misstatement.
An internal control audit involves performing procedures to obtain
audit evidence about the assessment of internal control over financial
reporting in the Internal Control Report. The procedures selected
depend on the auditor’s judgement, including significance of effect on
the reliability of financial reporting. Also, an internal control audit
includes evaluating the appropriateness of the scope, procedures
and result of the assessment determined and presented by management, and the overall internal control report presentation. We believethat the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
OpinionIn our opinion, the Internal Control Report, in which JGC Corporation
states that internal control over financial reporting was effective as ofMarch 31, 2013, presents fairly, in all material respects, the assessment of internal control over financial reporting in conformity withassessment standards for internal control over financial reporting
generally accepted in Japan.

KPMG AZSA LLC
June 27, 2013
Tokyo, Japan

Six-Year Summary—Non-Consolidated
For the six years ended March 31.
Yen amounts are in millions except per share data.

2013

2012

2011

2010

2009

2008

¥454,261¥451,724¥359,561¥317,597¥349,925¥460,161

Operating Income

48,94654,21851,91832,14541,35630,550

Income before Taxes on Income

56,25060,70845,20527,93444,57832,832Net Income

44,14734,30422,853

21,271

30,214

21,312

Total Current Assets

357,957

299,329

272,339

232,540

276,325

270,646

Total Current Liabilities

200,001

173,793

167,621

126,240

184,205

194,470

Working Capital

157,956

125,536

104,718

106,300

92,12076,176

Current Ratio

179.0%

172.2%

162.5%

184.2%

150.0%

139.2%Net Property and Equipment

50,91349,961

49,95650,36449,414

51,115

Total Assets

507,981444,659

415,737

374,549

412,893

404,424

1,876

2,486

1,663

16,104

16,757

15,519Total Net Assets

290,011251,006

227,794

212,619

192,655

174,795

New Contracts

468,427

342,983

569,128

675,505

440,548

348,755

1,019,426

1,005,260

1,114,182

953,511

641,781607,378

174.86135.86

90.44

84.15

119.5

84.01

Cash Dividends per Share (in yen)

45.5

38.5

30.0

21.0

30.0

21.0

Number of Employees

2,185

2,155

2,137

2,107

2,069

2,014

Net Sales

Long-Term Debt, Less Current Maturities

Outstanding Contracts
Net Income per Share (in yen)

JGC CORPORATION Annual Report 201363

Non-Consolidated Balance Sheets
JGC CORPORATIONMarch 31, 2013 and 2012

Millions of yen

Thousands of
U.S. dollars(Note 1)

2013

2012

2013

Cash and deposits¥214,775¥169,426$2,283,626

Marketable securities

25,00027,500265,816

Notes and accounts receivable (Note 2)

62,574

51,683665,327

Contract works in progress

20,89422,424

222,159

Deferred tax assets (Note 7)

13,245

9,751

140,829

Other current assets (Note 2)

21,543

18,616

229,059

AssetsCurrent Assets:

Allowance for doubtful accounts

(74)

(71)

(787)

357,957

299,3293,806,029

Land (Notes 8 & 9)

21,931

21,931

233,184

Buildings and structures

52,49548,363558,161

Machinery and equipment

10,768

9,921

114,492

Total Current Assets

Property and Equipment (Note 3):

Construction in progress

951

2,172

10,112

86,14582,387915,949(35,232)(32,426)(374,609)

50,91349,961

541,340Investments in subsidiaries and affiliates (Note 3)

52,186

48,505554,875

Marketable and investment securities

35,34429,845375,800

Long-term loans receivable (Notes 2 & 3)

7,230

9,698

76,874

Deferred tax assets (Note 7)

1,368

4,137

14,545

Other

2,983

3,184

31,717

99,111

95,369

1,053,811¥507,981¥444,659$5,401,180

Less accumulated depreciation
Net Property and Equipment

Other Assets:

Total Other Assets

Total Assets
The accompanying notes are an integral part of these statements.

64Millions of yen

Thousands of
U.S. dollars(Note 1)

2013

2012

2013

¥ 21,481¥ 13,833$ 228,400

Notes and accounts payable (Note 2)

60,43057,252642,530

Advances received on uncompleted contracts (Note 2)

56,85458,389604,508

Reserve for job warranty costs

1,713

2,051

18,214

Reserve for losses on contracts

20,376

4,107

216,651

Income taxes payable

15,623

11,658

166,114

Liabilities and Net Assets

Current Liabilities:
Short-term loans (Notes 2 & 3)

Provision for loss on guarantees

2,417

—

25,699Other current liabilities (Note 2)

21,10726,503

224,423

Total Current Liabilities

200,001

173,793

2,216,539

Long-Term Debt, Less Current Maturities (Note 3)

1,876

2,486

19,947Retirement and Severance Benefits

9,199

10,026

97,810

Deferred Tax Liabilities for Land Revaluation (Notes 7 & 8)

3,692

3,692

39,256

Other Non-Current Liabilities (Note 2)

3,202

3,656

34,045217,970

193,653

2,317,597

23,511

23,511

249,984

Capital surplus

25,60325,603

272,228

Legal earnings reserve

2,693

2,693

28,633244,185

209,758

2,596,332

Treasury stock, at cost

(6,449)(6,375)(68,570)

Net unrealized holding gains on securities

5,404

2,319

57,459Deferred gains on hedges

1,606

39

17,076

Land revaluation, net of deferred tax portion (Note 8)(6,542)(6,542)(69,559)

Total Net Assets

290,011251,006

3,083,583

Total Liabilities and Net Assets¥507,981¥444,659$5,401,180

Total Liabilities

Contingencies (Note 5)

Net Assets (Note 6):
Common stock
Authorized — 600,000,000 shares,
Issued — 259,052,929 shares in 2013 and 2012

