SANKI ENGINEERING CO., LTD.

SANKI ENGINEERING CO., LTD.

Engineering
Engineeringforthe
Futurefor the Future

SANKI REPORT 2018
SANKI REPORT 2018

Engineering
for the Future
02

SANKI REPORT 2018

SANKI REPORT 201803

CONTENTS
Sanki Engineering Group Philosophy

Local
Communities
NGOs,
NPOs,
and Citizens’GroupsGovernment
andAdministrative
Authorities

Value Creation
throughBusiness Activities
Customers

Employees

Shareholders
and Investors

Partners
Business
Partners

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

Sanki Engineering GroupManagement Philosophy
Sanki Standard

Sanki Engineering Group Management Philosophy
Sanki Standard

We create comfortable environments through engineering andwidely contribute to social development.
We will refine our skills and wisdom with the aim of increasing client satisfaction.
We will place significance on communication and mutual respect.
We will remain aware that we are a member of society and will act accordingly.

The Sanki Engineering Group marked the start of its journey toward the centenary of its foundingin 2025 by formulating the Management Vision and the Sanki Engineering Group Management
Philosophy, which carries the spirit of the Group’s former Corporate Credo, in December 2015.
The Management Philosophy is a comprehensive statement of the Sanki EngineeringGroup’s purpose in society and presents three values. The Sanki Engineering Group is pursuingsustained growth by ensuring all Group executive officers and employees uphold these sharedvalues and is contributing to the creation of a sustainable society. Under the Sanki EngineeringGroup Compliance Declaration, which summarizes issues related to corporate ethics andlegal compliance, all Group executive officers and employees will strive to create value forstakeholders and society at large by performing their daily job duties in accordance with the
Sanki Engineering Group Code of Conduct, which lays out the basic principles of appropriate
conduct, and the more specific Sanki Engineering Group Action Guidelines.

04

SANKI REPORT 201804

Sanki Engineering Group Philosophy

05

Editorial Policy/Contents

06

History of Sanki Engineering

08

Business Overview by Segment

10

Sanki Engineering’s Value Creation

14

Message from the President

20

Progress in the Medium-Term Management Plan

Editorial Policy
Aiming to Produce a Tool that Further Boosts
Understanding of the GroupWe have positioned the SANKI REPORT, the annual reportof Sanki Engineering, as a key, integrated communication
tool for reaching all our stakeholders. We hope it will boost
understanding of the Sanki Engineering Group’s businessactivities and future direction and welcome feedback forenhancing our operations and information disclosure.
In compiling the report, we used the following approachin 2018.
• We adopted the Ministry of the Economy, Trade andIndustry’s “Guidance for Integrated Corporate Disclosure andCompany-Investor Dialogues for Collaborative Value Creation”
as a reference in the editing of the report.
• We created new pages in the “Value Creation” section toprovide an overview of Sanki Engineering’s business life cycle(pages 12 and 13).
• We sought to enhance the reporting of results of the MediumTerm Management Plan by adding information on specificaspects (pages 20 to 26).
• We categorized the ESG initiatives and relevant SDGs that are
particularly significant for the Sanki Engineering Group (page 26).
• We restructured the Business Report pages to provide more
focused information that is easier to read, with messages
from officers responsible for the divisions (pages 28 to 38).
• We revised the composition of the corporate governance andenvironment sections of the CSR Report to make them easierto understand (pages 40 to 43, 62 to 66).

Business Report
28

Facilities Construction Business

32

Plants & Machinery Business

36

Real Estate Business37

Research and Development

CSR ReportManagement40

Corporate Governance

44

Compliance46

Risk Management

48

CSR Management

Reference Guidelines• “International <IR> Framework” of the International
Integrated Reporting Council• Ministry of the Economy, Trade and Industry’s “Guidancefor Integrated Corporate Disclosure and Company-Investor
Dialogues for Collaborative Value Creation”• Ministry of the Environment’s “Environmental Reporting
Guidelines 2012”• GRI Sustainability Reporting Standards 2016
• ISO 26000

50

Relationship with Customers

53

Relationship with Shareholders and Investors

54

Relationship with Business Partners

56

Health and Safety at Construction Sites

58

Relationship with Employees

Organizations Covered by the Report• Financial information shows consolidated Group figures.
• Non-financial information is based on non-consolidated
figures for Sanki Engineering Co., Ltd. When the information
concerns the Group, organizations covered by the data are
specified in the text, list or graph.

62

Relationship with the Environment

67

Relationship with Local Communities

Reporting Period
April 2017–March 2018 (Some information from outside thisperiod has been included with the period specified.)

Precaution on Performance Outlooks, etc.
In addition to past and present information concerning the SankiEngineering Group, this report includes the targets, plans, outlooks,
strategies, forecasts of future performance and other information
drawn from our long-term vision “Century 2025,” Medium-termManagement Plan “Century 2025” Phase 1 (FY2016–2018) andother sources. Please be aware that these forecasts are the best
estimates by Sanki Engineering management and based on theinformation available at the time, and actual performance may
differ significantly from these forecasts, owing to changes suchas in economic conditions, market trends and exchange rates.

Financial Report and Corporate Information
70

Financial Report

100

Corporate Information, Business Locations andGroup Companies

102

Share Information

103

Third-Party Opinion

SANKI REPORT 201805

History of Sanki Engineering
Sanki Engineering has developed its business in step with the modernization of Japanese industry over the past nine
decades. Under the Sanki Engineering Group Management Philosophy, “We create comfortable environments throughengineering and widely contribute to social development,” the Company will continue to open new eras with the powerof technology toward its 100th anniversary in 2025.

2025

Toward the 100th Anniversary• History of Sanki Engineering
1923

1925
1931
1933
1935
1941
1944
1945
1950

1958
1963
1964

The Great Tokyo Earthquake strikes, and building
modernization drives up demand for building utilities, such asheating, ventilation and air conditioning, water supplies anddrainage, and electrical fixtures and fittings, and construction
technology advances.
On April 22, Sanki Engineering is established as a spinoff from the Machinery Department of the former Mitsui
Bussan, with capital of 500,000 yen and 12 employees.
Moves the head office to the Sanshin Building.
Opens a branch in Dalian, Manchuria.
Celebrates the 10th anniversary of its founding, with fivebranches, six field offices, three affiliates and around 300
employees.
The Pacific War begins; Sanki Engineering suffers a shortageof workers as well as materials due to tight control over the
distribution of goods.
Emergency metal collection campaigns start nationwide.
The Kawasaki and Tsurumi plants are designated militaryindustrial plants.
War ends.
The outbreak of the Korean War leads to a war-driven
economy, and the Japanese economy takes a favorable
turn. Expansion of demand for building constructionand equipment results in dramatic improvement in the
Company’s business performance.
Capital exceeds 1 billion yen.
Completes Sagami plant (currently the Yamato Engineering
Center), which tailors production equipment for conveyor
mass production.
Participates in projects on the occasion of the 1964 Tokyo
Olympics, including the Yoyogi National Gymnasium and the
NHK Broadcasting Center.

1971

1973
1980
1982
1990
1997
2000
2005
2010
2011
2012

2015
2016
2018

The Environmental Agency is inaugurated. Sanki Engineeringdevelops a track record for waste incineration facilities andwater and sewerage treatment facilities and sets up theEnvironmental Administration office.
Spins off the sash business.
Establishes the Company Credos.
Builds the Technical Research Laboratory, equipped withbasic research facilities and large-scale experimental facilities
in Yamato City, Kanagawa Prefecture.
Bubble economy collapses.
COP3 conference in Kyoto adopts the Kyoto Protocol on
preventing global warming.
Opens the Shonan Training Center (Yokosuka City, Kanagawa
Prefecture) and strengthens human resource development.
Moves the head office to Nihonbashi.
Launched the SANKI YOU Eco Contribution Point as a uniquesocial contribution system.
Moves the head office to Tsukiji.
Launches the Smart Building Solution Business to provide
Smart Buildings with a focus on the energy-saving business.
Set up the Disaster Reconstruction Project for assisting thereconstruction of regions affected by the Great East Japan
Earthquake through Sanki Engineering’s business activities.
90th Anniversary.
Establishes the Sanki Engineering Group Management
Philosophy.
Launches the long-term vision “Century 2025.”
All facilities of the Sanki Techno Center opening in October(tentative).

1950s
A Proactive Approach toTechnological Innovation• Technological Progress

1920s

1960s

• Develops environment-related
technology, including an ice thermal
storage system, sewage advanced
treatment systems, and gasificationand melting furnaces.

A Manufacturer that Responds to the Needs of the Times

2000s• Completes work on air conditioning, plumbing and electricalsystems for Japan’s first skyscraper, the Kasumigaseki Building.
• Develops the standardized “6S sash” and gains the top market
share among steel sash manufacturers.

Meeting the Needs of a Rapidly
Advancing Information Society

1970s• Advances network systems, including LAN,building monitoring and automated control.
• Provides air conditioning, plumbing and an
open BA system (automated control, BEMS)
for the Roppongi Hills building and otherconstruction work.
• Establishes the Energy Solutions Centerto promote and develop the energy-saving
business and provide sales support.
• Develops and begins sale of clean conveyor
facilities in response to growing demand for
liquid crystal displays and organic EL panels.

Wide Range of Technological Innovations• Completes work on Japan’s first large-scale clean room at NEC’s
Sagamihara plant.
• Develops the world’s first completely unmanned automatic
sorting system and airport baggage handling system.
• Provides HVAC equipment for satellite communication groundstations in the Middle East and other regions and builds
automotive testing equipment in Russia.

Diversified and Expanded Businesses Lead toGreater Technological Competence• Develops and installs a proprietary incinerator for facilities in
the Sanshin Building.
• Establishes Toyo Carrier Industries together with U.S.-based
Carrier Engineering and launches the air conditioning business.
• Completes work on the Tokyo Office of Nippon Life Insurance
Company (currently Takashimaya Nihonbashi department store).

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

SANKI REPORT 2018

Driving Progress inEnvironmental andInformation Technologies

1930s

Laying the Base for TechnologicalCompetence by Meeting the Needs of the Era

06

1990s

1940s

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

2010s
Contributing to a
Sustainable Society
by Bolstering the LCE
Business

Sanki’s Advanced Technology Bolsters a Construction Boom• Starts manufacturing conveyors.
• Concludes sales contracts for machinery usedin mining-related chemistry with U.S.-based
Dorr Inc. and Oliver, Inc.
• Completes work on the main building of theDai-ichi Life Insurance Company, Japan’s firstbuilding with the special high- voltage power
reception of 22 kV.

1980s
Rising to the Challenge of New Businesses• Launches the information and communications business.
• Launches the facility systems business to deal with officeintegration and moving.

• Promotes the LCE Business, inwhich the Sanki Engineering Group
provides life cycle engineeringfor buildings and facilities, fromplanning, design and construction
work to maintenance, operation/management, renovation and reconstruction.
• Wins order for the DBO project, a bulk contract encompassing design, construction,
management and maintenance.
• Completes hygiene facility for the Tokyo Midtown Hibiya building.

SANKI REPORT 201807

Business Overview by Segment(year ended March 2018)

Facilities Construction BusinessNet sales

139,688

Net Sales
Composition Ratio

million yen

82

Net sales

29,164%
Facility Systems
Business

Main Sales Items● HVAC Systems

Our Facilities Construction Business isconducted in ways that are friendly to bothpeople and the environment and throughsystems that are convenient, comfortableand efficient and also save energy. We areengaged in wide-ranging fields, including
designing HVAC and plumbing systems forbuildings, an industrial HVAC system, andelectrical systems and developing smart
building solutions and facility systems.

• HVAC systems• Industrial HVAC systems• Clean rooms• Environmental control systems• Pharmaceutical and food
manufacturing facilities• Freezing and refrigeration• District heating and cooling plants• Nuclear power-related facilities● Electrical Systems• Electrical systems• Telecommunication systems• Communication-related facilities• Electrical civil engineering● Plumbing and Drainage Systems• Plumbing system for water supply and drainage• Kitchen systems• Disaster prevention systems

Facilities Construction
Business

Main Sales Items
Machinery
Systems
Business

5%●Conveyance Systems• Lightweight conveyors• Distribution-related conveyors• Sorting devices• Automated warehouse

Electrical
Systems BusinessIndustrial HVAC
Business%

Net Sales
Composition Ratio

million yen

Machinery Systems Business5%●Facility Systems• Design for fit-out and relocation of offices andworkplaces• Consulting for project management●Smart Building Solutions• Central monitoring and automated control systems• ICT systems• Crisis management (BCP) solutions• IP phone systems• Security systems

17

Plants & Machinery Systems Business●Material Handling Systems• FA systems• Clean conveyance systems• Material handling systems• Airport baggage and cargo handling systems• Medical handling systems• Handling information control systems

12 %We provide material handling systems andconveyance systems that meet customer
needs and challenges in supply chain
management.

27%
Net Sales

170,1

57

Net Sales
Composition Ratio

million yen*

5%

Environmental
Systems
Business

12 %Real Estate BusinessNet sales

1,755

Net Sales
Composition Ratio

million yen

1Main Sales Items

Our Real Estate Business includes operationsin the areas of real estate leasing andbuilding management. We are striving to
expand into higher value-added real estate
while taking advantage of our current
technology.

● Real Estate Leasing● Building Maintenance and Management• Land leasing• Building leasing• Facility maintenance and upgrades• Facility construction• Facility ownership%

Environmental Systems Business

Building
HVAC and
Plumbing
Business

Main Sales Items

38 %Real EstateBusiness

1%

Plants & Machinery Systems
Business● Waste Treatment• Waste incineration facilities• Landfill wastewater treatment
facilities• Sludge incineration facilities● Water Treatment• Water and sewage treatment facilities• General and industrial waste disposal andrecycling facilities• Sludge recycling facilities• Industrial wastewater and waste gas
treatment facilities• Plant facilities for the food and chemicalindustries

We develop unique facilities and systems
for water and sewage treatment and waste
treatment to enhance living environments
while conserving energy and reducing CO2
emissions.

12

Net Sales
Composition Ratio%*Includes 578 million yen in other net sales and 1,030 million yen in elimination of inter-segment transactions.

08

SANKI REPORT 2018

SANKI REPORT 201809

Sanki Engineering’s Value Creation
Guided by the “Sanki Standard” management philosophy, the Sanki Engineering Group strives to fulfill its mission ofrealizing all types of comfortable environments and contributing to the development of a sustainable society by creating
value at each step of the business process and in every business area.

Capital Resources
Natural Capital• Input such as energy and water
resources

Social CapitalSocial Issues
Global environmental issues
Limited resources and energy
Declining population and aging
society
Escalation of natural disasters

SocialExpectations
and Needs
Decarbonization
Energy conservation
Energy creation
Infrastructure maintenance andupgradesAutomation, labor-saving
solutions and higher productivity
Safe working environment
Information security• Reliability and a solid customer
base cultivated over 90 years• Collaboration between Group
companies• Stable network of cooperation
with subcontractor groups
nurtured through longstanding
relationships of trust• Members of subcontractor groups:
810 companies

Business Activities

Natural Capital

Broad Areas of Business
Facilities Construction
Plants & Machinery Systems Business・Machinery Systems Business• Facilities construction services
provided
Orders received (consolidated):
191.1 billion yen Net sales(consolidated): 170.1 billion yen• Participation in PPP*2 and PFI*3
projects• Support for customers resuming
and reconstructing businessafter major disasters such as theGreat East Japan Earthquake

DesignMaintenanceand Inspection

Human
ResourcesandTechnology
Operation andManagement

Intellectual Capital

Procurement

Financial Capital•Net assets (consolidated): 86.1
billion yen• Sound financial base

• Registered patents for newly
developed technologies andproducts: 154 (cumulative total
for 2013 to 2017)

Stakeholders

Partners

Business
partners

Shareholders
and investors

Customers(clients)

Employees

Human Capital
Construction

R&D and Manufacturing
Capital• Comprehensive training andresearch facility, Sanki Techno
Center• Manufacturing base for
equipment and facilities• Adopted CO2 reduction
proposals: 353 (consolidated)• CO2 reduction for clients: 47,905
t-CO2 (consolidated)•Contribution to achieving ZEB*1

Social Capital

Renovation
and Renewal

Human Capital• Number of employees(consolidated): 2,384• Competent engineers andresearchers• Sales staff with close
relationships with customers

・Environmental Systems Business

Planning and
Basic DesignIntellectual Capital• Rich track record and highly
specialized technology acrossbroad areas of technology
including heating, ventilation
and air conditioning; plumbing;electrical systems; ICT;
automatic control; water andsewage treatment; incinerationand conveyance

Value CreatedManagement Philosophy, Sanki Standard
Medium-Term Management Plan
Compliance Declaration, Code of Conduct,and Action Guidelines➡ Page 4➡ Pages 20 to 26➡ Page 44• Reinstatement after childcare
leave: 100% (non-consolidated)• Non-Japanese employees: 18(non-consolidated)• Project management technician(civil works, construction,
electrical construction,
pipelaying work): 1,112 (nonconsolidated)• Accident frequency rate: 0.86

A Better,
Sustainable
Society
Creation of
Comfortable
Environments

Localcommunities

Governments

Financial Capital• Cash dividends: 35.00 yen peryear• Gross profit margin: 14.7%(highest in the past 10 years)

NGOs andcitizen groups*1 ZEB: Net-zero energy buildings maintain comfortable environments while reducing
annual energy consumption to as close to zero as possible by enhancing energy saving
performance using solar power generation and other measures.
*2 Public Private Partnership: Provides public services through public-private sector
collaboration.
*3 Private Finance Initiative: A major PPP method in which private capital and expertiseare used in the design, construction, maintenance and operation of public facilities toprovide public services.

Notes:• Data on each capital resource are actual results for fiscal 2017.
• Composed by referencing the International Integrated Reporting Framework of the International Integrated Reporting Council (IIRC)

10SANKI REPORT 2018

SANKI REPORT 201811

Addressing Social Issues throughout the Value Chain● Related to society ● Related to the environment

SocialIssues● Low birth rate and aging population● Labor shortage● Aging facilities and social infrastructure● Disaster prevention, mitigation and resilience● Supply chain risks● Fair procurement● Waste issue● Shift to a decarbonized society● Limited resources

Planning and Basic Design

Adding Sanki’sStrengths toCreate Value● Safety first● Quality assurance● Labor shortage● Labor shortage● Improving productivity● Safety first● Ensuring information security● Disaster prevention, mitigation and resilience● CO2 emissions

DesignProcurement

Construction● One-stop solution● Optimal proposals that accurately serve customers by meeting
sophisticated and diversified needs● Proposal and design for reducing costs● Technological proposal and design for disaster prevention andmitigation● Raise efficiencyof transactions
through online
procurement● Collaboration withbusiness partners● Proposal and design for reducing environmental impact, such as
saving energy and resources● Procurement ofenergy-saving,highly efficientequipment● Quality
management
activities toenhance quality● Saving labor inconstruction
work

Operation/Management

Maintenance/Inspection● Automation, labor-saving, improved productivity● Comfort and convenience● Meeting high-level information security requirements● Life-extension and long-life facilities● Reduced running costs● Efficient preventive maintenance based on fault prediction● Disaster prevention and mitigation measures● Reduced environmental impact through energy saving,reuse and recycling● Aging facilities andequipment● Renovation costs● Waste generated
during disassembly

Renovation and Renewal● Improving comfort
and convenience● Saving labor inconstruction● Further reductionof environmental
impact   ●● Utilization of BIM ※Minimizing
Negative Impact● Appropriate management of customer information, protectionof personal information● Centralized management using common Company-wide sales
tools● Fair and transparent
transaction on an
equal footing●● CSR procurement● Prevention of problems and complaints● Health and safety activities, onsite hazard prediction● Collaboration with subcontractors● Energy-saving initiatives● Proper disposal and reduction of waste● Compliance with environmental regulations*BIM (Building Information Modeling): The concept of constructing a 3D model of abuilding on a computer and applying the information across the entire process, including
design, construction and management.

Advanced
Technology

Diverse Human
Resources

Open innovation led by

12

SANKI REPORT 2018

Collaboration among Group
Companies

Collaboration with
Subcontractors

Collaboration with Other
Industries and Fields

the Sanki Techno Center

SANKI REPORT 201813

Message from the President

We will further refine our technicalskills and human resources to create
comfortable environments as ourcontribution to society.
Business Environment and Results for Fiscal 2017

was on the whole favorable, as the Tokyo Olympic andParalympic Games, scheduled for 2020, has spurreddemand for redevelopment and reconstruction, andcontinued capital investments by manufacturers,
bolstering public and private investment inconstruction projects.
The Sanki Engineering Group is pursuing its longterm vision “Century 2025” over a ten-year period to
become the company of choice by its first centenary
in 2025. Furthermore, we have been steadily
implementing initiatives for enhancing quality under the
medium-term management plan “Century 2025” Phase
1, which covers the first three years of the vision fromfiscal 2016 to fiscal 2018. As a result, in fiscal 2017
we saw increases in orders received and net sales aswell as operating income and ordinary income. Orders
received rose 2.8% year-on-year to 191,113 million yen
and net sales rose 1.0% to 170,157 million yen. We
were able to maintain profits at the high levels achievedin the previous year, as operating income rose 9.7%
year-on-year to 6,593 million yen and ordinary income
rose 8.1% to 7,434 million yen. Meanwhile, profit
attributable to owners of parent fell 16.9% year-on-year
to 3,906 million yen as a result of having reported an
extraordinary income and an extraordinary loss.

Japanese Construction Market Maintains Bullish Tone
In fiscal 2017, the Japanese construction market
maintained its bullish tone on the back of strong
corporate earnings and an increase in redevelopment
projects in the Tokyo metropolitan area.
The Sanki Engineering Group operates acrossbroad domains of social infrastructure. Our Facilities
Construction Business includes heating, ventilation andair conditioning, water supply and drainage, plumbing,electrical systems, ICT and office relocation. Our
Machinery Systems Business includes material handlingsystems and conveyors. And our Environmental
Systems Business includes water and sewage
treatment as well as waste incineration facilities.
Therefore, changes in the external environment have an
impact on our business to varying degrees dependingon the segment. For example, the impact of the worker
shortage, caused by the declining population, has
negative and positive aspects. Specifically, there is anegative impact on the Facilities Construction Business,while growing demand for automation provides abusiness opportunity for the Machinery Systems
Business. Nevertheless, the business environment
Business Performance (Millions of Yen)

179,598
171,496

Tsutomu
Hasegawa

168,295

173,398

183,270

185,880

178,901

168,512

8,135

3,146
1,763

3,809

170,157
7,434

6,880
5,327

● Orders received● Net sales■ Ordinary income■ Profit (loss) attributable to ownersof parent

191,113

4,698

3,906

2,461

President
2013

14

2014

2015

2016

2017

（FY）

Orders received rose above those of theprevious year due in part to orders forlarge-scale projects, and net sales also
increased. Construction profitability
improved further, allowing us to maintainprofits at high levels and show year-onyear growth in gross profit, operating
income and ordinary income.

SANKI REPORT 201815

Long-Term Vision “Century 2025”

Phase 3 (FY2022–2025)4-year period to become thecompany of choice

The Company of Choice
The Sanki Engineering Group values
customers, not only the shareholders andcustomers from whom we directly receive
orders but all our stakeholders. They
include owners of facilities, end users,
subcontractors, suppliers and students,
all as customers. Over the next ten years,
we will strive to become the company ofchoice for all of them.

Increased reliability will encourage morecustomers to choose our company.

The Company
of ChoicePhase 2 (FY2019–2021)

3-year period to enhance reliability
Superior quality generates customer
satisfaction, and customer satisfaction andconfidence leads to reliability.

Phase 1 (FY2016–2018)

Medium-Term Management Plan

3-year period to enhance quality“Century 2025” Phase 1

We will enhance quality by refining our skills andwisdom and developing our human resources as afoundation for responding to change.
FY2016

We will strive over the next ten
years to become the company ofchoice for customers by further
enhancing the quality andreliability we provide.

Please refer to pages 20 through 26 for more information.

FY2019FY2022

Progress in Medium-Term Management Plan“Century 2025” Phase 1

FY2025● Lowered costs based on the full operation of thePurchasing Web System for digitizing the ordering
process.
● Launched the “Smile Site Plan” as a dedicatedcommittee that pursues workstyle reforms forconstruction site management.
● Actively exchanged opinions with subcontractors
to reduce factors that hurt profits, such as reworks,
troubles and claims, while also improving profit
margins.

Securing High Profit Margins
Fiscal 2017 was the second year of the medium-term
management plan “Century 2025” Phase 1, whichcorresponds to the three-year period of enhancing
quality under the long-term vision “Century 2025.” Asin the first year, we sought to enhance the quality of ourtechnology and human resources toward establishinga foundation responsive to change by implementing
three key initiatives: (1) Strengthen core businesses, (2)Promote growth strategies, and (3) Enhance the Sanki
Brand.
To strengthen our core businesses, the Facilities
Construction Business made progress in the following
areas.

While the improvement in profit margins was partly
due to the external environment, our series of initiatives
on reinforcing the internal control process, including
stringent cost management, played a major role. As a

Gross Profit Margins (%)

Average forthe past 10 years

12.9

12.3

10.9

12.8
11.4

13.4

10.7
10.0

3.9

2007

16

SANKI REPORT 2018

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

● Expanded sales of hybrid facilities that combine
conveyors with robots.
● Won a large-scale project order for airport
transportation facilities.
● Developed the cross belt sorters CBII and CBIII, theworld’s fastest conveyor and sorting devices.
In the Environmental Systems Business, we
received an order for a large-scale DBO*1 project, in
accordance with our policy for developing the LCE*2
business, and pursued initiatives in renewable energy.

● Won the first DBO project order involving new
construction for energy-recovery type waste
treatment facilities.
● Made a full-scale entry into the market for a woodbiomass gasification power generation facility.
*1 Design Build Operate: A process through which the design, building,operation and maintenance of a project is awarded to a private enterpriseas a bulk order.
*2 Life Cycle Engineering: A business concept of the Sanki EngineeringGroup. Throughout the life cycle of a building, we provide services fromnew construction, repair and maintenance to renewal and reconstruction.

Sanki Techno Center Enhances Quality ofTechnology and Human Resources

14.7
12.8

result, in fiscal 2017 we were able to further extend
our gross profit margin for the entire Group, which inthe previous year had risen to its highest point in ten
years. Achieving high profit margins while maintaining
the same level of sales is a trend that is in line with our
future direction and also corresponds to enhancing thequality of our profit structure. While ensuring quantity interms of sales is naturally important, we will continue tocarefully balance this value with quality in terms of profit
margins as we seek to strengthen our core businesses.
In the Machinery Systems Business, we madeprogress mainly in meeting labor-saving automationneeds arising from the shortage of workers caused byfalling birthrates and an aging population, as well as
baggage handling needs at airports due to the growing
number of inbound visitors to Japan.

（FY）

As a result of stringent costmanagement and enhanced worksite
support systems, the gross profit
margin improved year on year andfurther extended the ten-year record
high for the second consecutive
fiscal year.

With respect to the second key initiative of promoting
growth strategies, the most significant topic of fiscal
2017 was the progress achieved on the STeP (Sanki
Techno Park) Project, which is intended to redevelop
the Sanki Yamato Site as the foundation upon which toachieve the long-term vision “Century 2025.” The Sanki
Techno Center is the core facility of this project andscheduled to come into full operation in October 2018as a site for research and development, training andstudy. At the center, we will develop technology thatlies at the backbone of the Sanki Engineering Group andhand it down to the next generation. The new TechnicalResearch & Development Institute, equipped with themost advanced facilities, already began operation in
March 2018. And in September 2019, we plan to start
operation at a new plant for conveyance equipment
featuring enhanced operability and compact design.
The Sanki Techno Center is characterized by thefollowing functions and characteristics.

● R&D for promoting and supporting open innovation.
● Education and training with an emphasis on practical
drills related to technology, skills and safety.
● Showroom to promote the technical skills of SankiEngineering.
● Ample training and accommodation facility.
● Temporary shelter under a disaster managementagreement with Yamato City.
We will be able to ensure a uniform standard oftraining for the entire Group and equal educational
opportunities by conducting integrated training at
the center with its combined education and training
functions. As a place where diverse people come andgo, we hope it will serve as a catalyst for generatingrich communication and synergies, and ultimately forenhancing the quality of our technology and humanresources.

Nurturing Practitioners of the Sanki Standard
On the third key initiative of enhancing the Sanki Brand,
we have defined our ideal personnel as a practitionerof the Sanki Standard, the management philosophyof Sanki Engineering, which has been passing down
the mindset of placing the utmost value in people asmembers of the Mitsui Group. We have sought to instillamong employees the ideal of a person who places toppriority on communication and mutual respect and can
act as a responsible member of society.
However, given the current concerns surrounding
the labor shortage associated with a declining
population, management faces the vital issue of
securing and educating competent personnel who can
become practitioners of the Sanki Standard, which will

SANKI REPORT 201817

in turn determine the continuation of the Company.
Sanki Engineering has been promoting diversity anddeveloping an environment for securing personnel forthe future through its Smile Project, an industry-leading
effort to reduce long working hours, and developing
programs for a more comfortable workplace withwelfare benefits to enable employees to choose fromdiverse workstyles. A fulfilling personnel system andcomfortable living environment creates peace of mind,
which ultimately leads to enhancing the quality of ourhuman resources.
A company’s personnel structure is essentiallydiverse, and we believe that practicing the Sanki
Standard provides the ideal universal value that brings
together the sensibilities of diverse employees.
Promoting diversity and practicing the Sanki Standard
have the same aim, which we believe will enhance the
Sanki Brand.

Incorporating the ESG Perspective toManagement
Fiscal 2018 is the year for rounding out our mediumterm management plan “Century 2025” Phase 1 forenhancing quality over a three-year period. We will
steadily implement the three key initiatives outlined
above while fully leveraging the Sanki Techno Centerscheduled to open in autumn 2018 and completely
implementing the ”Smile Site Plan” designed to further
bolster site capabilities and reduce the workload ofsite managers. Moreover, we will summarize theprogress and challenges of Phase 1 to formulate thenext medium-term management plan, “Century 2025”
Phase 2 for fiscal 2019 to fiscal 2021, which will target
enhancing reliability.
To ensure that Phase 2 gets a strong start, we mustcomplete the three-year period for enhancing quality
and further incorporate ESG (environment, social andgovernance) perspectives as indicators for corporate
sustainability into management. Sanki Engineering’s
operations have the mission of saving and creatingenergy, and our business development is directly
linked to our contribution to the environment. During
a period in which humankind must squarely face up toenvironmental challenges, the fact that we have beenable to address social issues through our core business
represents a source of pride.
With respect to the social dimension, we need toestablish an environment that allows for employees tocontinue working for many years. In the “big picture”
context of having difficulty adequately meeting thedemand for personnel, related areas such as HVAC
systems, plumbing and drainage systems and electricalsystems must mutually support each other to create
better, more efficient workplace environments.
As for governance, which sustains our businessactivities, we are confident that we are demonstrating
effective management. Looking ahead, we willcontinue to strengthen our governance systems inorder to ensure management transparency, validity andagility.

Stable Dividend Payments as Our Basic Policy
Sanki Engineering recognizes the appropriate returnof profits to shareholders and investors as a key
management concern. Realizing that dividends form thebasis of our policy of shareholder returns, we consider
the balance between sustainable corporate development
and returns to shareholders while consistently seeking
to provide stable dividends, as the basis of our policy,
and additional dividends in accordance with our financial
performance. We will continue to adhere to this policy
and will examine comprehensive and stable methodsof shareholder returns, in light of demands fromshareholders, investors and society at large.
As part of our shareholder return efforts, we retired
three million shares of treasury stock in May 2017 andacquired another three million throughout fiscal 2017.

Our Legacy of Contributing to Society throughTechnology

surprises people. We have been in business for nearly
100 years because society has called upon our services.
Basic human instinct drives us to seek comfort in food,clothing and shelter, and we expect that people willcontinue to seek advances in establishing even more
comfortable environments far into the future.
We have been guided by our Management
Philosophy: “We create comfortable environment
through engineering and widely contribute to social
development.” This we believe has much in common
with the principles behind the Sustainable Development
Goals (SDGs) adopted at the United Nations Summit,
while it also offers sound guidelines for the next
100 years. We intend to continue serving society bycontinuously refining our core technologies for creating
comfortable environments. Also, to remain needed bysociety over the next century, we will consistently refine
our human resources and technical skills while winningthe public trust by providing comfortable environmentsthat are uniquely associated with Sanki Engineering toachieve sustainable growth.

