JGC Report 2018

JGC Report

2018
A p ri l 1 , 2 0 1 7 - Ma rc h 3 1 , 2 0 1 8

Engineering
2-3-1, Minato Mirai, Nishi-ku, Yokohama 220-6001, Japan
Tel: 81-45-682-1111 Fax: 81-45-682-1112
www.jgc.com

the Future

Considerations made for paper use

Use of FSC certified
paper®
We used paper made of timber
from adequately managed
forests.
Printed in Japan
 Since its founding in 1928, JGC has built plants and facilities worldwide serving a wide range of
purposes, mainly in the oil and gas industries, such as oil, natural gas and petrochemical plants,
but also power plants, non-ferrous metal plants, and other energy and industrial infrastructure
Corporate Philosophy as well as pharmaceutical plants, hospitals, environmental facilities, and other social infrastructure.

JGC Way
JGC’s proven capabilities in all these areas have established its reputation as a leading engineering
contractor worldwide.
JGC views its corporate group mission as one which is committed to creating a
The corporate philosophy of the JGC Group, “The JGC Way” , is
the fundamental platform pursuant to which the business activ-
more prosperous future for its clients, for people and for society through integrating its
ities of the group are promoted and furthermore is followed by core capabilities and technical expertise to generate innovative solutions.
each and every JGC Group employee and executive in their
activities. We intend to further promote the expansion of our business areas and contribute to
industrial advancement, economic progress, and sustainable growth,
Mission not only in Japan but throughout the world.

We are committed to creating a more prosperous future

for our clients, for people and for society through inte-
grating our core capabilities and technical expertise to
generate innovative solutions.

Values

We are driven by our shared values and commitments.

These elements express our strengths and represent the
basis for how we work and deliver solutions to our
clients and stakeholders:

Shared Values

Challenge We venture into new business fields, overcome

technical hurdles and establish innovative
methodologies.
Create We remain dedicated to developing results-
focused, thoughtful solutions that fully meet
the needs of our clients and benefit society as
a whole.
Integrate We bring together a wide range of technolo-
gies, innovative tools and a diverse team dedi-
cated to increasing value to all stakeholders.
Deliver We commit to overcoming obstacles through
diligence and our “never-give-up” philosophy,
and to delivering quality products and services
to our clients and society.

Professional Commitments

Respect We undertake to foster mutual respect and

support among all those involved in our activi-
ties and to emphasize the impor tance of
safety for all.
Integrity We pledge to maintain the highest ethical
standards in everything we do.

Vision

We bring a new generation of innovative solutions to the

energy and infrastructure industries by utilizing our core
competencies in engineering and project management.

1 JGC Report 2018

2
 JGC Report 2018
Chapter 1
CONTENTS Targeting Sustainable Growth
Corporate Philosophy 01 Chapter 4: Environment and Society Initiatives In this chapter, we look at the JGC Group’s growth trajectory and its value
Editorial Policy 03 creation model. The chapter includes messages from the Chairman & CEO,
Basic Stance on ESG 39
Environmental Initiatives 41 President & COO and CFO, who explain how JGC is responding to developments

Working with Local Communities 45 in the operating environment and provide updates about measures being
Chapter 1: Targeting Sustainable Growth
implemented in line with the medium-term business plan, Beyond the Horizon.
Human Rights and Diversity 47
JGC STORY 05
　1 JGC Groupʼs Businesses
　2 Growth Trajectory
　3 Value Creation Process Chapter 5: Management Structure
　4 Adapt to Change
Outside Director Dialogue 49
Message from the Chairman & CEO and Presiden & COO 13
Corporate Governance 53
CFO Message 19
Risk Management 55
Financial and Non-financial Highlights 21
Compliance 57
Quality Management System 60
Occupational Health and Safety 61
Chapter 2: Value Creation IR Activities 63
Management Structure 64
Total Engineering Business 24
ESG Data Highlights 65
Functional Materials Manufacturing Business 29

Chapter 6: Data Section

Chapter 3: The JGC Groupʼs Strengths and Management Base

JGC Group's Strengths 31

Strengthening Human Resources 33
Strengthening Our Client Base 37
Strengthening Our Supplier Base 38

Editorial Policy
(Primarily aimed at investors)
Narrow

Purpose of This Report Information Provided

JGC Report
The purpose of the JGC Report, which was first The JGC Report summarizes and presents the most (Integrated Report)
published in 2015, is to explain to stakeholders how the relevant information related to the JGC Group and
JGC STORY
Target

JGC Group works to generate sustainable growth and society. For detailed and comprehensive financial and
increase corporate value over the medium to long term. non-financial information about the Group, please visit JGC Website
05 1 JGC Group’s Businesses
JGC uses this report as a tool to communicate with the JGC website.
Broad

07 2 Growth Trajectory
stakeholders as part of its efforts to deliver sustainable
Detailed Critical
growth through continuous, constructive dialogue. Forward-looking Statements (Comprehensive)
Content 09 3 Value Creation Process

Data and forecasts disclosed in this report are based

11 4 Adapt to Change
Financial Information
Period Covered 13 Message from the Chairman & CEO
on judgments and information available at the time of Earnings data, etc.
In principle, the report covers the period April 2017 to publication. The Company provides no guarantee for
http://www.jgc.com/jp/05_ir/index.html and President & COO
March 2018 (fiscal 2017), but also includes information targets, forecasts and earnings projections, which may Non-financial Information 19 CFO Message
related to events from April 2018. change due to a range of factors. Sustainability information
21 Financial and Non-financial Highlights
http://www.jgc.com/jp/06_esg_hsse/index.html

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 Targeting Sustainable Growth Value Creation The JGC Group’s Strengths and Management Base Environment and Society Initiatives Management Structure Data Section

1 JGC STORY
JGC Group’s Businesses
The JGC Group creates social and economic value
through two business segments – the total engineering
business, which is active in a wide range of areas, and
the functional materials manufacturing business, which
is supported by a portfolio of unique technologies.