Retained earnings

JGC CORPORATION Annual Report 201365

Non-Consolidated Statements of Income
JGC CORPORATION
Years ended March 31, 2013, 2012 and 2011

Millions of yen

Thousands of
U.S. dollars(Note 1)

2013

2012

2011

2013

Net Sales¥454,261¥451,724¥359,561$4,829,995

Cost of Sales

393,520

386,555

297,622

4,184,157

Gross profit

60,741

65,16961,939645,838

11,795

10,951

10,021

125,41248,94654,21851,918520,426

Selling, General and Administrative Expenses
Operating income
Other Income (Expenses):
Interest and dividend income

9,491

9,181

8,642

100,914

Interest expense

(102)

(372)

(518)

(1,085)

Loss on sales and disposal of property and equipment

(91)

(722)

(32)

(968)
968

Gain on sales of marketable and investment securities

91

16

—

Gain (loss) on sales of an affiliate security

—

(45)

9,665

—

Loss on devaluation of marketable and investment securities

—

—

(197)

—

Loss on provision for guarantees(2,417)——(25,699)

Loss on allowance for investment(5,951)(1,318)—(63,275)

Exchange gain (loss), net

3,434

(617)

(4,293)36,512

Reversal for doubtful accounts

2,181

—

—

23,190Loss on impairment of fixed assets (Note 9)

—

(420)

—

—

Other, net

668

787

(19,980)

7,103

Income before taxes on income

7,304

6,490

(6,713)

77,66056,25060,70845,205598,086

164,742

Taxes on Income (Note 7):
Current

15,494

20,781

19,175

Deferred(3,391)

5,623

3,177

(36,055)

Net Income¥ 44,147¥ 34,304¥ 22,853$ 469,399

Yen

U.S. dollars(Note 1)

Amounts Per Share of Common Stock
Net income¥174.86¥135.86¥90.44$1.86

Cash dividends applicable to the year

¥ 45.50¥ 38.50¥30.00$0.48

The accompanying notes are an integral part of these statements.

66

Non-Consolidated Statements of Changes in Net Assets
JGC CORPORATION
Years ended March 31, 2013, 2012 and 2011

Thousands ofsharesMillions of yen
Common stock

Balance at April 1, 2010

SharesAmountCapitalsurplusLegalreserve

Retainedearnings

Treasurystock,
at costNet unrealized
holding gains(losses) on
securities

259,053¥23,511¥25,601¥2,693¥165,434¥(5,854)¥ 5,075

Net income for the year

Land
Deferred revaluation, net
gains (losses)of deferredon hedges
tax portion(Note 1)
(Note 8)¥2,712

Cash dividends(5,309)Gain on disposal of treasury stock2

2

Net unrealized holding losses on securities(1,745)Net deferred losses on hedges(193)

Increase of treasury stock
Balance at March 31 and April 1, 2011

(435)
259,053¥23,511¥25,603¥2,693¥182,978

Net income for the year

34,304

Cash dividends(7,576)

Land revaluation, net of deferred tax portion¥(6,287)¥ 3,330¥2,519110

Net unrealized holding losses on securities(1,011)

Net deferred losses on hedges(2,480)

Increase of treasury stock(88)
259,053¥23,511¥25,603¥2,693¥209,758

Net income for the year

44,147

Cash dividends(9,720)¥(6,375)

Net unrealized holding gains on securities¥ 2,319¥39¥(6,542)3,085

Net deferred gains on hedges

1,567

Increase of treasury stock
Balance at March 31, 2013¥(6,553)

52

Gain on disposal of treasury stock

Balance at March 31 and April 1, 2012¥(6,553)

22,853(74)
259,053¥23,511¥25,603¥2,693¥244,185¥(6,449)¥ 5,404¥1,606¥(6,542)

Thousands of U.S. dollars (Note 1)

Balance at April 1, 2012

Common stock

CapitalsurplusLegalreserve

Retainedearnings

Treasurystock,
at costNet unrealized
holding gains(losses) on
securities$249,984$272,228$28,633$2,230,282$(67,783)$24,657

Net income for the year

469,399

Cash dividends(103,349)

Net unrealized holding gains on securities$

415$(69,559)

32,802

Net deferred gains on hedges

16,661

Increase of treasury stock
Balance at March 31, 2013Land
Deferred revaluation, net
gains (losses)of deferredon hedges
tax portion(Note 1)
(Note 8)(787)
$249,984$272,228$28,633$2,596,332$(68,570)$57,459$17,076$(69,559)

The accompanying notes are an integral part of these statements.

JGC CORPORATION Annual Report 201367

Notes to Non-Consolidated Financial Statements

Note 1 — Summary of Accounting Policies(a) Basis of Presenting Non-Consolidated Financial Statements

stated at fair market value. Unrealized gains and losses on these

The accompanying non-consolidated financial statements of JGC

securities are reported, net of applicable income taxes, as a separate

Corporation (Nikki Kabushiki Kaisha, the “Company”) have been

component of net assets. Realized gains and losses on the sale ofprepared in accordance with the provisions set forth in the Japanesesuch securities are computed using the moving-average method.

Financial Instruments and Exchange Law and its related accounting

Other securities with no available fair market value are stated atregulations, and in conformity with accounting principles generally

moving-average cost. Equity securities issued by subsidiaries andaccepted in Japan (“Japanese GAAP”), which are different in certain

affiliates, which are not consolidated or accounted for using therespects as to application and disclosure requirements ofequity method, are stated at moving-average cost.