Under our long-term vision “Century 2025,” we are
striving to raise our quality and reliability levels toward
our goal of becoming the company of choice. We havedisclosed the related methods and measures throughthe medium-term management plan. And we feel thatseeking broad social recognition for our work will create
another reason for choosing Sanki Engineering.
For example, the general public has little opportunity
to come into contact with Sanki Engineering’s major
technologies, such as our HVAC, plumbing and drainage
systems, or waste and water treatment facilities.
However, Sanki Brand facilities have been incorporated
into many renowned buildings, a fact that generally

Dividend Payments

Progress on the STeP Plan (Fiscal 2017 to Fiscal 2018)

Facility

Sanki Techno
CenterFormer Yamatosite

New factory  

18

SANKI REPORT 2018

Status of ProgressMar. 2018
Oct. 2018

・Technical Research &Development Institute began
operation
・Entire building scheduled to open

Apr. 2018

・Demolition completed

May 2018

・Began construction on a newfactory
・New factory scheduled to start
operation

Aug. 2019

Functions of the Sanki Techno Center
Enhancement
and successionof technology
and skills

Technology
training
facilities

Organic R&D + Open
Innovation

Safetyeducation
facilities

Technical
Research andDevelopment
Institute

Used bytrainees asaccommodation
Accommodation
during training

Integrated training ontechnologies, skills
and safety

Showroom

Facilities tocontributeto the local
community

Publicity

Sheltering people
unable to return home
after a disaster

FY2014FY2015FY2016FY2017

Interim divided
(yen)

7.5

9.0

10.0

15.0

Year-end dividend
(yen)

12.5

21.0

20.0

20.0

Annual dividend
(yen)

20.0

30.0

30.0

35.0

Consolidated
payout ratio (%)

52.2

35.8

40.6

55.5

• Year-end dividend for FY2014 includes 7.5 yen in regular dividend and
5.0 yen in commemorative dividend for the 90th anniversary.
• Year-end dividend for FY2015 includes 9.0 yen in regular dividend and12.0 yen in extra dividend.
• Year-end dividend for FY2016 includes 10.0 yen in regular dividendand 10.0 yen in extra dividend.
• Interim dividend for FY2017 includes 10.0 yen in regular dividend and
5.0 yen in extra dividend.
• Year-end dividend for FY2017 includes 10.0 yen in regular dividendand 10.0 yen in extra dividend.

19Progress in the Medium-Term Management Plan
▶Medium-Term Management Plan “Century 2025” Phase1 (FY2016–2018)
Key Initiatives

Phase 1 = Quality

Point

Refining Technical Skills and Human Resources
to Further Enhance Quality

Strengthen Core Businesses
Improve component technologies
and achieve stable growth

Refining Technical Skills• Make further improvements in component technologies
to meet diverse needs▶Second Year Results (1) Progress in Business Performance

Enhancing Reliability
in Phase 2• Enhance productivity and efficiency to achievesustainable growth

Promote Growth Strategies
Pursue future growth in the areas oftechnology and business

Refining Human Resources• Orders received exceeded that in the previous fiscal year due in part to orders
for large-scale projects• Continuous improvement in profitability. Gross profit margin extended to tenyear highs➡ Positive result of enhancing quality under the Medium-Term Management
Plan “Century 2025” Phase 1• Year-on-year growth in sales and profit, while ordinary income target wasessentially achieved under the medium-term management plan
• Promoted the STeP Plan (construction of the Sanki Techno Center, temporary
relocation of the Machinery Systems plant, and other activities)• Paid out returns including extraordinary dividends for the third consecutive year

• Continually cultivate human resources that possess the
Sanki spirit our customers value• Nurture a corporate culture that encourages employees
to act with a deep respect for social norms

Enhance the Sanki Brand
Develop human resources thatpossess the Sanki spirit(Unit: billion yen)

Summary of Business
Performance
Business results for fiscal 2017, thesecond year of the Medium-Term
Management Plan “Century 2025”
Phase 1, are shown at right. In particular,
the gross profit margin improved further
compared to the previous fiscal year.

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

Issue Passing on technical skills

Issue

We will renovate the Sanki Yamato

Anticipating the age of
maintaining building stockIssue

We will give a boost to the LCE

Developing next-generation
technologies

FY2017 (Results)

Difference(Results-initial Forecast)

Indicator

FY2017 (Initial Forecast)

Net sales

180.0

Gross profit(ratio)24.0（13.3%）

25.0 （14.7%）

Operatingincome (ratio)

7.0（3.9%）

6.5（3.9%）−0.5

Ordinary
income (ratio)

7.5（4.2%）

7.4（4.4%）−0.1 （＋0.2 pt）

−9.9

170.1

1.0 （＋1.4 pt）

Key Initiatives—Fiscal 2017 Results and Fiscal 2018 Objectives

Strategy Building (Yamato City, Kanagawa

Strategy business, as described in SANKI

Strategy R&D base inside the Sanki

We will establish a new

Fiscal 2017 Results

Fiscal 2018 Objectives

Prefecture) and reopen it as the Sanki
Techno Center. This will be a comprehensive
training facility that imparts and develops thetechnical skills at the backbone of the SankiEngineering Group.

VITAL PLAN 90th. This will bolster ourbusiness foundation, allowing us tomaintain sound corporate management,even if the construction market
experiences a slowdown.

Techno Center. There we will develop
technologies for the next generation
while keeping up with advances in newtechnologies such as robotics, IoT, and AI.

• Facilities Construction- Expanded worksite support initiatives (created an online
procurement system, enhanced support operations)• Facilities Construction- Review the work styles of sitemanagers, expand support operations
by office workers

Facility Systems:- Expanded PM*1 and SI*2 operations for fit-out andrelocation of offices

Strengthen Core
Businesses

Financial Performance Targets and Results(Unit: billion yen)
Indicator

FY2016 (Results)

FY2017 (Results)

FY2018 (Plan)

168.5

170.1

187.0

Gross profit (ratio)

22.5 （13.4%）

25.0 （14.7%）

26.8 （14.3%）

Operating income (ratio)

6.0 （3.6%）

6.5 （3.9%）

7.5 （4.0%）

Ordinary income (ratio)

6.8 （4.1%）

7.4 （4.4%）

8.0 （4.3%）

Net sales（±0 pt）• Plant and Machinery
Machinery Systems:- Received a major order for an airport conveyance facility- Developed the world’s fastest conveyor andsorting device
Environmental Systems:- Won our first order for the DBO project involving
new construction work (won an order for the
DBO project for a second consecutive year)

Facility Systems:- Present proposals for office in line withwork style reform• Plant and Machinery
Machinery Systems:- Steadily promote plans for new plant
construction and relocation- Make a full-scale entry into the logistics
marketEnvironmental Systems:- Expand sales of strategic products

Promote Growth
Strategies• Won strategic large-scale orders to build future
stock• Made full-scale entry into the woody biomass
power generation plant market• Develop IoT systems• Develop stock properties• Proactively engage in PFI and DBO projects

Enhance the Sanki
Brand• Developed programs for a more comfortableworkplace and welfare benefits• Held an exchange of views between division chiefs
and young employees (about 700 participants)• Held the 2nd Sanki Ladies’ Roundtable (meeting forfemale engineers)• Doubled the number of press releases ontechnological development• Continue initiatives to enhancecommunication• Develop a new Sanki brand*1 Project Management: Performing of tasks, including the formulation of plans and management of their execution, to facilitate the completion of a project.
*2 System Integration: Performing of tasks, including planning, design, development and operations, toward offering solutions to issues that clients face and that are
based on a comprehensive understanding of their businesses.

20

SANKI REPORT 2018

SANKI REPORT 201821

▶Second Year Results (2) Sanki Techno Center• Created as a place for imparting and developing the Sanki Engineering Group's
technical skills• Extend medium to long term investments for the future as a strategic base forenhancing the quality of our technologies and human resources• Provide efficient and systematic education related to practical technology,
skills, safety awareness and other areas that supplement classroom learningand on-the-job training• Provide quality training for subcontractors to improve their technology, qualityof facility construction, and safety, and to further strengthen our partnerships

Point

New Site for Research and Development,
Training and Study for Enhancing the Quality of
Our Technology and Human Resources
As a key initiative of our Medium-Term Management
Plan “Century 2025” Phase 1 (FY2016–2018), we are
seeking to refine our technology and human resources
to pass on and develop our technical skills while
enhancing quality in all areas of our business. The Sanki
Techno Center is a comprehensive training and researchfacility central to the Sanki Yamato Site Redevelopment
Project (STeP) under Phase 1, and its grand opening isscheduled for October 2018.

●Description of the Sanki Techno Center
Floor area : approx, 46,162 m

2

Structure : SRC, 6 floors above and 1 floor below ground
Address: 1623-14 Shimo-tsuruma, Yamato City,
Kanagawa Prefecture

Floor Map

6F

STeP Project
The STeP (Sanki Techno Park) Project involves theredevelopment of land and buildings at the Sanki Yamato
Site, owned by Sanki Engineering and primarily covering
the Sanki Yamato Building and former Yamato Engineering
Center sites in Yamato City, Kanagawa Prefecture. The
project includes the construction of the Sanki Techno Center,
which is a comprehensive training and research facility, thereorganization of conveyance system factories, and theeffective utilization of existing assets.

5F

4F

3F

2F

Accommodation
facilities

Technical Research & Development
Institute● Multi-purpose area
Cafeteria● Recreation facility for guests● Seminar room
● Common area
● Machinery Systems Businessdivision office●

Entrance
Showroom● Technical Research & Development
Institute laboratory● Machinery Systems Businessdivision pilot plant
●

B1F

22

SANKI REPORT 2018

open lab model that will emphasize working with both internaland external collaborators, including other companies anduniversities.

Systematic Learning of Practical Technology,
Skills and Safety Awareness

The training curriculum used at the Sanki Techno Center
will be divided broadly into the categories of management,
technology and skills, as well as safety. In addition toseminars for new employees, we will organize practicaltraining by rank to supplement the experience acquired ateach workplace. Apart from the lecture rooms that will be
used as classrooms for basic courses, the center also houses
the Technology and Skills Training area and Safety Experiencearea in a large space on the first basement floor, spanningroughly 2,000 m2. These will serve as the core of the center’s
education and training functions. Construction site mock-ups
have been installed in various locations so that participants
can apply their minds and bodies during training, enabling
them, through classroom lectures and on-the-job training,to efficiently and systematically acquire practical knowledge
related to technology, skills, and safety awareness, which
had been only possible at actual construction sites. There
will also be a section whereindividuals can learn about past
problems and industrial accidents
so that they can prepare for
future incidents and develop anunderstanding about emergency
response. We plan to actively
encourage subcontractors toparticipate, particularly in the skill
and technology training and safety
training, with the aim of enhancing
the quality of all human resources
and technologies at the SankiEngineering Group’s construction
sites.

Showroom
Conveying the Ability and Possibilitiesof Total Engineering

The showroom will convey the past, present and future
initiatives of the Sanki Engineering Group under thethemes of “Amenity,” “Ecology & Energy,” “Industry”
and “Environment.” We
will communicate theability and possibilitiesof our total engineeringand seek new solutions
through dialogue withcustomers.

Accommodation
Facility and Amenities
Offering a Comfortable andVigorous Learning Environment

We intend for the Sanki Techno Center to become afacility that encourages active exchanges between training
participants and researchers. It houses a variety of areas forcommunication, including a café, a large tatami-floored room
and a lounge. The center also offers a comfortable lodging
facility with ample accommodations, a cafeteria and a gym
for overnight training and educational programs.

Base for Regional Contribution

●

●

1F

Training Area

Technical Research & Development
Institute testing area
● Technology and Skills Training area,
Safety Experience area●

R&D Facility (Technical Research& Development Institute)
Promoting Unfettered R&D throughan Open Lab Model

The research and development facility will be our new
Technical Research & Development Institute, which will serveas the general headquarters of Sanki Engineering’s technology,
including component technologies related to air, water, heat,
information and machinery. Under the most advanced ICT
environment, and anticipating the full use of AI and IoT, weplan to create an unfettered center for R&D based on an

Offering Temporary Shelter in Times of Disaster

The Sanki Techno Center will serve not only as an
education and research base for the Sanki EngineeringGroup and its subcontractors but also as a base forregional exchange. Under an agreement concluded with
Yamato City in 2013, the Sanki Yamato Site (Yamato
Engineering Center) will be made available as a temporary
shelter for those who are unable to return home in thewake of a disaster. We will continue to develop the Sanki
Techno Center’s functions as a shelter with a focus on its
lodging facility.

SANKI REPORT 201823

▶Second Year Results (3) Progress in ESG Initiatives

Point• Develop products and technologies that contribute to realizing adecarbonized society• Create a good working environment• Bolster the workforce by promoting diversity• Further strengthen the governance system

ESG Initiatives—Fiscal 2017 Results and Fiscal 2018 Objectives
Fiscal 2017 Results

E• Continued to extend donations through the “SANKI YOU EcoContribution Point” program• Won an order for the DBO project to build a new energyrecovery waste treatment facility• Delivered a woody biomass gasification power generation
facility• Delivered an advanced energy-saving facility in Shanghai City,
China, through a partnership with NEDO and others• Registered as a “ZEB Planner” under the new licensing system
introduced by Japan’s Ministry of Economy, Trade and Industry
in FY2017

Fiscal 2018 Objectives• Continue donations through the “SANKI
YOU Eco Contribution Point” program• Contribute solutions to global
environmental issues, including
decarbonization and energy creation

Case 1In July 2017, commercial operations began at the woody
biomass gasification power generation facility we built for NKC
Nagai Green Power Co., Ltd. in Nagai City, Yamagata Prefecture.
As the severity of global warming increases, woody biomassenergy generated by wood and forest thinnings is expected toreplace fossil fuel as an alternative source of energy with lessenvironmental impact. Compared with conventional biomass
power generation, in which wood is burned directly to generate
Woody biomass gasification power generation
plant of NKC Nagai Green Power Co., Ltd.
steam that turns the turbines, biomass gasification uses
flammable gas generated by heating wood and therefore offers
higher power generation efficiency at a smaller scale.
The facility in Nagai is capable of generating 14.8 million kWh of electricity, equivalent to the annual power
needs of 3,000 households. It boasts the world’s highest level of power generation per furnace within theclass of biomass gasification facilities having a capacity below 20 million kWh, and more than twice the power
generation efficiency compared to the same size of facilities based on steam turbines. Plans are also underway
to supply residual hot water from power generation to farms and various facilities in the neighboring area toefficiently use hot wastewater.
Sanki Engineering will continue to develop products and technologies to reduce society’s impact on theenvironment.

Case 224

S• Sanki Engineering’s unique “Smile Project” work style reform
entered its third year
• Launched the “Smile Site Plan” focused on work styles atconstruction sites• Established a “Women’s Hotline” exclusively for consultations byfemale employees• Held an exchange of views between division chiefs and young
employees• Held the “2nd Sanki Ladies’ Roundtable” meeting for female
engineers• Confirm the effectiveness of initiatives on
promoting diversity• Enhance the effectiveness of work stylereform• Promote work style reform through thecontinuation of the “Smile Project” and“Smile Site Plan”• Implement initiatives aimed at enhancing
communicationG• Added to the content of self-assessment by the Board of
Directors• Held a board member meeting to exchange views on overall
corporate governance• Began revising procedures for submitting agendas to the
Meeting of Board of Directors• Continue efforts to ensure stronger
governance

SANKI REPORT 2018

Reducing Environmental Impact
with a Woody Biomass Gasification
Power Generation Facility

Exploring and Implementing Work Style
Reform that Meets Actual Worksite Needs
to Become the Company of Choice

Guided by its management philosophy: “We place significanceon communication and mutual respect,” Sanki Engineering set
up the “Smile Site Plan” work style reform expert committee in
November 2017. The committee focuses on construction site
operations and strives to create a working environment in which
each individual employee can thrive.
Seeking to create a better working environment, SankiEngineering launched the “Smile Project” in 2015, which is led
by the president. Under the project, we have been actively reforming internal systems, such as limiting overtime
and improving childcare and nursing leave programs.
Sanki Engineering is involved in wide-ranging operations with different work styles at each site. We therefore
decided to set up a committee specifically for operations at construction sites, comprising directors andmembers from relevant divisions, to review operations as well as explore and implement initiatives for reducing
the workload.
The committee will particularly categorize onsite operations into tasks that should be handled by specificstaff, tasks that can be handled by others, and overlapping tasks, toward reducing the respective workloads andbolstering construction site capabilities and quality.
Based on the review, the Technical Support Center was created as a new organization that specializes inproviding support and guidance to onsite operations, starting in fiscal 2018.
Sanki Engineering will continue to create good working environments toward the “Century 2025” long-term
vision of becoming the company of choice.

SANKI REPORT 201825

▶Sanki Engineering Group’s ESG Initiatives and Contribution to SDGs
Companies are required to minimize the negative
impact of their business activities while maximizing
their positive impact and contributing to the sustainable
development of society.
The Sanki Engineering Group will seek to meet the
expectations and requirements of society by addressing
the following long-term issues through its businessactivities.
These issues are related to initiatives for the
Sustainable Development Goals (SDGs), which areinternational goals for creating a world that “leaves noone behind,” and companies as well as countries are
required to actively participate. Through its businessactivities, the Sanki Engineering Group will play a role
in resolving medium- to long-term social issues, as
designated in the SDGs.

Initiatives

E

Most Relevant SDGs

Following the signing of the Paris Agreement,
decarbonization has become a global concern. We muststrive to achieve a sustainable society by separating
consumption of energy and resources from economic
development.
In the Sanki Engineering Group’s business, namely theconstruction of facilities for buildings and plants, we must
constantly contend with the propositions of saving andgenerating energy. Our business development is directly
linked to environmental issues, enabling us to contribute
solutions through engineering.
• Contribution to resolving global environmental issues, including
decarbonization and energy creation through technology• Initiatives for realizing ZEB (net zero energy buildings)• Reduction of environmental impact resulting from businessactivities

S

Safe, highly reliable and sustainable infrastructure is essential
to society. We will promote work style reforms to ensure thatdiverse human resources can create higher value and growtogether.
• Contribution to the construction of social infrastructure• Promotion of work style reform• Promotion of diversity

G

Strengthening corporate governance and pursuing complianceand risk management initiatives are the foundation of ourbusiness activities and constitute key actions for increasing
the soundness and sustainability of our operations.
• Strengthened corporate governance• Thorough compliance• Reinforced risk management

26

SANKI REPORT 2018

Business Report

Facilities Construction
Business
Refining Our Technologies to Meet Diverse Social Needs

Net Sales and Net Sales Composition Ratio for Fiscal 2017

Director, Senior Executive Office and General Manager, Mechanical& Electrical Contracting Headquarters

150.0 152.4 146.6 153.4

Net Sales (Billions of Yen)

143.6

151.1 149.9

141.5 139.6

82%
2014

2015

2016

Market Conditions

2017 （FY）

2013

2014

2015

2016

2017 （FY）

Opportunities and Risks• Need for global environmental action due to growing climatechange risks (Paris Agreement came into effect)• Labor shortage, aging workforce• Fluctuations in foreign exchange and rise in material prices
caused by uncertain international political environment• Regional disparities in economic conditions and demand

Key Initiatives of the Medium-Term Management Plan
Key Initiative01

Key Initiative

02

Key Initiative

03

28

Reinforcing Sales Capabilities
We will pursue efficient work styles for sales personnel while enhancing systems for providing sales
support to reinforce our sales capabilities.

Reinforcing Construction Capabilities and Enhancing Quality
We will enhance construction capabilities and raise profitability by reviewing the work styles of sitemanagers and improving construction site support operations.

Bolstering Collaboration with Subcontractors
We will bolster our construction framework by closely collaborating with subcontractors through liaison
meetings and seminars.

SANKI REPORT 2018by enhancing construction site capabilities, improving
quality and reducing the site manager workload. Under
the plan, we were able to identify challenges and issues
for raising construction site efficiency, in cooperation
with subcontractors. We also sought to improve
operational efficiency by making use of ICT, such as
by developing an online procurement system andconstructing a system for searching internal technicalmaterial, which contributed to the higher profit margins.
Major Projects◦Nippon Life Hospital (completed in January 2018)◦Tokyo Midtown Hibiya (completed in February 2018)◦Hibiya Heat Supply Center (completed in February 2018)◦ 260 facilities of the Toshiba Memory Yokkaichi Plant(completed in March 2018)

Policies and Outlook for Fiscal 20182013

• Ongoing demand for construction, including replacement demand
and redevelopment for buildings constructed during Japan’s
period of rapid economic growth• Expansion in capital investment led by the manufacturing industry• Nationwide labor shortage resulting from a shrinking workforce• Proliferation of technological innovation, including robotics, IoT
and AIWe responded to robust construction demand by pursuinga strategy for seeking orders that correspond to SankiEngineering’s construction capabilities and securing solid
profits from orders received. We enjoyed favorable resultsfrom industrial HVAC systems centered on large-scale
projects, resulting in a year-on-year increase in orders
received. While net sales declined from the previous
fiscal year, we were able to secure high profit margins byimproving construction quality based on enhancements
made to the construction site support system and by
allocating engineers across branch and branch offices, withdue consideration to the state of the economy and orders
received in each region.
Meanwhile, we achieved progress on the MediumTerm Management Plan based on the Smile Site Plan,a subcommittee dedicated to reforming work styles

Facilities Construction Businessmillion yen

Eiji Mitsuishi

Orders Received (Billions of Yen)

143.8

139,688

Major Results for Fiscal 2017

Business Report

The Facilities Construction Business has been providing total engineeringencompassing various technologies, including HVAC systems, plumbing and drainage
systems, electrical systems and ICT systems to create comfortable environments thatare optimized for diverse social needs. At the same time, we have worked on savingenergy and reducing greenhouse gases in each respective engineering field towardrealizing a decarbonized society.
We remain committed to refining our technological capabilities, which are central
to our identity, to continue creating comfortable environments a step ahead of thetimes for the benefit of society as a whole. We will also help attain the SDGs in areas
where we have a competitive advantage, such as community development andindustrialization, to achieve our own sustainable development.

● Improvement of Execution Quality at
Construction Sites
We will continue efforts from fiscal 2017 to enhance
our construction framework by seeking orders that
correspond to our construction capabilities andpromoting construction site support. Recently we haveestablished the Technical Support Center as a unit
specializing in support for construction sites toward
improving the quality of their technical capabilities. In
addition, we will accelerate our efforts to create goodworking environments by seeking closer collaboration
with each branch and branch office under the Smile Site
Plan, which is focused on construction site work styles.
● Promoting the Approach of Meet
Customer Needs
Sanki Engineering was registered as a ZEB Plannerthat can offer consultation to clients planning to adopt
the ZEB*1 concept, promoted by the Agency of Natural
Resources and Energy of the Ministry of Economy,
Trade and Industry. We have taken this opportunity
to further bolster our efforts to reduce our carbon
footprint.
Moreover, we are introducing and strengthening
BIM*2, which is emerging as the mainstream modelingmethod in the facility construction industry, in an effort
to cut costs, lower risks and respond faster to moreclosely reflect customer needs.

● Bolstering and Expanding the Scope of
the Facility Systems BusinessWe will focus on design planning and management
consulting related to the construction and relocation of
workplaces. In addition, we will seek to expand our scope ofbusiness We will focus on design planning and management
consulting related to the construction and relocation of
workplaces. In addition, we will seek to expand our scope ofbusiness in the areas of instrument and control engineering,for centralized monitoring systems that create comfortableoffice environments, and of network systems infrastructurewith ICT systems, which raise productivity.
Also, we will propose office environments that
respond to work style reform through our New Office
Project, allowing for the optimal use of ICT tools.
● Strengthening the International Business
The International Business Division, set up in fiscal
2017, leads supervision and management of theGroup’s overseas companies to strengthen the Plants& Machinery Systems Business and other overseas
businesses and pursue Group-wide initiatives so that
we can spread the Sanki brand abroad.

Net Sales Target for Fiscal 2018

151,200(numerical forecast at start of fiscal 2018)*1 ZEB (Net-Zero Energy Buildings): Buildings that maintain comfortable environments while reducing annual energy consumption to as
close to zero as possible by enhancing energy saving performance using solar power generation and other measures.
*2 BIM (Building Information Modeling): The concept of constructing a 3D model of a building on a computer and applying the information
across the entire process, such as design, execution, progress and management.

million yen

SANKI REPORT 201829

Focus

An Environmentally Friendly, Disaster-Resistant Commercial Complex

Reducing the Facility’s Annual Power Supply by Approximately 40%

Tokyo Midtown Hibiya

DOUP™, Energy-Saving HVAC System for Clean Rooms

Value Provided
by SankiEngineering◦Water supply and drainage systems that sustain environmental
features and BCP measures◦Fire protection systems that flexibly respond to specific situations◦Stringent safety management and highly reliable execution of
workability

To be ready in the event of a disaster, the building can store
about a week’s worth of both tap water and recycled water.
We also developed a mechanism for using recycled waterand rainwater as makeup water for cooling towers.
Fire extinguishing facilities are provided through indoor fire
hydrants and sprinklers installed throughout the building. To offer
flexibility for a variety of situations, a foam fire extinguishingsystem was installed in the basement parking lot where watercannot be used, and environmentally friendly nitrogen fire
extinguishing systems were incorporated into the electricalroom, generator room and mechanical parking system.
Facility construction involved the use of aerial platforms,
and we were able to provide highly reliable construction work
based on stringent safety management.
Purpose of Building• Office and commercial facility

Type of Work• Construction of hygiene facilities

Relevant SDGs

Value Provided
by SankiEngineering◦Reducing energy used in supplying power for the facility◦Lower risk of product contamination by limiting dust diffusion◦Enhanced productivity through effective use of floor space

Sanki Engineering developed DOUP™, an energy-saving
HVAC system. Drawing upon years of accumulated
know-how, our technology conserves energy byproviding separate air conditioning for the operationarea, which requires high levels of cleanliness, and themaintenance area, which is subject to high temperaturesgenerated by production equipment.
In a typical clean room used for pre-processing
semiconductors, production equipment is placed ina large partition-free space. After dust removal andcooling, very clean air is supplied by the ceiling-mounted
HVAC in an even flow to simultaneously maintainthe cleanliness of the operation area in front of the
production equipment where product is handled, andthe maintenance area where the equipment itself isinstalled.
Meanwhile, DOUP™ begins securing a high levelof cleanliness for the operation area by supplying a
concentrated down-flow of purified air. This air is thensupplied to the maintenance area to form an up-flow tocool the production equipment, thus enabling efficientuse of HVAC air.
Optimizing the temperature of the chilled water usedin the cold heat source reduces the power supplied tothe system during the peak summer season. When
this strategy is combined with other energy-saving
methods, annual power supply can be reduced by up
to 40%. Moreover, since the system requires no spacefor cooling coils, the floor area can be more effectively
used, thereby boosting productivity.
We plan to actively promote sales of this system as
an energy-saving technology for clean rooms that also
reduces environmental impact.

Purpose of Building• Clean room for pre-processing
semiconductors

Facilities Construction Business

In March 2018, Tokyo Midtown Hibiya, a commercial
complex intended to become a new center of arts andculture, opened in Chiyoda-ku, Tokyo, at the former siteof the Sanshin Building, where Sanki Engineering once
maintained its head office. Sanki Engineering is responsible
for the hygiene facilities of the entire building, which was
newly constructed at this site, and its deep company
connections.
The building houses commercial and office spaceon 4 floors below ground and 35 floors above ground.
Stringent environmental consideration and BCP measures
are considered as key design concepts. To realize theseconcepts, we constructed a facility with four water supply
systems for potable water, recycled water (service water),makeup water used in cooling towers, and water for theplants, as well as six drainage systems for gray water, kitchen
wastewater, rainwater, and drains for mechanical systems.

Relevant SDGs

Business Report

Focus

Type of Work• Construction of HVAC facility

DOUP™ Air conditioning System

Entrance installed with fire sprinklers

Elevated tank for recycled water*1 FFU: Fan filter unit
*2 FOUP: Front operating unify pod*3 FCU: Fan coil unit
Exterior of Tokyo Midtown Hibiya

30

SANKI REPORT 2018

SANKI REPORT 201831

Plants & Machinery
Systems BusinessContributing to Society by Applying Technology
to Create Comfortable Environments

Net Sales and Net Sales Composition Ratio for Fiscal 2017

Major Results for Fiscal 2017

Takashi Motomatsu
Director, Senior Executive Officer and General
Manager, Plants & Machinery Systems Headquarters

Orders Received (Billions of Yen)
38.7

Net Sales (Billions of Yen)
Machinery Systems Business
Environmental Systems Business

36.3

8.1

million yen

17%

29.9
23.5

10.3

22.4
5.7

8.4

30.6
15.0

2013

16.7

2014

2016

27.4

9.8

9.9

17.1

17.4

27.9

24.2

19.6

2015

27.0

2017

( FY)

2013

2014

26.4

29.1
9.2

9.2

8.1

18.7

18.2

2015

2016

19.9

2017

Environmental Systems Business

Market Conditions

Market Conditions• The declining population is driving advances in IoT and AI, and awider use of robots, for saving labor at worksites• Manufacturers are returning to Japan to avoid a variety ofoverseas risks• Social infrastructure investment in environment-related markets
remains at the same level• Persistent needs for energy saving and energy creation in boththe public and private sectors

Opportunities and Risks

Opportunities and Risks• Timely development and commercialization of products that meetmarket needs• Recruitment of engineers to keep up with advances in IoT and AI,
and promoting the introduction of robots• System for ensuring reliability and assurance on quality• Government’s policy for promoting PPP and PFI• Expansion in demand for energy saving and energy creation
systems at water treatment and domestic waste plants• Contraction in project scale and consolidation of facilities due to thedeclining population and fiscal restraint by municipal governments

Key Initiatives of the Medium-Term Management Plan

Key Initiatives of the Medium-Term Management Plan

01

Key Initiative

02

Key Initiative

03

Broadening the Product Lineup for Logistics
Operations
Enhance our lineup of products for logistics facilities tomeet growing demand that arise from the expansion in
e-commerce

Promoting the Hybrid Facilities Business
Focus on increasing sales of hybrid facilities that combine
conveyors and robots

Reconstructing Manufacturing Functions
Implement plans for improving productivity toward thescheduled start of operations at new conveyor production
facility in August 2019

SANKI REPORT 2018

Key Initiative01

Key Initiative

02

Key Initiative

03

ASKUL Value Center Hidaka

Major Product Development and Projects◦ASKUL Value Center Hidaka (completed in September 2017)◦CB II Cross Belt Sorter (developed in January 2018)( FY)

Machinery Systems Business

Key Initiative

32

12.1

As part of our efforts to bolster our core business, wepursued sales activities that closely reflected customer
needs and nurtured trust, and we were rewarded withan order for a large-scale airport conveyance facility.
Moreover, we were able to increase orders significantly
as well as sales of standard conveyors by offering a firm
response to growing demand from corporate capital
investment. As a result, orders received and net sales
for fiscal 2017 rose considerably from the previous fiscal
year.
Furthermore, we began full-scale marketing of hybrid
facilities that combine robots and conveyors with thegoal of addressing labor saving and automation needs
driven by the shortage of labor over the past few years.
In a new move, we launched sales of the CB II crossbelt sorter, our new high-speed conveyor and sorting
device offering the top-class sorting speed in Japan,
targeting the logistics market, which faces a severelabor shortage due to the expansion of e-commerce.

Plants & Machinery Systems Business

29,164

Business Report

Machinery Systems BusinessIn our Machinery Systems Business, we strive to meet future labor shortages
by using conveyors to reduce personnel and automate logistics systems. In
our Environmental Systems Business, we seek to conserve energy and curtail
greenhouse gas emissions at water treatment and domestic waste plants. The
Plants & Machinery Systems Business creates comfortable environments throughthese two areas that broadly contribute to social development. While it may not
be obvious to the general public, “comfort” is an essential aspect of society anda consideration that requires constant technological innovation. We aspire tohelp achieve the SDGs, particularly in the areas of industrial development, theenvironment and energy conservation, by continuously providing comfortableenvironments that are optimized to meet future needs.

Expanding Sales of Strategic Products
Reinforce our core business by expanding sales of
products that meet energy saving and energy creating
needs

Promoting the LCE BusinessConduct a collaborative Group effort to expand the LCE
business, such as upgrading, maintaining and managing
water treatment plants

Developing New Business Areas
Explore new business areas in which we can leverage ourproprietary technologies in the Environmental Systems
Business

Policies and Outlook for Fiscal 2018
● Promoting the Hybrid Facilities Business under
Leadership of the Solutions Division
In fiscal 2018, the Solutions Division wasestablished as a dedicated unit for further
expanding sales of hybrid facilities, which showedfavorable results last year. We will satisfy evenhigher requirements from our customers withsystems that incorporate robots and peripheraldevices into the material handling technology that
we have cultivated over the years.
● Expanding Sales of a High-Speed Conveyor andSorter for Logistics Operations in the Home
Delivery, Distribution and Postal Service Industries
We are targeting the home delivery, distribution
and postal service industries in our developmentof a business that includes expanding sales of
the CB II cross belt sorter, a high-speed conveyor
and sorting device. At the same time we aredeveloping peripheral devices and commercializing
the CB III cross belt sorter, one of the fastest of its
kind in the world.