Business Segments Target Areas

Total Engineering Oil & Gas Infrastructure

Upstream Energy Infrastructure

The total engineering business executes engineering, procurement and construction
Project Execution Objective Crude Oil/Gas Gathering, Power Generation
(EPC) projects, delivering facilities that support clientsʼ businesses. The JGC Group
Gas-Oil Separation, Offshore (Fossil Fuels, Nuclear Power,
has delivered more than 20,000 projects in 80 countries and built up a high level of Our goal is to create facilities that help clients Renewable Energy)
trust with clients worldwide. increase the value of their businesses by Downstream
JGC works with clients from the early stage of projects, helping them realize their meeting quality and delivery parameters, while Social Infrastructure
LNG and Gas Processing,
plans for facilities at the feasibility study (FS) stage and the front end engineering also generating an appropriate level of profits Oil Refining, Petrochemicals, Pharmaceuticals
and design (FEED) stage before EPC projects get under way. – the essential role of an engineering business. LNG Receiving Terminals Medical
To realize that goal, the JGC Group constantly
Airports
The total engineering business also provides operating and maintenance (O&M)
services after project completion, helping clients increase the value of their improves its capabilities to ensure each project
Industrial Infrastructures
businesses during the entire lifecycle of facilities. is a success by optimizing quality, cost and
Non-ferrous
delivery and appropriately managing diverse
risks.
Quality

Project Execution Flow

Optimize
FS FEED Engineering Procurement Construction O&M

Cost Schedule

Functional Materials Manufacturing The title of this segment has been changed from Catalyst and Fine Chemicals Business.
Catalysts and Fine Ceramics Fine Ceramics
Catalysts and Fine Chemicals
This business uses particle control technology and production Catalysts Fine Ceramics
management technology to produce and sell catalysts used in oil Oil Refining Semiconductor, Automotive,
refining and petrochemical manufacturing processes, catalysts that Petrochemicals Telecommunications, Industrial
Environmental, etc. Equipment, Medical, Space, etc.
protect the environment, and fine chemicals.
Fine Ceramics Fine Chemicals
This business makes and sells a wide range of fine ceramics IT and electronic materials, Optical
products using materials evaluation and modification technology that materials, Cosmetic materials, etc.
harnesses the mechanical and electrical properties of ceramics. Engineering Ceramics Honeycomb-type DeNOx Catalyst

5 JGC Report 2018

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 Targeting Sustainable Growth Value Creation The JGC Group’s Strengths and Management Base Environment and Society Initiatives Management Structure Data Section

2 JGC STORY
Growth Trajectory
JGC has constantly transformed its business in
response to changing times.
Tireless efforts to overcome shifts in our operating
environment have supported JGC’s growth to this day.
Since the 1950s, when the engineering business gained momentum, the JGC Group has achieved growth by constantly adapting to changes in the
market. Today, JGC is actively moving into the infrastructure area to complement its presence in the core oil & gas area, aiming to sustain growth as
an engineering company and meet the expectations of all its stakeholders.

1928 1960s 1970s 1980s 1990s 2000s 2010s

Established Moves into overseas Establishes presence as a Develops and establishes Growth in target area and regions Business expansion driven by growth Strengthens and expands business in the
markets world-class engineering and a global project execution in resource development worldwide infrastructure area while also responding
Net sales by year* Involved in process licensing and
catalyst production business
construction company framework Overcomes a wave of global restructuring and to changes in the oil & gas market
(¥ billions) Makes full-scale move into overseas realignment in the engineering sector Increases sales and profits through involvement
1,000 markets with the execution of oil Wins a string of orders for oil refinery, Starts using overseas resources after Responds to growing demand for gas in the second in resource development projects in oil-producing JGC moves into North America amid advances in shale
refinery construction projects in South petrochemical and gas processing steep gains for the yen undermine half of the 1990s, securing a string of orders for gas countries in the Middle East oil and gas development; also actively participates
America facilities in resource-producing the competitiveness of domestic processing plants and LNG plants Becomes one of the leading EPC contractors in LNG in thermal and renewable energy power generation
countries resources projects
Builds first LNG plant in Brunei Number of projects declines
due to global recession
triggered by the collapse of

1950s
Lehman Brothers
Increase in LNG
demand following
High crude oil price
the Great East Japan
drives growth in
Earthquake
Steep drop in projects in Asia due to capital investment by
the currency crisis resource-producing
Middle East becomes the main countries in the
500 Engineering business Middle East and other
Dramatic decline in market
takes off projects due to global regions
recession
Constructs oil refineries and Fiscal year ended
March 2018
petrochemical plants in the domestic
market, supporting Japan’s rapid 722,988
economic growth million yen

0
1950 1960 1970 1980 1990 2000 2010
1960 1973 1980 1987 1991 2001 2005 2015
OPEC established First oil shock, fourth Arab-Israeli War, Iran-Iraq War (ends 1988) Black Monday Gulf War September 11 Terror Kyoto Protocol comes into effect Paris Agreement adopted
floating market system adopted Attacks
Key Developments
1962 1979 1985 1997 2003 2008 2011
Japan liberalizes imports of crude oil Second oil shock Plaza Accord Asia currency crisis Iraq War Collapse of Great East Japan Earthquake
Lehman Brothers

*Non-consolidated figures used until fiscal year ended March 1999, consolidated figures used from fiscal year ended March 2000.
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3
JGC STORY
JGC STORY Four key strengths underpinned by
a powerful business base help
Value Creation Process the JGC Group maximize value creation.
JGC has achieved sustained growth through its total engineering business and functional materials manufacturing business,
which generate profits that outperform levels at peers, and through active efforts to tackle issues faced by society.

JGC Group’s strengths

Total Engineering Business Functional Materials Manufacturing Business

JGC’s Sustainable Growth

Advanced
Business portfolio manufacturing
Recognized Engineering covering a wide
Project
technology Economic value
Social value
Management
Social Issues Technologies range of area
Capabilities that addresses generated created
and markets global needs
Operating margin 10-year average Realize a sustainable,
Global warming

8
low-carbon society
P.31 JGC Group’s Strengths
JGC %
Rising energy demand Better access to energy
Management base
3
Average for
domestic peers Contributing to economic and
%
Global economic disparities industrial development in
Internal Capital Social Capital
emerging economies and
Average for

3
Advanced engineering technologies / Highly trusted by oil majors resource-producing countries
Human Client global peers
resources
highly skilled global personnel
base
and state-run oil companies (Based on JGC research) %
P.39 Environmental and Social Initiatives
P.33 Strengthening Human Resources P.37 Strengthening Our Client Base

Strong financial base supporting Emphasizing the importance of suppliers

Financial Supplier
stable project execution as partners in value creation
base base
P.19 CFO Message P.38 Strengthening Our Suppliers Base

Corporate Philosophy: the JGC Way

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4
JGC will generate sustained growth by accurately
identifying trends in the market and strategically
JGC STORY adapting to change
Adapt to Change Changes in the market are both a threat and opportunity for sustained growth. By accurately responding to changes in the market, JGC aims to
reinforce its position as the leading engineering contractor in the oil & gas area while also strengthening and expanding its position in the
infrastructure area, actively extending its reach into target regions and enhancing competitiveness by improving technological capabilities.