International Financial Reporting Standards.
The accompanying non-consolidated financial statements have

Available-for-sale securities with available fair market values are

If the market value of available-for-sale securities declines
significantly, such securities are restated at fair market value and the

been restructured and translated into English (with some expanded

difference between fair market value and the carrying amount is

descriptions) from the non-consolidated financial statements of therecognized as loss in the period of decline. For equity securities with

Company prepared in accordance with Japanese GAAP and filed

no available fair market value, if the net asset value of the investee

with the appropriate Local Finance Bureau of the Ministry of Financedeclines significantly, such securities are required to be written down

as required by the Japanese Financial Instruments and Exchange

to the net asset value with the corresponding losses in the period of

Law. Certain supplementary information included in the statutory

decline. In these cases, such fair market value or the net asset value

Japanese language non-consolidated financial statements, but notwill be the carrying amount of the securities at the beginning of therequired for fair presentation, is not presented in the accompanying

next year.

non-consolidated financial statements.
The translation of the Japanese yen amounts into U.S. dollars is(e) Allowance for Losses on Investment

included solely for the convenience of readers outside Japan, using

To prepare for estimated losses to be incurred in the future, allow-

the prevailing exchange rate at March 31, 2013, which was ¥94.05

ance for losses on investment is stated in amounts considered to be

to U.S. $1. The convenience translations should not be construed as

appropriate based on financial condition of investments.

representations that the Japanese yen amounts could be converted
into U.S. dollars at this or any other rate of exchange.

(f ) Provision for Losses on Guarantees
To provide for losses on guarantees, the Company makes a provision(b) Conversion of Foreign Currencies

for potential losses at the end of the fiscal year.

Receivables and payables denominated in foreign currencies aretranslated into Japanese yen at the year-end rates.

(g) Recognition of Sales, Contract Works in Progress
and Advances Received on Uncompleted Contracts(c) Allowance for Doubtful Accounts

Sales on contracts for relatively large projects, which require longNotes and accounts receivables, including loans and other receivables,

periods for completion and which generally include engineering,are valued by providing individually estimated uncollectible amounts

procurement (components, parts, etc.) and construction on aplus the amounts for probable losses calculated by applying afull-turnkey basis, are recognized on the percentage-of-completion

percentage based on collection experience to the remaining accounts.

method, primarily based on contract costs incurred to datecompared with total estimated costs for contract completion. The(d) Marketable Securities, Investments in Subsidiaries andAffiliates, and Marketable and Investment Securities

percentage-of-completion method is adopted for large jobs for which

The Company is required to examine the intent of holding eachexceeds ¥1,000 million. Revisions in contract revenue and cost

security and classify those securities as (1) securities held for trading

estimates are recognized in the period in which they are determined.

purposes, (2) debt securities intended to be held to maturities, (3)the construction period exceeds 12 months and the contract amountContract works in progress are stated at cost determined by aequity securities issued by subsidiaries and affiliates, and (4) all otherspecific identification method and comprised of direct materials,

securities that are not classified in any of the above categories

components and parts, direct labor, subcontractors’ fees and other(hereafter, “available-for-sale securities”). The Company did not haveitems directly attributable to the contract, and job-related overheads.

the securities defined as (1) and (2) above in the years ended March

Selling, general and administrative expenses are charged to opera-

31, 2013 and 2012.

tions as incurred and are not allocated to contract job work costs.
The Company normally receives payments from customers on
a progress basis in accordance with the terms of the respective
construction contracts.

68(h) Operating Cycle(k) Retirement and Severance Benefits and Pension Costs

Assets and liabilities related to long-term contract jobs are included

The Company provides two types of post-employment benefit plans,in current assets and current liabilities in the accompanying

unfunded lump-sum payment plans and funded non-contributory

non-consolidated balance sheets, as they will be liquidated in thepension plans, under which all eligible employees are entitled tonormal course of contract completion, although it may require more

benefits based on the level of wages and salaries at the time of retire-

than one year.

ment or termination, length of service and certain other factors.

(i) Property and Equipment, Depreciation and Finance Leases

retirement benefits at March 31, 2013 and 2012, based on theProperty and equipment are stated at cost, except for certain

estimated amounts of projected benefit obligation, actuarially calcu-

revalued land as explained in Note 8. Depreciation on property andlated using certain assumptions and the fair values of the plan assets

equipment is calculated using the straight-line method for buildings

at these dates.

The Company provided allowance for employees’ severance andused for business operation, and the declining-balance method forPrior service costs are recognized as expenses in equal amounts

other property and equipment over the estimated useful lives of theover the average of the estimated remaining service lives of theassets based on the Corporate Tax Code of Japan.

employees (12 years), and actuarial gains and losses are recognized

Effective as of the accounting period ended March 31, 2013, theas expenses using the declining-balance method over the average ofCompany has changed its depreciation procedure based on an

the estimated remaining service lives (12 years) commencing in theamendment in corporation tax law for the tangible assets acquired onfollowing period.

and after April 1, 2012. The effect of this change on the financial
statement result is immaterial.
All finance leasing transactions were capitalized except for(l) Research and Development Costs
Research and development costs for the improvement of existing

finance leases which commenced prior to April 1, 2008 and haveskills and technologies or the development of new skills and technol-

been accounted for as operating leases, and continue to be accounted

ogies, including basic research and fundamental development costs,

for as operating leases with disclosure of “as if capitalized” information.

are charged to operations in the period incurred.

Expenditures for new facilities and those that substantially
increase the useful lives of existing property and equipment are(m) Taxes on Income

capitalized. Maintenance, repair and minor renewals are charged to

The Company provides tax effects of temporary differences between

expenses as incurred.

the carrying amounts and the tax basis of assets and liabilities. The

The cost and accumulated depreciation applicable to assets retired

asset and liability approach is used to recognize deferred tax assets

or otherwise disposed of are eliminated from the related accounts

and liabilities for the expected future tax consequences of temporary

and the gain or loss on disposal is credited or charged to income.

differences.