● Enhancing Productivity
As part of the STeP project currently underway
at the Sanki Yamato site, we are building a newplant that will serve as our base for MONOZUKURI(manufacturing). After its completion in August
2019, this will be our main production facility plantfor conveyance systems. We plan to make full use
of cutting-edge digital technologies to construct ahighly efficient production system. To that end, weare currently implementing various preparations at
the plant’s temporary location in order to improve
productivity.

Net Sales Target for Fiscal 2018
(numerical forecast at start of fiscal 2018)

12,000

million yen

SANKI REPORT 201833

Environmental Systems Business
Major Results for Fiscal 2017

Offering the World’s Fastest Processing Speeds

Cross Belt Sorters CB II and CB III for Belt Conveyors
Value
Providedby SankiEngineering

Woody biomass gasification power generation facility of NKC Nagai GreenPower Co., Ltd.

Major Orders Received◦ Construction and operation of the Tenzan area energyrecovery-type waste treatment facility◦ Renovation work for key facilities of the Tsushima Clean
Center◦ Construction of facilities, including the secondary reaction
tank of the Tsuzuki Wastewater Treatment Plant◦Top class in operational speed of carriers in Japan,
approaching the highest speeds in the world◦Accurate sorting of transported objects with varying shapes◦Can be accommodated within a compact layout

The recent expansion in e-commerce has led to a dramatic risein the quantity and variety of home delivered items, thereby
increasing the urgency of realizing fast, accurate logistics
systems. Taking advantage of the know-how accumulated byproviding conveyors and sorting devices for airport baggage
and large cargo, Sanki Engineering began sales of its CB II
cross belt sorter, capable of accurate, high-speed sorting oftransported items having various shapes, including thin items,
bags and boxes. The CB II can also be installed in a compact
layout inside warehouses and other such facilities. It operates
at the speed of 160 meters per minute, which is among thefastest in Japan, and can sort up to 12,800 items per hour. We
are currently working on commercializing the CB III cross belt
sorter, which offers even faster processing speeds, to support
further expansion of the logistics market.

CB II

Relevant
SDGs

CB III, among the world’s fastest
sorters, under development

Plants & Machinery Systems BusinessIn fiscal 2017, while orders received decreased year-onyear due to the large order received last year, net sales
increased as we steadily completed our backlog of
construction work.
We made a full-scale entry into the market of woody
biomass gasification power generation facilities andhandled construction of the plant facility for the power
generation facility built by NKC Nagai Green Power Co.,
Ltd. in Nagai City, Yamagata Prefecture. Since becoming
fully operational in July 2017, the facility has maintained
regular commercial operations. In addition, we further
developed our LCE business and won our first order fora DBO project to build an energy-recovery-type waste
treatment facility involving new construction work.
In overseas business, our Group company
AQUACONSULT Anlagenbau GmbH opened a new
branch office in Germany to expand sales of ultra-finebubble air diffusers for wastewater treatment in theEuropean market.

Business Report

Focus

Maximum Number of Items Sorted per Hour

(Items)
18,00012,000
6,000
0

CBⅠ

CBⅡ

CBⅢ

Saving Energy with a Slim Design

SANDEC G3 Energy-Saving Decanter Centrifuge

Policies and Outlook for Fiscal 2018
● Promoting the Woody Biomass Gasification
Power Generation BusinessWe made a full-scale entry into this market in fiscal 2017
and will continue to seek new orders and pursue further
technological innovation.
The technological difficulties of generating power
through biomass gasification in Japan are known. We
will seek to win greater recognition by maintaining
stable operations of our existing facilities andemphasizing the superiority of our technology.
● Expanding Infrastructure Maintenance andUpgrades, and Strategic Products
Public projects for wastewater treatment anddomestic waste plants have constituted the core of theEnvironmental Systems Business. However, since such
facilities are already serving customers and providing
their services throughout the country, the main market
is shifting to maintaining and upgrading their offerings.

34

SANKI REPORT 2018

Accordingly, we will develop technologies that
address the needs of the times and enhance the LCE
Business. At the same time, we will keep up our efforts
to increase orders for strategic products, including
SANDEC G3, an energy-saving decanter centrifuge;
AEROWING II, an ultra-fine bubble air diffuser; and theturbocharged fluidized bed combustion system.

Net Sales Target for Fiscal 2018
(numerical forecast at start of fiscal 2018)

22,000

million yen

Value
Providedby SankiEngineering◦Slim design for energy conservation◦Simple configuration for ease of maintenance and management◦High centrifugal operation to reduce the moisture content of sludge

It is said that in large cities more than 1% of electricity isconsumed at public sewage facilities. About 30% of that isused for thickening and dewatering sludge separated fromsewage, and this has raised the need for energy-friendly
dewatering machines.
SANDEC G3 decanter centrifuge, a technology imported
by Sanki Engineering, could save energy as a result of its slim
body design. Its simple configuration enhances operability
and workability while also reducing the process and cost of
maintenance and management. Compared to conventional
decanter centrifuges, the centrifugal force of SANDEC
G3’s conveyor, used to separate moisture contained in thesludge, can be increased, thereby reducing moisture in the
dewatered sludge. This can significantly lower the amount of
supplementary fuel used for incinerating the sludge.

Relevant
SDGs

SANDEC G3 installedat the Hachioji Water
Reclamation Center

Saving energy with a slim design

This product was developed through a technical collaboration with Alfa Laval AB.

SANKI REPORT 201835

Real Estate BusinessResearch and Development

Our Real Estate Business is engaged in leasing operations and building management
while striving to increase the added value of our properties.

Sanki Engineering conducts a variety of research and development activities to ensure
our business operations meet customer needs and address issues faced by society.

Basic Strategies for
Fiscal 2018

Net Sales (Billions of Yen)
1.7
1.5

1,755

million yen

1%• Effective use of portfolio assets• Maintenance and managementof portfolio assets• Raise revenues from building
stock-based business byaccumulating leasing operations• Disposal of non-performing
assets

1.5

1.2
1.0

2013

2014

2015

2016

2017

(FY)

• Began construction of the Sanki Techno Center, thestrategic base for research and education aimed
at raising the quality of human resources andtechnologies.
• Decided to lease the space created by the

consolidation of our manufacturing plants at theformer Yamato Engineering Center to Nippon Life
Insurance Company. Plans are underway to build
a large-scale logistics facility in the approximately
41,300 m2 space. The lease of this land is expected
to generate stable long-term revenue.
• Rental income from the Sanki Daiwa Building
increased as three new tenants, who signed rental
agreements between fiscal 2016 and 2017, opened
for business. We will continue to seek new tenants.
As a result of these initiatives, overall net sales
increased from the previous fiscal year. In the area ofmanaging portfolio assets, we overhauled the foodcourt inside the “Molive” shopping mall in Moriyama
City, Shiga Prefecture, to enhance asset value.

2014

1.0

2015

1.0

2016

Led by our Technical Research & Development Institute,we have been collaborating with each businessdivision to pursue R&D for new technologies, refine
and upgrade proprietary technologies, conduct basic
research and investigate new technologies. In March
2018, the Technical Research & Development Institutewas opened in the Sanki Technical Center, ahead ofother areas of the center still under construction,
to serve as our new R&D base. We will seek evencloser collaboration with partners inside and outside theGroup to pursue a new initiative for open innovation in afree and vigorous R&D environment equipped with thelatest ICT infrastructure.

• Labor and power savings inconstruction work
• Pursuit of energy conservation• Short construction period andcost reduction• Pursuit of comfort andconvenience

2017
(FY)

Plant Facilities• Promotion of waste power
generation• Labor savings, energy savings
and a speeding up in material
handling and logistics

Basic Approach and System

Intellectual Property Initiatives

We engage in research and development relevant to ourdiverse business activities toward our goal of providing
high added-value solutions that contribute to thecreation of a sustainable society.
We develop innovative technologies by highly
expert engineers; refine our proprietary technologies
to expand practical applications through demonstration
experiments, analysis and evaluation; and conduct basic
research and investigate new technologies. In particular,
we strive to develop technologies with high added value
by applying information communication technology,
AI, IoT and big data analysis as well as labor-saving
technologies for construction work.

The Intellectual Property Department responsibly
manages intellectual property in accordance with
our established rules. To protect and use intellectual
property, a liaison is assigned to each business division
to identify intellectual property from our activities andshare information through meetings and internal LAN.
Also, we address risks by maintaining and making
available a Group-wide database as well as patentsummaries and public notifications. We organize
training for risk management involving intellectual
property based on e-learning for employees in their
third and seventh year. By sharing information, training
and education, we enhance our potential to protect
and utilize our own technology and not to infringe uponother companies’ rights.

Real Estate Business / Research and Development

In the office leasing market of the Japanese realestate sector, demand remains strong in the Tokyo
metropolitan area, where vacancy rates have continued
to improve for four consecutive years. Vacancy rates in
outlying regions are also on the rise. In building facilities,
we continue to see a pronounced need to conserve
energy and resources, extend the life of aging buildings
and ensure longer life for facilities. Under thesecircumstances, we pursued initiatives for the effective
use of the real estate we own in Yamato City, Kanagawa
Prefecture.

1.0

2013

Major Results of Fiscal 2017

Facilities Construction

1.2

1.1

R&D System

R&D Activities

R&D Expenditures(Billions of Yen)

Business Report

Net Sales and Net Sales Composition Ratio for Fiscal 2017

Areas of Recent Research and Development

Policies and Outlook for Fiscal 2018
In fiscal 2018, we will continue to seek increased sales
and profit for the real estate business by applying
Sanki Engineering’s technologies and know-how to themaintenance and management of portfolio assets.
Once demolition work for facilities at the site of theformer Yamato Engineering Center is completed, we
will start leasing the land to Nippon Life Insurance
Company. Meanwhile, we will open a restaurant spaceat the Sanki Yamato Building and repair the elevators
while continuously seeking new tenants to raise theoccupancy rate. At the “Molive” shopping mall in

36

SANKI REPORT 2018

Moriyama City, Shiga Prefecture, we plan to re-cover
the floor of the common passageway and repair theescalators to increase tenant satisfaction.

Energy-saving water
treatment technology

Energy-saving control

Heat recovery and reuse

Comfortable air
conditioning technology

Logistics and material
handling technology

Biomass technology

Thermal storage
technology

Central monitoring
technology

Information
communication technology

Material handlingtechnology

Waste heat power
generation technology

Heat source
control technology

Analysis anddiagnosis technology

Energy-saving water
treatment technology

Energy-saving water
treatment technology

Waste incineration
technology

Specialized environmental
technology

Clean technology

Labor-saving technology

Total engineering
AI/IoT

Net Sales Target for Fiscal 2018
(numerical forecast at start of fiscal 2018)

1,800

Big data
Cost reduction

million yen

Energy conservation

Cloud

Machine learning
Resource
conservation

Product life extension

Shorter
construction period
Acceleration

ComfortSpace saving

Reliability
SafetySocial issues and needs

SANKI REPORT 201837

FocusOur R&D Base at the Sanki Techno Center

New Technical Research & Development Institute
Value
Providedby SankiEngineering◦Open innovation based on closer collaboration with partners inside and outside
the Group◦Latest ICT infrastructure to enable the use of AI and IoT◦Development environment that allows researchers to freely apply ourcomponent technologies

In March 2018, the new Technical Research &Development Institute opened as the key facility forensuring the future of R&D at the Sanki EngineeringGroup. It is equipped with the latest ICT infrastructure
to enable the use of AI and IoT as well as multi-purpose
labs, various analysis chambers and outdoor testing
facilities that provide an environment in which researchers
can freely apply the component technologies we havecultivated over the years.
While research was conducted in individual rooms
according to research themes at the former TechnicalResearch & Development Institute, the new facility has

Relevant
SDGs

adopted an open laboratory design featuring open
spaces without partitions that encourage informalinteraction among researchers. To promote open
innovation, we also created innovative collaboration
areas, where corporate and academic R&D partners aswell as staff from the internal business divisions cangather under a common research theme and engage
in joint development. We expect to generate synergies
and accelerate development by engaging in R&D thatemphasizes lateral connections across the spectrumof total engineering.

Open Laboratory(innovative collaboration areas)

Sanki
Engineering
Joint development
Collaboration

Companies

Generation ofsynergies

Universities
and research
institutions

Meeting Complex Challenges based on the Open Laboratory
Approach to Broadly Contribute to Society with Rapid R&D
The challenges facing R&D today, primarily
at our Technical Research & Development
Institute, straddle diverse fields and appear
to exceed the ability of our accumulated
engineering technology and knowledge tomeet them. On the other hand, challenges
that seemed insurmountable in the past are
increasingly being met from new strategies
made possible by utilizing the latest ICT, suchas AI and IoT, leading to the unearthing of new
seeds of technology.
The new Technical Research & Development
Institute, established in March 2018 in advanceof the opening of the Sanki Techno Center, willaddress these complex challenges throughan open laboratory approach. The initiativeis intended to realize rapid, high-quality
development by seeking to engage as manysources as possible rather than limiting itself toa handful of researchers tackling an issue. We
have created an ideal environment in which
researchers can enthusiastically demonstrate
the full extent of their abilities to resolve
shared problems. We will make maximum
use of this environment and rise to a difficult
challenge by combining both internal andexternal knowledge, thus expanding the rangeof solutions we offer through total engineeringand contributing broadly to society.

Executive Officer, General Manager of Technical Research & Development Institute38

SANKI REPORT 2018

Kazuaki Iijima

CSR ReportManagement

Corporate Governanceresponsible for making decisions on material issues.
In addition, to increase management efficiency
and simultaneously speed up the decision-making
process, we employ an executive officer system inwhich we divide management functions between the
Board of Directors, responsible for decision-making
and supervision functions, and executive officers,
responsible for the execution of business affairs.

We established the Sanki Engineering Corporate
Governance Guidelines to clarify the Sanki EngineeringGroup’s basic philosophy and policy on corporate
governance. Once a year, we review the status of ourcompliance with the Corporate Governance Code. And
we will continuously seek to enhance our corporate
governance under the guidelines in order to achievesustainable growth for the Group and strengthen its
corporate value over the medium to long term.

WEB Corporate Governance Report (in Japanese)

http://www.sanki.co.jp/corporate/governance/report.html

Corporate Governance System Outline (as of June 27, 2018)

WEB

Number of Persons

Sanki Engineering Corporate Governance Guidelines (in Japanese)

https://www.sanki.co.jp/corporate/governance/guideline.html

Corporate Governance System● Corporate Governance System
We adopted a Company with Board of Company
Auditors system with dedicated, full-time auditors as
our form of corporate governance. Under this structure,
the auditors and the Board of Auditors exercise
oversight over the execution of duties by directors, theaccounting auditors auditing the financial statements
and other documents as well as the Board of Directors

Frequency of Major Meetings (Fiscal 2017)
Frequency

Average Attendance of External
Directors

Board of Directors

13

91%

Board of Auditors

8

94%

Management Meeting50―(attended by only internal directors)

Meeting

Framework of the Corporate Governance System (as of June 27, 2018)

Board of Company Auditors
5 auditors *2 including 3 external auditors
One substitute auditor

Appointment/Dismissal

Business auditing
Accounting auditing

Board of Directors

12 directors*1 including 3 external directors
Exchange of opinions,establishing common awarenessConsultation

Liaison Meeting of External Officers
Appointment to/removalfrom office

3 external directors
3 external auditors

Risk Management Committee
Executive Officer Committee

Discussion
and reporting

Appointment/Dismissal
Accounting auditing

Accounting Auditors(Ernst & Young ShinNihon LLC)

ReportAdvisory Committee on
Nomination and Remuneration
ReportingPresident and Representative Director

Management Meeting
Corporate Ethics Committee
Internal Finance Control
Committee

Policy Meeting

Discussion, andreporting onimportant matters

ReportingExecutive Officers
Leadership and supervision

Monitoring, guidance, support and education• Training for Officers
We provide newly appointed directors and auditors withinformation on Sanki Engineering, including our history,
achievements and future business plans, as well as
legal, financial and accounting issues. During their terms

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

Board of Directors
The Board of Directors holds a meeting, led by the chairman, at least once a monthto deliberate on important matters and supervise the status of execution of businessaffairs.
Management Meeting
The meeting consists of directors and executive officers nominated by the president
and, in principle, meets weekly as an advisory body to the president. It deliberates
on important matters, including those to be discussed by the Board of Directors.
Policy Meeting
Risk Management Committee → See page 46.

Election, dismissaland supervision

Leadership andsupervision• Liaison Meeting of External Officers
A liaison meeting, comprising mainly of external
directors and auditors, is held once every quarter to
openly exchange views and necessary information andto develop a common awareness of issues.

● Business Execution System

General Shareholders’ Meeting
Appointment/Dismissal• Separately Scheduling Management Meetings
and Board of Directors’ Meetings
To secure adequate time to discuss the risks inherent in
the agendas submitted to the Board of Directors, we are
no longer holding Management Meetings and Board of
Directors’ meetings on the same day, as we had in thepast. Since fiscal 2018, we began holding these meetings,
in principle, on different days with the exception of the
day of our financial results announcement, thereby raising
the effectiveness of the Board of Directors.

Internal Audit Department
Auditing

Executive Officer Committee
Consisting of executive officers and presidents of the Group companies, thecommittee meets at least four times a year to discuss the policies expressed by thepresident and executive officers responsible for departments, report on the status ofbusiness execution by each executive officer and Group company president and discuss
initiatives for achieving the medium-term management plan.
Corporate Ethics Committee
The meeting consists of executive officers and is chaired by the president. The
executive officers responsible for corporate ethics and nominated by the president
oversee all matters related to corporate ethics. The committee deliberates on plans
for the implementation and observance of the Code of Conduct and Action Guidelines
during the biannual meetings. The committee deliberates on action plans and othermeasures to achieve further penetration and stricter observance of the Company’s
Code of Conduct and Action Guidelines at two regularly scheduled meetings per
year.

in office, we continue to offer regular opportunities for
obtaining knowledge related to the supervision andauditing of management.

● Assessing the Effectiveness of the Board of Directors
The directors conduct an annual self-assessment toverify their deliberation process and identify possible
improvements as well as to analyze and evaluate theeffectiveness of the process toward improving theboard’s effectiveness and disclosing a summary of theresults.
Fiscal 2017 Efforts to Assess the Effectivenessof the Board of Directors
Self-assessment by Directors•Requested that directors complete a questionnaire focused on
possible improvements over the previous fiscal year
• The board assessed the results of analysis and confirmed theappropriate functioning of the board• Tasks for further invigorating the board included enhancing accessto information concerning the Management Meeting and risks

Corporate Governance

Chairman of the Board of Directors
Director and Chairman
Directors (women) (term: 1 year)
12 (0)
External Directors (independent directors)
3 (3)Executive officers
36
Those also serving as directors
7
Auditors (women)
5 (0)External auditors (independent directors)
3 (2)● Strengthening the Effectiveness of theGovernance System
We are strengthening our system in line with the SankiEngineering Corporate Governance Guidelines.

CSR Report

Corporate Governance Guidelines

Priority Survey on Themes to Be Discussed by the Board• Particularly high priority was given to how the board should
function, such as balancing supervision and execution
Feedback and Exchange of Views on Corporate Governance in General• Predominant opinions included conducting deeper discussions
on medium- to long-term strategy, holding dialogues withstakeholders and reflecting these talks in management

Internal Finance Control Committee
This committee consists of executive officers, is chaired by the president, andmeets four times a year. Its central role is Group-wide control, including review
and decision making concerning important matters regarding internal controls forfinancial reporting.
Advisory Committee on Nomination and Remuneration
This committee consists mainly of the president and external directors and ischaired by an external director. It deliberates on matters including the nomination ofcandidates for directors and the system for and level of remuneration, and it meetsas needed.

● Auditing System
Board of Company Auditors
The board consists of auditors, from whom a chairperson is selected, and meets at least
six times a year to monitor the status of governance and audits the execution of duties
by directors as an independent body entrusted by shareholders. Members attend board
and other important meetings, review the status of operations and assets, and maintainclose contact with the accounting auditors, the Internal Audit Department and theinternal controls departments. A supplementary external auditor has been appointed tofill any future external auditor vacancies.
Internal Audit Department
This department conducts internal audits of the execution of operations by businessdivisions in accordance with the Auditing Plan for that fiscal year. It verifies the internalmanagement system including its appropriateness and efficiency. As necessary, thedepartment exchanges opinions with or makes proposals concerning the improvement
or correction of a problem to the internal controls departments and reports the results of
its audits to the president and auditors.

*1 The Articles of Incorporation stipulate that the number of directors shall not exceed 16.
*2 One of the auditors possesses a degree of knowledge of finance and accounting.

40

SANKI REPORT 2018

SANKI REPORT 201841

Independence Standards for External Officers

WEB (Appendix for the Sanki Engineering Corporate Governance Guidelines) (in Japanese)
https://www.sanki.co.jp/corporate/governance/guideline.html• Fixed remuneration: rank and scope of responsibilities• Bonus: portion linked to performance during the period• Stock options: granted according to rank as a long-term
incentive
Elements and Procedures for Remuneration for Directors and Auditors
Category
Procedure

Fixed
Remuneration

Bonus

Stock
Options

Full-time
director◯◯◯

External
director◯－－

Full-time
auditor◯◯－External
auditor

◯－－Procedure
Determined by the Boardof Directors following
deliberation by the Advisory Committee on Nomination and Remuneration
Determined through consultation among external
auditors

Remuneration for Directors and Auditors in Fiscal 2017
Category

42

Persons Receiving
Payment

Total Payment(thousands of yen)

Directors(external directors)

11 (3)

448,920 (32,400)

Auditors(external auditors)

4 (2)89,200 (21,600)

SANKI REPORT 2018

• Ensuring the Reliability of Financial Reporting
The Internal Finance Control Committee meets four times
a year to conduct our financial reporting in accordance with
the internal control framework stipulated by the Financial
Instruments Exchange Act of Japan. Moreover, we arepromoting the establishment and appropriate managementof an internal control system to safeguard the reliability of
our financial reporting by having the committee deliberateon the assessment and response with respect to thefinancial risks within each department and subsidiary. A
report is produced in adherence with the internal control
reporting system to ensure that internal controls related
to financial reporting are being exercised effectively. In thereport for fiscal 2016, auditors expressed their opinion that
our financial reports have been presented in an appropriatemanner in terms of all material aspects.

Executives of the Sanki Engineering Group (as of June 27, 2018)

Director and Chairman

Representative Director andPresident

Representative Director

Representative Director

Director

Director

Director

External Director

Yukiteru Yamamoto

Makoto Nukaga

Full-time Auditor

Full-time Auditor

External Auditor

External Auditor

External Auditor

Director

ChairmanTakuichi Kajiura

Representative Director

President

Tsutomu Hasegawa

Vice President and Executive Officer

Nobuo Kumura

Vice President and Executive Officer

Hidemi Fujii

Takuichi Kajiura

Hirokazu Ishida

Hirotoshi Fukui

Director

Nobuo Kumura

Tsutomu Hasegawa

Masayuki Kudo

Masato Komura

Etsuji Hitomi

Senior Executive
Officer
Senior Executive
Officer
Senior Executive
Officer

Takeo Inokuchi

Hidemi Fujii

Mamoru Norisada

Director

Director

Eiji Mitsuishi

Takashi Motomatsu

External Director

External Director

Kazuhiko Kashikura

Shozo Fujita

General Manager, Mechanical & Electrical Contracting Headquarters

Eiji Mitsuishi

General Manager, Plants & Machinery Systems Headquarters

Takashi Motomatsu

General Manager, Management Planning Office

Hirokazu Ishida

Managing Executive Officer

Corporate Governance● Officer Remuneration
Sanki Engineering has established the Advisory
Committee on Nomination and Remuneration underthe Board of Directors, comprising the president,
external directors and others, to nominate candidates
for directors and to deliberate on matters including thesystem and level of remuneration.
The remuneration for directors and auditors
comprises, within the limits adopted by our generalshareholders’ meeting, of fixed remuneration, bonus andstock options. Each fiscal year, we decide the amountseparately for directors and auditors depending on theirfull-time or part-time status, with due consideration forbalancing each of the following elements and ensuringthat the amount is aligned with the long-term interestsof shareholders and offers sufficient motivation for
maximizing corporate value.

● Internal Controls• Basic Policy and Systems for Internal Controls
Under its Basic Policy on Internal Financial Control, SankiEngineering is developing and operating a system toensure the legality, soundness and transparency of its
operational execution. Moreover, we have establisheda whistleblowing system that comprises contact points
for corporate ethics in general, dedicated internal andexternal contact points for reporting violations of the AntiMonopoly Act as well as a system for reporting to the fulltime auditor as efforts to stringently enforce compliance.
The Board of Directors makes decisions on issues
stipulated by laws, regulations and the Articles ofIncorporation as well as on issues related to the executionof operations. Furthermore, it exercises oversight toensure that operations are being effectively executed.
The Management Meeting is held every week to ensure
the effective execution of duties in accordance with therules for discussion and reporting. To further strengthen
management oversight, the Liaison Meeting of External
Directors, consisting of external directors, is convened to
exchange necessary information and share awareness of
issues.
To ensure effective auditing, the auditors attend
meetings, offer their opinions as necessary, receive
reports from accounting auditors and the Internal Audit
Department, request that this department investigate
and report on its findings if needed, and discuss mattersas required. In addition, the full-time auditor seeks toascertain the status of internal controls across the Groupby regularly exchanging opinions with the presidents,
auditors and internal audit departments of Group
companies, receiving reports from the accounting auditorsand exchanging opinions.

CSR Report● Appointment of Directors and Independence ofExternal Directors
The Advisory Committee on Nomination andRemuneration considers candidates for directors
and submits the results to the Board of Directors fordeliberation. Appointments are finalized by a resolution at
the general shareholders’ meeting. We have establishedstandards on the independence of external directors toraise the objectivity of their oversight of management.

Masayuki Kudo
Masato Komura

External Director

Yukiteru Yamamoto*
Makoto Nukaga*
Kazuhiko Kashikura*

Full-time Auditor

Hirotoshi Fukui
Etsuji Hitomi

External Auditor

Takeo Inokuchi
Mamoru Norisada*
Shozo Fujita**Independent directors have been appointed in accordance with the listing rules of the Tokyo Stock Exchange.

SANKI REPORT 201843

Management

Compliance

The Sanki Engineering Group strives to maintainlegally compliant behavior based on corporate ethics
across all aspects of its operations by upholding the
Sanki Engineering Group Compliance Declaration, theSanki Engineering Group Code of Conduct and Action
Guidelines and the Sanki Engineering Group Conduct
Standards.
The Sanki Engineering Group Code of Conduct andAction Guidelines was revised in April 2017.

throughout the entire Group. In addition, we began
operating the Fair Trade Hotline in fiscal 2016 for reportingof violations of the Anti-Monopoly Act. No violations werereported in fiscal 2017.
Whistleblowing System
Full-time
auditorBoard of Directors(president)
ReportReportSecretariat(CSR Promotion Division)
Reporthttps://www.sanki.co.jp/en/csr/policy/conduct-code.html

We have established a Corporate Ethics Committee,
chaired by the president, who nominates officers
responsible for corporate ethics to oversee thecommittee’s activities. In principle, it meets twice a year
to review, monitor and provide guidance with respect
to compliance guidelines and action plans for the entire
Group. In fiscal 2017, the committee convened twice.

Compliance Promotion Activities● Whistleblowing System
We have set up corporate ethics hotlines forwhistleblowers, both within and outside the Company.
The internal hotline goes to the full-time auditor and the
CSR Promotion Division, while the external hotline goes toour consulting attorney’s office. We act swiftly to resolve
the issues that are reported, with consideration for theprotection of anyone seeking consultation or providing
information in accordance with the Corporate Ethics
Regulations. All of the reported information is presented
to the executives responsible for corporate ethics, andimportant information is reported to the Board of Directors
and the Management Meeting. In fiscal 2017, there were
11 reported incidents (11 internally and 0 externally), andall incidents have been appropriately handled. The namesof individuals who report to the corporate ethics hotlines
will be handled in secrecy by the executives responsible
for corporate ethics and will not be disclosed to others
without the reporter’s prior consent. The reporter will not
be placed at a disadvantage for consulting or reportingto the hotline. We are also distributing a corporate ethics
hotline card in order to raise awareness of this system

SANKI REPORT 2018

Harassment
Consulting
Office(expertexternal
counsellor)

External
hotline(consulting
attorney)

Corporate Ethics Hotline
Fair Trade Hotline

Women´sHotlineReport andConsultation● Receipt of Compliance Confirmation Sheets fromAll Executives and Employees
In order to refresh the awareness of all Group executives
and employees of the responsibilities that they must fulfill in
their respective positions and roles, compliance confirmation
sheets covering items such as observance of the Codeof Conduct and Action Guidelines, and eliminating criminal
elements and groups, are submitted at the beginning of eachfiscal year. In fiscal 2017, there were no serious complianceviolations, such as illegal acts, unethical behavior or unfair
practices.

Number of Persons Submitting Compliance Confirmation
Sheets (Fiscal 2018)
Sanki Engineering(relevant employees)
Compliance confirmation
sheets concerning
performance of duties*1
Compliance confirmation
sheets*2

Subsidiaries(relevant employees)（37）

46 （46）2,014（2,031）

384（385）37*1 Compliance confirmation sheets concerning performance of duties are
submitted by directors and executive officers.
*2 Individuals who have not submitted compliance confirmation sheets are onmaternity leave, receiving medical treatment, etc.

Sanki Engineering Group
Code of Conduct and Action
Guidelines, compliancewith the Anti-Monopoly Act,
preventing harassment

TargetFrequency andparticipation(attendance rate)Group
executive
officers andemployees

37 times
2,361 employees(97%)● Compliance Audit

The Internal Audit Department conducts compliance audits
and seeks to strengthen compliance by providing guidanceon legal compliance and through monitoring. In fiscal 2017,
internal audits were carried out at 20 worksites including
those of 3 domestic subsidiaries and 2 overseas subsidiaries.
In addition, to raise awareness at our construction sites, we
conduct onsite hearings with site managers to gain a better
understanding of the situation.

Strengthening Anti-Monopoly
Act Compliance● Measures in an Ongoing Effort to Prevent
Recurrence● Compliance Awareness Survey

We conduct an annual awareness survey on issues suchas compliance and CSR targeting all executive officers andemployees. Survey results are disclosed to all of them andused to monitor and improve the effectiveness of our CSR
activities and identify human rights risks. We noted feedback
and issues concerning harassment in the results of thequestionnaire and from the current state of reports, and weare taking action to prevent and eliminate any harassment
by consistently carrying out preventive education throughcorporate ethics training and division training.

Results of Questionnaire Regarding
Compliance Awareness for 2018
Survey period: May 2018  
Participants: All Group executive officers and employees

Q Do you understand the Sanki Engineering Group Code of
Conduct and Action Guidelines?
I have an adequate understanding.

41%

I have a general idea.

51%

I do not have an adequate understanding.

8％

Q Are you aware of the Corporate Ethics Hotline and Fair
Trade Hotline?
Yes

98%

No

2%

Q Do you know that business partners can also report tothe hotlines?
Yes

84%

No

16%

The following are major measures we undertook between
fiscal 2013 and fiscal 2017. Looking ahead, we will continue
our Group-wide effort to prevent violations of the AntiMonopoly Act in fiscal 2018.

Compliance

When a report
is required

Compliance Promotion System

44

Theme

Officers responsible forcorporate ethics

https://www.sanki.co.jp/en/csr/policy/compliance.html#etc02

WEB

Results of Corporate Ethics Training (Fiscal 2017)

ReportEngineering Group Compliance Declaration, Sanki EngineerWEB Sanki
ing Group Conduct Standards
Sanki Engineering Group Code of Conduct and Action Guidelines● Corporate Ethics Training

Sanki Engineering conducts corporate ethics training for all
employees on a regular basis in order to ensure thoroughcompliance with the Code of Conduct and Action Guidelines.
We also hold training on the Anti- Monopoly Act for newly
assigned sales staff.