Market Characteristics and Developments Our Response Strategy

Ratios by Business Area (adjusted operating income basis*)

Wider use of renewable energy Reinforce the Business Portfolio
Rising share of energy generated from renewable sources as Establish a broad, balanced
countries work towards targets set in the COP 21 Paris
business portfolio that is not
Agreement
Strengthen and expand JGC’s 2020 2025
Fluctuations in resource prices
solely dependent on oil & gas
presence in the infrastructure field 2015 FY
FY
FY
area
Changes in resource prices (crude oil) affect our operations
Actively target renewable
energy projects
Rising demand for energy ●Oil & Gas 87% 75% 60%
Demand for energy is projected to increase worldwide, driven by Strengthen competitiveness
population growth and rising standards of living in emerging economies Strengthen and expand and increase orders in ●Infrastructures 5% 10% 20%
the offshore oil & gas
operations in the core oil &
Changes in demand structure for petroleum products and petrochemical areas ●Manufacturing, etc. 8% 15% 20%
All Markets

gas area
Increasing popularity of electric vehicles expected to reduce
demand for oil-based fuel, but spur demand for oil used to
Expand presence in FLNG, *Adjusted operating income:
generate energy and produce petrochemicals
FPSO and other offshore areas Operating profit plus interest income, dividend income and share of profits of entities accounted for using equity method in each business area.

Growing demand for eco-friendly materials Rapidly develop and commercialize Start volume production of silicon nitride substrates for EV power units
Rising demand for electric vehicle components and materials
related manufacturing technologies Increase production of materials made from silica sol, which has low environmental impact
with low environmental impact

Change and growth in target regions Predict and identify the potential of
Constant changes and growth in target regions due to innovative resource development trends in Actively expand target regions
resource development technologies and shifts in demand structure target regions
Implement strategic marketing activities to drive growth
Changes in competitive environment Establish an order and project
Use global network to
Competitive environment becoming tougher due to emergence execution system that can compete
of new engineering contractors
strengthen cost competitiveness
against emerging contractors
Existing markets New markets

Projects
エンジニアリング becoming increasingly complex
New 技術の進化
projects are likely to be implemented in increasingly challenging
Improve technological capabilities and
Enhance competitiveness by
Technological

increase efficiency to boost competitiveness

innovation

regions and fields, such as extreme natural environments or at sea

harnessing advances in
technology to boost Actively use new technologies such as the modular construction method
Further advances in AI / IoT
IoT/AIの進化
Rapid advances in AI / IoT technology could lead to major technological capabilities
changes in EPC execution Use AI / IoT to reduce costs and delivery times

Transportation of a large-scale module

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 Targeting Sustainable Growth Value Creation The JGC Group’s Strengths and Management Base Environment and Society Initiatives Management Structure Data Section

Message from the Chairman & CEO and the President & COO

Pursuing sustainable growth-responding

After emerging from several difficult years, the plant market continues to recover. Here, the chairman & CEO
and president & COO report on relevant measures. They focus on the JGC Group market strategies and risk

to market changes
management against a background of positive change as well as discuss how JGC is reinforcing management
and responding to changes in this environment, in pursuit of sustainable growth.

Representative Director, Since joining JGC in 1979, Masayuki Sato has worked throughout the Company in Representative Director, After joining JGC in 1972, Tadashi Ishizuka was assigned to the Domestic Project
Chairman and Chief Executive Officer (CEO) finance and accounting. He has been in charge of finance for projects in the Middle President and Chief Operating Officer (COO) Construction Division before being transferred to a role in overseas project

Masayuki Sato Tadashi Ishizuka

East, North Africa, Southeast Asia and CIS countries. He was appointed Director in June management. He was Managing Director and Senior General Manager of the Project
2010. He served as Managing Director, Senior General Manager of the Corporate Operation Services Division from June 2008. He was appointed Senior Managing
Administrative & Financial Affairs Division, and Chief Financial Officer from July 2011, Director in 2010 before being promoted to the role of Executive Vice President and
and was appointed Executive Vice President and Director in June 2012. Since June Director in June 2011. He became Senior Executive Vice President in February 2017,
2014, he has held the positions of Representative Director, Chairmanand and CEO. and was appointed President and COO in June 2017.

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 Targeting Sustainable Growth Value Creation The JGC Group’s Strengths and Management Base Environment and Society Initiatives Management Structure Data Section