(j) Impairment of Fixed Assets(n) Reserve for Job Warranty Costs

The Company reviews its long-lived assets for impairment wheneverA reserve for the estimated cost of warranty obligations is provided

events or changes in circumstances indicate the carrying amount offor the Company’s engineering, procurement and construction work

an asset or asset group may not be recoverable. An impairment loss

at the time the related sales on contracts are recorded.

would be recognized if the carrying amount of an asset or asset
group exceeds the sum of the undiscounted future cash flows(o) Reserve for Losses on Contracts

expected to result from the continued use and eventual disposition of

A reserve for losses on contracts is provided for an estimatedthe asset or asset group. The impairment loss would be measured as

amount of probable losses to be incurred in future years in respect of

the amount by which the carrying amount of the asset exceeds its

construction projects in progress.

recoverable amount, which is the higher of the discounted cash flows
from the continued use and eventual disposition of the asset or the(p) Per Share Information

net selling price at disposition.

Cash dividends per share have been presented on an accrual basis
and include dividends to be approved after the balance sheet datebut applicable to the year then ended.

JGC CORPORATION Annual Report 201369

(q) Derivatives and Hedge Accounting(1) Change in Accounting Policies

The accounting standard for financial instruments requires companies

When a new accounting policy is applied with revision of

to state derivative financial instruments at fair value and to recognize

accounting standards, the new policy is applied retrospectively

changes in the fair value as gains or losses unless the derivative

unless revised accounting standards include specific transitional

financial instruments are used for hedging purposes.

provisions. When revised accounting standards include specific

If derivative financial instruments are used as hedges and meetcertain hedging criteria, the Company defers recognition of gains orlosses resulting from changes in fair value of derivative financialtransitional provisions, an entity shall comply with the specifictransitional provisions.
(2) Changes in Presentations

instruments until the related losses or gains of the hedged items

When the presentation of financial statements is changed, prior

are recognized.

period financial statements are reclassified in accordance with the

However, in cases where forward foreign exchange contracts areused as hedges and meet certain hedging criteria, forward foreign

new presentation.
(3) Changes in Accounting Estimatesexchange contracts and hedged items are accounted for in the

A change in an accounting estimate is accounted for in the period

following manner (Allocation Method):of the change if the change affects that period only, and is(1) If a forward foreign exchange contract is executed to hedge an

accounted for prospectively if the change affects both the period

existing foreign currency receivable or payable,(i) The difference, if any, between the Japanese yen amount of theof the change and future periods.
(4) Corrections of Prior Period Errors

hedged foreign currency receivable or payable translated using

When an error in prior period financial statements is discovered,

the spot rate at the inception date of the contract and the bookthose statements are restated.

value of the receivable or payable is recognized in the statement

This accounting standard and the guidance are applied toof income in the period which includes the inception date, andaccounting changes and corrections of prior period errors which are(ii) The discount or premium on the contract (that is, the difference
between the Japanese yen amount of the contract translated

made from the beginning of the fiscal year that begins on or after
April 1, 2011.

using the contracted forward rate and that translated using the
spot rate at the inception date of the contract) is recognizedover the term of the contract.
(2) If a forward foreign exchange contract is executed to hedge afuture transaction denominated in a foreign currency, the future

Note 2 — Receivables from and Payables to Subsidiaries
and Affiliates
Significant receivables from and payables to subsidiaries and affiliates
at March 31, 2013 and 2012 were as follows:
Thousands of
U.S. dollars(Note 1)Millions of yen

transaction will be recorded using the contracted forward rate,
and no gains or losses on the forward foreign exchange arerecognized.

March 31,

Also, where interest rate swap contracts are used as hedges andNotes and accounts receivable

¥

2013

2012

2013

825

¥ 7,128 $8,772

meet certain hedging criteria, the net amount to be paid or received

Other current assets

9,396

8,369

99,904

under the interest rate swap contract is added to or deducted from

Long-term loans receivable

7,208

9,688

76,640

the interest on the assets or liabilities for which the swap contract

Notes and accounts payable

6,887

11,09373,227was executed (Special method for interest rate swap).

Short-term loans

20,72913,175

220,404(r) Accrued Bonuses to Directors and Corporate Auditors
The Company recognizes directors’ and corporate auditors’ bonuses
as expenses when incurred.

(s) Accounting Changes and Error Corrections
On December 4, 2009, the Accounting Standards Board of Japanissued ASBJ Statement No. 24, “Accounting Standard for
Accounting Changes and Error Corrections” and ASBJ Guidance
No. 24, “Guidance on Accounting Standard for Accounting Changes
and Error Corrections”. Accounting treatments under the new
accounting standard are as follows:70

Advances received on uncompleted
contracts

81

221

861

Other current liabilities

717

1,509

7,624

Other non-current liabilities

184

184

1,956

Note 3 — Borrowings and Assets Pledged as Collateral

Note 4 — Lease Transactions(a) Finance Lease Transactions Without OwnershipTransfer to Lessee

At March 31, 2013 and 2012, short-term loans consisted of
unsecured debt from subsidiaries and bore interest at TIBOR.
Long-term debt consisted of the following:

Finance leases commenced prior to April 1, 2008 which do not
Thousands of
U.S. dollars(Note 1)Millions of yen

March 31,

2013

2012

2013

transfer ownership of leased assets to lessees were accounted for as
operating leases.
Assumed amounts of acquisition cost and accumulated depreci-

Unsecured Debt

ation at March 31, 2013 and 2012 are as follows:

0.74% – 1.25% loans from banks
and insurance companies, due
serially through 2018

(1) Purchase price equivalents, accumulated depreciation equiva-

Less current maturities
Long-term debt due after one year

¥2,628¥3,144$27,943

(752)

(658)