CSR Report

Basic Philosophy

Policies and Manuals• Formulated the Sanki Engineering Group ComplianceDeclaration and Sanki Engineering Group Conduct
Standards.
• Distributed the Compliance Handbook.
• Issued an Anti-Monopoly Act Compliance Manual.
• Clearly stipulated breaches of laws such as the AntiMonopoly Act as grounds for disciplinary action.
Structural Reinforcements• Established a comprehensive, Group-wide Anti-Monopoly
Act Compliance Program at a meeting of the Board of
Directors and implemented the program.
• Assigned a compliance manager in each department andbegan supervising the process for deciding the bid amountfor public works and operating a compulsory system ofadvance approval and reporting when attending a meetingwith any companies in the same industry.
• Introduced regular rotations for sales staff assignments.
• Established a Compliance Risk Subcommittee within the
Risk Management Committee.
• Reconsidered membership in outside groups.
• Began an in-house leniency system (voluntary reporting
system).
Training and Education• Submitted compliance confirmation sheets.
• Boosted awareness of compliance-related hotlines.
• Top management visited all business bases to hold special
corporate training sessions through direct exchange with all
Group executives and employees.
• Held training on the Anti-Monopoly Act for newly assigned
sales staff.

Q Do you know that you can report directly to the full-time
auditor?
Yes

80%

No

20%

SANKI REPORT 201845

Management

Risk Management

Sanki Engineering has established a Company-wide risk
management system based on its Risk Management
Rules to comprehensively identify risks that pose an
obstacle to conducting normal business operations
and prevent such risks from materializing, and also tominimize loss in the case that it does occur.
We set up the Risk Management Committee,
chaired by a risk management officer, to centrally
manage Group-wide risk and implement an organizedresponse. In principle, the committee convenes once
every quarter to monitor important risk throughout
the Group, formulate control plans, and monitor risk
reported from subcommittees and divisions. To enhancethe effectiveness of our risk assessment and control,
we have set up risk management subcommittees toaddress specific risks under the Risk Management
Committee. In addition, the Internal Audit Department
conducts regular audits to check the status ofrisk management at each division and verify theappropriateness of risk management.

Each fiscal year, the Risk Management Committee
identifies risks that affect business activities andconducts a risk assessment based on frequencyof occurrence and impact on management. The
committee receives reports from the risk management
subcommittees to monitor risks and consider necessary
countermeasures, provides instructions and confirms
the status of progress.
The committee convened four times in fiscal 2017 toreconfirm risk control procedures and review the current
status of priority risk management. It also conducted aninspection and review based on a risk matrix to ascertain
whether or not priority risks are being properly assessed.
Major Countermeasures in Fiscal 2017
Risk

Countermeasures

Customer credit• Risk management framework and system incorporating
consolidated subsidiaries

Supplier credit
Operational
Information
security• Expanded and reselected target companies, dispersed
suppliers• Surveyed price trends• Ensured the effectiveness of our BCP• Promoted measures against long working hours,
including the Smile Project• Reinforced antivirus software• Held a simulation drill for handling targeted email
attacks (including subsidiaries)

Overseas• Reviewed the Overseas Crisis Management Manualand Overseas Safety Measures ManualCompliance• Opened the Women’s Hotline whistleblowing system

Responding to Disaster Risks throughthe BCPThe Sanki Engineering Group’s BCP aims to ensure
the safety of all related persons, including employees,
based on the integrated efforts of all divisions andemployees. The Company has also formulated aframework to contribute to customers and society
through swift business restoration in collaboration withbusiness partners. We have sought to maintain oursystem under normal conditions and clearly establish
the codes of action and division of roles for times ofdisaster in order to ensure that restoration activities
can be implemented more promptly. To date, we haverelocated the directors’ offices from the upper floors
to the lower floors to ensure the functionality of theemergency response headquarters, conducted a drill
on the assumption that the head office sustained
damage and another office served as an alternative
headquarters and modified the way we operate oursafety confirmation system.
In fiscal 2017, we sought to raise the effectivenessof our BCP by conducting a more realistic drill based on
specific damage
scenarios in
addition to ourregular simulation
drills for large-scaledisasters.
BCP drill

Framework of the Risk Management System

Strengthening Risk Managementin Overseas Operations

President and Representative Director
ReportManagement Meeting
Discussion on policy torespond to important risks

Internal Audit Department
Audit
ReportRisk Management Committee
Chairperson:
Members:
Roles:

MonitorConvenes:
Secretariat:

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

Report findings of deliberations

MonitorReport status

Risk management executive
Management meeting constituent members and persons
nominated by the chairperson
1. Monitor important risks and formulate a control plan
2. Monitor risks reported by subcommittees and divisions
Once a quarter in principle and additionally as requiredManagement Planning Office

Subcommittees

ReportMonitorSANKI REPORT 2018

Committees and Management System

Customer credit risk

Central Disaster Countermeasures Committee

Supplier credit risk

Corporate Ethics Committee

Operational risk

Internal Finance Control Committee

Information security risk

Management review of EMS and QMS

Overseas risk

Central Safety and Health Committee

Compliance risk

46

Monitor

We have formulated the Risk Management Manual for
Overseas Operations for the head office and overseas
bases as well as the Manual to Ensure Safety in Foreign
Countries for overseas employees, those travelingoverseas on business, and their families, which arerevised each year.
The Risk Management Manual for Overseas
Operations stipulates the rules and response proceduresfor crises that could occur in foreign countries. It covers
various crisis situations such as preventing physicalharm to overseas employees and others, addressing
violation of laws, responding to the mass media anddealing with litigation. The Manual to Ensure Safety in
Foreign Countries was compiled as a practical guideand includes actual situations and checklists that coveractions required in the event of a terrorist attack or

natural disaster, the prevention of damage from crimeand other risk, compliance with anti-corruption laws,
personnel/labor management of locally employed staff,
religion and other related matters to help overseas
employees and other people reduce risk and respond to
emergencies.
In fiscal 2017, following the establishment of theOverseas Operations Control Office, the presidentsof three overseas Group companies reported the risk
management status at their respective companies to
the Risk Management Committee meeting, which
verified their findings.

Initiatives to Ensure Information Security
The Group handles information provided by customers
in accordance with our Information Security Risk
Management Rules. We have established an
information security risk subcommittee within the Risk
Management Committee as a management system.
Through the system, we can control information
security measures Company-wide and manage risk related
to information security in an integrated manner. As partof our activities to develop our management system, weuse checklists to confirm the status of information security
measures during onsite inspections by supervisors at eachbranch and branch office.
To strengthen our countermeasures for information
security risks, we reinforced our antivirus software,
conducted a simulation drill for handling targeted email
attacks (including subsidiaries), constructed a cloud- based
onsite data sharing system and carried out regular audits.
In fiscal 2017, we held two subcommittee meetings.

Risk Management

Risk Management Activities

CSR Report

Risk Management Policy and System

Key Information Security Measures
Type

ActionDissemination ofrules• All Group executive officers and employees take ane-learning course• Corporate ethics training, submission of confirmation
forms (once a year)• Training on preventing targeted email attacks(conducted twice)• Status review of information security
countermeasures during onsite inspections (8 sites)

Information device
management• Encryption of information terminals• Regular inventory reviews (conducted once)

Prevention ofunauthorized use• ID and password management, secure room
• Confirmation using asset management tools• Preventing non-Company owned PCs brought into
the office from being connected to the in-housenetwork

Prevention ofunauthorized use• Antivirus measures, automatic updating of security
patches (once a month)• Web filtering, countermeasures against unsolicitedemails• Monitoring of illegal outbound data streams

Measures for social
media• Instill an understanding among Group employees
using guidelines• Improving the level of security regarding social media

SANKI REPORT 201847

Management

CSR Management
Promoting CSR Activities

FY 2017this system, we pursue our CSR initiatives in eachphase of our value chain while ensuring communication
with diverse stakeholders and reflecting societal
demands on business activities.

Major Action Policies

Customers

Key Stakeholders of the Sanki Engineering Group

Outline of Stakeholders

Shareholders andInvestors

Business Partners

Partners

Employees

Local Communities

Governments andAdministrative
Bodies

Office buildings,
factories, airports,
distribution/ research/data centers, hospitals,
schools, etc.

We construct facilities andprovide systems and technicalservices for a broad range ofsocial infrastructure projects.

◦ Resolve issues forcustomers and society atlarge◦ Provide construction andtechnical services withhigh added value◦ Enhance customer
satisfaction in terms of
quality, delivery and cost

Number ofshareholders: approx.
3,200 (as of March 31,
2018)

Sanki Engineering has approx.
63 million shares outstanding.
Financial institutions accountfor about 42% of ownership,
foreign corporations for about
29%, and individuals and others
for about 16% (as of March 31,2018).

◦ Enhance corporate value◦ Ensure a stable return ofprofits and appropriate
allocation of management
resources◦ Conduct timely andadequate disclosure ofcorporate information

Subcontractors,
general contractors,
material/ machinery
manufacturers,
building maintenancecompanies, etc.

Business partners offer crucial
support to Group operations
through the Subcontractor
Group system, based onrelationships of trust fosteredover many years.

◦ Build fair, equal andtransparent business
relationships◦ Strengthen relationships oftrust and collaboration◦ Ensure health and safety
and create good working
environments◦ Respect human rights

Universities,
research institutions,architecture offices,etc.

Collaboration with thesepartners constitutes a key
element of the Group’s
technological capacity.

◦ Pursue open innovation◦ Build equal and fairrelationships

The Group derives its
competence from the individual
abilities of its diverse humanresources characterized by the
Sanki Spirit.

◦ Ensure equal opportunityand fair evaluation◦ Cultivate human resources,develop capabilities andpromote diversity◦ Ensure health and safety
and create good working
environments◦ Respect human rights

Number of employees
Consolidated: 2,384
Non-consolidated:
1,969(as of March 31, 2018)

Areas aroundconstruction sites andoffices

Central and local
governments
Water supply anddrainage disposal
plants, waste disposal
facility sites

We develop our businessactivities in various areas bothin Japan and overseas.

We operate under thesupervision of central and local
governments, which are also
customers of the Group.

Major Methods ofEngagement◦ Dialogue through sales
activities and meetings◦ Websites and showrooms◦ Exhibits at trade showsand exchange of views◦ General shareholders
meeting, shareholder
reports◦ Results briefings, oneon-one IR interviews andresponse to inquiries◦ IR website, SANKIREPORT◦ Dialogue through dailypurchasing activities◦ Collaboration and support
through the Subcontractor
Group◦ Corporate Ethics Hotline◦ Industry-university
collaboration◦ Dialogue at the Open Lab◦ Interviews withsupervisors, training◦ Various reporting andconsulting channels◦ Labor-Management
Council◦ Website and intranet◦ Develop social
infrastructure◦ Pay due consideration to
local communities and theenvironment◦ Disclose information◦ Branch and branch officecounters◦ Briefings related toconstruction work
◦ Dialogue throughcontributions to local
communities◦ Comply with laws,
regulations andadministrative guidance◦ Pay taxes◦ Develop social
infrastructure◦ Contribute to local disasterprevention◦ Various applications◦ Branch and branch officecounters◦ Briefings and reports related
to construction work
◦ Dialogue through industry
associations• Total number of requests:
1,834(250 requests at 5
branch offices)• Total number of requests:
2,031(296 requests at 5 branch
offices)○• Expand operational
assistance through branches
and branch offices• Reduce the number ofproblems and complaints
during construction per year

• Reduce the number ofproblems and complaints by
15% year on year

• Roughly the same number asin the previous fiscal year△

• Reduce the number ofproblems and complaints
during construction per year

• Strengthen guidance for sitemanagers• Conduct training on
construction technology andmanagement for all applicants• Cumulative number ofparticipants: 461○• Strengthen practical training
using actual machines andfacilities and hands-on practiceand drills• Promote dialogue withshareholders• Enhance IR activities for
institutional investors andindividual investors• Revitalize the generalshareholders’ meeting• Expand opportunities for IR
meetings with domestic andoverseas investors• Increased shareholder
attendance• Aggregate total of companies
with which individual
meetings were held: 57(increased by 14 YoY)
• Exhibited at IR event forindividual investors○• Promote dialogue withshareholders• Enhance IR activities for
institutional investors andindividual investors• Provide consistent, steadyreturns to shareholders• Paid an annual dividend of
35 yen per share (including a• Paid stable dividends inspecial dividend of 15 yen per
principle and provided special
share)
dividends depending on• Retired and acquired 3 million
business performance
shares of Company stock,
respectively○• Provide consistent, steadyreturns to shareholders• Digitization of order request
forms and claim forms forcompleted work: over 70%
Company-wide○• Further enhance procurement
efficiency• Hearings: 63 companies○• Visit business partners• Number of participatingcompanies: 19○• Strengthen cooperation
through subcontractor groups• Reduced by 43%○• Deploy measures against
the three major categories ofaccidents• Promote online procurement• Digitize operations
systemHealth and
Safety at
Construction
Sites

Employees

Environment

Local
Communities• Strengthen relationships with• Continue hearings
subcontractors• Expand the scope of• Strengthen cooperation
participation for thethrough subcontractor
nationwide Liaison MeetinggroupsParticipants: 19 companies• Deploy measures against• 30% reduction from thethe three major categories of
average for the past three
accidents
years• Launch a web portal on thehealth and safety portal site

• Launched a portal site anddistributed videos and email◎• Implement accident
prevention measures for
subcontractors• Enhance knowledge andcapabilities related to healthand safety• Expand education for new
employees• Increased the number ofcourses from 8 in FY2016
to 12

◎

• Develop health and safety
education to sharpen
awareness• Enhance training programs
to develop human resources
with the Sanki spirit• Deepen understanding ofdiversity• Further revitalize theorganization• Hold exchanges of views
between division heads• Offered programs forovercoming individual
weaknesses and developing
strengths• Implemented early training
for manager candidates• About 120 sessions attended
by about 700○• Implement training programsfor boosting overall levels
as a culmination of the final
year of the medium-term
management plan
• Hold exchanges of views
with the president• Implement measures
outlined in the “Smile
Project”• Consider measures for each
workplace• Launched the Smile Site Plan
to implement measures atconstruction sites◎• Implement measures underthe “Smile Project”• Providing products andservices to help reduce CO2
emissions of customers• Increase orders for proposals
to reduce CO2 emissions
compared to fiscal 2016

• Reduced 27,319 t-CO2
in FY2016
Reduced 16,599 t-CO2
in FY2017△• Providing products andservices to help reduce CO2
emissions of customers• Properly dispose of andreduce industrial waste• Promote the proper disposalof materials containing
asbestos• Regional disaster prevention• Participate in regional
disaster prevention activities• Conservation of the local
environment• Participate in local cleanup
activities• Supporting the developmentof the next generation• Provide educational
opportunities such asenvironmental seminars

SANKI REPORT 2018

• Completed preparation of
the Basic Flow Chart ofProcedures for HandlingAsbestos• Carried out activities under
the large-scale disasteragreement between
Yamato City and the Yamato
Engineering Center• Held Group-wide activities inover 30 locations• Offered 6 social study tours
for a total of 179 students◎ Achieved and goal exceeded

Report
Pages

50–52

53

• Elevate awareness levels

Self-evaluation

48

Major Action Policies• Nationwide development ofSite-Documentation Support
Centers

Shareholders
and Investors

Business
Partners

Major Results

FY 2018

CSR Management

Customers

Main Responsibilities of the
Sanki Engineering Group

Primary Goals

Selfevaluation

CSR Report

The Sanki Engineering Group promotes CSR activities
through a Group-wide effort based on its Code of
Conduct and Action Guidelines, and deliberation andreview of important matters concerning CSR are
conducted by the Corporate Ethics Committee. Under

Major Action Policies and Results for Fiscal 2017 and Major Action Policies for Fiscal 2018

54–55

56–57

58–61

62–66
◯

• Improve the introduction rateof digital manifests◯• Regional disaster prevention○• Conservation of the local
environment○• Supporting the developmentof the next generation◯ Almost achieved as planned

67–68△ Not achieved and unresolved issues remain
SANKI REPORT 201849

Relationship with Customers

FY2018
Assessment

Major Action Policies

Primary Goals

Results• Nationwide developmentof Site-Documentation
Support Centers• Total number of requests:
1,834(250 requests at 5 branch
offices)• Total number of requests: 2,031(296 requests at 5 branch offices)• Enhance the accuracy ofquality management• Reduce the numberof problems andcomplaints during
construction per year

• Reduce the number ofproblems and complaints by
15% year on year

• Roughly the same number as in
the previous fiscal year

• Reduce the number of problems
and complaints during
construction per year

• Improve construction
quality and pass ontechnologies• Strengthen guidance forsite managers• Conduct training on
construction technology andmanagement for all applicants• Cumulative number ofparticipants: 461• Strengthen practical training
using actual machines andfacilities and hands-on practiceand drills• More effectively
respond to increasingly
sophisticated anddiversified customer
needs

Response to Sophisticated and Diverse
Customer Needs

Initiatives to Ensure Quality● Philosophy on Quality and the Quality
Management System
Since April 2017, we have been operating an integrated
quality management system based on the ISO 9001 (QMS)
and ISO 14001 (EMS) standards in our facilities construction,
machinery systems and environmental systems divisions.
In fiscal 2017, we held discussions on raising the efficiency
of system operations and reviewed our activities during theCompany-wide QMS and EMS Office Conference.
Framework for Promoting the Quality and Environmental
Management System

Communication with Our Customers
The Sanki Engineering Group actively participatesin exhibitions to introduce customers to our unique
technology utilizing comprehensive engineering andopen up new sales opportunities.

• Expand operational assistancethrough branches and branch
offices

Top Management (President)
Company-wide management
reviews for QMS and EMS

Management Meeting
Approves annual policy
on QMS and EMS

Reports on Company-wide activities anddecisions on plans Held in September 2017

General Manager of the Quality and Environmental Management Office
Exhibition Participation in Fiscal 2017
Exhibitions

Sewage Works
exhibition ’17 Tokyo

50

Exhibited Items
Supercharged fluidized bed incinerator, AEROWING,
SANDEC G3, and a demonstration of the flow
fluctuation tracking type wastewater treatment
technology using a DHS system commissioned
under the B-DASH Project

Waterworks Exhibitionin Takamatsu 2017
(51st Waterworks
Exhibition)

Report on PFI Okubo, UV sterilizer

ENEX 2018
42nd Exhibition for
Harmony between the
Global Environment
and Energy

Energy-related technologies and presentation of
actual cases

4th INTERPHEX
OSAKA
Pharmaceutical R&D
and Manufacturing
Expo/Conference (partof Medical Japan
Osaka 2018)

CPCube®, Wide Area Clean System, MEDIFORT®,
AGV, and the continuous heat sterilization apparatus

HVAC&R Japan 2018

Aluminger™ aluminum refrigerant piping method,
and the EcoSearcher® real-time heat source
optimization system

Company-wide QMS and EMS Office
Conference
Held in February 2018

Eachdivision

Company-wide QMS and EMS Office(Labor Safety, Health, Quality Management& Environment Promotion Office)Divisional Managers(Heads of sections, general managers of the headquarters, chief director of the research
institute, heads of business divisions, presidents of branches and branch offices)

Divisional Management Review
Reports on divisional activities andformulation of plans (twice per year)

Quality and Environmental Management Officer
Divisional QMS and EMS Office

Sales, Design, Production, Construction and Office Duties

SANKI REPORT 2018

● Quality Management Activities
We advance construction quality with an emphasis on
improving communication. Enhancing our support for
construction sites and offering rapid, constructive responses

to problems and complaints are areas in which we
consistently seek to raise our standards. In fiscal 2017, werevamped our criteria for assessing customer satisfaction.
Combined with detailed revisions and consolidation of ourdocumentation and rules, we have developed an evenstronger connection between customer satisfaction andquality management at our construction sites.
● Providing Operational Support forConstruction sites
To reduce the workload on site managers and enable themto spend more time on construction work and quality
management, we provide operational support from theperspectives of site documentation as well as design andtechnology.
The Site-Documentation Support Center was set up
in fiscal 2015 to consolidate and support administrative
work, and it received 2,031 requests in fiscal 2017, anincrease of roughly 1.4 times since it was launched.
In fiscal 2018, the center was restructured into a new
system under which its operations are handled by
support divisions modeled after the centers that were
set up in each branch and branch office, and the Labor
Safety, Health, Quality Management & Environment
Promotion Office. We are also raising operational
efficiency by reducing and digitizing documents ofconstruction sites. The Design Support Center assists
operations at five branch offices. In fiscal 2017, thiscenter sought to enhance design capabilities throughon-the-job training while providing design and technicalassistance for 89 projects, including those on a large
scale and in the medical area. In fiscal 2018, we will
widen the scope of support to the Building HVAC andPlumbing Business in line with organizational expansion.
● Quality Management Activities by
Technical Experts
Highly skilled former branch and branch office managers
work as “Technical Experts” under the direction of thequality assurance administrator and visit construction
sites to conduct construction audits and quality reviews,
as a means of preventing problems and complaints,
while also mentoring junior employees.
We set goals each year to strengthen our response to
problems and complaints as an ongoing initiative, promptly
dispatching staff to sites and thoroughly disseminating
information across the Company by issuing and sharing
technical memos. Consistent quality management led by the
Quality Assurance Administrator Office has enabled us toeffectively exercise the total engineering competency of the
Sanki Engineering Group at our construction sites.

● Sharing Information and Preventing the
Occurrence of Problems and Complaints
We share our quality-related experiences across the Company bymeans of technical documents in order to prevent the occurrenceof incidents and complaints related to quality or, in the event thatthey do occur, to quickly and effectively handle them.
Information about problems and complaints are distributed
to construction engineers through a flash bulletin, the “weekly
bulletin” (a weekly meeting of the Problems and Claims Evaluation
Committee, which is also attended by Group companies), andthe “monthly bulletin,” which discusses the causes of issues,corrective measures and preventive measures. In January 2017,
we began distributing posters to construction sites each month toraise awareness of preventing
problems and complaints. We
復旧忘れにご用心！！
復旧忘れにご用心！！
復旧忘れにご用心！！
have been seeking to reduce
the number of problems andcomplaints by 15% year on year.
However, the number of suchcases remained little changed
from fiscal 2016 and fiscal 2017.
We will continue to pursue
quantitative targets in fiscal 2018
and strengthen our response.
休日工事明け、電話等の復旧忘れにより、トラブルが発生するケースが多発しています。

休日工事明け、電話等の復旧忘れにより、トラブルが発生するケースが多発しています。

休日工事明け、電話等の復旧忘れにより、トラブルが発生するケースが多発しています。

Relationship with Customers

To fully demonstrate the Sanki Engineering Group's
comprehensive capabilities and proposal-making
capabilities, we have been strengthening the functionsof our sales organization at the head office byintegrating operations to boost sales management,planning, development, support and sales capabilities
related to the construction facilities business. We willmeet the increasingly sophisticated and diversified
needs of customers and thereby continue to earn theirtrust and appreciation.

Major Action Policies

CSR Report

FY2017

Important Issues

Poster for raising awareness of
preventing problems and claims

V o i c e Seeking to Transfer andReinforce Our Technology
through Individual Efforts
and Dialogue
Yoshiya Sakurai
Quality Assurance Administrator,
Technical Administration Division

As the Quality Assurance Administrator for the electrical systems
of construction facilities, I formulate and revise the manual ofengineering instructions and working instructions, organize review
meetings on electrical system technology and the conference onelectrical construction quality, and offer support to transfer andreinforce our technology through design reviews, meetings toreview the start of construction, prior review meetings on trouble
prevention and construction audits. During new employee training
and skill-based training, I advise participants to learn by preparing
construction drawings based on blueprints so that they may identify
problems. Knowledge of rules and regulations, design, technology
and construction work is required to prepare a construction drawing
as well as consideration of the costs and conducting research.
When that is not enough to solve a problem, you can consult
others, and the dialogue will confirm and enhance the technicalskills of the worker and those consulted. I hope this will enable us
to transfer and reinforce our technology, which will serve as thebasis for winning customer trust and increasing orders and profits,
ultimately benefiting society.

SANKI REPORT 2018

51

Relationship with Shareholders
and Investors

Fostering Human Resources to Sustain
Our Technological Level
The Technical Training Center fosters human resources

Changes in the Number of Personnel with Quality-Related
Qualifications (Totals as of April 1 for Each Fiscal Year)*
Qualification

FY2017FY2018

97

92

1,123

1,112

Architect

44

42

Facilities construction architect

208

210

Electrical engineer

157

153

Chief electrical engineer

3329First class instrument engineer

285

284

Fire protection engineer

675

683

1,695

1,659

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

Qualified managing engineer*Cumulative figures are shown for all qualifications.

Major Skill Development Activities for Fiscal 2017
Initiatives

Initiatives at theTechnical Training
CenterInitiatives forpassing ontechnology

Initiatives forGroup companies
and subcontractors

52

Training

Details of Training

Results

Training for new employees• Education for new businesspersons, basic skills

67 participants

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

214 participants

Skill-based training
Step 1 training: for inexperienced workers and novices
Step 2 training: for workers with basic skills
Step 3 training: for workers with practical skills• Five-day training session for Steps 1 through 3 for improving skills• Optional program based on the amount of practical experience and skill level• Practical drills and practice by repetition to develop a sound grasp of skills

7 sessions
168 participants

Strengthen training on construction engineering andconstruction management•Strengthen practice to enhance skills for making and reading drawings• Strengthen practical drills on case study explanation, practice and presentation• Strengthen visual confirmation-based training using machinery and facilities

461 participants (cumulative total)On-the-job-training by technical experts• Practical on-the-job training offered by technical experts selected from all branches
who participate in onsite commencement discussions and construction audits

21 technical experts
2,222 site visits (cumulative total)

Conference on electrical construction quality for all branches• Test of practical skills for electrical technicians from subcontractors of all branches,
written exam based on past cases. Participants receive the internally certified
qualification, Sanki Engineering-certified Class A Electrical Engineer

18 subcontractors
20 participating technicians

Explanation of problems and complaints

Number of sessions
Tokyo branch: 11
Kansai branch: 19
Chubu branch: 12• Introduce cases at briefings and liaison meetings held at branches and branch offices
Hokkaido branch office: 3
Hokuriku branch office: 3
Chugoku branch office: 2
Tohoku branch office: 3

SANKI REPORT 2018

FY2017

Important Issues• Timely and appropriate
information disclosure• Shareholder return

FY2018
Assessment

Major Action Policies

Primary Goals

Results• Promote dialogue
with shareholders• Enhance IR activities
for institutional
investors andindividual investors• Revitalize the generalshareholders’ meeting• Expand opportunities
for IR meetings withdomestic and overseas
investors• Increased shareholder attendance• Aggregate total of companies withwhich individual meetings were held: 57(increased by 14 YoY)
• Exhibited at IR event for individual
investors• Promote dialogue withshareholders• Enhance IR activities for
institutional investors andindividual investors• Provide consistent,
steady returns toshareholders• Paid stable dividends inprinciple and provided
special dividends
depending on businessperformance• Paid an annual dividend of 35 yen per
share (including a special dividend of 15
yen per share)• Retired and acquired 3 million shares ofCompany stock, respectively• Provide consistent, steadyreturns to shareholders

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

WEB Sanki Engineering Corporate Governance Guidelines

https://www.sanki.co.jp/en/csr/policy/conduct-code.html● Timely and Appropriate Information Disclosure

Sanki Engineering strives to disclose required corporate
information in an easy-to-understand, fair, speedy, timely
and appropriate manner pursuant to the stipulations of our
Disclosure Policy. We also disclose information beyond legal
mandates when we deem such information to be usefulto shareholders and investors and to ensure managementtransparency. In addition, we facilitate the effective exercise
of voting rights by shareholders through efforts such as
releasing the convocation notice of shareholders’ meetings
well in advance and posting information at an early date on
our corporate website, in English and Japanese.

WEB Disclosure Policy

https://www.sanki.co.jp/ir/disclosure/● Communication with Shareholders and Investors

In June 2016, we changed the venue of our annual
general meeting of shareholders from a conference
room at the head office to a hotel in Tokyo. We wereconsequently able to welcome and hear the opinions
and questions of even more shareholders, at the 93rd
annual general meeting held in June 2017, than in theprevious year.
We engage our investors by holding results briefings

Major Action Policies

for analysts and institutional investors twice a year. In
fiscal 2017, 83 people participated. We also held 57
individual IR meetings, convened as needed throughout
the year. For the first time, we exhibited at an IR event
for individual investors to offer information about SankiEngineering at our booth. We are actively striving tounderstand theminds and needs ofindividual investors
while creating more
opportunities for
dialogue.

Relationship with Shareholders and Investors● Action Plans for Fiscal 2018
We designated reducing problems and complaints during
construction as our action policy for fiscal 2018 and aim toachieve a year-on-year reduction target of 15%. We strive
to prevent problems by identifying their causes and quickly
developing prevention plans. Moreover, we will continue
to accelerate this process and disseminate information
to reduce the number of problems. Meanwhile, wehave been advancing our site documentation support by
reducing the volume of documents and establishing a
digital documentation system, and in fiscal 2017 we set up
a search system for technical information across the Groupfor technical support and guidance. We will continue toprovide technical support from design to construction byorganizing on-the-job training in coordination with branches,branch offices and the Engineering Integration Office.

by helping employees acquire basic skills, brush up on
skills and attain qualifications. New employees receive
four and a half months of basic training and safety
training.
We provide a three-stage program for construction
management engineers based on the level of eachindividual’s skills in design, construction engineering,
construction management and other areas. These
programs are focused on case studies and practical drills
for subjects such as design calculation, construction
management, making drawings, responding to problems
and complaints.
We will further enhance our engineers’ skills by
improving hands-on practice and drills using actualmachinery and facilities at the Sanki Techno Center,
which will open in October 2018 to offer the combinedfunctions of education, training and R&D.

CSR Report● Technical Awards for Improving Construction
Methods and Operational Processes
In fiscal 2017, we began presenting awards for excellent
ideas that improve operational processes, such as raising
efficiency, in addition to ideas that improve construction
work. As a result, we received a record 1,480 applications
in fiscal 2017 and presented 10 awards for improvements inconstruction methods and operational processes as well as 2
Contribution to Customers Awards.

Results briefing forinvestors● Our Basic Policy Concerning Returns toShareholders and Track Record
Dividend payments form the basis of our policy on providing
shareholder returns and represent a key management
issue. In accordance with our basic policy, we endeavor toprovide stable dividends by balancing sustainable corporate
development with returns to shareholders. We invest internal
retained earnings in new businesses and technologicaldevelopment to strengthen competitiveness and createa basis for business development with the objective ofcontinually boosting corporate value.
For the fiscal year ended March 2018, we paid afull-year dividend totaling 35.0 yen, up 5.0 yen from theprevious year, including a regular dividend of 10.0 yen
and a special dividend of 5.0 yen for the interim period,
and a regular dividend of 10.0 yen and an extra dividendof 10.0 yen.
In fiscal 2017, we made a further effort to improve
capital efficiency by retiring 3 million shares of treasury
stock in May and acquiring another 3 million shares ofCompany stock, worth approximately 3.7 billion yen, by
December.

SANKI REPORT 2018

53

Relationship with Business Partners• Thoroughly ensure equal,
fair and transparent
transactions• Improve quality throughcooperation withbusiness partners

Major Action Policies

Primary Goals

Major Action Policies• Digitize operations• Digitization of order request
forms and claim forms forcompleted work: over 70%
Company-wide• Further enhance procurement
efficiency• Strengthen relationships with
subcontractors• Continue hearings• Hearings: 63 companies• Visit business partners• Strengthen cooperation
through subcontractor
groups• Expand the scope ofparticipation for thenationwide Liaison Meeting
Participants: 19 companies• Number of participatingcompanies: 19• Strengthen cooperation throughsubcontractor groups

Building Fair, Equal and Transparent
Business Relationships● Thoroughly Ensuring Fair and Transparent
Transactions
To build and maintain equal, fair and transparent relationships
with our business partners, we develop and distribute
an order procedure manual that prohibits the abuse of asuperior bargaining position and strive to ensure thoroughcompliance by providing employee education each year. As
is customary, upon starting business with a new company,
such as a construction subcontractor, materials manufacturer,
agent or expense-related business partner, we assign abusiness partner code based on objective standards coveringvarious areas, including the registration status of quality andenvironmental management systems, financial conditions,procurement track records, delivery, pricing, and response to
problems and complaints.

● Procurement System and Execution of
Action Plans
Reducing costs and improving our profit ratio are important
initiatives in our new medium-term management plan, and to
this end the Procurement Division has been negotiating prices
for all offices and sharing procurement-related information
across the Company through centralized procurement andmaking price adjustments based on surveys for all offices. In
fiscal 2016, we began digitizing the ordering process, and by
April 2017 divisions related to technology and procurement

at all offices had begun operating under the new system.
Moreover, we began digitizing claim forms for completed
work in November 2017. Of those surveyed to verify the
impact, more than 70% of users inside and outside theCompany indicated that digitizing the forms for ordering andcompleted work claims reduced the time spent on these
operations.