future project leaders. In particular, our net loss in fiscal 2016 underscored myself took part in this project from the proposal stage, and we spent some
1 Market environment and company situation 2 Measures for higher performance
the urgent need for more robust project management. Steps I have taken time broadly assessing risks. Our accumulated expertise and experience
■ Masayuki Sato, Chairman & CEO (hereinafter referred as to “Sato”): to sharpen our sensitivity to project risks have included promoting changes ■ Sato: As crude oil prices have topped US$70 a barrel this year, we from the Ichthys LNG and Yamal LNG projects were applied in the evalua-
The first decade of the 2000s saw considerable capital investment in in awareness (among executives and employees alike) and risk profiling. sensed that international oil companies (IOCs), the oil majors, and national tion of construction methods for module fabrication. We took the utmost
oil-producing countries, spurred by rising crude oil prices from factors such On the basis of our return to profitability in fiscal 2017, I have concluded oil companies (NOCs), the state-run oil companies, are becoming more care in risk profiling.
as economic growth in emerging countries. Seizing this opportunity, we won that these measures have gradually spread across the company. However, open to capital investment. Large LNG projects are good example, an area ■ Sato: As for fiscal 2018 earnings forecasts, we expect net sales, operat-
orders for a good number of oil and natural gas projects, including LNG with factors such as a 6.2% gross profit ratio and loss on an Algerian where the market has been stagnant for years. We see signs that these ing income, and ordinary income on the same level as in fiscal 2017. Our
projects. Sales and profit rose accordingly. From project preventing us from meeting our full-year projects are now resuming, driven by increased gross profit ratio is also expected to be compara-
autumn 2014, however, crude oil prices started to earnings forecast, we still have work to do before LNG demand in China, India, and Southeast Asia. ble, at 6.4%, due to factors such as projects that
drop, which curbed capital investment by clients A turning point for we have reached a level we can be content with. Refinery and petrochemical investment continues Stronger incurred a loss in fiscal 2017. Among the projects
and led to a period of weakness in the plant performance growth ■ Sato: Since the plant market slowdown, we have to rise in Southeast Asia. The tide has turned and risk mitigation awarded to us during the downturn in the plant
market. Orders received declined, the plant missed our targets for new contracts over the past the plant market is emerging from a long slump. market, some have little leeway in terms of profit
business worsened, and we recorded a net loss in three years. In fiscal 2015, we recorded ¥320 Looking forward to a full market recovery, we aim or loss. This makes it essential that we strive even
fiscal 2016. Clearly, times were tough for us. Yet when the fiscal 2017 billion, followed by ¥500 billion in fiscal 2016 and ¥550 billion in fiscal to secure JGC’s highest level of orders ever, at ¥1 trillion (with ¥850 harder to strengthen project management. Net income attributable to the
results were in, income and profit were up year-on-year, marking a return 2017. Outstanding contracts at the end of fiscal fiscal 2017 dropped below billion overseas and ¥150 billion domestically). Attaining it means owners of the parent is projected at ¥10 billion, due to an expected
to profitability. We met our initial forecast and maintained a dividend payout the ¥900 billion mark. One of our highest priorities is to once again meet continuing to pursue projects with adequate margins and, as I mentioned increase in the effective tax rates applied. Accordingly, a dividend of ¥12
of ¥25 per share. As rising crude oil prices continue to turn the tide toward our expectations for new contracts. We recognize that in our current earlier, raising the bar in new contracts. per share is planned, following the target dividend payout ratio (30% of net
plant market expansion, I believe we stand at a significant point for position, we must significantly raise the bar in total orders received. ■ Ishizuka: As we see signs of a turnaround in the planning of large LNG income attributable to owners of parent).
performance growth. ■ Ishizuka: In spite of the difficult market conditions, JGC has produced plants, it has been truly momentous for JGC to be selected for the first of ■ Ishizuka: Effective project execution is a matter of mitigating risk. We
■ Tadashi Ishizuka, President & COO (hereinafter referred as to “Ishizuka”): steady results. We have grown in oil and gas area, taken a strategic these opportunities: Shell’s LNG Canada project. LNG projects represent a have seen positive results from the changes in awareness and risk profiling
Since my appointment as President & COO in June 2017, it has been a approach to meaningful advances in infrastructure and secured noteworthy segment where JGC is among a limited number of EPC contractors that we began emphasizing last year to sharpen our sensitivity to project
year of taking on the key tasks of “strengthening project management”, projects, including FLNG (Floating LNG) in Mozambique and solar power qualified to participate. Fully committed, we leverage superior resources in risks. This will remain a focus of ours in fiscal 2018, with the goal of it
expanding into the offshore and infrastructure sectors, and cultivating plants in Vietnam. Although we have fallen short of our target in new these projects, including a wealth of experience and unmatched technolo- contributing to meeting our full-year earnings forecasts.
contracts overall, the type of projects won has been very significant. gies. The client’s final investment decision for the LNG Canada project is
Net sales, net income, and gross margin by year
expected to be made within 2018. Considering the plant market in fiscal
Net Sales Net Sales Net income (loss) attributable to owners of parent Gross margin (%)
(Billions of yen) 2018, including this project, there is also a
Orders received (consolidated)
1,000 chance we may surpass our ¥1 trillion contract
(Billions of yen)
800
target. Overseas EPC group companies have 1,200 1,000
Raising the bar higher than ever in new contract volume (Target)
Net income (loss) also become more adept at securing orders. I 1,000
600 attributable to
owners of parent think we are in precisely the right position to 818.1
769.6
(Billions of yen) 800
400 further raise this target.
8.3%
6.6% 6.2% 50 600 547.8
506.2
200
6.4% ■ Sato: Still, LNG Canada is a “lump-sum”
30
0.2% 400 320.6
10 contract, and we recognize that monetary
0
-10 amounts for this size of project do carry consid- 200
-30
erable risk. 0
2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018 (FY)
(projected) (FY)
■ Ishizuka: Our management officers including

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■ Sato: What is fundamental in creating value for stakeholders is sound

3 Reinforcing management to create value
corporate governance. We have enacted measures to strengthen corporate
■ Sato: By its very nature, our work in the EPC business area fulfills a direct governance from a variety of standpoints, such as by making the Board of
role in creating value for society and the environment. The issues we can Directors more effective. Among these measures, Shigeru Endo and
help solve through JGC business, and the social and environmental value Masayuki Matsushima lend an impartial perspective as JGC’s outside
that is created, will provide greater access to energy in a world where board directors, sharing their thoughts on risk and on challenges to
energy needs are growing. By contributing to economic and industrial sustainable growth for the company. They provide valuable opinions and
development in emerging economies and resource-producing countries, are contributing toward steadily reinforcing corporate governance.
we play a role in bridging the economic gap between developed and ■ Ishizuka: Viewing the plant market from a regional perspective, we make a difference is promoting hydrogen in support of a sustainable,
developing countries. This also calls for fostering a sustainable, low-carbon JGC Business and Management Base anticipate such development to spread into Africa, Central Asia, and low-carbon society. Ammonia is viewed as the most economically
society. other areas with emerging economies. JGC has been cultivating the viable hydrogen energy carrier, and we are currently developing an
Functional
Total
■ Ishizuka: More than ever, I believe that further promoting this social and Materials North American and East African markets for ammonia synthesis process.
Engineering
Manufacturing
Business
Turning challenges in ■ Ishizuka: In functional materials manufactur-
environmental value will require us to hone our strengths in the total Business several years now, and we will continue this
engineering and functional materials manufacturing businesses, and to trend. Although we can expect a more competi- ing, a JGC domestic group company involved in
reinforce a variety of strategic resources that give us a competitive edge.
Management base
tive business environment due to the presence
the business environment the production of fine ceramics possesses
Internal Capital Social Capital of contractors from emerging economies, our into opportunities outstanding and internationally acclaimed

EPC business: Human resources Client bace highly cost-competitive overseas EPC group production technology for power unit substrates
● ●