(7,996)¥1,876¥2,486$19,947

Thousands of
U.S. dollars(Note 1)Millions of yen

Buildings and structures, at net
book value
Machinery and equipment, at net
book value
Total

2013

2012

2013

¥4,280¥4,280$45,508

2,089

2,196

22,2122

2

21¥6,371¥6,478$67,741

Assets pledged as collateral for subsidiary’s debt at March 31,

Investments in subsidiaries andaffiliates
Long-term loans receivable
Total

2013

2012

2013

¥ 801

¥—

$ 8,517

400

—

4,253

¥1,201¥—$12,770

The annual maturities of long-term debt outstanding at March 31,
2013, were as follows:
Thousands of
U.S. dollars(Note 1)Millions of yen

2014

¥ 752

$ 7,996

2015

282

2,999

2016

94

999

2017

—

—

1,500

15,949¥2,628$27,9432018 and thereafter
Total

¥132

¥138

(71)

(62)

¥ 61

¥ 76

Thousands of
U.S. dollars(Note 1)March 31,2013

Machinery and equipment:$1,404

Accumulated depreciation equivalents(755)

Book value equivalents$ 649

Purchase price equivalents are calculated using the inclusive-of-(2) Lease commitments
Thousands of
U.S. dollars(Note 1)Millions of yen

March 31,

2013

2012

2013

Due within one year

¥15

¥15

$160

Due after one year
Total

46

61

489

¥61

¥76

$649

Lease commitments are calculated using the inclusive-of-interest
AmountYear ending March 31,

2012interest method.
Thousands of
U.S. dollars(Note 1)Millions of yen

March 31,

Book value equivalents

Purchase price equivalents

2013 and 2012, were as follows:

2013

Machinery and equipment:
Accumulated depreciation equivalents

March 31, 2013 and 2012, were as follows:Land

Millions of yen

March 31,

Purchase price equivalents

Assets pledged as collateral for other non-current liabilities at

March 31,

lents, and book value equivalents:

method.

JGC CORPORATION Annual Report 201371

(3) Lease payments and depreciation equivalents
Thousands of
U.S. dollars(Note 1)Millions of yen

Year ended March 31,

2013

2012

2011

2013

Lease payments

¥15

¥17

¥18

$159

Depreciation equivalents

15

17

18

159

Note 6 — Taxes on Income
The statutory effective tax rates are 38%, 40.7%, and 36.2% for theyears ended march 31, 2013, 2012 and 2011, respectively.
(1) The following table summarizes the significant differences
between the statutory tax rate and the Company’s effective tax
rate for financial statement purposes for the years ended March(4) Calculation method of depreciation equivalents
Depreciation equivalents are computed by the straight-line method

31, 2013, 2012 and 2011:

over the lease period without considering residual value.
Statutory tax rate(b) Operating Lease Transactions
Lease commitments under non-cancelable operating leases:
Thousands of
U.S. dollars(Note 1)Millions of yen

March 31,

2013

2012

2013

Due within one year

¥400

¥542

$4,253Due after one year

204

359

2,169

¥604

¥901

$6,422

Total

2012

2011

40.7%

36.2%

Non-deductible expenses

0.4

0.4

0.3

Non-taxable dividend income

(4.8)

(4.8)

(5.5)

Tax credit utilized

(0.3)

(0.2)

(0.4)

Other

(11.8)

7.4

18.9

21.5%

43.5%

49.5%

Effective tax rateSignificant components of the Company’s deferred tax assets
and liabilities as of March 31, 2013 and 2012 were as follows:
Thousands of
U.S. dollars(Note 1)Millions of yen

Note 5 — Contingencies

March 31,

(1) It is a business practice in Japan for a company to guarantee theCurrent deferred taxes

indebtedness of certain of its trading agents, suppliers, subcon-

Deferred tax assets:

2013

2012

2013

tractors and certain subsidiaries and affiliates. The aggregate

Accrued employees’ bonuses

amount of such guarantees was ¥33,565 million ($356,885

Reserve for job warranty costs

651

779

6,922

thousand) and ¥20,191 million at March 31, 2013 and 2012,

Reserve for losses on contracts

7,743

1,561

82,329respectively.

Other

4,184

5,806

44,487

14,395

9,927

153,057(176)(12,228)(2) The Company has guaranteed employees’ housing loans andothers from banks in the amount of ¥7 million ($74 thousand) and¥5 million at March 31, 2013 and 2012, respectively.

72

2013

38.0%

Total current deferred
tax assets¥ 1,817¥1,781 $ 19,319

Deferred tax liabilities:
Forward exchange contracthedge(1,150)Net current deferred tax assets¥13,245¥9,751 $140,829

Thousands of
U.S. dollars(Note 1)Millions of yen

March 31,

2013

2012

2013

As discussed in Note 1 (j), the Company has applied the accounting
standard for impairment of fixed assets.
The Company has grouped their fixed assets principally based on

Non-current deferred taxes
Deferred tax assets:
Employee’s retirement andseverance benefits

Note 8 — Impairment of Fixed Assets

its business segment, while considering mutual supplementation of
the cash flows.
¥ 3,412¥ 3,795$ 36,278

Loss on impairment of fixed assets for the year ended March 31,

Allowance for losses oninvestment

469

469

4,987

Depreciation

352

358

3,743

Location

Use

Type of assets

Sendai (Japan)

Rental Property

Land

Other
Total non-current deferred
tax assets

256

930

2,722

4,489

5,552

47,730

Deferred tax liabilities:
Net unrealized holding gains
on securities
Other
Total deferred tax liabilities

2012 consisted of the following:

Carrying amount of certain assets was devalued to theirrecoverable amounts, since the land’s market value has significantly
declined. As a result, the Company recognized loss on impairment in(2,987)(1,282)(31,760)

(134)

(133)

(1,425)(3,121)(1,415)(33,185)

Net non-current deferred tax assets¥ 1,368¥ 4,137$ 14,545

Deferred tax liabilities for land
revaluation¥ 3,692¥ 3,692$ 39,256

the amount of ¥420 million. The recoverable amounts were calculated
according to estimated net sales value, which was real-estate appraisal.