● Seminars and Training for Procurement Staff

We organize seminars and training as needed to promote
appropriate procurement activities and enhance thepurchasing and negotiating skills of procurement staff. In
fiscal 2017, we held study groups for Procurement Division
operations covering topics such as criteria for making
decisions on pricing, price negotiating know-how and futurebusiness improvements, to develop procurement andnegotiating skills. In addition, we encouraged procurement
staff to obtain registered qualifications for certified
procurement professionals (CPP), instrument engineersand fundamental information technology engineers, among
others, to enhance their skills and knowledge. Also, wesought to train employees on electronic acceptance andprocessing by holding 19 internal seminars for all offices,with about 650 employees in attendance.

● Handling Anti-social Forces

Sanki Engineering is committed to eliminating anti-social
forces from its procurement activities. We clearly state thisas a precondition for doing business with us and requestthat business partners submit a letter pledging to sever any
ties with anti-social forces. As of March 31, 2018, we havereceived pledges from 3,749 companies.

● Operation of Internal Whistleblowing
Hotlines
We operate a Corporate Ethics Hotline to prevent any
improper transactions. In fiscal 2017, we sought to ensure
fair transactions in good faith by asking business partners inletters for their cooperation with the internal whistleblowing
hotlines.

Strengthening Cooperation
with Business Partners● Providing Feedback to Business Partners on
Safety Management
To raise quality and improve operations across the supply
chain, we annually survey the status of our business partners
and, as part of this initiative, conduct an assessment of theirsafety management. We provide them with feedback on
the results and exchange information on improvements asneeded to enhance their safety management capabilities.

● Communication with Business Partners

We strive to enhance quality and improve operations in ajoint effort with our business partners. Under this initiative,
we maintain open communications for exchanging ideas on
improvements.

with subsidies designed to encourage further quality
improvements, from the standpoint of promoting consistentcontributions to quality.

● Sanki Best Partner Program

The Sanki Best Partner Program was established to commend
subcontractors that have significantly contributed to thedevelopment of the Sanki Engineering Group. In fiscal 2017,
we presented the award to 129 companies during safety andquality conferences held across the country.

● Support System for the Acquisition of
Qualifications
To support subcontractors in upgrading their technical skills,
we subsidize the acquisition of qualifications. Since fiscal 2016,
we have been publicizing the system during Central Safety
and Health Committee meetings to encourage its use.

Relationship with Business Partners

The Sanki Group Code of Conduct and Action Guidelines
stipulates that we engage in fair transactions with all
business partners. We promote free market competitionand conduct business in good faith and in accordance withthe relevant laws and individual contracts.
Under this basic principle, we endeavor to build trustwith our business partners to jointly provide high-quality
systems and services to customers.

SANKI REPORT 2018

Assessment• Promote online procurement
systemBasic Principle

54

FY2018Results

CSR Report

FY2017

Important Issues● Joint Improvement Activities with
Subcontractor Groups
Sanki Engineering has established subcontractor
groups at each branch, branch office and division aspart of our effort to bolster our construction system.
In addition to monthly liaison meetings, we hold jointlabor-saving projects and seminars to enhance technicalskills and thoroughly enforce quality management andsupervision of safety and health at construction sites.
Moreover, we review the status of safety and healthmanagement and offer guidance by organizing safety
and health education as well as courses on obtaining
qualifications led by Sanki Engineering employees, andby conducting joint patrols. To forge an even stronger
cooperative relationship, we set up the Liaison Meetingfor Subcontractor Groups, which meets twice a year.
In fiscal 2017, members shared information andexchanged views on subjects such as the Construction
Career Up System*, which was led by the Ministry ofLand, Infrastructure and Transport.

V o i c e Expecting Sanki Engineering*An initiative led by Japan’s Ministry of Land, Infrastructure and Transport andintended to create a database containing the résumés and qualifications ofskilled construction workers based on common industry standards to ensure
the proper evaluation and compensation for skilled construction workers,
encourage younger people to work in the construction industry and help
skilled workers develop their careers.

The latest move to digitize purchase order forms and invoices had
the effect of raising efficiency in the following areas of our in-house
operations. First, it has shortened the time required from pricing toreceipt of payments since we can now obtain orders and request
payment on a real-time basis. Second, it has reduced labor by
eliminating the process of dispatching billing and order confirmation
statements via courier, while the use of electronic authentication
has cut the costs of stamp duties and printing. As a result,
we were able to improve efficiency at all our nationwide sites.
Also, we have made progress by meeting the needs for rapidly
acquiring information and reducing costs. The latest procedure
lists outstanding orders to prevent missed invoices, which should
enable us to recover funds more quickly, and we therefore intend
to make full use of it in our operations.

● Sanki Super Meister System

The Sanki Super Meister System certifies and commends
foremen of Group subcontractors whose superior
construction techniques have significantly contributed toelevating the quality of our construction work. In fiscal
2017, 16 foremen were certified. In fiscal 2015, we began
rewarding subcontractors to which the foremen belong

to Lead by Constructing an
Even Better System
Nobuhiro Senga
Vice President,
Fujikizai Co., Ltd.

The system for digitizing the order and acceptance process offers
considerable value by reducing costs and shortening the timerequired. Digitization is expected to proceed at an even faster paceto achieve operational efficiency, and I hope Sanki Engineering will
become a leader by constructing an even better system in theyears ahead.

V o i c e Digitization of Purchase Order
Forms and Invoices Raises
Efficiency in Many Ways
Ryukichi Konishi
Managing Executive Officer,
Totech Corporation

SANKI REPORT 201855

Health and Safety at Construction Sites• Rising demand in theconstruction industry• Shortage of construction
workers and the aging
and shrinking of theskilled workforce• Growing risk of work
accidents due tooverworked laborers orlack of experience

FY2018

Primary Goals•Deploy measures against thethree major categories ofaccidents• 30% reduction from theaverage for the past threeyears• Reduced by 43%• Deploy measures against thethree major categories ofaccidents• Elevate awareness levels• Launch a web portal on thehealth and safety portal site

• Launched a portal site anddistributed videos and email• Implement accident prevention
measures for subcontractors• Enhance knowledge andcapabilities related to healthand safety• Expand education for new
employees• Increased the number ofcourses from 8 in FY2016
to 12• Develop health and safety
education to sharpen
awareness

Health and Safety Environment of theConstruction Industry

Health and Safety Policy and Structure
The Sanki Engineering Group was one of the first in theconstruction facilities industry to introduce an occupational
health and safety management system (Sanki OHSMS) in
2001 and has since engaged in activities in partnership with
subcontractors. Under the Sanki Engineering Group Basic
Health and Safety Principles, we formulate a Companywide health and safety activities plan based on the Safety
Guidelines for each year. Also, we seek to visualize our
PDCA cycles, including the analysis of risk factors andimplementation of remedial and preventive actions.

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

Major Action Policies

Initiatives in Fiscal 2017

● Safety and Quality Conventions andSafety Patrols
Every year in June, the preparatory month for National
Safety Week, Sanki Engineering holds safety and quality
conventions at each branch, branch office and division In
fiscal 2017, the president and Central Safety and HealthCommittee chairperson attended the convention for all
offices. We also conduct special joint safety patrols, during
which the president and directors tour 38 construction
sites in the summer
and before and after
year-end.

● Key Items Implemented in Fiscal 2017

A review of the accidents that occurred in fiscal 2016 showsthat while those in the “caught/pinched” category decreased,
those in the “falls/tumbles” category are on the rise again
after having declined in fiscal 2015. As a result, we attained
our numerical targets for accidents but failed to reduce thenumber from the previous year. Accordingly, in our slogan
and key actions, we emphasize the need for all employees to
sharpen their awareness so they recognize diverse risks andnotice changes in their physical and mental conditions.

Outline of Activities in Fiscal 2017
Policy of the Central Safety and Health Committee
Chairperson• Slogan“Catch the Danger Signs! Create a Pleasant Workplace!”
Look out for each other toward our common goal of raising the quality ofhealth and safety.
Key Actions
Safety1. Deploy measures against the three major categories ofaccidents (traffic, caught/pinched, falls/tumbles)• Launched the “SAN-3-3 Campaign” during National Safety Week in
July• Carried out inspections focused on the three major categories ofaccidents
2. Elevate awareness levels• Launched a health and safety portal, centralized the source of
information and improved website content• Began distributing video tools for health and safety inspections andhealth and safety handbooks
3. Enhance knowledge and capabilities related to health andsafety• Carried out educational measures with due consideration for diversity(younger employees, women, foreigners and others)• Promoted education by setting numerical targets for each division,
enhanced education for improving various skills
Health
1. Boost mental and physical health• Lowering the rate of positive findings in health checkups and rate ofhigh stress scores in stress-related checkups● Accidents during 2017

In 2017, 16 accidents occurred (8 lost workday accidents,
8 with no lost workdays), and we were unable to reduceincidents from the previous year. According to our analysis,
50% of the accidents involved either workers in their 20s or
those with less than five years’ experience, and there was anincrease in accidents at primary subcontractors that were notmembers of the Cooperative Association. While the numberof serious accidents has fallen, there is a slight increase inminor accidents. The results show that preventing the threemajor categories of accidents and bolstering preventive
measures at subcontractors remain key issues.
Number of Accidents, Frequency Rate and Severity Rate
● Frequency rate for Sanki Engineering● Average frequency rate for the general construction industry◆ Severity rate for Sanki Engineering◆ Average severity rate for the general construction industry■ Number of accidents
1.25

Safety patrol in a construction
site accompanied by thepresident (at right)● Health and Safety Training

For our own employees and for staff employed bysubcontractors, Sanki Engineering provides healthand safety training led by in-house instructors
or at designated training institutes. In particular,
we recommended that staff take part in special
training on scaffolding following regulatory revisions
and skill development training for foremen, andattendance increased significantly. For newcomers
to the construction site, we provide a health andsafety orientation using handbooks and joint training
sessions with the Sanki Health and Safety Cooperative
Association. In fiscal 2017, we carried out educational
plans for each division by setting numerical targets.
Growing construction demand has led to anincrease in foreign workers. As in the previous year,
Sanki Engineering spent twice as much time than its
statutory obligation to provide a safety seminar throughan interpreter for three Vietnamese technical interns
at a subcontractor. We will continue providing optimal
education on health and safety to meet the needs ofeach site’s workforce.

Number of Participants in Health and Safety Training (Fiscal 2017)*
Type
Special education and other courses

Number of Participants(from Subcontractors)
2,661 (1,504)

Health and safety training, including foremen

380 (268)

In-house health and safety training

294 (–)

Other client-focused training
Total

508 (460)

0.98

0.91

0.92

0.86
0.69

0.74
0.26
0.23
11

0.50

0.05

2014

0.81

0.64
0.11

0.06
6

2013

0.21

0.07

Health and Safety at Construction Sites

The Tokyo 2020 Olympic Games will take place in two years,
and amid growing demand for construction, the industry
has faced such issues as securing labor and improving work
efficiency. The Japanese government is leading initiatives tointroduce ICT and cultivate female engineers, and in fiscal
2018 the Ministry of Land, Infrastructure and Transportlaunched the “Construction Career Up System” for securing
and cultivating competent personnel. The shortage of laborand skilled workers poses a potential risk of increasing workrelated accidents and requires continued attention, while long
working hours and mental health remain ongoing issues. The
Sanki Engineering Group has continued to address thesechanges by taking action on health and safety.

Results

Assessment

Major Action Policies

CSR Report

FY2017

Important Issues

0.18
0.02

0.03
8

7

8

2015

2016

2017

（year）

Scope: Sanki Engineering construction sites (Sanki Engineering Co., Ltd. andbusiness partners)
Number of accidents: interrupted work for one day or longer (number ofaccidents shown in the graph reflects the number of victims, which was used
to calculate accident frequency and therefore does not correlate with thenumber previously cited on this page)
Source for average frequency rate and severity rate for the general constructionindustry: Survey on Industrial Accidents, Ministry of Health, Labor and Welfare• Frequency rate: calculated as the number of deaths and injuries caused by
accidents in the construction site per one million working hours; this figure
indicates the frequency with which accidents occur.
• Severity rate: calculated as the number of lost workdays caused by
accidents in the construction site per one thousand working hours; thisfigure indicates the severity of the accidents.

Activities Plan for Fiscal 2018
Considering the social and industry environment as well as
the number and nature of accidents in 2017, we are focusing
on the following key action areas for safety in fiscal 2018: (1)deploying measures against the three major categories ofaccidents, (2) implementing accident prevention measures
for subcontractors, and (3) developing health and safety
education to sharpen the senses.

3,843 (2,232)* Limited to training by in-house instructors, not including training at
designated educational institutions.

56

SANKI REPORT 2018

SANKI REPORT 201857

Relationship with Employees• Promote diversity• Develop andappropriately allocate
human resources• Create a comfortableworking environment

Major Action Policies• Enhance training
programs to develop
human resources with
the Sanki spirit• Implement measures
outlined in the “Smile
Project”

Primary Goals• Deepen understandingof diversity• Further revitalize theorganization• Hold exchanges ofviews between division
heads• Consider measures foreach workplace

Our Commitment to Employees

Promoting Diversity
The Sanki Engineering Group believes that creating
working environments in which various personnel are able
to demonstrate their particular capabilities will raise thevalue of our company. With this in mind, we are cultivatinga corporate culture that respects the diversity of employees
and establishing various programs toward our goal of
creating a working environment that is even more pleasantfor employees.
● Respecting Diversity in Employment
We seek to bring on board human resources that differ ingender and nationality as well as in talent and personality.
Staff from the sales, design, technology and other divisions
join the human resources department to ensure fairness
based on multiple perspectives. In April 2018, we hired 80
new graduates, of which 71 are men and 9 are women.
We are also actively hiring foreign nationals, and as of April
1, 2018, 18 people from China, Peru, South Korea, Thailand,
Vietnam and the U.K. are working with us, of which 5
are women and 13 are men. Under our medium-term
management plan, we will continue to actively hire foreign
nationals to steadily develop our overseas operations andpromote diversity.

58

SANKI REPORT 2018

Assessment

Major Action Policies• Offered programs for overcoming
individual weaknesses anddeveloping strengths• Implemented early training for
manager candidates• About 120 exchange sessions
attended by about 700 division heads• Implement training programsfor boosting overall levels as aculmination of the final year of
the medium-term management
plan• Hold exchanges of views withthe president• Launched the Smile Site Plan toimplement measures at construction
sites• Implement measures under the“Smile Project”● Promoting Women’s Careers
We believe that creating opportunities in which our female
employees can demonstrate their talents further would leadto sustainable growth of our company and in turn boost
our corporate value. We therefore continue to upgrade
our personnel system and introduce new programs. The
following are the major measures that we have taken.
FY2007 ◦Introduced a career change system that allows
female employees to change their career typefrom general-office to career-track positions.
FY2009 ◦Launched full-scale recruitment of new female
graduates as career-track employees.
FY2013 ◦Eliminated all general-office positions by shiftingthem into regional positions and conducted
special training for those in regional positions.
◦Acquired the Kurumin mark, a certificate granted
to companies that support childcare and based on
the Act on Advancement of Measures to Support
Raising Next-Generation Children.
FY2014 ◦Launched and continued Step Up training for
employees who moved into regional positions.
◦Joined the Action Plan on Women’s Active
Participation in the Workplace advocated by
the Keidanren (Japan Business Federation) andpublished our voluntary actions related to thepromotion of female executives and managers.
FY2015 ◦Launched and continued diversity training for
general managers and department managers.
FY2016 ◦Held a roundtable discussion for working mothers.
FY2017 ◦Opened the “Women’s Hotline” which accepts
consultations.
◦Held a roundtable meeting for female engineers.

To create an environment in which our female employees
can continuously develop their careers based on the Act ofPromotion of Women’s Participation and Advancement in the
Workplace—commonly referred to as the Act for Promoting
Women’s Careers—we have formulated the following Action
Plan and are pursuing various measures to promote women’s
careers.

Action Plan under the Act for Promoting
Women’s Careers
1. Period: from April 1, 2016 to March 31, 2021
2. Goals
Goal 1: Extend the average service years of female
employees by 20% from the current level.
Goal 2: Actively allocate women in career-track positions inthe sales division to double the current ratio.
Goal 3: Raise the ratio of female managers to theconstruction industry average of 1%.

● Career Change System
Sanki Engineering introduced a system that allows
employees to change their career type from regional
positions to career-track positions. As of April 1, 2018,a total of 41 employees who have changed their career
type are succeeding in main career-track positions
nationwide.
● Creating Workplaces for Persons with Disabilities
We regularly hire persons with disabilities and areworking to create an environment in which they canwork comfortably over long periods. We hold problemsolving seminars, exchanges of views and management
training for employees who are hearing-impaired topromote workplace management so that all employees
can thrive. Moreover, in an effort to establish a safe
working environment, all offices have been installedwith lamps that bear evacuation instructions for hearingimpaired employees in the event of a disaster.

V o i c e Designing Stronger Careers

through an Effective Return toWork Program
Akiko Miyamoto
Analysis and Diagnosis Section,
Technical Research & Development InstituteI left my job when my husband was transferred but was
reinstated under the Return to Work program introducedin fiscal 2017. A female manager served as an example
for me, and I decided that I wanted to contribute to theCompany by applying the skills and experience I had
acquired. I am currently raising two children while working
full-time in a regional position, and I feel I have developed
a good balance between work and family. The introductionof this program offers more options for pursuing work
while dealing with job transfers or nursing needs in thefamily and will enable us to design stronger careers.

● System for Reemploying Workers Following
Retirement
Seeking to provide employment opportunities forolder employees with advanced skills and expertise,
we led the industry by introducing a system for the
reemployment of employees following retirement. In
fiscal 2017, we reemployed 222 retired employees on
a consolidated basis, compared with 240 in fiscal 2016.

Developing and Evaluating
Human Resources● Personnel System for Supporting Workplaces
Where People Grow
Our personnel system ensures equal opportunity and fairevaluation and treatment for all employees while also
supporting employee initiatives for career development.
As part of this, we introduced an early career system for
employees in their 20s to provide them with experiencesin different jobs early on in their career development.
Once a year, all employees fill in a Career Development
Sheet and receive feedback through an interview with
their supervisors. Another system allows employees to
bypass their superiors and speak directly with the Human
Resources Department. These measures are offeredseparately from the evaluation system.
We will continue enhancing employee education
and working conditions at Group companies to develop
human resources that possess the Sanki spirit, a key
initiative of our new medium-term management plan.

Relationship with Employees

Guided by our management philosophy: “We placesignificance on communication and mutual respect,”
we endeavor to create a working environment and acorporate culture in which all employees grow with theCompany, respect individuality and are able to succeed
and thrive. We know that the technical capabilities andskills of our employees are valuable assets and that eachof our employees is an invaluable human resource. We
are therefore creating an environment that fosters thedevelopment of human resources based on our unique
Sanki spirit, which enables them to work to their fullpotential.

FY2018Results

CSR Report

FY2017

Important Issues

Contributing to Society

V o i c e beyond My Work at theCompany with the
Support of Colleagues
Takayuki Ochiai
2nd Design Section, 2nd Design
Division, Kansai Branch

I joined the Company in 1997 and have been engaged
in design operations since fiscal 2009. In the meantime,
I have remained committed to rugby for the hearingimpaired and was named coach of Japan’s national teamfor the World Deaf Rugby 7’s Australia competition in
December 2017. As I sought to balance work with rugby,
the Company offered to sponsor me, and I enjoyed the
support and understanding of my colleagues as well, which
made it possible for me to participate in the competition
fully prepared. Contributing to society beyond your job
can raise motivation toward your daily work and lead topersonal growth. I am grateful to everyone who has givenme this opportunity.

SANKI REPORT 201859

Major Programs Supporting Work-Life Balance(Non-consolidated) (as of April 2018)
Area

Work

Training System
Younger Employees

Management
Training

Mid-career Employees

New recruit training

Leadership position training

Education by mentors

Management training

Third-year training

Section chief training

Program

Consecutive leave
for onsite managers
responsible forconstruction sites

Three consecutive days of leave after
staying at a construction site for more thansix months or before moving to another site

Half-day off

Paid leave for half a day at a time

Anniversary leave

A planned paid leave on special dates for
employees or their families, requested at
the start of the fiscal year

Sanki Smile Day

Employees are encouraged to take a full or
half day of paid leave on payday and avoid
overtime

Return to Workprogram

Employees who have left the Company forreasons such as childbirth, childcare, nursing
care or a spouse’s transfer can apply forreinstatement

Childcare leave

Can be obtained for the requested amountof time up to when the child turns 1 year old

Nursing leave

Can be obtained five times for up to 180
days per person

Shortened workhours

The reduction of scheduled working hours
or the delay of starting/finishing times forchildcare or elderly care; for childcare, it isavailable until the child reaches the third
grade of elementary school

Reserved leave

The use of reserved days off as childcare,nursing or other kinds of leaves

Support forchildcare leave andreinstatement

An interview is held with the supervisor
before and after applying for childcare leave

Department manager
training

Fifth-year training
Seventh-year training
New recruit training

Safety Training

Qualification training
Career-positioned staff training

Childcareandnursing
care

Corporate ethics training

Corporate Ethics
Training

Corporate ethics training
Qualification training

Facilities
Construction
Equipment
Division

Career-positioned staff training
Qualification training
Step 1 training
Step 2 training

Technical training

Step 3 training

Plant &
Machinery
Systems
Divisions

Quality &Environment
System training

Qualification training
New recruit orientation

Smile Site Plan

Inspector education

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

Education to developinternal auditors

Promoting Workstyle Reform● Promoting Work-Life Balance
We have been augmenting our programs in response toemployee requests for broad support of a healthy balanceof work and personal life so that both male and female
employees can continue to work with a sense of security
while attending to various life events.

Sanki Engineering launched the Company-wide “Smile
Project,” led by the president, in October 2015 topromote work style reform. We have been implementing
initiatives across the Company to create a better working
environment, such as by enhancing our paid leave system,
revising internal programs including the Sanki Smile Day,and introducing the use of tablets at construction sites.
In November 2017, we set up the Smile Site Plan under
the project as a subcommittee targeting the workstyle ofthose at construction sites. We are completely reviewing
operations and considering measures for expanding oursystems to support the construction site as well as toreduce and digitize paperwork, with the aim of lessening
the operational load of site managers and enhancing
capabilities and quality at our construction sites. We willcontinue to review our internal systems and introduce new
systems under our “Employee First” principle.

The Kurumin markfor support of raisingnext-generation
childrenChildcareleave
Nursing
care
leave

FY2014FY2015FY2016FY2017

Consolidated──

10 (2)

16 (1)

20 (2)

Nonconsolidated

16

9 (0)

7 (1)

13 (1)

16 (2)

Consolidated

─

─

─

0 (0)

0 (0)

Nonconsolidated

─

─

─

0 (0)

0 (0)

34.7
53.7
35.6
41.8
50.5
Paid
NonMale 31.6 Male 32.6 Male 38.8 Male 47.6 Male 49.9
leave
consolidated
ratio (%)
Female 57.6 Female 56.4 Female 62.1 Female 69.5 Female 78.2
Figures in parentheses signify the number of men.

60

SANKI REPORT 2018

● Acquiring the Kurumin Mark and Recognition for
Supporting Childcare by the City of Nagoya
In 2015 we were granted an update for the Kurumin mark,a certificate granted by the Tokyo Labor Bureau of the
Ministry of Health, Labour and Welfare and based on the
Act on Advancement of Measures to Support Raising NextGeneration Children, for meeting certain criteria as a company● Mechanism for Gathering Employee Feedback
Since 2016, we have continuously held the Century
Communication Up (CCU) discussion events inaccordance with the Century 2025 long-term vision. In
addition to holding CCU dialogues with the president,
we held about 120 CCU meetings in 2017 with division
managers, with roughly 700 employees engaging inmeaningful discussions. We have applied their opinions
and proposals to improve our operations and systems.

● Respect for Human Rights
We declare our respect for human rights in the Sanki Group
Code of Conduct and Action Guidelines, which prohibits
discrimination based on nationality, gender, age and disability,
and we endeavor to instill respect for human rights acrossthe Company through various means, including educational
programs. We have set up Guidelines for preventing
harassment, a system offering consultation on harassmentand other workplace issues, and a counter staffed by qualified
external counselors. In June 2017, we added a Women’s
Hotline that women can use to consult female advisors. We
also seek to incorporate results of our compliance awarenesssurvey when monitoring human rights issues.
Reference● Sound Employer-Employee Relationships
The human resources department and the employees
union at Sanki Engineering meet monthly to discuss
improvements in the workplace environment and thedevelopment and operation of Company systems. Also,
we provide the employees union with opportunities topresent their proposals or requests to management.

Compliance Awareness Survey

P. 45

Employee Data (as of March 31 of Each Fiscal Year)
FY2013

FY2014

Male
2,022
（637）
1,677
（550）

FY2015
Female
287
（5）
249
（3）

Total
2,309
（642）
1,926
（553）

Male
2,041
（653）
1,678
（572）

FY2016
Female
298
（5）
255
（3）

Total
2,339
（658）
1,933
（575）

Male
2,079
（664）
1,698
（586）

FY2017
Female
305
（5）
271
（5）

Total
2,384
（669）
1,969
（591）

Consolidated

2,283

2,282

Non-consolidated

1,908

1,908

Average age

Non-consolidated

42.7

42.6

43.7

36.1

42.7

43.8

36.5

42.8

43.8

36.3

42.8

Average years of service

Non-consolidated

18.2

18.2

18.8

12.9

18.1

19.0

13.3

18.2

18.8

13.2

18.0

Consolidated

─

─

111

20

131

81

20

101

105

21

126

Non-consolidated

92

95

75

18

93

60

16

76

88

21

109

Number of employees*

Number of new recruits
Number of employed post
retirement-age employees

Number of Employees on Childcare Leave, Nursing Care Leave and Paid Leave
FY2013

City of Nagoya certification
for companies supportingchildcare

Relationship with Employees

Refresh leave

Executives
Executive officer
training

Details
Five consecutive days of leave for eachfive-year period of employment using
employee’s reserved leave● Maintaining and Improving Employee Health
We introduced a 24-hour telephone health consultation
service to offer advice on health, medical, nursing andchildcare issues for employees and their families. The
service was set up outside the Company, and the caller’s
privacy is strictly protected. In fiscal 2017, we received
24 calls from individuals seeking advice on healthissues and 24 counseling requests, which included
18 interviews. We have also been working to prevent
employees from developing mental health issues byconducting checkups for stress-related symptoms, even
before they became legally mandated in 2014.

supporting childcare. In 2014 the Chubu Branch became thefirst construction equipment company to be recognized by
the City of Nagoya as a company supporting childcare, andcertification was updated in 2017.

CSR Report● Education and Training System
We maintain training systems associated with each career
path, such as management training, technical training andtraining by field of expertise in order to strengthen specializedskills, technical skills and management skills and boost
personal growth. We also operate an overseas language andjob training program, designed to develop human resourcesthat are adaptable to diverse environments.

Employmentof people
withdisabilities

Number ofpeople withdisabilities
Ratio ofpeople withdisabilities

Consolidated

─

─

234

2

236

235

5

240

217

5

222

Non-consolidated

189

203

188

2

190

183

4

187

164

3

167

Non-consolidated

39

37

─

─

32

─

─

30

─

─

32

Non-consolidated

2.13

2.11

─

─

1.80

─

─

1.69

─

─

1.78

*Figures in parentheses signify the number of managers.

Employees by Age (as of March 31, 2018)
20s

30s

40s

50s

Consolidated

10s
0（0）

425（96）528（92）694（90）485（36）60s
248（5）

70s
4（0）2,384（319）

Total

Non-consolidated

0（0）395（93）436（75）548（73）399（27）

188（3）

3（0）

1,969（271）*Figures in parentheses signify the number of women.

SANKI REPORT 2018

61

Relationship with the Environment• Protect the global
environment by meansof our exceptional
technological capability• Minimize theenvironmental impact
caused by our businessactivities

Major Action Policies

Primary Goals• Providing products andservices to help reduce CO2
emissions of customers• Increase orders for proposals
to reduce CO2 emissions
compared to fiscal 2016

• Properly dispose of andreduce industrial waste• Promote the proper disposalof materials containing
asbestos

FY2018Results• Reduced 27,319 t-CO2 in
FY2016
Reduced 16,599 t-CO2 in
FY2017• Completed preparation of
the Basic Flow Chart ofProcedures for HandlingAsbestos

Assessment

Major Action Policies• Providing products and services
to help reduce CO2 emissions ofcustomers

Number of Employees with Environment-related Qualifications(as of April 1, 2018)
Certified environmental measurer

Supervisor of management of industrial waste
subject to special control• Improve the introduction rate ofdigital manifests

Pollution prevention manager*

Consolidated

8

Non-consolidated

7

Consolidated

174

Non-consolidated

155

Consolidated

72

Non-consolidated

51*When the same individual holds several qualifications, it counts as one person.

Environmental Management
at Sanki Engineering

Sanki Engineering Environmental Policy
Established: April 1, 2015
Revised: April 1, 2017

The Sanki Engineering Group recognizes environmental
issues as key management issues and will actively engage inprotecting the working environment, local environment andglobal environment as a corporate citizen.
We have established our environmental goals andframework of action in Japan as follows.
1. We will strive to prevent environmental pollution andwork further toward conserving resources and energy,
reducing industrial waste, promoting recycling, preserving
biodiversity and protecting ecosystems.
2. We will actively develop proposals on resource and energy
conservation when designing facilities.
3. We will comply with laws and regulations related to theenvironment and with external requirements agreed to by
the Sanki Engineering Group.

● Environmental Management System
We have obtained ISO 14001 certification for environmental
management systems at all Group company sites in Japan,
including Sanki Kakou Kensetsu Co., Ltd. and Sanki Kankyo
Service Co., Ltd. Under our system for implementing
environmental management, headed by the president, eachdivision reports on the status of its activities, and decisions
on action plans are made during management reviews
and company-wide QMS and EMS secretariat meetings.

62

SANKI REPORT 2018

Reference

Quality and Environmental Management System

P. 50● Major Activities in Fiscal 2017
In fiscal 2017, we started to base our management on the2015 version of the ISO standard. So that our initiatives
related to the environmental management system do not
become merely nominal, we pursue our activities by having
each section set environmental goals aligned with theirrespective operations.
The 2015 version calls for “visualization” as arequirement listed under “Initiatives on Risks andOpportunities.” To address this, we use the JOB
Environmental Aspects Assessment List to
identify environmental issues that are unique to eachconstruction site, bylaws governing site location, regional
agreements and more. There is an infinite variety to type, scopeand regulatory requirements with respect to environmental
risks, depending on the project type, such as medical institutions
and commercial facilities, and the surrounding environment,
community and nature of construction work. The assessment
list consists of 10 aspects and around 60 items, and, prior to
the start of construction, we seek effective and appropriate
action by conducting an environmental risk assessment for eachproject.
Moreover, we completed formulating the Basic Flow Chartof Procedures for Handling Asbestos to promote the proper
disposal of asbestos at construction sites amid an increase inrenovation projects.
● Developing Environmental Leaders
We encourage employees to acquire environment-related
qualifications in response to regulatory changes. In particular,
we plan to increase the number of managers of special
controlled wastes.

With respect to our environmental management
system, we provide introductory training on ISO every
year to new recruits as well as mid-career recruits. We
also offer training to develop internal auditors qualified
to conduct simultaneous ISO 9001/ISO 14001 audits.
Number of Employees Qualified as Internal Auditors(Consolidated/as of March 31, 2018)*
Internal auditing (QMS)

1,153

Internal auditing (EMS)

1,225* Number of employees (including employees at subsidiaries) with internal
auditing qualifications relevant to the scope of the quality management
system and environmental management system administered by the Quality
Management Department and Global Environment Department of the Labor
Safety, Health, Quality Management & Environment Promotion Office.

● Environmental Education
We conducted e-learning on preserving biodiversity andprotecting ecosystems for all Group companies, andevery year we invite outside lecturers to speak on various
environmental topics. In fiscal 2017, the ninth year of thesetalks, we held a two-way lecture that was attended by theInitiatives to Prevent Global Warming andSave Energy and Resources● Contributing to Conservation of the Global
Environment with Our Exceptional Technological
Capabilities
As the Paris Agreement came into force, global moves tocreate a low-carbon society have accelerated, and there
are growing expectations that companies will contribute toachieving the SDGs.
One mission of our environmental management
is to enhance functionality and comfort through thetechnology of each of our businesses and develop andintroduce technologies and products that conserve
energy, reduce CO2 emissions and lower lifecycle costs
for customers and society as a whole. To that end, theEnergy Solutions Center works to improve activities
on an ongoing basis by collecting energy-related
information and supporting technical development andproposals to customers.

Relationship with the Environment● Promoting Environmental Management
At Sanki Engineering we believe that environmental
problems represent an important management issue andtherefore promote environmental management based on
the Sanki Engineering Environmental Policy. We will continue
to engage in environmental activities with a firm vision of
the future under the ESG policy laid out in our mediumterm management plan. At the same time we will makenecessary revisions in response to regulatory trends in Japanand overseas.