●
Financial base ●
Supplier base companies will fulfill an instrumental role. in electric vehicles, which may contribute to the popularization of
directly creating value for society ■ Sato: We recognize that another key area of endeavor where we can these vehicles.
Corporate Philosophy JGC Way
and the environment ■ Sato: We can view future changes in the
Strategies responding to market characteristics and changes
market environment as both threats and
Market characteristics and changes Strategies opportunities. Our achievements and
4 Toward sustainable growth
■ Sato: When we consider that from among these business assets experience demonstrate how we should
Wider use of renewable energy
employees form the primary resource of EPC companies, we realize that ■ Sato: JGC has been in the global engineering business since the anticipate market changes, make strategic
Fluctuations in resource prices
we must focus our efforts on human resource development. JGC oversees 1950s. Though this business inherently carries considerable risk, we moves in preparation and turn threats into
a workforce of about 10,000 individuals with superior engineering skills have enjoyed sustainable growth throughout our corporate history by Rising demand for energy Reinforce the Business Portfolio opportunities, leading to sustainable
and specializations. For this diverse workforce, which includes many facing and overcoming risks of all kinds. It is our obligation to Changes in demand structure for growth.
All Markets petroleum products
nationalities, a growing number of female specialists, and people who are stakeholders to maintain this sustainable growth. Yet the market ■ Sato: ■ Ishizuka: We will be deeply grateful
Growing demand for eco-friendly
physically challenged, we will continue to expand our training system to environment for the engineering business inevitably changes over materials for the continuing support of all JGC
develop technical capabilities and expertise as we ensure time. From the standpoint of the energy demand structure, for Change and growth in target stakeholders.
regions
employee-friendly environments and maintain a high level of motivation. example, although we do not anticipate sudden changes in the Actively expand target regions
Changes in competitive
■ Ishizuka: An EPC business relies on the cooperation of joint venture dominance of fossil energy sources such as natural gas, we can be environment

partners, equipment manufacturers, subcontractors, and all of our sure that renewable energy will gradually come to occupy a greater
Projects becoming increasingly Improve technological
business partners. It is also essential that not only JGC but also our share. We have already broadened the scope of our business in oil and Technological complex capabilities and increase
innovation efficiency to boost
partners and suppliers adopt the stance of increasing value across the gas area and stepped up efforts to expand into power generation area Further advances in AI / IoT competitiveness
supply chain. We will continue taking steps toward this end. that includes renewable energy. This preparation is already underway.

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CFO Message

as strengthening our core EPC business, which is focused on the oil & Shareholder returns
gas and the infrastructure areas, and expanding the functional
materials manufacturing business, which is led by Group companies; To ensure a clear stance on shareholder returns, the JGC Group allocates
and second, working to secure projects with adequate margins and profits based on a dividend payout ratio target, while also taking into
Director, Executive Vice President and CFO carefully controlling risk to maintain those margins. account the need to maintain the shareholders’ equity ratio and retain
Senior General Manager, Corporate Administrative &
Financial Affairs Division
funds to invest in growth.

Kiyotaka Terajima Under our Beyond the Horizon medium-term business plan, we are putting

Stance on allocating cash reserves greater emphasis on capital efficiency. We are aggressively investing in
growth, but we are also aiming to increase shareholder returns in line with
After joining JGC in 1981, Kiyotaka Terajima worked
in the Legal Department, where he was involved in The JGC Group has to maintain liquidity backed by an adequate level of our dividend payout ratio target, which is 30% of net income attributable to
establishing business alliances and developing
cash reserves. We need working capital to support the smooth owners of parent.
contracts for domestic and overseas projects. He
was appointed Executive Officer and Deputy implementation of large-scale projects and we also have to take into In fiscal 2017, net income attributable to owners of parent fell short of our
General Manager of the Corporate Administrative & account the outlook for annual sales and projected funding requirements start-of-year forecast announced in May 2017. However, after taking into
Financial Affairs Division in 2014, Director,
Executive Officer and Senior General Manager of the
over the medium and long term. account the Group's financial position and other factors, we decided to pay
same division in 2016, and Director, Senior In October 2017, we issued ¥50 billion in straight corporate bonds. The a dividend of ¥25.00 per share for fiscal 2017, the same as our
Executive Officer and Senior General Manager of the
money will be used to offset the expected costs associated with a number start-of-year dividend forecast.
same division in 2017. He was appointed to
Executive Vice President and CFO in April 2018. of unprofitable projects that occurred in fiscal 2016 and to step up debt For fiscal 2018, we forecast net income attributable to owners of parent of
repayments at subsidiaries. We will also use some of the funds for working ¥10 billion, reflecting an expected increase in tax payments. Based on that
capital to implement large-scale projects that are likely to lead to major forecast and our dividend payout ratio target, we plan to pay a dividend of
orders in the future. As of March 31, 2018, cash and cash equivalents ¥12.00 per share for fiscal 2018.
totaled ¥235.3 billion, which is an appropriate level of cash reserves to
support the Group’s operations.

Maintaining a Sound Financial Base and

Investing in Growth Cash and cash equivalents, and shareholders' equity ratio (last five years)

(Billions of yen) 60.7 (%)

59.1 57.6
Basic aim of financial strategy JGC needs to retain the trust of clients and ensure large-scale projects
400
385.2 53.8 60

are implemented smoothly. From that perspective, as an engineering

50.2 297.7
The basic aim of our financial strategy is to appropriately allocate the company responsible for clients’ major capital investment projects, JGC 40
247.9 235.3
Group’s financial resources generated by the core total engineering has to maintain a sound financial base that is resilient to fluctuations in
185.6
200
business. Profits from the business are used to fund sustainable financial markets. Given those demands on our business, we aim to
20
business expansion, which increases corporate value and helps to meet ensure the shareholders’ equity ratio remains above 50%. As of March
the expectations of shareholders and other stakeholders. 31, 2018, the ratio was 57.6%, underscoring the Group’s continued
0 0
Our five-year medium-term business plan, Beyond the Horizon, which solid financial position. 2013 2014 2015 2016 2017 (FY)

runs from the start of fiscal 2016 to the end of fiscal 2020, includes Our ROE target is 10% or higher. We are working to achieve that target Cash and cash equivalents (Billions of yen) Shareholders' equity ratio (%)

targets for the shareholders’ equity ratio and return on equity (ROE). in two key ways: first, efficiently using capital to invest in growth, such

19 JGC Report 2018 20

 Targeting Sustainable Growth Value Creation The JGC Group’s Strengths and Management Base Environment and Society Initiatives Management Structure Data Section

Chapter 2 Total Engineering Business

Value Creation
This chapter looks at the JGC Group’s value creation model through measures Oil & Gas Area
and projects being implemented in the total engineering business and the
functional materials manufacturing business.
Business Overview

Despite some uncertainties, the operating environment in the oil & gas area improved in fiscal 2017, supported by moves in oil and gas-producing
countries to restart capital investment programs due to the stable crude oil price since 2016. In the oil & gas area, the EPC business worked to
establish a firm position in offshore projects and improve project execution capabilities. With demand for energy likely to continue increasing, spurred
by population growth and rising living standards in emerging economies, we expect investment in major LNG projects and other facilities to gain
momentum again.