For the years ended March 31, 2013 and 2012, the valuation
allowances of ¥9,905 million ($105,316 thousand) and ¥6,132 million
have been deducted from the gross amount of the non-current deferred
tax assets, respectively.

Note 7 — Land Revaluation
Pursuant to Article 2 of the Enforcement Ordinance for the Law
Concerning Land Revaluation (the “Law”) effective March 31, 1998,
the Company recorded its owned land used for business at the fairvalue as of March 31, 2002, and the related revaluation difference,
net of income taxes, was debited to “land revaluation, net of deferred
tax portion” in the net assets section. The applicable income tax
portion was reported as Deferred Tax Liabilities for Land Revaluationin the non-consolidated balance sheet at March 31, 2013 and 2012.
When such land is sold, land revaluation is reversed and debited toretained earnings.
Fair value of revalued land as of March 31, 2013 was ¥4,177
million ($44,413 thousand) less than the book value as of March 31,
2013, which amounts include ¥1,199 million ($12,749 thousand)relevant to rental property.

JGC CORPORATION Annual Report 201373

Independent Auditor’s Report
JGC CORPORATION

To the Board of Directors of JGC Corporation
We have audited the accompanying non-consolidated financial statements of JGC Corporation which comprise thenon-consolidated balance sheets as of March 31, 2013 and 2012, and non-consolidated statements of income andnon-consolidated statements of changes in net assets for the years ended March 31, 2013, 2012 and 2011, and a summaryof significant accounting policies and other explanatory information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting
principles generally accepted in Japan, and for such internal control as management determines is necessary to enable thepreparation of financial statements that are free from material misstatements, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits.We conducted our audits inaccordance with auditing standards generally accepted in Japan.Those standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements arefree from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.
The procedures selected depend on our judgement, including the assessment of the risks of material misstatement of thefinancial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to
the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate
in the circumstances, while the objective of the financial statement audit is not for the purpose of expressing an opinion on theeffectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used
and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of thefinancial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, the non-consolidated financial statements present fairly, in all material respects, the financial position of JGC
Corporation as of March 31, 2013 and 2012, and their financial performance for the years ended March 31, 2013, 2012 and2011, in accordance with accounting principles generally accepted in Japan.
Convenience Translation
The U.S. dollar amounts in the accompanying non-consolidated financial statements with respect to the year ended March 31,
2013 are presented solely for convenience. Our audit also included the translation of yen amounts into U.S. dollar amounts and,in our opinion, such translation has been made on the basis described in Note 1 to the financial statements.

KPMG AZSA LLC
June 27, 2013
Tokyo, Japan74

JGC GroupAs of March 31, 2013

OthersTotal Engineering

Catalysts and Fine Products
JGC Catalysts & Chemicals Ltd.

System Solution Services
JGC Information Systems Co., Ltd.

JGC CORPORATION

Equipment Procurement
JGC Trading and Services Co., Ltd.
JGC (USA), Inc.

Japan Fine Ceramics Co., Ltd.
Nikki-Universal Co., Ltd.

Specialized Consulting Services
Japan NUS Co., Ltd.

JGC Plant Solutions Co., Ltd.

Office Support Services
Nikki Business Services Co., Ltd.

JGC PLANTECH Co., Ltd.
JGC PLANTECH AOMORI Co., Ltd.

Water & Power Generation Business
JGC-ITC Rabigh Utility Co., Ltd.
JGC Mirai Solar Co., Ltd.

Nikki-Universal Co., Ltd.

Provision of products and services

JMD Greenhouse-Gas Reduction
Co., Ltd.

Oil & Gas Production and Sales Business
JGC Energy Development (USA) Inc.
JGC Exploration Eagle Ford LLC
JGC EXPLORATION CANADA LTD.

JGC SINGAPORE PTE LTD
JGC PHILIPPINES, INC.
PT. JGC INDONESIA

Consolidated subsidiaryJGC Gulf International Co. Ltd.

Non-consolidated, non-equity-method subsidiaryJGC OCEANIA PTY LTD

Equity-method subsidiary or affiliate
Non-equity-method subsidiary or affiliate

Total Engineering
BusinessEngineering & Construction
Services

Maintenance Services
Process Licensing Services
Global Warming Gas-Emissions
Credits BusinessCompanyCountry

CapitalCapital ShareJGC Plant Solutions Co., Ltd.
JGC SINGAPORE PTE LTD
JGC PHILIPPINES, INC.
PT. JGC INDONESIA

Japan
Singapore
Philippines
Indonesia¥695,000,000
S$2,100,000
P340,000,000
US$1,600,000

100%
100%
100%
100%

JGC Gulf International Co. Ltd.

Saudi Arabia

SAR187,500,000

100%

A$1,000,000¥135,000,000¥50,000,000¥1,000,000,000¥30,000,000

100%
100%
100%
50%
47%

JGC OCEANIA PTY LTD
Australia
JGC PLANTECH Co., Ltd.
JapanJGC PLANTECH AOMORI Co., Ltd.
Japan
Nikki-Universal Co., Ltd.
JapanJMD Greenhouse-Gas Reduction Co., Ltd. JapanOther* JGC 70%
* JGC Plant Solutions 30%* JGC 92%
* JGC SINGAPORE 8%* JGC PLANTECH 100%

Catalysts and Fine ProductsCompany

JGC Catalysts & Chemicals Ltd.
Japan Fine Ceramics Co., Ltd.
Nikki-Universal Co., Ltd.