Annual policies are approved by the Management Meeting,comprising directors and other members.
In fiscal 2017, an external audit found no issuesof noncompliance and there were no violations ofenvironmental laws or regulations that warranted a fine.

president and 275 employees. By taking part in experiencebased learning and communicating with each other during
quizzes on Sanki Engineering’s relationship with theenvironment, the attendees deepened their understanding
and at the same time enjoyed themselves. And so that all
employees could have this opportunity, including those unable
to attend, we made the lecture available on the company
intranet.
Looking ahead, we will continue to improve ourcommunication by sharing information about the environment.

CSR Report

FY2017

Important Issues

Technological Developments that Have Contributed to Conservation of the Global Environment

DOUP™ Energy-Saving HVAC System for Clean Rooms
Reducing the Facility’s Power Supply Even in Midsummer, Offering a 40% Annual Reduction
We developed DOUP™ by drawing from our accumulated expertise in the design andconstruction of clean rooms. The technology provides separate air conditioning for theoperation area, which requires high levels of cleanliness, and for the maintenance area,
which is subjected to high temperatures generated by production equipment. Powersupplied to the facility during the peak summer season can be reduced by lowering
the temperature of already cold water. Also, when combined with other energy-saving
methods, the annual power supply can be cut by up to 40% compared to conventional
clean rooms.
DOUP™ will start to secure a high level of cleanliness for the operation area by
supplying a concentrated flow of purified air, which is then supplied to the maintenancearea to cool the production equipment. Separating the two areas is easily done by hanging
a partition to the height of the production equipment. This allows the system to send adown-flow into the operation area and an up-flow into the maintenance area, allowing forthe effective use of HVAC air after dust removal and cooling.

Effect of Power Supply
Reduction

40

Maximum annual reduction%

SANKI REPORT 2018

63

FY2015

FY2016FY2017

NumbersCO2
reduction

NumbersCO2
reduction

NumbersCO2
reduction

Proposals

Consolidated

418

36,147345

56,205353

47,905

Nonconsolidated

413

35,074313

54,877

321

46,143

Ordersreceived

Consolidated

205

20,680183

27,624

166

16,949Nonconsolidated

200

19,607

168

27,319157

16,599• Donations to Tree-planting Projects
Recipients of donations were selected from theframework of global environmental preservation
activities mainly handled by private non-profit
organizations. In fiscal 2017, we donated to two projects
in which our employees participated.

R&D Expenditures Related to Environmental Preservation(Millions of Yen)

● Initiatives in the Office• Energy Conservation Activities
Sanki Engineering has been promoting energy-saving
activities based on a Company-wide objective for its EMS
activities to reduce energy consumption by 6% compared tofiscal 2012 over the five-year period from fiscal 2013 to fiscal
2017. In fiscal 2017, we achieved a reduction of 14.3% fromthe 2012 level in energy consumption Company-wide.
Energy consumption for fiscal 2017 was equivalent to1,581 kl of crude oil and CO2 emissions generated by energy
use was 3,060 t-CO2. Looking ahead, we will continue toreduce energy use across the Sanki Engineering Group.
Energy Consumed by Offices (Crude Oil Equivalent)

675.5■ Group companies (kl)■ Sanki Engineering Co., Ltd. (kl)Participating in a tree-planting project organized by Mori wa Umi no Koibito

346.0

2014

2015

2016

2017

（FY）

● SANKI YOU Eco Contribution Point System
We launched the SANKI YOU Eco Contribution Point
System in October 2010. Under the system, when we
propose an energy-saving solution that reduces CO2
emissions to a customer, and that proposal is adopted, theamount of the achieved emissions reduction is converted
to Eco Contribution Points, which are used to subsidize
environmental conservation activities such as those explained
below. In the second half of fiscal 2016 and first half of fiscal
2017, customers adopted 170 of our proposals, resulting in
donations totaling 1,877,000 yen (equivalent to an 18,770
t-CO2 reduction) in fiscal 2017, raising the overall total of
donations since the start of the program in fiscal 2010 to
15,255,500 yen.

Silva Association

NPO Mori wa Umi no
Koibito

1,696
115

Tree planting for a forest
surrounding Shonan
Village (Yokosuka City,
Kanagawa Prefecture)

1,696

500,000 yen in first halfof FY2017279,500 yen in second
half of FY2017

1,581

Waste Discharged at Sites where Sanki Engineering is the Prime
Contractor and at the Yamato Site
2013

2014

2015

2016

2017

797,500 yen in first halfof FY2017

Tree planting for the
Hikobae Forest on Mt.
Yagoshi (Ichinoseki City,
Iwate Prefecture)

300,000 yen in second
half of FY2017（FY）● Initiatives at Construction Sites
We strive to limit CO2 emissions generated by our businessactivities by compiling and managing the emissions
discharged at sites where Sanki Engineering is the prime
contractor.

■ Discharge by Group companies (t)■ Discharge by Sanki Engineering Co., Ltd. (t)  Recycling rate* for Sanki Engineering Co., Ltd. (%)

CO2 Emissions Generated by Energy Consumption at Offices

3,490

3,402

3,174

3,589
212

96.5

13,333

3,281
221

3,377

746

2015

2016

2. Adopting the
proposal

2014

2017

14,424

17,946
17,025
2,060
1,003

98.0

16,022

2014

2015

2016

2017

（FY）

*Target rate: 90% or higher（Unit: t-CO2）

2013

98.7

3,060
2013

525

13,38096.9

15,904CO2 Emissions at Construction Sites (Derived by Energy
Consumption)

537

96.5

（FY）

2013

2014

2015

2016

2017

（FY）

• Campaign to Reduce Copy Paper
We have consistently engaged in activities to reduce
copy paper use in our offices. To some extent, we havebeen effective in making a reduction, and the campaign
is now well established at each office.
Throughout the Sanki Engineering Group, we willcontinue reducing paper use by utilizing IT devices tosave resources.

4. Total donated annually

Environmental
conservation activity

SANKI REPORT 2018

Donations

833

Sanki Engineering

64

1,800
104

■ Group companies (t-CO2 )■ Sanki Engineering Co., Ltd. (t-CO2 )Customer

3. One ton of CO2 isconverted to 100 yen

Project

1,081

SANKI YOU Eco Contribution Point System

Proposing energy-saving
solutions for equipment to
reduce CO2 emissions

1,589

Donation History for Tree-planting Projects
Recipient

1. Proposing
energysaving
solutions

1,643

323.9
214.1

2013

1,691

● Current State of Industrial Waste
With respect to industrial waste discharged at ourconstruction sites, we seek to understand the current
status by compiling data on waste discharged at sites
where Sanki Engineering is the prime contractor.
We have maintained the recycling rate for industrial
waste, excluding waste disposed at final landfill sites, at highlevels above 90.0%, and the rate was 98.0% in fiscal 2017.
We will continue to promote proper disposal by monitoring
and analyzing the discharge of industrial waste. In fiscal
2017, the waste disposal cost for construction sites was
366,287,000 yen. Furthermore, we have been properly
disposing waste CFC and halons, the cost of which was
40,695,000 yen in fiscal 2017.
In addition, following the revision of the Waste
Management and Public Cleansing Act, we created anddistributed posters to disseminate the revisions in storage
and disposal procedures for waste containing mercury.

Relationship with the Environment

421.1

Proper Disposal of Waste

CSR Report

Proposals for CO2 Reduction and Outcomes(CO2 Reduction Unit: t-CO2/Year)

Poster: “How to handle
mercury-laced industrial waste”

SANKI REPORT 2018

65

Relationship with Local Communities

Rate of Introduction of Digital Manifests

Fiscal 2017

Important Issues• Coordination with local
communities

Rate of Introduction of Digital Manifests (%)
Target rate
(Target) 95.0
88.4 90.0• Contribution to society asa corporate citizen

100

Major Action Policies

Primary Goals

Assessment

Major Action Policies• Participate in regional
disaster prevention
activities• Carried out activities under thelarge-scale disaster agreement
between Yamato City and the
Yamato Engineering Center• Regional disaster prevention• Conservation of the local
environment• Participate in local cleanup
activities• Held Group-wide activities inover 30 locations• Conservation of the local
environment• Supporting the developmentof the next generation• Provide educational
opportunities such asenvironmental seminars• Offered 6 social study tours fora total of 179 students• Supporting the development of
the next generation

47.2
28.8

2013

2014

2015

2016

2017

2018

2019

2020

（FY）

Scope of aggregation: Sites with ISO 14001 certification(organizations covered are listed on page 62)

Coordination with Local Communities

As stated in the Sanki Group Code of Conduct andAction Guidelines, “We seek to contribute to society inorder to aid in the development of local communities asa good corporate citizen and member of society,” andour activities reflect this principle. Looking ahead, we
will continue to fulfill our corporate social responsibility
while maintaining active communication withstakeholders in the communities where we operate.

● Agreement for the Provision of Facilities in Timesof Disaster and Other Activities
Under an agreement concluded with Yamato City in2013, our business site in the city will be made available
as a temporary shelter for those who are unable toreturn home in the wake of a disaster. As of June 2018,
the former Yamato Engineering Center was demolishedand relocated with a new name: Sanki Techno Center.
However, the agreement remains in effect. Once thefacility is fully constructed, it will be able to better serve
regional disaster prevention.
Furthermore, Sanki Engineering has concluded
an agreement with Yamato City on the emergency
recovery of water supply and sewage facilities. Under
the agreement, we will work to restore the functions of
the city’s water quality management centers promptly
in the event that they are damaged by a disaster.

Dispatching Engineers to the Japanese Antarctic Research Expedition

Helping to Protect the Environment over a Quarter Century
research and observation.
Looking ahead, we intend to offer wide-ranging support
for the Antarctic research operation through engineering.

In July 2017, we held a weeding event at the Sanki
Forest in Kai City, Yamanashi Prefecture, where we
had planted a thousand trees in October 2015, tocommemorate the 90th anniversary of our founding.
With the help of staff from the local forestry
cooperative, 24 of our employees used sickles to clear
underbrush as volunteers.

Participants of the tree planting event
New wastewater treatment facility

Relationship with Local Communities

Our Approach to Local Communities

Sanki Forest

Sanki Engineering is connected to the Japanese research
expedition to Antarctica in a number of ways. In 1957, when
Japan began its expedition by opening the Showa Base, wedelivered 30 roller conveyors for use in transporting materials.
Following the adoption of the Protocol on Environmental
Protection to the Antarctic Treaty in 1991, we sent 12engineers to the National Institute of Polar Research to serve
as environmental protection staff for the Antarctic Research
Expedition. As pioneers responsible for protecting theenvironment, we began by surveying the status of waste andwastewater. Also, we suggested appropriate disposal methods,
presented design proposals for a wastewater treatment facility,and have been involved with the construction, operation andmanagement of the facility. In 2015 we replaced a purifying
facility, which had been in operation for nearly 15 years, withan advanced wastewater treatment facility incorporating amembrane separation process, and operations have sincecontinued there. Through these efforts, Sanki Engineering has
been contributing to the environmental protection activities of
the Antarctic research operation for a quarter of a century.
In November 2018, the 60th Antarctic Research Expeditionteam will set off for the Showa Base. Sanki Engineering will
dispatch two engineers to the National Institute of Polar
Research as members of the expedition. Their main objective
will be to construct the HVAC and hygiene facility for the Basic
Observation Building, which will serve as the main building for

Fiscal 2018
Results• Regional disasterprevention

68.5 67.9

CSR Report● Introduction of a Digital Manifest
With the aim of ensuring the proper disposal of industrial
waste, we are pushing ahead with the introductionof a digital manifest. The rate of introduction of digitalmanifests to the total number of manifests issued
was 88.4% against the target of 85.0% on a nonconsolidated basis in fiscal 2017.
To achieve our goal of raising the use of digitalmanifests to 100% on a non-consolidated basis
by fiscal 2020, we are building a system that canaccurately monitor the status of disposal. This involves
encouraging departments that have yet to use digitalmanifests to start doing so while also recommendingthat business partners who have yet to connect to thedigital manifest system do so.

● “Uchimizu” Water Sprinkling Event
In support of the traditional “uchimizu” water
sprinkling event sponsored by the Tokyo Metropolitan
Government’s Bureau of Environment, SankiEngineering held its own “uchimizu” event in July 2017
on the second floor waterside park of the St. Luke’s
Garden building, where its head office is located.
Drawing from wisdom dating back to the Edo
period, “uchimizu” offers an environmentally friendly
way to cool down without consuming energy. Ourevent used recycled water supplied by the Shibaura
Water Reclamation Center of
the Tokyo Bureau of Sewerage.
We will continue to contribute to
the creation of comfortable living
environments in collaboration
with local communities.

“Uchimizu” event

66

SANKI REPORT 2018

SANKI REPORT 201867

Cleanup and Environmental
Beautification Activities

and workings of the sewerage system. We also organize
facility tours for people living in the neighborhood.

Each branch, branch office and Group company
participates in cleanup activities in areas around theiroffices or construction sites as well as environmental
beautification activities organized by local governments.
In fiscal 2017, Group company Sanki Kako KensetsuCo., Ltd. participated in the Japan-Korea Beach CleanupCampaign 2018 in Tsushima, Nagasaki Prefecturecollecting marine debris that presents a serious problem
in terms of the city’s scenery and from the standpointof the local fishery industry and marine pollution.
Meanwhile, employees of Sanki Kankyo Service Co.,
Ltd. clean the streets near the water treatment facility
constructed by the company as well as other places.
On a Group-wide basis, we carried out activities in morethan 30 local communities.

Donating Blood

Supporting the Development of
the Next Generation● Yamato Engineering Center, Kanagawa Prefecture
The Yamato Engineering Center participates in local
cleanup activities organized by Yamato City and supports
events such as a parent-child summer environmental
school as an active corporate member of a local
environmental group (Yamato-no Kankyo-o Yokusuru-kai).
In August 2017, we held the environmental seminar“Looking at the Earth Today from Antarctica” at a civic
study center in response to a request from Yamato
City, Kanagawa Prefecture. We explained to citizens
the ways in which we are protecting the Antarctic
environment by treating wastewater and other waste
at the Showa Base, introducing the experience of
employees dispatched to the base and episodes fromtheir daily life in Antarctica.
● Sanki Kankyo Service Welcomes Social Studies
Tours by Local Schools
Our Group company Sanki Kankyo Service Co., Ltd. hosts
field trips for elementary schoolchildren at its offices andwater purification plant. In September 2017, the Sea Clean
Suttsu and Suttsu Water Purification Center in Hokkaido
received 15 students from Suttsu Elementary School, andin January 2018, Sea Clean Suttsu welcomed 6 children
from Oshoro Elementary School. And in November, theOshamanbe Office in Hokkaido received 34 students from
Oshamanbe Elementary School and the Ryotsu Officein Niigata Prefecture welcomed 32 students from Kamo
Elementary School. The students learned about the role

68

SANKI REPORT 2018

Our head office began encouraging employees todonate blood in 2013. Since blood for transfusions
cannot be artificially produced or stored for an extended
period, we will cooperate on an ongoing basis withthe corporate blood donation program. In fiscal 2017,
64 employees at the head office donated blood in
November.

Donations and Contributions
We extend donations to universities and research
institutes and sponsor cultural activities by the Japan
Philharmonic Orchestra, the Japan Chamber Music
Foundation and other institutions. We also support
the training of guide dogs by continuously collecting
donations for this cause. And each of our branches andGroup companies take part in a variety of activities inwhich anyone can get involved, such as by donatingused stamps and cards. Also, we contribute to MitsuiGroup activities through our support for the Mitsui
Volunteer Network, which promotes the voluntary
efforts of retired, former employees of Mitsui Group
companies.

Presenting a donation to the Japan Guide Dog Association

Financial Report andCorporate Information

Financial Report

Financial Report and Corporate Information

11-year Consolidated Financial Summary(Millions of yen)
Year ended
March 31, 2008

Year ended
March 31, 2009

Year ended
March 31, 2010

Year ended
March 31, 2011

Year ended
March 31, 2012

Year ended
March 31, 2013

Year ended
March 31, 2014

Year ended
March 31, 2015

Year ended
March 31, 2016

Year ended
March 31, 2017

Year ended
March 31, 2018

Fiscal year
Orders received

218,256

188,653

143,348

147,129

175,291

165,800

168,295

173,398

183,270

185,880

191,113

Balance carried forward

108,253

93,566

77,641

72,976100,272

111,414108,219

102,019

106,388

123,756

144,712Net sales

254,460

203,340

159,273

151,794

147,994

154,658

171,496

179,598

178,901

168,512170,157

Selling, general and administrative expenses

13,962

14,97815,41915,763

15,712

15,19915,60415,015

16,41916,526

18,466

Operating income or loss

(3,958)

7,125

5,027

3,843

2,525

2,391

2,818

2,951

6,509

6,012

6,593

Ordinary income or loss

(3,307)

6,900

5,456

4,239

2,268

2,680

3,146

3,809

8,135

6,880

7,434
3,906

Profit (loss) attributable to owners of parent*

3,134

3,283

3,141

2,124

176

(4,992)

1,763

2,461

5,327

4,698

Cash flows from operating activities(4,097)

19,177

1,294

11,554(2,697)

9,729(9,403)

(139)

5,220

10,845

6,306

Cash flows from investing activities

11,511

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

3,440

5,520

(1,644)△2,510Cash flows from financing activities(3,812)(4,377)(2,936)(1,883)(280)(1,028)(4,152)(2,901)(1,826)(2,458)

1,814

Cash and cash equivalents at end of fiscal year

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

39,18744,866

As of end of fiscal year under review
215,680

176,664

163,307

158,501

163,120

166,477

170,181

176,382

169,423

166,612

178,591

80,27678,78080,49879,833

79,662

76,932

74,91784,86984,55785,961

86,191

Number of employees

2,225

2,239

2,272

2,316

2,289

2,246

2,283

2,282

2,309

2,339

2,384

Financial Report

Total assets
Net assets

Per share information
Earnings per share (yen)

42.42

44.45

42.86

29.67

2.46

(71.04)

26.46

38.30

83.84

73.91

63.02

Book-value per share (yen)1,086.02

1,065.77

1,119.40

1,115.41

1,113.70

1,106.32

1,142.74

1,334.65

1,328.60

1,350.08

1,419.77

15.00

15.00

15.00

15.00

15.00

15.00

15.00

20.00

30.00

30.00

35.00

Equity ratio (%)

37.2

44.6

49.3

50.3

48.8

46.2

44.0

48.1

49.8

51.5

48.2

Return on assets (%)

(1.4)

3.5

3.2

2.6

1.4

1.6

1.9

2.2

4.7

4.1

4.3

Return on equity (%)

3.7

4.1

3.9

2.7

0.2

(6.4)

2.3

3.0

6.3

5.5

4.5

Cash dividends (yen)Other information*The revised Accounting Standard for Business Combination and other standards have been applied from the year ended March 2016.
Accordingly, “Profit (loss) attributable to owners of parent” as listed in the consolidated fiscal year under review, is equivalent to “Net
income” listed for the consolidated fiscal years between the year ended March 2008 and the year ended March 2015.

Orders received and sales(left axis) ● Orders received● Sales(right axis) ■ Operating income■ Ordinary income■ Profit (loss) attributableto owners of parent

300,000
250,000(Millions of yen)
Profit20,00015,000200,000
150,000

10,000100,000
5,000
50,0000-50,000-5,000-100,000-150,000

70

2007

SANKI REPORT 2018

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

(FY)

-10,000

SANKI REPORT 201871

Consolidated Balance Sheet(Millions of yen)
As of March 31, 2017

(Millions of yen)

As of March 31, 2018

Assets

As of March 31, 2017

As of March 31, 2018

¥ 48,277¥ 49,854

5,654

6,894

Liabilities and Net Assets

Current assets:

Liabilities:¥ 43,866

Notes and accounts receivable on completed construction contracts and other (Note 4)

58,16864,458Notes and accounts payable on construction contracts and other (Note 4)

Electronically recorded monetary claims (Note 4)

8,570

5,878

Short-term loans payable

Securities

6,999

4,199

Lease obligations

158

133

Income taxes payable

887

3,691

Inventories:
Costs on uncompleted construction contracts
Raw materials and supplies

1,692

1,852

453

569

Current liabilities:

Advances received on uncompleted construction contracts

5,728

3,439

Provision for bonuses

2,285

2,654

Deferred tax assets

1,615

1,858

Provision for directors’ bonuses

143

160

Other

3,231

2,076

Provision for warranty costs

422

513

Provision for loss on construction contracts

970

1,058

Deferred tax liabilities

22

47

Other

4,223

5,386

Total current liabilities

68,776

73,834–

6,610

Allowance for doubtful accounts
Total current assets

(13)

(0)

114,906

124,759

Noncurrent assets:

Financial Report and Corporate Information¥ 34,187

Cash and deposits

Property, plant and equipment:
39,36436,864

Accumulated depreciation(35,363)(32,163)

Buildings and structures, net

4,001

4,701

Lease obligations

3,187

2,104

Liability for retirement benefits(2,789)(1,701)

397

402

3,958

3,709

676

698

Accumulated depreciation

(205)

(267)

Lease assets, net

470

431

Buildings and structures

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

Construction in progress
Total property, plant and equipment
Intangible assets

21

1,418

8,849

10,662542

813

Investments and other assets:
Investment securities (Note 1 and 2)
Long-term loans receivable

32,49731,927

145

124

Long-term loans payable

Provision for directors’ retirement benefits
Deferred tax liabilities

452

369

2,274

2,884

79

61

4,187

3,717

Other

4,881

4,922

Total noncurrent liabilities

11,875

18,56580,651

92,399Total liabilities
Net assets:
Shareholders’ equity:
Capital stock

8,105

8,105

Capital surplus

4,181

4,182

Retained earnings

68,314

67,844

Treasury stock(2,251)(3,736)

Total shareholders’ equity

78,34876,395

10,928

11,687

Asset for retirement benefits

4,493

4,759

Lease and guarantee deposits

1,256

1,386

Insurance funds

486

567

Foreign currency translation adjustment

Deferred tax assets

237

250

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

(125)

(12)

Retirement benefits asset and liability adjustments(3,337)(2,058)

Total accumulated other comprehensive income

7,465

9,616
179

Other (Note 2)

4,151

5,452

Allowance for doubtful accounts(955)(2,112)

Total investments and other assets

42,31442,355

Subscription right to shares

126

51,70553,831

Non-controlling interests

19–－¥ 166,612¥ 178,591

85,961

86,191¥ 166,612¥ 178,591

Total noncurrent assets
Total assets

Financial Report

Machinery, equipment, vehicles, and tools, furniture and fixtures, net

Noncurrent liabilities:

Total net assets
Total liabilities and net assets

See notes to consolidated financial statements.

72

SANKI REPORT 2018

SANKI REPORT 201873

Consolidated Statement of Income and Comprehensive Income

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

Year ended March 31, 2017

Year ended March 31, 2018

[For the year ended March 31, 2017 ](Millions of yen)

Net sales:
Net sales of completed construction contracts
Net sales of real estate business and otherTotal net sales¥ 166,817¥ 168,266
1,890

168,512170,157

144,632

143,863

Cost of sales on real estate business and otherTotal cost of sales

1,340

1,233

145,973

145,097

22,184

24,403Gross profit:
Gross profit on completed construction contracts
Gross profit on real estate business and otherTotal gross profit

353

656

22,53825,060

Balance at the beginning of current period
Changes in items during the period
Dividends from surplus
Profit (loss) attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Transfer of loss on disposal of treasury stock
Retirement of treasury stock
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balance at the end of current period

Capital stock¥ 8,105

Capital surplus¥ 4,181–¥ 8,105

Retained earnings¥ 65,586

Treasury stock
Total shareholders’ equity¥ (2,258)¥ 75,614(1,970)4,698(1,970)
4,698
–
6
–
–

(0)
0

(0)

6

–
¥ 4,181

2,727¥ 68,3146¥ (2,251)

Financial Report and Corporate Information

1,694

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

Shareholders’ equity

2,734¥ 78,348

Selling, general and administrative expenses:
6,303

6,578

Provision for bonuses

930

1,194

Provision for directors’ bonuses

144

162

Retirement benefit expenses

943

1,118

Depreciation

369

421

Other (Note 1)

7,834

8,990

Total selling, general and administrative expenses

16,526

18,466

6,012

6,593

Employees’ salaries and allowances

Operating income
Non-operating income:

20

30

Dividends income

684

683

Insurance income

247

251

Other

290

248

1,243

1,214

84

76

Total non-operating income
Non-operating expenses:
Interest expense
Commission for purchase of treasury stock
Other
Total non-operating expenses
Ordinary income

–

48

290

248

375

373

6,880

7,434

650

2,219

Extraordinary income:Gain on sales of investment securities
Total extraordinary income

650

2,219

17

194

Unrealized gains on Foreign currency
available-for-saletranslation
securities
adjustment
Balance at the beginning of current period
Changes in items during the period
Dividends from surplus
Profit (loss) attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Transfer of loss on disposal of treasury stock
Retirement of treasury stock
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balance at the end of current period

–

54

419

1,333

Environmental expenses–

203

Office transfer expenses

44

171

Loss on sales of noncurrent assets
Loss on retirement of noncurrent assets

Settlement package

43–

Loss on valuation of investments in capital of subsidiaries and affiliates–

62

Provision of allowance for doubtful accounts

–

1,179

525

3,199

7,004

6,454

Total extraordinary losses
Profit (loss) before income taxes(2,084)(2,084)¥ 10,928¥ (53)(71)(71)¥ (125)798
798¥ (3,337)(1,356)(1,356)¥ 7,465

Non-controllinginterests

Total net assets¥ 30¥ 84,557

(10)
(10)
¥ 19

(1,970)
4,698
–－
6
–
–
(1,330)1,403¥ 85,961

36
36
¥ 126

[For the year ended March 31, 2018](Millions of yen)
Shareholders’ equity

Extraordinary loss:
Impairment loss (Note 3)¥ 13,012

Retirement
Total accumulated Subscription rights
benefits asset
otherto shares
and liability
comprehensive
adjustments
income¥ (4,135)¥ 8,822¥ 90

Financial Report

Interest income

Accumulated other comprehensive income

Balance at the beginning of current period
Changes in items during the period
Dividends from surplus
Profit (loss) attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Transfer of loss on disposal of treasury stock
Retirement of treasury stock
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balance at the end of current period

Capital stock¥ 8,105

Capital surplus¥ 4,181

Retained earnings¥ 68,314

Treasury stock¥ (2,251)

Total shareholders’ equity¥ 78,348(3,679)13(2,195)
3,906(2,180)2,180(2,195)
3,906(3,679)
14
–
–

(469)
¥ 67,844(1,485)¥ (3,736)(1,953)¥ 76,395

1–¥ 8,1051¥ 4,182

Income taxes:
Income taxes-current

1,833

4,190

Income taxes-deferred482(1,621)

2,315

2,568

¥ 4,688¥ 3,885¥ 4,698¥ 3,906¥ (9)¥ (20)¥ (2,084)¥ 759

Total income taxes
Profit (loss)

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

Profit (loss) attributable to:
Owners of parent
Non-controlling interests
Other comprehensive income (Note 4) :Unrealized gains on available-for-sale securities
Foreign currency translation adjustment

(71)

113

Remeasurements of defined benefit plans

798

1,278

Total other comprehensive income
Comprehensive income(1,357)2,151¥ 3,330¥ 6,037¥ 3,341¥ 6,057¥ (10)¥ (19)

Comprehensive income attributable to:
Owners of parent
Non-controlling interests

Balance at the beginning of current period
Changes in items during the period
Dividends from surplus
Profit (loss) attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Transfer of loss on disposal of treasury stock
Retirement of treasury stock
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balance at the end of current period¥ 10,928

759
759¥ 11,687¥ (125)

112
112¥ (12)

Retirement
Total accumulated Subscription rights
benefits asset
otherto shares
and liability
comprehensive
adjustments
income¥ (3,337)¥ 7,465
¥ 126

1,278
1,278
¥ (2,058)

2,150
2,150
¥ 9,616

52
52
¥ 179

Non-controllinginterests

Total net assets¥ 19¥ 85,961

(19)
(19)
¥–

(2,195)
3,906(3,679)
14
–
–
2,183
229
¥ 86,191

See notes to consolidated financial statements.

74

SANKI REPORT 2018

SANKI REPORT 201875

Consolidated Statement of Cash Flows

Notes to Consolidated Financial Statements(Millions of yen)
Year ended March 31, 2017

Year ended March 31, 2018

Cash flows from operating activities:¥ 6,454718

818

Impairment loss

17

194

Loss on retirement of noncurrent assets

419

1,333

Office transfer expenses

44

171

Environmental expenses–

203(Decrease) Increase in allowance for doubtful accounts

(128)

1,145

Increase in liability for retirement benefits

1,606

2,191

–

(17)

(Decrease) increase in provision for loss on construction contracts

(215)

87

Decrease in provision for loss on compensations

(30)

–

Interest and dividends income

(705)

(714)

Interest expense

84

76

Loss on sales of property, plant and equipment

254Gain on sales of investment securities(649)(2,219)Decrease (increase) in notes and accounts receivable on completed construction contracts and other

8,808(3,546)

Decrease in provision for directors’ retirement benefits(159)(Decrease) increase in notes and accounts payable on construction contracts and other(3,180)

1,092

Increase (decrease) in advances received on uncompleted construction contracts

2,588(2,289)(Decrease) increase in other current liabilities

(783)

206

Other

(2,705)

2,139

Subtotal

13,472

7,222

Interest and dividends received

707

713

Interest paid

(83)

(76)

(3,205)(1,482)

Income taxes paid
Income taxes refunded
Payments for office transfer expenses
Payments for environmental expenses
Net cash provided by operating activities

0

130

(44)

(124)

–

(76)

10,845

6,306

(29)

(1,500)Cash flows from investing activities:
Payments into time deposits

333

300

Purchase of securities(5,000)(13,500)

Proceeds from redemption of securities

4,000

12,300Purchase of property, plant and equipment(452)(2,290)

Proceeds from withdrawal of time deposits

9

7

(163)

(971)

Purchase of investment securities(1,328)(324)

Proceeds from sales of investment securities

1,008

4,151

Proceeds from sales of property, plant and equipment
Payments for retirement of property, plant and equipment

Proceeds from redemption of investment securities

200–

Execution of loan

(61)

(0)

Collection of loans receivable

27

80

Proceeds from maturity of insurance funds

57

46

(245)

(810)

(1,644)(2,510)Other
Net cash used in investing activities

2. Scope of consolidation(1) Number of consolidated subsidiaries: 7
Names of consolidated subsidiaries:
Sanki Techno Support Co., Ltd.
THAI SANKI ENGINEERING & CONSTRUCTION CO., LTD.
Sanki Sangyo Setsubi Co., Ltd.
Sanki Kako Kensetsu Co., Ltd.
Sanki Kankyo Services Co., Ltd.
AQUACONSULT Anlagenbau GmbH
Shin-yu Services Co., Ltd.
(2) Number of unconsolidated subsidiaries: 4Names of unconsolidated subsidiaries:
Tomakomai Netsu Services Co., Ltd.
Sanki Construction Engineering (Shanghai) Co., Ltd.
AEROSTRIP Corporation
Sendai Kankyohozen Co., Ltd.

Cash flows from financing activities:
Net increase in short-term loans payable2

169

Proceeds from long-term loans payable

–

8,000

Repayments of long-term loans payable

(340)

(320)

–

(3,679)Purchase of treasury stock

0

0

(150)

(160)

Cash dividends paid

(1,970)(2,195)

Net cash (used in) provided by financing activities(2,458)

1,814

Proceeds from exercise of stock options
Repayments of lease obligations

Effect of exchange rate changes on cash and cash equivalents
Net increase in cash and cash equivalents

(57)

68

6,686

5,679

Cash and cash equivalents at beginning of period

32,501

39,187

Cash and cash equivalents at end of period (Note 1)¥ 39,187¥ 44,866(3) Reasons for exclusion of unconsolidated subsidiaries fromconsolidation
The four unconsolidated subsidiaries above were
excluded from consolidation because their total
assets and sales and the Company's equity in their
net income and retained earnings were not material
to the consolidated financial statements.

(2) Number of companies excluded from application of theequity method:
Unconsolidated subsidiaries: 4
Affiliates: 1
Names of unconsolidated subsidiaries and affiliates:
Tomakomai Netsu Services Co., Ltd.
Sanki Construction Engineering (Shanghai) Co., Ltd.
AEROSTRIP Corporation
Sendai Kankyohozen Co., Ltd.
PFI Okubo Techno Resource Co., Ltd.
(3) Reasons for exclusion of unconsolidated subsidiaries andaffiliates from the equity method of accounting
The four unconsolidated subsidiaries and one
affiliate referred to above were excluded from being
accounted for by the equity method because theCompany's equity in their net income and retained
earnings were not material to the consolidated
financial statements.