Orders Received in Fiscal 2017

Major orders in fiscal 2017 included a Floating Liquefied Natural Gas the LNG field and client recognition of our strong project management
(FLNG) facility offshore the Republic of Mozambique and a large-scale capabilities and engineering technologies. We also won an order to build
LNG plant construction project in the US (order amount to be booked in a natural gas processing plant in Indonesia with subsidiary JGC Indonesia.
2019). We secured the orders on the back of our leading track record in

Projects Under Way in Fiscal 2017

Russia
Yamal LNG Project

Business Segment Earnings Highlights for the Last Five Years

Segment Sales Segment Profit (Loss)

(Billions of yen) (Billions of yen)

900 70
62.3 JGC is currently involved in one of the world’s largest LNG plant
828.4 Total Engineering Business Total Engineering Business
construction projects in Sabetta in Russia’s Yamalo-Nenets Autonomous
800 Functional Materials 50 Functional Materials
Manufacturing Business 44.0 Manufacturing Business District.
745.0
Project Overview
30
Plant facilities designed to operate in the extremely cold environments,
700 670.0 23.5 Client Yamal LNG
624.8
643.3 module transportation via the Northern Sea route using icebreakers, and
11.5 challenging construction conditions in the Yamal peninsula, which is Location Sabetta, Yamalo-Nenets Autonomous District, Russia
600 10
6.1 7.1
4.2 3.7 3.5 above the Arctic Circle, combine to make Yamal LNG a very tough project. Capacity 16.5 million tons / year (5.5 million tons x 3 trains)

50 37.1 37.4 37.6 39.9 42.1 0 Despite those challenges, shipments from the plant’s first train left Contract type Hybrid lump-sum and cost-reimbursement contract
Yamal as planned in December 2017. JGC is currently drawing on all its Project
-29.3 Joint-venture group headed by Technip FMC (France), with JGC and
0 -30 resources to complete the second train before the end of 2018 and the implementation
2013 2014 2015 2016 2017 (FY) 2013 2014 2015 2016 2017 (FY) Chiyoda Corporation (Japan)
structure
third train in the first half of 2019.

24
 Targeting Sustainable Growth Value Creation The JGC Group’s Strengths and Management Base Environment and Society Initiatives Management Structure Data Section

Australia USA
Ichthys LNG Project USGC Ethylene Project

As the operator of the Ichthys LNG Project, the first large-scale LNG JGC was awarded an order to construct the US Gulf Coast (USGC) ethylene
project to be undertaken by a Japanese company, INPEX CORPORATION plant in 2013. The plant has one of the world’s largest gas crackers fed by
commissioned a joint venture group headed by JGC and including KBR of Project Overview shale gas (at time of order) and is the first large engineering, procurement
the U.S. and Chiyoda Corporation of Japan to carry out the Engineering, Client Ichthys LNG and construction (EPC) project won by JGC in the US. JGC worked with
Project Overview
Procurement and Construction (EPC) work. Location Darwin, Northern Territories, Australia
leading US engineering firm Fluor on EPC execution. The project faced a
A module construction method was adopted for this project, with modules number of challenges, including worse-than-expected weather conditions Client Chevron Phillips Chemical
8.9 million tons / year
built at fabrication yards and transported onsite. Project execution and a shortage of skilled labor due to the shale oil and gas boom in the Location Baytown, USA
Capacity (LPG: 1.6 million tons / year, condensate: 100,000 barrels / day (peak
therefore required a high level of expertise to manage construction. The output)) US. Despite those issues, the project was completed in December 2017 Capacity 1,500,000 T/Y
first train and the second train were completed in 2018. Contract type Hybrid lump-sum and cost-reimbursement contract and production started in March 2018. Contract type Hybrid lump-sum and cost-reimbursement contract
Project Building on that success, JGC is now actively targeting the large number Project
Joint-venture group headed by JGC, with KBR (US) and Chiyoda
implementation of planned investments in LNG and gas chemical plants in the US that will implementation Joint-venture group headed by JGC with Fluor Corporation (US)
Corporation (Japan)
structure use local price competitive gas. structure

Fiscal 2017-2018: Orders Received and Projects Under Way in Projects Order Order
the Total Engineering Business Under Way Received in Received in
Mozambique Fiscal 2017 Fiscal 2018

Coral South FLNG Project

1

19

12 14
10
9 11
6 13
16 5
7
4
18
3 8

17
2
15

JGC secured an order in June 2017 to construct a Floating Liquefied

Natural Gas (FLNG) facility offshore Mozambique. It is the world’s fourth
Project Overview
FLNG facility to reach Final Investment Decision (FID) and the first in Client Plant type Country/region Client Plant type Country/region
Africa. The construction of FLNG plants is a highly complex process Client Coral FLNG
1 Yamal LNG LNG plant Sabetta, Russia 11 Karumai West Solar Solar power plant Iwate, Japan

with numerous technical challenges. Currently, only JGC and one other Location Coral gas field, offshore, Republic of Mozambique 2 Ichthys LNG LNG plant Darwin, Australia 12 Muroran Biomass Power Generation Biomass power plant Hokkaido, Japan
3 Petronas Floating LNG plant Sabah, Malaysia 13 Sumitomo Chemical Chemical plant Ehime, Japan
contractor worldwide have experience in FLNG topside work*. Capacity approx. 3.4 million tons/year
4 Saudi Aramco Oil refinery Jazan, Saudi Arabia 14 Jordan Cove LNG LNG plant Oregon, US
In Mozambique, one of the world’s major offshore gas fields was Contract type Lump-sum contract 5 Kuwait National Petroleum Company Oil refinery Ahmadi, Kuwait 15 Coral FLNG SA Floating LNG plant Coral, Mozambique
discovered in recent years and multiple LNG and other gas-related Project 6 Sonatrach
Gas boosting separation
and compression facilities
Hassi R’Mel, Algeria 16 Sonatrach
Crude oil gathering and
Hassi Messaoud, Algeria
processing facilities
Joint-venture group headed by Technip FMC (France), with JGC and
projects are currently under consideration. We hope that this project will implementation 7 Banagas Gas processing plant Awali, Bahrain 17 PT Pertamina EP Cepu Gas processing plant East Java, Indonesia
Samsung Heavy Industries Co. Ltd. (Korea)
serve as our foothold in expanding our operations in the country. structure 8 Sarangani Energy Thermal power plant Sarangani, Philippines 18 Gia Lai Electricity Solar power plant Gia Lai, Vietnam
9 Pacifico Energy Solar power plant Okayama, Japan
19 LNG Canada LNG plant British Columbia, Canada
*True FLNG plants that can be positioned in high seas and with gas liquefaction processing 10 Karumai East Solar Solar power plant Iwate, Japan
capacity of several million tons from a single train.