Country

Japan
Japan
Japan

Capital¥1,800,000,000¥300,000,000¥1,000,000,000

Capital Share

Other

100%
100%
50%

OthersBusiness

System Solution Services
Equipment Procurement
Specialized Consulting Services
Office Support Services
Water & Power Generation
Business
Oil & Gas Production andSales BusinessCompanyJGC Information Systems Co., Ltd.
JGC Trading and Services Co., Ltd.
JGC (USA), Inc.
Japan NUS Co., Ltd.
Nikki Business Services Co., Ltd.
JGC-ITC Rabigh Utility Co., Ltd.
JGC Mirai Solar Co., Ltd.
JGC Energy Development (USA) Inc.
JGC Exploration Eagle Ford LLC
JGC EXPLORATION CANADA LTD.

Country

Japan
Japan
U.S.A.
Japan
Japan
Japan
Japan
U.S.A.
U.S.A.
CanadaCapital¥400,000,000¥40,000,000
US$100,000¥50,000,000¥1,455,000,000¥319,533,500¥400,000,000
US$128,000,000
US$65,000,000
C$75,385,179

Capital Share

Other

100%
24.50%
100%
80%
100%
55.43%
100%
100%
100%
100%

JGC CORPORATION Annual Report 201375

Outline of JGC
As of March 31, 2013

Established

October 25, 1928

Capital¥23,511,189,612

Number of Employees

2,185 (Consolidated: 6,721)
Number of shares(Thousands)

Percentage of total(%)

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

17,437

6.73

Japan Trustee Services Bank, Ltd. (Trust Account)

17,251

6.65

JGC Trading and Services Co., Ltd.

12,112

4.67

Sumitomo Mitsui Banking Corp.

11,0004.24

JGC-S SCHOLARSHIP FOUNDATION

8,433

3.25

Mizuho Corporate Bank, Ltd.

5,700

2.20

SSBT OD05 OMNIBUS ACCOUNT - TREATY CLIENTS

5,522

2.13

State Street Bank and Trust Company 505223

3,296

2.17

State Street Bank and Trust Company

3,282

1.26

Mellon Bank, N.A. as Agent for its Client Mellon Omnibus US Pension

3,158

1.21

Major Shareholders

JGC’s treasury stock holdings total 6,601 thousand shares, approximately 2.54% of total shares issued.

Authorized Shares

600,000,000

Issued and Outstanding
Shares259,052,929

Number of Shareholders

10,323Administrator of the
Shareholders’ Register

Mitsubishi UFJ Trust and Banking Corp. 4-5,
Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-8212, Japan

Distribution of Shareholders (%)
Banks 7.63

Other domestic
corporations 12.55

Trust banks (including trust accounts) 21.37
Foreign investors
39.53

Life and non-life insurance corporations 3.15
Financial instruments firms 4.97
Individuals and others 8.25

Treasury stock 2.55
Figures have been rounded to two decimal places.

Stock PriceJGC Stock Price (Yen)
4,000

Nikkei Stock Average (Yen)
40,000JGC Stock Price

3,000

30,0002,000

20,00010,0001,000
Nikkei Stock Average00Volume (Thousands of shares)
80,00060,00040,00020,000
0

76

2010
1 2

3

4

5

6

7

8

2011
9 10 11 12 1 2

3

4

5

6

7

8

2012
9 10 11 12 1 2

3

4

5

6

7

8

2013
9 10 11 12 1
2

3

4

5

6

Domestic Offices
Tokyo Corporate office
New Ohtemachi Bldg., 2-2-1,
Ohtemachi, Chiyoda-ku,
Tokyo 100-0004, Japan
Tel: 81-3-3279-5441
Fax: 81-3-3273-8047
Yokohama world operations Center
2-3-1, Minato Mirai, Nishi-ku,
Yokohama 220-6001, Japan
Tel: 81-45-682-1111
Fax: 81-45-682-1112
MM Park Building Office
3-6-3, Minato Mirai, Nishi-ku,
Yokohama 220-0012, Japan
Tel: 81-45-682-1111
Fax: 81-45-682-1112
research and Development Center
2205, Narita-cho, Oarai-machi,
Higashi Ibaraki-gun, Ibaraki Pref.
311-1313, Japan
Tel: 81-29-266-3311
Fax: 81-29-266-3310
Osaka Office3-1-18, Kitahama, Chuo-ku,
Osaka 541-0041, Japan
Tel: 81-6-6208-0260
Fax: 81-6-6208-0265

Overseas Offices
Asia
Beijing Office#101 Changfugong Office, 26,
Jianguomenwai Dajie,
Chaoyang District, Beijing 100022,
China
Tel: 86-10-6518-3001
Fax: 86-10-6518-3006
Jakarta officeWisma Kyoei Prince, 12A Floor,
Jl. Jend. Sudirman Kav. 3,
Jakarta 10220, Indonesia
Tel: 62-21-572-3320
Fax: 62-21-572-4311
JGC KoreA CorPorATIoN
Lotte Kwanak Tower 5th Floor
395-67, Shindaebang-Dong,
Dongjak-Gu, Seoul, Korea
Tel: 82-2-831-7316
Fax: 82-2-831-7317

JGC engineering Consultants(Shanghai) Co., Ltd.
Suite 1503-1504, POS-PLAZA,
1600 Century Avenue, Pudong
New Area, Shanghai 200122, China
Tel: 86-21-5058-9881
Fax: 86-21-5058-9880

Middle East
Abu Dhabi office
Office No. 305, 3rd Floor,
Al Salam Building,Junction of Zayed the 1st St. /Al Salam Road
P.O. Box 28543
Abu Dhabi, U.A.E.
Tel: 971-2-6443-335
Fax: 971-2-6444-204