Financial Report

575

Decrease (increase) in costs on uncompleted construction contracts

1. Basis of Preparation
Sanki Engineering Co., Ltd. (the “Company”) and its
domestic subsidiaries maintain their books of accountin conformity with the financial accounting standardsof Japan, and its foreign subsidiaries maintain theirbooks of account in conformity with those of theircountries of domicile.
The accompanying consolidated financial statements
have been compiled from the consolidated financial
statements prepared by the Company as required under
the Financial Instruments and Exchange Law of Japan
and, therefore, have been prepared in accordance withaccounting principles generally accepted in Japan, which
are different in certain respects as to the applicationand disclosure requirements of International Financial
Reporting Standards.
Certain amounts in the prior year’s financial statements
have been reclassified to conform to the current year’s
presentation.
As permitted, amounts of less than one million yen
have been omitted. As a result, the totals shown in theaccompanying consolidated financial statements do
not necessarily agree with the sums of the individual
amounts.

3. Application of the equity method(1) Number of companies to which the equity method of
accounting has been applied:
Unconsolidated subsidiaries: –Affiliates: –Financial Report and Corporate Information¥ 7,004

Depreciation and amortization

Profit (loss) before income taxes

Basis of Preparation of Consolidated
Financial Statements

4. Fiscal year end of the consolidated subsidiaries
Names and the fiscal year end of the consolidated
subsidiaries whose fiscal year end is different fromthat of the consolidated financial statements:
Name

Fiscal year end

AQUACONSULT
Anlagenbau GmbH

December 31

THAI SANKI ENGINEERING &CONSTRUCTION CO., LTD.

December 31

Financial statements of the above subsidiaries wereconsolidated on the basis of its own fiscal year end.
However, the necessary adjustments were madeto reflect any significant transactions from the fiscal
year end of the subsidiary to that of the consolidated
financial statements.
5. Accounting policies(1) Valuation policies for significant assets
Securities
Held-to-maturity securities:
Held-to-maturity securities are stated at cost andamortized by the straight-line method.
Available-for-sale securities:
Marketable securities are stated at fair value withany changes in unrealized gain or loss, net of theapplicable income taxes, included directly in net
assets. Cost of securities sold is determined by
the moving average method.
Nonmarketable securities are stated at cost
determined by the moving average method.

See notes to consolidated financial statements.

76

SANKI REPORT 2018

SANKI REPORT 201877

Derivatives
Derivatives are stated at fair value.
Inventories

Intangible assets (excluding lease assets)
Depreciation is calculated by the straight-line
method. Depreciation of the software for internal
use is computed by the straight-line method overthe useful life of the software (principally 5 years).
Lease assets
Finance lease assets which transfer ownership title
to the lessee
Depreciation of finance lease assets whichtransfer ownership titles to the lessee is calculatedby the same method as that for property, plantand equipment owned.
Finance lease assets which do not transfer
ownership title to the lessee
Depreciation of finance leases assets which
do not transfer ownership title to the lessee iscalculated by the straight-line method over therespective lease terms with a nil residual value.
(3) Significant provisions and allowances
Allowance for doubtful accounts
Allowance for doubtful accounts is provided at
an amount sufficient to cover possible losses oncollection. The allowance consists of an estimateof the uncollectible amounts with respect tospecific receivables plus a percentage based on
historical losses on accounts receivable.

78

SANKI REPORT 2018

Provision for warranty costs
Provision for warranty costs is provided at an
estimated amount based on historical experienceand certain other factors.
Provision for loss on construction contracts
Provision for loss on construction contracts isprovided at an amount of estimated loss if asignificant amount of loss is expected to occur
for uncompleted construction contracts and theamount of the loss can be reasonably estimated.
Provision for directors’ retirement benefits
Provision for directors’ retirement benefits is stated
at 100% of the amount which would be required
to be paid if all directors and corporate auditors
resigned their positions at the balance sheet date.
At the meetings of board of directors of theCompany and its domestic consolidated
subsidiaries held in March 2012, it was resolvedthat their retirement benefit plans for directors
and corporate auditors be terminated on March
31, 2012. Subsequently, at the ordinary general
meeting of shareholders of each company held in
June 2012, it was resolved that retirement benefits
shall be paid to directors and corporate auditors,
who were incumbent as of the close of the said
shareholders’ meeting, for their individual service
periods to March 31, 2012. It was also resolved that
retirement benefits shall be paid at the time of theirindividual retirement and that the amount to be paid
and the payment method for directors would bedetermined at the meeting of the board of directors
and for corporate auditors by mutual agreement
among the corporate auditors.
As a result, the estimated amount of retirement
benefits to be paid to directors and corporate
auditors of those companies is included in accrued
directors’ retirement benefits on the consolidatedbalance sheet as of March 31, 2018.

(5) Recognition criteria for significant revenues and expenses
Recognition criteria for revenues and costs ofconstruction contracts
Construction contracts, of which the percentage ofcompletion can be reliably estimated:
Revenues and costs of construction contracts, ofwhich the percentage of completion can be reliably
estimated, are recognized by the percentage-ofcompletion method. The percentage of completionis calculated at the cost incurred as a percentage ofthe estimated total cost.
Other construction contracts:
Revenues and costs of construction contracts,of which the percentage of completion cannot
be reliably estimated, are recognized by thecompleted-contract method.
For the year ended March 31, 2018, net sales ofcompleted construction contracts of ¥94,180 million
was recognized by the percentage-of-completion
method.
(6) Foreign currency translation
Monetary assets and liabilities denominated inforeign currencies are translated into yen at theexchange rates prevailing at the year-end date of theconsolidated financial statements, with the resulting
translation gains and losses credited or charged toincome.
Receivables and payables denominated in foreign
currencies hedged by the forward exchange
contracts which qualify for the assigning methodof hedge accounting are translated into yen at theirrespective forward exchange contract rates.
The assets and liabilities and the revenue andexpense accounts of the foreign subsidiaries aretranslated into yen at the exchange rates prevailingat the fiscal year-end date of those respective

companies. The resulting translation adjustments areincluded in foreign currency translation adjustment
and minority interests in net assets.
(7) Hedge accounting
Principally, deferral hedge accounting is applied forderivatives which qualify as hedges. For the forward
exchange contracts which meet certain criteria, theassigning method is applied.
Hedging instruments are the forward exchange
contracts, and hedged items are receivables,
payables and forecasted transactions denominated inforeign currencies.
The Company uses the forward exchange contracts
for the purpose of mitigating risks arising fromfluctuations in foreign currency exchange rates. The
Company does not enter into derivative transactions
for speculation.
Hedge effectiveness is assessed quarterly bymatching changes in market prices/rates or cash
flows of hedged items with those of hedging
instruments. Hedge effective is not assessed if
the substantial terms and conditions of the forward
exchange contracts and the hedged items are thesame because their correlation in future fluctuation in
exchange rates is ensured.

Financial Report(2) Depreciation of significant assets
Property, plant and equipment (excluding leaseassets)Depreciation is calculated by the declining-balancemethod, except for property, plant and equipmentof the foreign consolidated subsidiaries which
are depreciated by the straight-line method. The
useful lives and the residual value are primarily inaccordance with those stipulated in the Corporation
Tax Law.

Provision for directors’ bonuses
Provision for directors’ bonuses is stated at an
estimate of the amounts to be paid by the Company
and its consolidated subsidiaries for services
rendered by the balance sheet date.

(4) Accounting for retirement benefits
Method of attributing expected benefits to periodsof service
The retirement benefit obligation for employees
is attributed to each period by the benefit formula
method.
Method of amortization for actuarial gain or loss
Actuarial gain or loss is amortized in the year
following the year in which the gain or loss isrecognized by the straight-line method over a period(10 years) within the average estimated remaining
years of service of the eligible employees.
Adoption of simplified method for small-scale
corporation
The liability for retirement benefits and the retirement
benefit expenses for each consolidated subsidiary arecalculated based on the retirement benefit obligation
which is stated at the amount that would be paid
if all eligible employees voluntarily terminated theiremployment at the end of the period.

Financial Report and Corporate Information

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

Provision for bonuses
Provision for bonuses is stated at an estimate of
the amounts to be paid by the Company and its
consolidated subsidiaries for services rendered by
the balance sheet date.

(8) Scope of cash and cash equivalents in the consolidated
statement of cash flows
The scope of cash and cash equivalents in the
consolidated statement of cash flows covers cash on
hand, deposits which can be easily withdrawn at any
time, and highly liquid investments with a maturity of
three months or less when purchased.
(9) OtherConsumption taxes:
Transactions subject to consumption taxes arerecorded at amounts exclusive of consumption
taxes.
However, non-deductible consumption taxes
charged on assets are recognized as expenses
for the period when the related transactions haveoccurred.

SANKI REPORT 2018

79

Changes in Presentation of Consolidated
Financial Statements

Accounting Standard and Implementation Guidance on
Revenue Recognition

Consolidated Statement of Income and Comprehensive
IncomeOn March 30, 2018, the ASBJ issued “AccountingStandard for Revenue Recognition” (ASBJ Statement
No. 29) and “Implementation Guidance on
Accounting Standard for Revenue Recognition” (ASBJ
Guidance No. 30).

Consolidated Statement of Cash Flows“Payments for retirement of property, plant andequipment”, which was included in “Cash flows
from investing activities-Other” in the prior fiscal
year, has been separately presented in the current
fiscal year due to its increased financial materiality.
To reflect this change in presentation, theconsolidated statement of cash flows has been
reclassified, and as a result, “Cash flows frominvesting activities -Other” of ¥408 million in theprior fiscal year has been divided into “Payments for
retirement of property, plant and equipment” of ¥163
million and “Cash flows from investing activitiesOther” of ¥245 million in the consolidated statementof cash flows for the prior fiscal year provided herein.

80

SANKI REPORT 2018

(Note 1)
Investment securities included the following shares of unconsolidated subsidiaries and affiliates:(Millions of yen)
Stock
Other equity securities

FY2016FY2017

¥ 422

¥ 422

117

346

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

FY2016FY2017¥5¥ 952) The following assets have been pledged as guarantees for the payment of trade payable by the
consolidated subsidiaries:(Millions of yen)
Investments and other assets (time deposits)

FY2016FY2017¥ 29¥ 29

Financial Report(1) Overview
This is a comprehensive accounting standard forrevenue recognition. Specifically, the accounting
standard establishes the following five-step modelthat will apply to revenue from customers:
1. Identify the contract(s) with a customer
2. Identify the performance obligations in thecontract
3. Determine the transaction price
4. Allocate the transaction price to the performanceobligations in the contract
5. Recognize revenue when (or as) the entity
satisfies a performance obligation(2) Scheduled date of adoption
The Company expects to adopt the accounting
standard and implementation guidance from the
beginning of the fiscal year ending March 31,
2022.
(3) Impact of the adoption of accounting standard andimplementation guidance
The Company is currently evaluating the effectof the adoption of this accounting standard andimplementation guidance on its consolidated
financial statements.

“Reversal of allowance for doubtful accounts”, which
was separately presented in the prior fiscal year, hasbeen included in “Non-operating income-Other” inthe current fiscal year due to its decreased financial
materiality.
To reflect this change in presentation, theconsolidated statement of income andcomprehensive income has been reclassified, andas a result, “Reversal of allowance for doubtful
accounts” of ¥113 million and “Non-operating
income-Other” of ¥177 million that were separately
presented under “Non-operating income” in the priorfiscal year have been reclassified into “Non-operating
income-Other” of ¥290 million in the consolidated
statement of income and comprehensive income forthe prior fiscal year provided herein.
“Repair expenses for construction contracts”, which
was separately presented in the prior fiscal year, hasbeen included in “Non-operating expenses-Other” inthe current fiscal year due to its decreased financial
materiality.
To reflect this change in presentation, theconsolidated statement of income andcomprehensive income has been reclassified, and as
a result, “Repair expenses for construction contracts”
of ¥67 million and “Non-operating expenses-Other”
of ¥222 million that were separately presented under“Non-operating expenses” in the prior fiscal year
have been reclassified into “Non-operating expensesOther” of ¥290 million in the consolidated statementof income and comprehensive income for the priorfiscal year provided herein.

Notes to Consolidated Balance Sheet

Financial Report and Corporate Information

Accounting Standards Issued But Not Yet
Effective3) The following assets have been pledged as guarantees for losses regarding capital investments in the
consolidated subsidiaries:(Millions of yen)
Investments and other assets (time deposits)

FY2016FY2017¥ 10¥ 10(Note 3)
The following guarantees have been provided for losses regarding capital investments in the consolidated
subsidiaries:(Millions of yen)
Guarantee to capital investors of THAI SANKI ENGINEERING & CONSTRUCTION
CO., LTD.

FY2016FY2017¥ 30¥ 31(Note 4)
Settlement of notes with a maturity date of the fiscal year-end is recorded as of the actual clearing
date. The following balances of notes with a maturity date of the fiscal year-end were included in the
consolidated balance sheet as of March 31, 2018 because financial institutions were closed on that date.
(Millions of yen)
FY2017
Notes receivable¥ 39

Electronically recorded monetary claims

122

Notes payable

135

SANKI REPORT 201881

Notes to Consolidated Statement of Income and Comprehensive Income(Millions of yen)

(Millions of yen)
FY2017

Amount arising during the year

¥ 1,084¥ 1,289

Reclassification adjustments for gains and losses included in net income
Amount before tax effect(Note 2)
Provision for loss on construction contracts included in cost of sales for the years ended March 31, 2017 and 2018 are
as follows:(Millions of yen)
FY2017¥ (215)¥ 87

FY2017¥ (2,419)¥ 3,298(638)(2,190)(3,057)

1,107

973

(348)

(2,084)

759

(71)

113

Unrealized gains on available-for-sale securities:

FY2016FY2016FY2016

Financial Report and Corporate Information(Note 1)
Research and development expenses included in selling, general and administrative expenses and cost of sales for theyears ended March 31, 2017 and 2018 are as follows:(Note 4)
The following table presents reclassification adjustments and tax effects allocated to each component of othercomprehensive income for the years ended March 31, 2017 and 2018:

Tax effectUnrealized gains on available-for-sale securities
Foreign currency translation adjustment:
Amount arising during the year
Remeasurements of defined benefit plans:(Note 3)
Impairment losses were recognized for the following assets for the year ended March 31, 2017:(Millions of yen)
Location

Use

Asset class

Yamato-shi, Kanagawa

Idle assets

Machinery and equipment

AmountAmount arising during the year

(239)

177

Reclassification adjustments for gains and losses included in net income

1,396

1,670

Amount before tax effect

1,156

1,848

Tax effect

(357)

(569)

Remeasurements of defined benefit plans

798

1,278

¥ (1,357)¥ 2,151

Total other comprehensive income¥ 17

Financial Report

The Company groups its business-use fixed assets based on the three business segments (facilities construction,
machinery systems and environmental systems) to perform assessments of impairment losses. For idle assets andassets used for the real estate business, the Company determines whether or not indications of impairment exist on
an individual asset basis. Fixed assets of its consolidated subsidiaries are grouped as one unit for each company.

Notes to Consolidated Statement of Changes in Net Assets[For the year ended March 31, 2017]

The net book value of the idle assets which were hardly expected to be used in the future was reduced to theestimated recoverable amount. The estimated recoverable amount was based on their net realizable value, which wasdeemed to be zero for the idle assets that were hard to be sold. The reduction was recognized as the impairment loss
in the extraordinary losses.

1. Types and total number of shares issued were as follows:(Shares)

Type of shares

As of April 1, 2016

Increase

Decrease

As of March 31, 2017

Common stock

66,661,156––

66,661,156

Impairment losses were recognized for the following assets for the year ended March 31, 2018:(Millions of yen)
Location

Use

Asset class

Yokosuka-shi, Kanagawa

Idle assets

Land, Structures

Kingdom of Thailand(Consolidated subsidiary)Business-use assets

Tools, furniture and fixture

Amount¥ 188

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

Type of shares

As of April 1, 2016

Increase

Decrease

As of March 31, 2017

Common stock

3,107,491

–

9,000

3,098,491

5

The Company groups its business-use fixed assets principally based on the three business segments (facilities
construction, machinery systems and environmental systems) to perform assessments of impairment losses. For
idle assets and assets used for the real estate business, the Company determines whether or not indications of
impairment exist on an individual asset basis. Fixed assets of its consolidated subsidiaries are grouped as one unit foreach company.
The net book value of the idle assets which were hardly expected to be used in the future was reduced to theestimated recoverable amount. The reductions of ¥188 million for land and ¥0 million for structures were recognized
as the impairment loss in the extraordinary losses.
The net book value of the business-use assets was reduced to the estimated recoverable amount because therecoverable amount of the assets was lowered significantly due to a decline in profitability of the consolidated
subsidiary. The reduction of ¥5 million for tools, furniture and fixture was recognized as the impairment loss in theextraordinary losses.
The estimated recoverable amount of the assets was based on their respective net realizable value, which wasestimated based on the real estate appraisal value and others. The net realizable value was deemed to be zero for theassets that were hard to be sold.

(Note) Decrease of 9,000 shares was due to disposal of treasury shares upon exercise of share subscription rights under
the stock option plans.

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

Balance as ofMarch 31, 2017

Stock options

126

The Company(Parent company)
Total

126

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

Type of shares

Total dividends(Millions of yen)

Dividends per share(Yen)

Record date

Effective dateJune 29, 2016
Ordinary general meeting of shareholders

Common stock

1,334

21.00

March 31, 2016

June 30, 2016

10.00

September 30,
2016

December 9,
2016

November 11, 2016
Meeting of board of directors

Common stock

635(Note) Dividends of ¥21.00 per share as a resolution at the June 29, 2016 Ordinary general meeting of shareholders
included an extra dividend of ¥12.00.

82

SANKI REPORT 2018

SANKI REPORT 201883

(2) Dividends with the record date within this fiscal year and the effective date after the end of this fiscal year were as
follows:
Type of shares

Total dividends(Millions of yen)

Source of dividends

Dividends per share(Yen)

Record date

Effective dateJune 27, 2017
Ordinary general meeting of shareholders

Common stock

1,271

Retained earnings

20.00

March 31, 2017

June 28, 2017

(Note) Dividends of ¥20.00 per share include an extra dividend of ¥10.00.

Short-term investments (securities) with a maturity within three months
after the acquisition dateCash and cash equivalents

1. Types and total number of shares issued were as follows:
As of April 1, 2017

Increase

Decrease

As of March 31, 2018

Common stock

66,661,156–

3,000,000

63,661,156(Note) Decrease of 3,000,000 shares was due to retirement of treasury shares by resolution at the meeting of the boardof directors.

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

As of April 1, 2017

Increase

Decrease

As of March 31, 2018

Common stock

3,098,491

3,000,076

3,019,000

3,079,567(Note) Increase of 3,000,076 shares was due to purchase of treasury shares of 3,000,000 by resolution at the meeting of
the board of directors and repurchase of fractional shares of 76.
Decrease of 3,019,000 shares was due to retirement of treasury shares of 3,000,000 by resolution at the meetingof the board of directors and disposal of treasury shares of 19,000 upon exercise of share subscription rights under
the stock option plans.

(Millions of yen)Type of subscription
rights to shares

Balance as ofMarch 31, 2018

Stock options

179

Total

179

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

Type of shares

Total dividends(Millions of yen)

Dividends per share(Yen)

Record date

Effective dateJune 27, 2017
Ordinary general meeting of shareholders

Common stock

1,271

20.00

March 31, 2017

June 28, 201715.00

September 30,
2017

December 8,
2017

Common stock

924

FY2017¥ 34,187¥ 43,866

4,999

999

¥ 39,187¥ 44,866(Note) Dividends of ¥20.00 per share as a resolution at the June 27, 2017 Ordinary general meeting of shareholders
included an extra dividend of ¥10.00.
Dividends of ¥15.00 per share as a resolution at the November 10, 2017 meeting of board of directors included an
extra dividend of ¥5.00.

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

Type of shares

Total dividends(Millions of yen)

Source of dividends

Dividends per share(Yen)

Record date

Effective dateJune 27, 2018
Ordinary general meeting of shareholders

Common stock

1,211

Retained earnings

20.00

March 31, 2018

June 28, 2018

Financial Instruments
1. Overview
1) Policy for financial instruments
The Company and its consolidated subsidiaries (collectively, the “Group”) invest funds in financial instruments suchas debt securities with high credit ratings and with low risk for loss of principal. The Group raises funds throughborrowings from banks and life insurance companies.
The Group uses derivatives for the purpose of reducing the foreign currency exchange risk arising from the receivables
and payables denominated in foreign currencies and the interest rate fluctuation risk for borrowings. The Group does
not enter into derivative transactions for speculative purposes.

Financial Report

Type of shares

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

FY2016(Shares)

Type of shares

November 10, 2017
Meeting of board of directors(Millions of yen)

Cash and deposits[For the year ended March 31, 2018]

The Company(Parent company)(Note 1)
Reconciliation of cash and deposits to cash and cash equivalents:
Financial Report and Corporate Information

Resolution

Notes to Consolidated Statement of Cash Flows

2) Types of financial instruments and related risks, and risk management for financial instruments
Trade receivables - notes and accounts receivable on completed construction contracts and other, and electronicallyrecorded monetary claims - are exposed to credit risk in relation to customers. To manage credit risk arising from tradereceivables, each related division of the Group monitors due dates and outstanding balances by individual customer.
Further, it periodically monitors credit worthiness of the main customers.
Securities and investment securities are composed mainly of held-to-maturity debt securities and the shares ofcommon stock of other companies with which the Group has business relations. These investment securities are
exposed to market fluctuation risk. The Group periodically reviews the fair values of such investment securities andthe financial position of the issuers.
Most of the trade payables - notes and accounts payable on construction contracts and other - have payment due
dates within one year.
Regarding derivative transactions, the Group uses derivatives for the purpose of reducing the foreign currency
exchange risk arising from the receivables and payables denominated in foreign currencies and the interest rate
fluctuation risk for borrowing.
Those derivative transactions are entered into based on actual needs for hedging risks and not for speculative or
trading purposes.
In conducting derivative transactions, the Group follows the internal policies established by the financial division, which
set forth delegation of authority and maximum upper limit on position.
In addition, to mitigate the credit risk of derivatives, the Group transacts only with financial institutions which have ahigh credit rating.
Trade payables and borrowings are exposed to liquidity risk. Each company of the Group prepares and updates its cash
flow plans monthly to manage liquidity risk.
3) Supplementary explanation of the estimated fair value of financial instruments
The notional amounts of derivatives in “Derivatives” of “Notes to Consolidated Financial Statements” are notnecessarily indicative of the actual market risk involved in derivative transactions.

(Note) Dividends of ¥20.00 per share include an extra dividend of ¥10.00.

84

SANKI REPORT 2018

SANKI REPORT 201885

2. Estimated fair value of financial instruments
Carrying value of financial instruments on the consolidated balance sheet, estimated fair value and unrealized gain
(loss) are summarized in the following table. The following table does not include financial instruments for which it isextremely difficult to determine fair value. (Please refer to Note 2 below.)(Note 2) Carrying value of financial instruments for which it is extremely difficult to determine the fair value(Millions of yen)Type

FY2017
Carrying value* Estimated fair value* Unrealized gain (loss)

Assets:1) Cash and deposits
2) Notes and accounts receivable
on completed construction
contracts and other3) Electronically recorded monetaryclaims¥ 34,187¥ 34,187¥–¥ 43,866¥ 43,866¥–

58,16858,168–64,45864,458

–

8,570

8,570

–

5,878

5,878

–

¥ 2,822(Note 3) Redemption schedule for receivables, claims and securities with maturities(Millions of yen)
FY2016

Held-to-maturity debt
securities

7,101

7,105

3

4,301

4,303

2

Available-for-sale securities

29,79029,790–29,00329,003–

137,818

137,8223

147,508

147,5102

Liabilities:(48,277)(48,277)–(49,854)(49,854)–

Total liabilities(48,277)(48,277)–(49,854)(49,854)

–

¥–

¥ –

¥–

¥ –

¥–

¥–

* The liabilities are indicated by parentheses.

Due within
one year

Due after one
year throughfive years

Due after five
years throughten years

Due after
ten years

Due within
one year

Due after one
year throughfive years

Due after five
years throughten years

Due after
ten years¥ 34,179

¥–

¥–

¥–

¥ 43,857

¥–

¥–

¥–

Notes and accounts receivable
on completed construction
contracts and other

58,168–––64,458–––

Electronically recordedmonetary claims

8,570

–

–

–

5,878

–

–

–

Held-to-maturity securities(corporate bonds)

6,999

101

–

–

4,199

101

–

–

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

–

–

–

116

–

–

–

–

¥ 107,918

¥ 101

¥–

¥ 116

¥ 118,394

¥ 101

¥–

¥–

Cash and deposits

Securities andinvestment securities:

Total(Note 1)
Methods to determine the estimated fair value of financial instruments and other matters related to securities andderivative transactions(Note 4) Redemption schedule for long-term loans payable, lease obligations and other interest-bearing debts(Millions of yen)

Assets:1) Cash and deposits
Since all the deposits are short-term, their carrying value approximates the fair value.
2) Notes and accounts receivable on completed construction contracts and other, and 3) Electronically recordedmonetary claims
The fair value of these receivables and claims is based on the present value of the receivables categorized by age,
discounted by a discount rate that reflects the remaining term and the credit risk. It was determined that, as ofMarch 31, 2018, the fair value of these receivables and claims was almost equal to their carrying value.
4) Securities and investment securities
The fair value of stocks is based on quoted market prices. The fair value of debt securities is based on either quoted
prices or prices provided by the financial institutions making markets in those securities. For information on securities
classified by holding purpose, please refer to “Securities” of “Notes to Consolidated Financial Statements.”

FY2017

Financial Report

Notes and accounts payable on
construction contracts and other

Derivative transactions

FY2017

Because no quoted market price is available and it is extremely difficult to determine the fair value, the above financial
instruments are not included in “Assets: 4) Securities and investment securities” of the above table.

4) Securities and investment
securities:

Total assets

FY2016¥ 2,605

Financial Report and Corporate Information

Unlisted stocks(Millions of yen)
FY2016
Carrying value* Estimated fair value* Unrealized gain (loss)

Carrying value

FY2016
Due within
one year

FY2017

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

Due after
four years
throughfive years

Due after
five years

Due within
one year

Due after
one yearthrough
two years

Due after
two years
throughthree years

Due after
three years
throughfour years

Due after
four years
throughfive years

Due after
five years

Short-termloans payable¥ 5,334

¥–

¥–

¥–

¥–

¥–

¥ 5,504

¥–

¥–

¥–

¥–

¥–

Long-termloans payable

320

–

–

–

–

–

1,390

1,390

1,370

1,050

2,800

–

Lease
obligations

158

124

263

46

16

2

133

289

53

21

3

0

¥ 5,813

¥ 124

¥ 263

¥ 46

¥ 16

¥ 2

¥ 7,028¥ 1,679¥ 1,423¥ 1,071¥ 2,803¥0

Total

Liabilities:
Notes and accounts payable on construction contracts and other
Since these payables are settled in a short period of time, their carrying value approximates the fair value.
Derivatives:
Please refer to “Derivatives” of “Notes to Consolidated Financial Statements.”

86

SANKI REPORT 2018

SANKI REPORT 201887

Securities

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

Carrying value

FY2016
Fair value

Difference

Carrying value

FY2017
Fair value

Difference

Securities whose fair value
exceeded their carrying value
Government bonds

¥–

¥–

¥–

¥–

¥–

¥–

Corporate bonds

101

105

3

101

103

2

Other

–

–

–

300

300

0

Subtotal

101

105

3

401

403

2

Securities whose carrying value
exceeded their fair value
–

–

–

–

–

–

Corporate bonds

4,999

4,999

(0)

999

999

(0)

Other

2,000

1,999

(0)

2,900

2,899

(0)

Subtotal

6,999

6,999

(0)

3,899

3,899

(0)

¥ 7,101¥ 7,105¥3¥ 4,301¥ 4,303¥2

Government bonds

Total

Financial Report and Corporate Information

1) Trading securities
Not applicable, because the Company and its consolidated subsidiaries had no trading securities both at March 31,2017 and 2018.

5) Impairment loss on securities
An impairment loss on investment securities of ¥1 million (available-for-sale securities for which it is deemed
extremely difficult to determine the fair value of ¥1 million) was recorded for the year ended March 31, 2017, and an
impairment loss on investment securities of ¥0 million (available-for-sale securities for which it is deemed extremely
difficult to determine the fair value of ¥0 million) was recorded for the year ended March 31, 2018.
For securities with market value, if the fair value of each security has declined by more than 30% from the acquisition
cost, the Company and its consolidated subsidiaries recognize an impairment loss after considering the potential
recoverability. For securities for which it is deemed extremely difficult to determine the fair value, if the net assets
per share of each security based on the issuer’s most recent financial statements available has declined by more than
50% from the acquisition cost, the Company and its consolidated subsidiaries recognize an impairment loss after
considering the potential recoverability.

Derivatives
1) Derivative transactions, to which hedge accounting is not applied
1. Currency-related transactions
Not applicable both for the years ended March 31, 2017 and 2018

3) Available-for-sale securities(Millions of yen)

Carrying value

FY2016
Acquisition cost

Difference

Stocks¥ 29,480¥ 13,958

Bonds

–

–

Other

–

Type

Carrying value

FY2017
Acquisition cost

Difference¥ 15,521¥ 28,750¥ 12,117¥ 16,632

–

–

–

–

–

–

–

–

–

29,48013,95815,521

28,75012,117

16,632(27)

Securities whose carrying value
exceeded their acquisition cost

Subtotal

Financial Report

2. Interest-related transactions
Not applicable both for the years ended March 31, 2017 and 2018
2) Derivative transactions, to which hedge accounting is applied
1. Currency-related transactions
Not applicable both for the years ended March 31, 2017 and 2018
2. Interest-related transactions
Not applicable both for the years ended March 31, 2017 and 2018

Securities whose acquisition costexceeded their carrying value
Stocks

193

216

(22)

253

280

Bonds

116

118

(1)

–

–

–

Other

–

–

–

–

–

–

Subtotal
Total

310

334

(24)

253

280

(27)

¥ 29,790¥ 14,292¥ 15,497¥ 29,003¥ 12,398¥ 16,604

4) Information regarding sales of securities classified as available-for-sale securities:
FY2016
Proceeds from sales Gross realized gain on sales Gross realized loss on sales(Millions of yen)

Proceeds from sales

FY2017Gross realized gain on sales

Stocks

¥ 892

¥ 638

¥–

¥ 3,999¥ 2,191

¥–

Bonds

100

–

0

116

–

0

Other

16

11

0

38

28

–

Total

¥ 1,009¥ 650¥0¥ 4,155¥ 2,219¥0TypeGross realized loss on sales(Note) “Securities classified as available-for-sale securities” presented above include securities for which it is extremely
difficult to determine the fair value.

88

SANKI REPORT 2018

Retirement Benefits
1) Summary of retirement benefit plans for employees
The Company has funded defined benefit plans as well as a defined contribution plan. Its consolidated subsidiaries
including foreign subsidiaries have unfunded defined benefit plans.
Under the defined-benefit corporate pension plan, which is a funded plan, covered employees are entitled to lump-sum
or annuity payments based on their basic rates of pay and length of service. For the defined-benefit corporate pension
plan, a retirement benefit trust has been established.
Under the lump-sum payment plans, covered employees are entitled to lump-sum payments based on their basic rates
of pay and length of service. The lump-sum payment plans are principally unfunded plans. However, the Company’s
lump-sum payment plan has funded status as a result of establishment of a retirement benefit trust.
The Company and its consolidated subsidiaries may pay additional retirement benefits under certain circumstances.
For the lump-sum payment plans of the consolidated subsidiaries, liabilities and expenses for retirement benefits arecalculated using the simplified method.

SANKI REPORT 201889

5. The components of retirement benefits asset and liability adjustments included in other comprehensive income (before
tax effect) for the years ended March 31, 2017 and 2018 are as follows:2) Defined benefit plans (including plans accounted for using the simplified method)
1. The changes in the retirement benefit obligation for the years ended March 31, 2017 and 2018 are as follows:(Millions of yen)
FY2017FY2017

Actuarial gain

¥ 1,156¥ 1,848¥ 22,153¥ 22,393

Total¥ 1,156¥ 1,848

Service cost

1,177

1,247

Interest cost

78

78

Actuarial loss (gain)

50

(21)

(1,066)(824)

FY2016
Balance at the beginning of the year

Retirement benefit paid
Other
Balance at the end of the year(0)0

¥ 22,393¥ 22,874(Note) Retirement benefit expenses of the consolidated subsidiaries applying a simplified method have been includedin the service cost.