25 JGC Report 2018 26

 Targeting Sustainable Growth Value Creation The JGC Group’s Strengths and Management Base Environment and Society Initiatives Management Structure Data Section

Saitama Prefecture Wakayama Prefecture

Infrastructure Area Kumagaya General Hospital Project Azalea (pharmaceutical plant)

Business Overview

In fiscal 2017, the operating environment in the infrastructure area saw a large number of overseas power generation projects move into the
execution phase in China, India, Southeast Asian countries and other emerging economies, where population growth and rising living standards are
spurring increased demand for electricity. In Japan, solar power, biomass and other renewable energy projects were implemented and there was
sustained investment in pharmaceutical plants, hospitals and other facilities in the life sciences area.
Under the current medium-term business plan, we are actively working to establish our business in the infrastructure area as a second key source of
earnings in the core EPC business. Specifically, we are focusing on securing more orders in three areas – energy infrastructure such as power plants,
Rendering of completed hospital Rendering of completed plant
industrial infrastructure such as non-ferrous metals refining plants, and social infrastructure such as pharmaceutical plants, medical facilities and
airports.
In May 2017, JGC was awarded a contract to redevelop Kumagaya General In June 2017, JGC was awarded an EPC contract by integrated
Hospital in Kumagaya, Saitama by Hokuto Social Medical Corporation. pharmaceutical manufacturing company Tamura Pharmaceutical for a new
Construction work started in June 2017. solid formulation plant. The new plant will make and supply over-the-counter
Orders Received in Fiscal 2017 The project is located in the north of Saitama Prefecture, which has been medicines and pharmaceuticals for external clients and strengthen Tamura
affected by a lack of healthcare provision. The upgraded hospital will Pharmaceutical’s manufacturing framework. JGC is currently working towards
In fiscal 2017, we won more orders in Japan for solar power plants, plants in Japan, we intend to actively target orders for solar power plants have the latest technologies and medical equipment, allowing it to provide an end-June 2019 completion date.
continuing the trend from fiscal 2016. In the pharmaceutical area, where in Vietnam and other markets in Southeast Asia. We plan to roll out advanced medical care. A new integrated PET* treatment center opened The new plant is designed to comply with GMP* standards in both Japan and
we have more than 20 years of experience, JGC was awarded orders to marketing activities in the infrastructure area overseas to secure more in July 2018 ahead of the hospital's full operational date. We plan to start overseas. People and material flows will be completely separate to prevent
build an antibody drug ingredient plant and a pharmaceutical plant. In the orders for energy infrastructure such as solar power plants, as well as construction of the new hospital buildings in 2019 to complete the project contamination risk and automated handling systems will improve speed
healthcare area, we secured orders to construct new general hospitals orders for chemical plants and other industrial infrastructure in Southeast in time for the grand opening in autumn 2020. of operation and productivity, ensuring Tamura Pharmaceutical can rapidly
and expand existing hospitals. Overseas, JGC was awarded one of Asia and social infrastructure such as new airports currently being supply large volumes of high-quality pharmaceuticals to external clients.
Vietnam’s largest-ever solar power plant orders. Vietnam has launched a planned for West Asia and Southeast Asia.
feed-in tariff system to promote wider use of renewable energy. Project Overview Project Overview
Leveraging our expertise from the delivery of numerous solar power Client Medical Corporation Kumagaya General Hospital Client Tamura Pharmaceutical

Location Kumagaya, Saitama Prefecture Location Hashimoto, Wakayama Prefecture

Capacity 310 beds Capacity 1.5 billion tablets/year

Contract type Lump-sum contract Contract type Lump-sum contract

*Integrated positron-emission tomography (PET) treatment center: An oncology facility *Good manufacturing practice (GMP): A set of international standards for quality assurance
equipped with advanced medical equipment such as radiation therapy systems and cutting- in pharmaceutical manufacturing. GMP standards cover all elements of the manufacturing
edge PET scanners that can effectively detect early signs of cancer. process, from ingredient delivery and manufacturing through to product shipment, to ensure
Projects Under Way in Fiscal 2017 product safety and meet certain quality requirements.

Vietnam Hokkaido Prefecture Okayama Prefecture

Mega-solar Power Generation Plant Biomass Power Plant Mega-solar Power Generation Plant

In 2016, JGC was awarded an EPC contract by JXTG Nippon Oil & Energy In May 2017, JGC secured an order to construct one of Japan’s largest
Corporation to construct one of Japan’s largest biomass power generation mega-solar power plants in Okayama Prefecture. The plant will have an
In March 2018, JGC and its subsidiary JGC Vietnam were awarded a plants (output of approximately 74.9MW) in Muroran, Hokkaido. As output of 257.74MW, equivalent to the annual electricity consumption of
contract by Gia Lai Electricity a subsidiary of the TTC Group, to construct the project operator, JGC will also support the plant’s safe and stable roughly 81,000 households. JGC is currently working towards delivery in
a mega-solar power plant with output of 49MW (equivalent to the annual operation. Since starting construction work in August 2017, JGC has been autumn 2019.
electricity consumption of about 47,000 households in Vietnam). JGC and pushing ahead with engineering work, such as installing equipment at JGC has not only undertaken the EPC work for a number of mega-solar
its subsidiary are now working to complete the project by autumn 2018. the plant in summer 2018, aiming to complete the project in time for the power generation plants domestically, but has also operated two such
The Vietnamese government formulated its 7th Power Development Plan planned start of commercial operation in spring 2020. facilities, providing the company with extensive experience and know-how
(PDP7) in 2011 and the country is promoting increased use of renewable in this area.
energy, with a plan to lift the generation capacity of solar power to
Project Overview Project Overview Project Overview
12,000MW by 2030. Using the order as a foothold, we intend to make
an all-out move into the power generation area in Vietnam’s energy Client Gia Lai Electricity Client Muroran Biomass Power Generation Client Pacifico Energy

infrastructure market. Location Krong Pa District, Gia Lai Province, Vietnam Location Muroran, Hokkaido Prefecture Location Mimasaka, Okayama Prefecture
Capacity approx. 49MW (AC) Capacity approx. 74.9MW Capacity approx. 257.74MW (AC)
Contract type Lump-sum contract Contract type Lump-sum contract Contract type Lump-sum contract