JGC PHILIPPINeS, INC.
2109 Prime Street,
Madrigal Business Park,
Ayala Alabang, Muntinlupa City,
Philippines 1780
Tel: 63-2-876-6000
Fax: 63-2-807-0668

Doha office
AI Fardan Tower 25F, P.O. Box 21371,
Doha, Qatar
Tel: 974-4409-3424
Fax: 974-4409-3557

TeCHNoSerVICe
CONSTRUCTION CO., INC.
19th Floor Export Bank Plaza,
Chino Roces Avenue, Corner Sen,
Gil Puyat Avenue, Makati City,
Philippines
Tel: 63-2-889-9440
Fax: 63-2-845-4533

Basra Office(Undisclosed for security reasons)
Baghdad Office(Undisclosed for security reasons)

JGC VIeTNAM CoMPANY LIMITeD
Unit 1709, 17F Keangnam
Hanoi Landmark Tower,
Me Tri, Tu Liem, Hanoi, Vietnam
Tel: 84-4-3794-0520/0521
Fax: 84-4-3794-0522
PT. JGC INDoNeSIA
Jl. TB Simatupang 7-B,
Jakarta 12430, Indonesia
Tel: 62-21-2997-6500
Fax: 62-21-2997-6599
JGC SINGAPore PTe LTD
29 International Business Park,#07-01 Acer Building Tower A,
Singapore 609923, Singapore
Tel: 65-6-227-0122
Fax: 65-6-227-0358
JGC CONSTRUCTION
INTerNATIoNAL PTe. LTD.
29 International Business Park,#07-01 Acer Building, Tower A,
Singapore 609923, Singapore
Tel: 65-6-561-1255
Fax: 65-6-561-1767
JGC (MALAYSIA) SDN. BHD.
Level 14 Tower 2, Etiqa Twins,
11 Jalan Pinang, 50450 Kuala Lumpur,
Malaysia
Tel: 60-3-2161-2155
Fax: 60-3-2161-0539

Oceania
Perth office
Level 50, 108 St Georges Terrace,
Perth, WA 6000, Australia
Tel: 61-8-9222-5555
Fax: 61-8-9222-5556

JGC Arabia Limited
P.O. Box 2414, Al-Khobar 31952,
Saudi Arabia
Tel: 966-3-896-5055
Fax: 966-3-896-5056
JGC Gulf International Co. Ltd.
P.O. Box 2257, Al-Khobar 31952,
Saudi Arabia
Tel: 966-3-896-5060
Fax: 966-3-896-5071
JGC Middle east Fze(Jebel Ali Head Office):
Office No. LB13124
P.O. Box 18414, Jebel Ali,
Dubai, U.A.E.
Tel: 971-4-8812102
Fax: 971-4-8873102(Doha Branch):
Al Fardan Tower 25F, P.O. Box 22173,
Doha, State of Qatar
Tel: 974-4409-3424/3425
Fax: 974-4409-3557(Delhi Branch):
Unit 201, Second Floor, Time Tower,
M.G. Road, Sector 28,
Gurgaon-122002, Haryana, India
Tel: 91-124-488-3550
Fax: 91-124-488-3560

JGC Italy S.r.I.
Via Lallio n.35., Frazione
Sforzatica, 24044-Dalmine (BG), Italy
Tel: 39-035-373705
Fax: 39-035-373728
JGC CORPORATION (UK) LIMITED401 Marble Arch Tower,
55 Bryanston St,
London, WIH 7AA, U.K.
Tel: 44-20-7868-8012
Fax: 44-20-7868-8011

AfricaAlgiers office
Boulevard du 11 decembre 1960,
Lotissement No.6, El-Biar, Alger, Algeria
Tel: 213-21-91-2366
Fax: 213-21-94-5728
JGC Algeria S.p.A
Boulevard du 11 decembre 1960,
Lotissement No.6, El-Biar, Alger, Algeria
Tel: 213-21-91-2366
Fax: 213-21-91-2285
JGC NIGerIA LIMITeD
Block 1, Flat 6, Zion Court,
No.1 Samuel Adedoyin Street,
Ikate Lekki, Lagos, Nigeria
Tel: 234-1-4630603

Americas
JGC (USA), Inc.
10370 Richmond Avenue, Suite 800,
Houston, TX 77042, U.S.A.
Tel: 1-713-789-1441
Fax: 1-713-975-7874
JGC Energy Development (USA) Inc.
10370 Richmond Avenue, Suite 810,
Houston, TX 77042, U.S.A.
Tel: 1-832-487-9965
Fax: 1-832-487-9973
JGC VENEZUELA C.A.
Edificio Bancaracas Piso 6,
Oficina 6-06,
Av. San Felipe con 2da Calle,
La Castellana, Caracas, Venezuela
Tel: 58-212-266-9155
Fax: 58-212-265-9231

EuropeAlmaty office050059 Almaty Samal-2
Microdistrict Bldg. 56A
Office 203, Kazakhstan
Tel: 7-727-263-5185
Fax: 7-727-263-5187
Paris office
17 Rue de Quatre
Septembre, 75002
Paris, France
Tel: 33-1-4477-4300
Fax: 33-1-4477-4311

Tokyo Corporate Office
Yokohama World Operations Center
MM Park Building Office

JGC CORPORATION Annual Report 2013

77

JGC Corporation Annual Report 2013

Program Management Contractor

2-3-1, Minato Mirai, Nishi-ku, Yokohama 220-6001, Japan
TEL. 81-45-682-1111 FAX. 81-45-682-1112
www.jgc.co.jp

Annual Report 2013
April 1, 2012 — March 31, 2013

Printed in Japan&

Investment Partner