2. The changes in the plan assets for the years ended March 31, 2017 and 2018 are as follows:(Millions of yen)
FY2017¥ 24,611

Expected return on plan assets

566

567

Actuarial (loss) gain

(189)

156

Retirement benefits paid

(587)

(586)

¥ 24,611¥ 24,748

Balance at the end of the year

3. The following table sets forth the funded status of the plans and the amounts recognized in the consolidated balance
sheets at March 31, 2017 and 2018 for the Company’s and its consolidated subsidiaries’ defined benefit plans:(Millions of yen)
FY2016FY2017Retirement benefit obligation under the funded plans¥ 21,886¥ 22,280

Plan assets at fair value(24,611)(24,748)(2,724)(2,468)506

593(2,218)(1,874)Retirement benefit obligation under the unfunded plans
Net asset for retirement benefits

6. The components of retirement benefits liability adjustments included in accumulated other comprehensive income(before tax effect) as of March 31, 2017 and 2018 are as follows:(Millions of yen)
FY2016FY2017

Unrecognized actuarial loss

¥ 4,815¥ 2,967

Total¥ 4,815¥ 2,967

7. The fair value of plan assets, by major category, as a percentage of total plan assets at March 31, 2017 and 2018 are
as follows:
FY2016FY2017

Bonds

39%

37%

Stocks26

25

Short-term funds

99Life insurance general accounts

23

24

Other

3

5

Total

100%

100%

(Note) The plan assets included the retirement benefit trust for the corporate pension plans, which comprised 8% and
5% of the total at March 31, 2017 and 2018, respectively, as well as the retirement benefit trust for the lump-sum
payment plans, which comprised 27% of the total both at March 31, 2017 and 2018.
The expected return on assets has been estimated based on the anticipated allocation to each asset class and the
expected long-term returns on assets held in each category.
8. The assumptions used in accounting for the above plans are as follows:
FY2016FY2017

Discount rate (defined-benefit corporate pension plan)

0.408%

0.408%

0.279%

0.279%

2.0~2.5%

2.0~2.5%

Liability for retirement benefits in the balance sheet

2,274

2,884

Discount rate (lump-sum payment plans)

Asset for retirement benefits in the balance sheet(4,493)(4,759)

Expected long-term rate of return on plan assets¥ (2,218)¥ (1,874)

Net asset for retirement benefits

4. The components of retirement benefit expenses for the years ended March 31, 2017 and 2018 are as follows:(Millions of yen)
FY2016FY2017

Service cost

¥ 1,177¥ 1,247

Interest cost

78

78

Expected return on plan assets

(566)

(567)

Amortization of actuarial loss

1,396

1,670

Other
Retirement benefit expenses

520¥ 2,090¥ 2,449

Financial Report

FY2016¥ 24,821

Balance at the beginning of the year

Financial Report and Corporate Information

FY2016(Millions of yen)3) Defined contribution plans
The amount contributed to the defined contribution plan by the Company for the years ended March 31, 2017 and2018 was ¥114 million and ¥125 million, respectively.

(Note) The consolidated subsidiaries’ retirement benefit expenses have been included in the service cost.

90

SANKI REPORT 2018

SANKI REPORT 201891

2. The following table summarizes stock option activity under the stock option plans referred to above during the year
ended March 31, 2018:

Stock Options

Stock option activity2) 1. Description of the stock option plans:

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

Stock option plans
Resolution date2013 Stock option
2016 Stock option
2017 Stock option
2014 Stock option
2015 Stock option(Share subscription rights) (Share subscription rights) (Share subscription rights) (Share subscription rights) (Share subscription rights)
June 26, 2013

June 26, 2014

June 25, 2015

June 29, 2016

June 27, 2017

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

8

6

6

6

6

20

20

25

25

28

Common stock
44,000 shares

Common stock
42,000 shares

Common stock
52,000 shares

Common stock
52,000 shares

Common stock
57,000 shares

Grant dateJuly 11, 2013

July 11, 2014

July 10, 2015

July 14, 2016

July 12, 2017

Conditions for being vested

None

None

None

None

None

Required service period

None

None

None

None

None

July 12, 2013
to July 11, 2043

July 12, 2014
to July 11, 2044

July 11, 2015
to July 10, 2045

July 15, 2016
to July 14, 2046

July 13, 2017
to July 12, 2047

Number of share subscription rights (Note 1)

260
(240)

290
(270)

430
(410)

460
(430)

570
(540)

Type and number of shares to be issued
upon exercise of the share subscription rights(Note 1)

Common stock
26,000 shares(24,000 shares)

Common stock
29,000 shares(27,000 shares)

Common stock
43,000 shares(41,000 shares)

Common stock
46,000 shares(43,000 shares)

Common stock
57,000 shares(54,000 shares)

Amount to be paid in upon exercise of theshare subscription rights (Note 1)

Amount of the exercise price of ¥1 multiplied by the number of shares to be issued upon exercise of the sharesubscription rights

Exercise period

Issuance price and amount to be incorporated
into capital stock per share (Note 1):
Issuance price

¥ 580

¥ 696

¥ 897

¥ 823

¥ 1,187

Amount to be incorporated into capital stock

¥ 290

¥ 348

¥ 449

¥ 412

¥ 594

Condition for exercise of the sharesubscription rights (Note 1)

Refer to (Note 2)

Transfer of the share subscription rights

Approval of the board of directors of the Company is required for acquisition of the share subscription rights bytransfer.

Grant of the share subscription rights
resulting from reorganization

Refer to (Note 3)(Note1) Presented is the information as of March 31, 2018. In the case where there have been any changes in theinformation from March 31, 2018 through May 31, 2018, the information as of May 31, 2018 is indicated byparentheses. Otherwise there have been no changes in the information from March 31, 2018.
(Note2) An individual to whom the share subscription rights are granted (a “Holder”) can exercise the rights only for theperiod of 10 days following the date of his retirement from the position of a director and/or corporate officer. All
the share subscription rights of a Holder must be exercised at one time.
In the event that a Holder died, one of his heirs, spouse or one of first-degree family, can exercise the sharesubscription rights in place of the Holder. In that case, all the rights must be exercised at one time.
(Note3) Upon any reorganization of the Company (collectively referred to as “Reorganization”) consisting of a merger(limited to cases where the Company becomes extinct thereby), absorption-type company split or incorporationtype company split (in each event, limited to cases where the Company is the surviving entity resulting from thecompany split), or exchange or transfer of shares (in each event, limited to cases where the Company becomesa wholly-owned subsidiary), parties holding share subscription rights in existence immediately preceding thedate of such Reorganization (hereinafter referred to as “Outstanding Share Subscription Rights”)* shall, ineach applicable case, be issued share subscription rights for shares of the resulting company as prescribed insubparagraphs (a)-(e) of Article 236(1)viii of the Companies Act of Japan (hereinafter referred to as the “Company
Resulting From Reorganization”), based upon the conditions equivalent to the issuing terms of these sharesubscription rights; provided, however, that terms and conditions stipulating that the Company Resulting From
Reorganization shall issue share subscription rights conforming to the issuing terms of the share subscription
rights are included in any absorption merger agreement, new merger agreement, absorption-type company split
agreement, incorporation-type company split plan, share exchange agreement or transfer of shares plan.

Outstanding at March 31, 2017

–

–

–

–

Granted

–

–

–

–

Forfeited

–

–

–

–

Vested––––Outstanding at March 31, 2018

–

–

–

–

–
57,000 shares–
57,000 shares–

Share subscription rights which have alreadybeen vested(Number of shares):
Outstanding at March 31, 2017

29,000 shares

VestedExercised

3,000 shares

Forfeited
Outstanding at March 31, 2018
Exercise price (Yen)

33,000 shares–

4,000 shares–
26,000 shares

49,000 shares––
6,000 shares–
29,000 shares–
43,000 shares–

52,000 shares–

57,000 shares–

6,000 shares––
46,000 shares

57,000 shares
¥1

¥1

¥1

¥1

¥1

Weighted average exercise price (Yen)

¥ 956

¥ 952

¥ 948

¥ 948

–

Fair value per stock at the grant date (Yen)

¥ 579

¥ 695

¥ 896

¥ 822

¥ 1,186

Financial Report

Corporate officers (except persons concurrently serving as a director)
Type and number of shares to be issued upon
exercise of the share subscription rights

2013 Stock option
2014 Stock option
2015 Stock option
2016 Stock option
2017 Stock option(Share subscription rights) (Share subscription rights) (Share subscription rights) (Share subscription rights) (Share subscription rights)

Financial Report and Corporate Information

1) Stock option expenses were included in “Selling, general and administrative expenses” for the years ended March 31,2017 and 2018 were ¥42 million and ¥67 million, respectively.

3) Fair value at the grant date for stock options which were issued during the year ended March 31, 2018 was estimatedusing the Black-Scholes option pricing model with the following assumptions.
2017 Stock option(Share subscription rights)
Expected volatility (Note 1)

29.816%

Expected holding period (Note 2)

3.0 years

Expected dividend (Note 3)
Risk-free rate (Note 4)¥ 20 per share(0.068%)(Note 1) The volatility of the share price is estimated based on the market prices of the Company’s stock from July 13,
2014 to July 12, 2017.
(Note 2) The expected holding period is estimated based on the weighted average period of the grant date to the datewhen the share subscription rights become exercisable, that is the date of each Holder’s retirement from theposition of a director and/or corporate officer, assuming that each Holder exercises his rights as soon as therights become exercisable.
(Note 3) The expected dividend is based on the dividends paid (excluding an extra dividend of ¥10.00) for the year ended
March 31, 2017.
(Note 4) Risk-free interest rate is the yield on government bonds for the period that corresponds to the remaining life of
the option.
4) Because it is difficult to reasonably estimate the number of options that will expire in the future, the number of vested
options is calculated only based on the number of options that have actually forfeited.

* “The date of Reorganization” for each Reorganization is defined as follows: for absorption-type merger the date when it becomes effective, for consolidation-typemerger the date when the consolidating company is newly incorporated, for absorption-type company split the date when it becomes effective, for incorporation-typecompany split the date a new stock company is incorporated, for exchange of share the date when it becomes effective, and for transfer of share the date the parent
company is newly incorporated.

92

SANKI REPORT 2018

SANKI REPORT 201893

(Millions of yen)Tax-effect Accounting
1) The significant components of deferred tax assets and liabilities at March 31, 2017 and 2018 were as follows:(Millions of yen)

Provision for bonuses

FY2017

¥ 196

¥ 546

721

829

103

242
1,640

Provision for warranty costs

130

155

Provision for loss on construction contracts

300

324

2,051

1,905

Impairment loss

Liability for retirement benefits

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

1,817

Accrued business taxes

FY2017¥ 3,962¥ 3,866

Provision for directors’ retirement benefits

28

22

Loss on devaluation of investment securities

240

255

Loss on devaluation of utility rights

128

128

Other

805

841

Subtotal
Valuation allowance for deferred tax assets

6,522

6,892

(2,180)(2,459)Total deferred tax assets

4,341

4,432

(95)

31

3,866

3,898

¥ 20,070¥ 20,520

Financial Report and Corporate Information

FY2016
1. Deferred tax assets
Allowance for doubtful accounts

FY2016
Carrying value

Notes:
1) The carrying value represents the acquisition cost less accumulated depreciation and impairment loss.
2) Increase in the carrying value included in the net change during the year was mainly due to acquisition of rental
real estate properties of ¥339 million, and decrease in the carrying value mainly due to depreciation of ¥247 million,
and transfer of properties of ¥177 million resulting from change of their usage, for the year ended March 31, 2017.
Increase in the carrying value included in the net change during the year was mainly due to acquisition of rental realestate properties of ¥314 million, and decrease in the carrying value mainly due to depreciation of ¥280 million for theyear ended March 31, 2018.
3) The fair value is estimated for major rental properties based on the appraisal value obtained from outside real estateappraisers with reasonable adjustments for timing and for the other rental properties based on the assessed value for
fixed-asset taxes.

Segment Information
2. Deferred tax liabilities(610)(1,263)(324)

Unrealized gains on available-for-sale securities(4,568)(4,916)

(193)

(236)

Total deferred tax liabilities(6,698)(6,088)Net deferred tax liabilities¥ (2,356)¥ (1,656)

Other2) The reconciliation of the significant difference between the statutory tax rate and the effective tax rate reflected in the
consolidated statement of income and comprehensive income for the year ended March 31, 2017 and 2018 is presented
as follows:
FY2016FY2017

Statutory tax rate

30.9%

30.9%

Items permanently not deductible for tax purposes

2.1

2.5

Items permanently not taxable

(0.6)

(0.7)

Inhabitants’ per capita taxes

1.4

1.8

Valuation allowance

(2.5)

4.2

Research and development tax credit

(1.0)

(1.1)

Donation not deductible for tax purposes

0.8

0.0

Difference of statutory tax rate between the Company and its consolidated subsidiaries

1.0

1.5

Other

1.0

0.7

Effective tax rate

33.1%

39.8%

(Segment Information)

Financial Report(673)

Gain on valuation of investment securities

Deferred capital gains for tax purposes

1. Outline of reportable segments
The reportable segments of the Group are components for which discrete financial information is available and whose
operating results are regularly reviewed by the Executive Committee to make decisions on resource allocation and toassess performance.
The Group's business divisions are based on the activities of the Company. The consolidated subsidiaries of theCompany conduct their respective business operations in cooperation with the relevant business divisions of theparent.
Thus, the Group consists of the segments based on the Company’s business divisions. It has four reportablesegments: “Facilities construction” offers general facilities construction services, “Machinery systems” offers services
of industrial facilities such as FA systems, logistics systems and conveyor equipment, “Environmental systems” offers
services of environmental sanitation equipment such as equipment for cleaning sewers, and “Real estate” offers
services of rental and administration of real estate.
2. Calculation method for sales, profits or losses and other items by reportable segment
Accounting policies of the segments are substantially the same as those described in “Basis of Preparationof Consolidated Financial Statements.” Segment performance is evaluated based on ordinary income or loss.
Intersegment sales and transfers are recorded at the same prices used in transactions with third parties.
Segment assets and liabilities are not disclosed because they are not reviewed to make decisions on resource
allocation or to assess performance.

Investment and Rental Properties
The Company owns office buildings and commercial facilities and housing for rent in Kanagawa Prefecture and otherareas. Profit from renting those real estate properties was ¥276 million and ¥541 million for the years ended March 31,2017 and 2018, respectively. Rental revenues were recorded as net sales of real estate business and other, and rental
expenses as cost of sales on real estate business and other.
Carrying value on the consolidated balance sheet and corresponding fair value of those rental real estate properties forthe years ended March 31, 2017 and 2018 were as follows:

94

SANKI REPORT 2018

SANKI REPORT 201895

3. Sales, profits or losses and other items by reportable segment[For the year ended March 31, 2018](Millions of yen)[For the year ended March 31, 2017](Millions of yen)
Reportable segments

Machinery Environmental
systems
systems

Real estate

Total

Other
(Note 1)

Total

Adjustments(Note 2)

Consolidated(Note 3)

Sales:
Sales tothird parties
Inter-segment sales
and transfers
Total sales¥ 140,722¥ 8,191¥ 17,862¥ 1,589¥ 168,366¥ 102¥ 168,468¥ 43¥ 168,512

845

0

409

2

1,258

396

1,655

(1,655)–¥ 141,567¥ 8,192¥ 18,271¥ 1,592¥ 169,624¥ 499¥ 170,123¥ (1,611)¥ 168,512¥ 6,404¥ (138)

¥ 671

¥ 189

¥ 7,127¥ 22¥ 7,150¥ (270)¥ 6,880

Segment profit (loss)
Other items:
Depreciation

¥ 330

¥ 33

¥ 81

¥ 276

¥ 721

¥0

¥ 721

¥ (2)

¥ 718

Interest income

9

0

4

–

13

0

13

7

20

Interest expenses

47

0

3

–

51

–

51

33

84

Extraordinary
income

598

0

47

–

646

–

646

3

650

Gain on sales ofinvestment securities

598

0

47

–

646

–

646

3

650

Extraordinary loss

118

4

24

24

172

–

172

353

525

(Note 2)Adjustments for segment profit or loss of ¥270 million for the year ended March 31, 2017 included corporate general lossof ¥75 million which was not allocable to the reportable segments, reversal of interest expenses of ¥279 million which
had been allocated to each of the reportable segments for administrative purpose, and adjustments of ¥474 million forhaving recognized gain on sales of investment securities and others attributable to each of the reportable segments as
the extraordinary income. The corporate general profit and loss consisted mainly of general and administrative expenses,
interest income (expense), and dividends income.
(Note 3)
Segment profit was adjusted to be equal to ordinary income in the consolidated financial statements.

Machinery Environmental
systems
systems

Real estate

Total

Other
(Note 1)

Total

Adjustments(Note 2)

Consolidated(Note 3)

¥ 1,753¥ 170,009¥ 148¥ 170,157¥–¥ 170,157

Sales:
Sales tothird parties
Inter-segment sales
and transfers¥ 139,204¥ 9,253¥ 19,797

484

1

112

2

599

430

1,030

(1,030)–¥ 139,688¥ 9,254¥ 19,909¥ 1,755¥ 170,608¥ 578¥ 171,187¥ (1,030)¥ 170,157¥ 6,010¥ (40)

¥ 575

¥ 476

¥ 7,021¥ 49¥ 7,071¥ 362¥ 7,434

Depreciation

¥ 389

¥ 39

¥ 111

¥ 292

¥ 832

¥0

¥ 832

¥ (14)¥ 818

Interest income

10

0

11

–

21

0

21

9

30

Interest expenses

44

0

3

–

48

–

48

28

76

389

0

0

–

391

–

391

1,828

2,219

Total sales
Segment profit (loss)
Other items:

Extraordinary
incomeGain on sales of investment securities
Extraordinary loss
Loss on sales of
noncurrent assets
Loss on retirementof noncurrent assets
Office transfer
expenses
Loss on valuationof investments incapital of subsidiaries and affiliates

389

0

0

–

391

–

391

1,828

2,219

334

16

22

–

374

–

374

2,825

3,199

54

－–

–

–

54

－–

54

–

54

70

5

7

–

83

–

83

1,250

1,333

142

11

15

－–

168

–

168

2

171

62

–

–

－–

62

–

62

–

62

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

Facilities
construction

Financial Report and Corporate Information

Facilities
construction

Reportable segments(Note 1)
The category of “Other” includes business segments which are not reportable segments, such as leasing services,
insurance agency services and others.
(Note 2)Adjustments for segment profit or loss of ¥362 million for the year ended March 31, 2018 included corporate generalloss of ¥256 million which was not allocable to the reportable segments, reversal of interest expenses of ¥255 million
which had been allocated to each of the reportable segments for administrative purpose, and adjustments of ¥363
million for having recognized office transfer expenses and others attributable to each of the reportable segments as theextraordinary income. The corporate general profit and loss consisted mainly of general and administrative expenses,
interest income (expense), and dividends income.
(Note 3)
Segment profit was adjusted to be equal to ordinary income in the consolidated financial statements.
(Other Information)[For the years ended March 31, 2017 and 2018]
1. Product and service information
Disclosure of product and service information has been omitted because similar information was disclosed in “Segment
information.”
2. Geographical information(1) Sales
Disclosure of geographical sales information has been omitted because the sales to third parties of the Japan
operation accounted for over 90% of the sales in the consolidated statements of income and comprehensive income.
(2) Property, plant and equipment
Disclosure of property, plant and equipment information has been omitted because property, plant and equipment
located in Japan accounted for over 90% of property, plant and equipment in the consolidated balance sheets.

96

SANKI REPORT 2018

SANKI REPORT 201897

3. Major customer information

Disclosure of major customer information has been omitted because the sales to any specific customers of third parties
did not account for over 10% of the sales in the consolidated statements of income and comprehensive income.

[For the year ended March 31, 2017](Millions of yen)

Facilities
construction

Machinerysystems

Environmental
systems

Real estate

Other

Total

Adjustments

Consolidated

¥–

¥–

¥ 17

¥–

¥–

¥ 17

¥–

¥ 17

Facilities
construction

Machinerysystems

Environmental
systems

Real estate

Other

Total

Adjustments(Note)

Consolidated

¥5

¥–

¥–

¥–

¥–

¥5

¥ 188

¥ 194

Impairment loss

Financial Report and Corporate Information(Information about impairment losses on tangible fixed assets by reportable segment)[For the year ended March 31, 2018](Millions of yen)

Impairment loss

(Note) Adjustments of ¥188 million were impairment loss for idle assets.
(Information about amortization and balance of goodwill by reportable segment)

Financial Report[For the years ended March 31, 2017 and 2018]
Not applicable(Information about gain on negative goodwill by reportable segment)[For the years ended March 31, 2017 and 2018]
Not applicable

Per Share Data
FY2016FY2017¥ 1,350.08¥ 1,419.77

Basic¥ 73.91¥ 63.02

Diluted¥ 73.74¥ 62.83

Net assets per share
Profit (loss) attributable to owners of parent per share:

Basis for the calculation of basic and diluted profit (loss) attributable to owners of parent per share is summarized
as follows:(Millions of yen)
FY2016FY2017¥ 4,698¥ 3,906

Basic:
Profit (loss) attributable to owners of parent
Amount not available to shareholders of common stock
Profit (loss) attributable to owners of parent available to shareholders of common stock
Average number of shares of common stock outstanding––¥ 4,698¥ 3,906

63,561 thousand shares

61,981 thousand shares

Diluted:Adjustments to profit (loss) attributable to owners of parent
Increase in shares of common stock(Of which, exercise of stock subscription rights)
Outline of dilutive potential which was not included in calculation of diluted profit (loss)
attributable to owners of parent per share due to non-dilutive effect––

148 thousand shares(148 thousand shares)

184 thousand shares(184 thousand shares)––

Subsequent Events
Not applicable98

SANKI REPORT 2018

SANKI REPORT 201899

Corporate Information, Business Locations and Group Companies
The Sanki Engineering Group aims to build a comfortable environment for people and the Earth by leveraging “total
engineering competency” in a wide range of regions and business domains. Together with our customers, we will strive asa group to contribute to the realization of a sustainable society. (as of April 1, 2018)

Domestic Business Locations

Financial Report and Corporate Information

Corporate Information

Representative Offices and Group Companies Overseas

Company nameSanki Engineering Co., Ltd.

● Representative officeGroup company

Date of establishment
April 22, 1925
Stated capital
8,105.18 million yen
Representative
Tsutomu Hasegawa, President

Hokuriku branch office

Hokkaido branch office

Toyota branch office

Kyoto branch office

Ibaraki branch office

Salt Lake City Office
AEROSTRIP
Corporation
Sale of aeration systems

Chiba branch office
Head office
Tokyo branch

Offices
Branches: 3
Branch offices: 15
Laboratory: 1

Yokohama branch office

Shizuoka branch office
Mikawa branch office

Head office
8-1 Akashi-cho, Chuo-ku, Tokyo
Shikoku branch office

Sanki Shonan Training Center

Austria Office

Yamato Engineering Center
Technical Research &Development Institute

AQUACONSULT
Anlagenbau GmbH

THAI SANKI ENGINEERING &CONSTRUCTION CO., LTD.

Manufacture and saleof aeration systems

Facility design, construction,
maintenance and consulting

Kansai branch
Kobe branch office

Consolidated Subsidiaries
Sanki Techno Support Co., Ltd.
Established: April 1, 1980
Capital: 100 million yen
Business areas:• Design, construction, operation/management, repair and maintenance of
HVAC, plumbing and electricity work
• Energy saving diagnosis and consulting• Building IP phone systems, call center systems and networks
Sanki Sangyo Setsubi Co., Ltd.
Established: May 1, 1980
Capital: 20 million yen
Business areas:• Installation, relocation, removal and altering of general equipment (production,transportation, etc.)• Electrical wiring, instrumentation work and computer software changes
Sanki Kako Kensetsu Co., Ltd.
Established: September 1, 1980
Capital: 80 million yen
Business areas:• Design, construction, operation/management, maintenance, upgrading andimproving of waste treatment facilities• Manufacture, sale and installation of solid-liquid separators• Design, construction and maintenance/management of water/wastewater
treatment facilities

SANKI REPORT 2018

Facility design, construction,
maintenance and consulting

Kanto branch office

Number of employees (as of March 31, 2018)
Chugoku branch office
Consolidated: 2,384
Non-consolidated: 1,969
Kyushu branch office

100

Sanki Construction Engineering(Shanghai) Co., Ltd.

Tohoku branch office

Chubu branch

Corporate Information, Business Locations and Group Companies

Principal lines of business
Facilities construction, plant and machinery
systems, real estate

Sanki Kankyo Service Co., Ltd.
Established: June 29, 1990
Capital: 50 million yen
Business areas:• Design, construction, management and work contracting of environmental
protection facilities, including water supply and sewage facilities and waste
treatment facilities, etc.
• Operation, maintenance and management, and sale of chemical products forthese facilities
Sanki Partners Co., Ltd.
Established: August 1, 1980
Capital: 10 million yen
Business areas: Insurance agency, leasing and temporary staffing(The company’s name was changed from Shin-yu Service Co., Ltd. in April 2017.)
AQUACONSULT Anlagenbau GmbH
Acquired a controlling interest in September 2006
Capital: 18 thousand euro
Business areas: Manufacture and sale of aeration systems

Non-consolidated Subsidiaries

Affiliate Not Accounted for by the Equity Method

Tomakomai Netsu Service Co., Ltd.
Established: July 20, 1971
Capital: 165 million yen
Business areas: Heat supply to multi-unit housing, and operation andmaintenance of cleaning center facilities

PFI Okubo Techno Resource Co., Ltd.
Established: December 3, 2004
Capital: 10 million yen
Business areas: Updating, maintenance, management and operation of		
wastewater treatment facilities and emergency generators		at the Okubo Water Purification Plant, Saitama Prefecture
Period of business: 3 years and 4 months for design and construction; 20 years
for operation, maintenance and management

Sanki Construction Engineering (Shanghai) Co., Ltd.
Established: July 20, 2005
Capital: 3.80 million U.S. dollars
Business areas: Facility design, construction, maintenance and consulting
AEROSTRIP Corporation
Acquired a controlling interest in September 2006
Capital: 100 U.S. dollars
Business areas: Sale of aeration systems
Sendai Kankyo Hozen Co., Ltd.
Established: November 7, 2016
Capital: 100 million yen
Business areas: Management of operation and maintenance for the		renovation work for key facilities of the Sendai Clean Center

THAI SANKI ENGINEERING & CONSTRUCTION CO., LTD.
Established: May 6, 2008
Capital: 16 million baht
Business areas: Facility design, construction, maintenance and consulting

SANKI REPORT 2018101

Share Information

Third-Party Opinion

Share Information (as of March 31, 2018)
Fiscal year

April 1 to March 31 of the following year

Annual general meetingof shareholders

Late June each year

Trading unit

100 shares

Number of authorized shares

192,945,000

Number of issued shares

63,661,156

Number of shareholders

3,243Transfer agent and special
account management institution

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

Stock exchange listing

Tokyo Stock Exchange

Securities code

1961

Ownership Statistics
Individuals and other: 2,885
10,056 thousand shares(15.80%)Treasury stock: 1
3,079 thousand shares(4.84%)

Foreign corporations and other: 166
18,319 thousand shares(28.78%)Financial institutions: 36
26,594 thousand shares(41.77%)

Other corporations: 126
5,214 thousand shares(8.19%)

Securities companies: 29
397 thousand shares(0.62%)● Major Shareholders
Number of Shares Held(Thousand Shares)

Shareholding Ratio(%)

Meiji Yasuda Life Insurance Company

5,700

9.41

Mitsui Life Insurance Company, Limited

4,864

8.03

Nippon Life Insurance Company

3,607

5.95

Sanki Kyoueikai

2,642

4.36

Japan Trustee Services Bank, Ltd. (Trust account)

2,248

3.71

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

2,131

3.52

State Street Bank and Trust Company 510311

1,554

2.57

State Street Bank and Trust Company 510312

1,541

2.55

JP Morgan Chase Bank 380684

1,513

2.50

DFA International Small Cap Value Portfolio

1,338

2.21

Name of Shareholder

Notes
1. Although the Company holds 3,079 thousand shares of treasury stock, it is excluded from the list of major shareholders. Calculation of shareholding ratio excludes
treasury stock.
2. The list covers beneficial shareholders whose shareholdings as of the end of the fiscal year under review had been confirmed by the Company.

102

SANKI REPORT 2018

Yoshinao Kozuma
Professor Emeritus,
Sophia University

1. Application of the Collaborative Value
Guidance
Starting in fiscal 2017, Sanki Engineeringin compiling the SANKI REPORT refers
to the Guidance for Integrated Corporate
Disclosure and Company-Investor
Dialogues for Collaborative Value Creation,
formulated by Japan’s Ministry of Economy,
Trade and Industry. The results of this arevisible in several sections, and an excellent
example is the promotion of initiatives
aimed at strengthening governance, anissue that I have pointed out since last year.
In fiscal 2017, improvements were madein organizational structure, implementationand information disclosure to compensate
for the inherent shortcoming of a Company
with Board of Company Auditors, whichis fraught with challenges related to its
governance functions. As for organizational
structure, an external auditor was added
to the four current members, so external
auditors now hold the majority in the Boardof Company Auditors. In implementation,
the Management Meeting and Board of
Directors’ meeting are no longer heldon the same day, thus bolstering thesupervisory functions of the latter. And in
information disclosure, the Company hasreported on specific results and reform

measures with respect to its assessment of
the effectiveness of the Board of Directors.
Although such assessments are not an
unusual practice these days, it is still rare
for companies to disclose specific results,
which makes Sanki Engineering a pioneer
among Japanese companies.
2. Business Model Conversion
The mindset of the management teamtoward converting its business modelseems to be even clearer compared tothat related to what is suitable for building
a sustainable society. Until now, theCompany’s strengths were expressedby a business model concept of total
engineering. This has been advanced toinclude a focus on the entire life cycleof facilities, a target of the Company’sbusiness, in order to understand, with a
total perspective of an LCE Business, theassociated social issues, opportunities
and risks at each stage: planning, design,
procurement, construction, operational
management, maintenance and inspection,
renovation and reconstruction. In asustainable society that must overcome
its dependence on finite resources andenergy, managing the life cycle of the target
business will provide a powerful profit
driver for sustainable growth.
3. Role of the Sanki Techno Center
As the Company moves forward with
Phase 1 of the Century 2025 long-term
vision, full-scale operation is set to begin
at the Sanki Techno Center, which willserve as the base for realizing that vision.
The center also serves as a symbol forachieving the Group’s long-term vision, as
it is essential for refining and enhancing

the advanced technical skills and humanresources that allow for the Group’s
sustainability. What is especially notable
about the center, however, is that it can beused for temporary accommodations by
those unable to return home in the eventof a disaster. This arrangement is part of a2013 agreement concluded between the
Sanki Yamato site, where the center islocated, and Yamato City. Therefore, theSanki Techno Center shows great promiseboth for the Company’s future growth andas a contribution to society.
4. Challenges Ahead
It is remarkably difficult to eliminate
occupational accidents from construction
sites. This is also true at Sanki Engineering,where despite there being fewer serious
incidents, minor accidents continue
to occur, and the effectiveness ofcountermeasures is a cause of concern.
Every year, the Company designatesslogans and key inspection issues while
also providing its staff with safety andhealth education. Nevertheless, reports onworksite safety and health often conclude
by simply emphasizing the importance ofpreventing and eliminating accidents, withlittle mention of the effectiveness of themeasures actually being implemented.
Out of respect for those working at theconstruction sites, I feel that a moredetailed explanation is needed.
Also, while respecting human rights
in the supply chain is cited as an important
responsibility of the Group, the report
does not provide any information on
related measures, which is another major
challenge to be addressed.

Response to Third-Party Opinion
I really appreciate all of your valuable insights and multiple perspectives for the SANKI REPORT 2018.
This is the seventh fiscal year since we started publishing an integrated report, and we appreciate your evaluation of our use of the
Ministry of Economy, Trade and Industry’s Collaborative Value Guidance primarily in reinforcing our system of governance. We are also
grateful to you for mentioning Sanki Engineering’s business model, including value chain management, and the role of the Sanki Techno
Center, our comprehensive training and research facility. For all of our stakeholders, we will continue striving to provide a report that isboth useful and appealing.
We will consider, as challenges going forward, the effectiveness of our measures for safety and health and initiatives on respecting
human rights in the supply chain, which were pointed out this year, and endeavor to make improvements while also providing detailed
explanations.
By utilizing the SANKI REPORT to further advance our business activities, we will seek to continuously contribute to social
development by creating comfortable environments and operations.

Mikio Hirose

Managing Executive Officer, General Manager, CSR Promotion Division

SANKI REPORT 2018103