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 Targeting Sustainable Growth Value Creation The JGC Group’s Strengths and Management Base Environment and Society Initiatives Management Structure Data Section

Functional Materials Manufacturing Business Chapter 3

The JGC Group’s Strengths
and Management Base
Business Overview

The JGC Group has a functional materials manufacturing business, in addition to its core total engineering business. Functional materials
manufacturing is divided into the catalysts and fine chemicals, and the fine ceramics areas.
JGC is unusual among global engineering contractors in that it focuses on engineering but also has a presence in manufacturing. However, the
In this chapter, we explain the four key strengths that underpin the Group’s value creation,
functional materials manufacturing business has a different business cycle to the total engineering business and it creates unique products with good
as well as steps we are taking to reinforce the management base that supports those
prospects for stable profits, which means it plays a key role in supporting the Group’s sustained growth. Given that position in the JGC Group, we
strengths.
continue to strengthen and expand the business.

*The functional materials manufacturing business includes two consolidated subsidiaries, JGC Catalysts and Chemicals Ltd. and JAPAN FINE CERAMICS CO., LTD. and one equity-method affiliate,
Nikki-Universal Co., Ltd.

Business Conditions in Fiscal 2017

In the catalysts area, we implemented initiatives focused on winning used in semiconductor cleaning equipment and OLED photolithography
back market share in Japan, increasing sales in export projects, and equipment, driven by wider use of AI, IoT and other new technologies in
maintaining and increasing collaboration with clients. Those efforts led the domestic market. As a result, the functional materials manufacturing
to growth in sales of FCC catalysts. In the fine chemicals area, demand business reported record-high segment profit of ¥7.1 billion in fiscal
for cosmetics ingredients and functional coating materials was firm. 2017.
In the fine ceramics area, we received strong orders for components

Catalysts and Fine Chemicals Fine Ceramics

We supply various types of catalysts for different applications (oil refining, We supply a range of fine ceramics products that harness the mechanical
chemical, environmental, etc.) that contribute to the development of and electrical properties of ceramics. Developed using unique
highly efficient manufacturing processes, helping to mitigate issues technologies, our products meet the needs of clients in various high- 31 JGC Group’s Strengths

related to the environment, energy and resources. One example is fluid tech industries. One of the products we supply is silicon nitride substrate, 33 Strengthening Human Resources
catalytic cracking (FCC), where JGC has one of the highest market which is a key material for electric vehicle (EV) power units and other 37 Strengthening Our Client Base
shares worldwide for FCC catalysts. We also help to enhance comfort for products and is projected to benefit from growth in demand. JGC has 38 Strengthening Our Supplier Base
consumers by supplying fine chemicals used in everyday products such developed a unique, advanced manufacturing process that reduces the
as cosmetics and LCD displays. cost of production and improves material performance compared with
existing processes. We aim to leverage those strengths in manufacturing
to capture a high share of the silicon nitride substrate market.

Catalysts for the oil refining process (FCC catalysts)

Cosmetics ingredients
(Inorganic silica beads with Fine ceramics products (Engineering ceramics)
low environmental impact)

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 Targeting Sustainable Growth Value Creation The JGC Group’s Strengths and Management Base Environment and Society Initiatives Management Structure Data Section

JGC Group’s Strengths

The JGC Group’s four key strengths underpin our extensive track record of project implementation in the total engineering business
and our range of unique products in the functional materials manufacturing business.

Total Engineering Business

Track record of more than 20,000 projects in over 80 countries worldwide
Oil Refining Liquefied Natural Gas (LNG)
Engineering Technologies

47 48
Track record* Track record
The JGC Group’s wide range of advanced engineering technologies allows us to
construct and deliver outstanding plants and facilities that help clients maximize
investment returns. Our technologies are also supporting the growing use of
hydrogen and renewable energy.
projects trains
Oil refinery for Star Petroleum Refining LNG plant for BP Berau
Business Portfolio Covering a Wide Range Location: Map Ta Phut, Thailand
Completed: 1996
*Overseas EPC projects
Location: Papua, Indonesia
Completed: 2009

of Areas and Regions JGC has a strong record in the construction of heavy oil cracking JGC has constructed LNG plants with a combined total of 48 trains,
facilities, such as fluid catalytic cracking (FCC) and hydrocracking units. equating to a market share of over 30% on a production capacity basis.
Since it was established in 1928, JGC has built plants and facilities in more than 80
countries worldwide, mainly for the oil and gas industry, but also for other sectors
Ethylene Floating Liquefied Natural Gas (FLNG)
such as power generation, pharmaceuticals, healthcare and non-ferrous metals
Four strengths

42
refining. Our business portfolio, covering a wide range of different areas and

34
Track record Track record

that maximize regions, means we can respond flexibly to changes in the market, helping to
support the Group’s sustained growth.
the creation of social
and economic value
Project Management Capabilities projects Involved in 3 of
Ethylene plant for Chevron Phillips Chemical CGI image of completed FLNG plant the world’s 4 projects
Implementing projects that optimize quality, cost and delivery while also appropriately Location: Texas, US
Completed: 2018
managing various project-related risks, is the key skill for an engineering contractor.
JGC is recognized as one of the best engineering contractor in the world at delivering JGC is recognized worldwide for its ability to deliver ethylene plant The JGC Group is involved in three of the four true FLNG* projects
lump-sum, full-turnkey projects. projects, which are seen as particularly challenging due to the complex currently under way worldwide.
nature of the facilities. *FLNG plants that can withstand high seas in open ocean locations

Functional Materials Manufacturing Business

Large market shares in niche areas backed by unique technologies
Advanced manufacturing technology Catalysts for Oil Refining and Petrochemical Fine Chemicals

that addresses global needs The JGC Group's companies supply catalysts that support highly efficient oil refining and petrochemical
processes. JGC has one of the top market shares worldwide for fluid catalytic cracking (FCC) catalysts.
The JGC Group's companies use nanotechnologies to develop and supply fine chemicals used in
everyday products such as cosmetics and LCD displays, contributing to the comfort of consumers.

Environmental Catalysts Fine Ceramics

The JGC Group’s particle modification technology, materials evaluation and modifica-
tion technology, and advanced production control capabilities allow us to develop and The JGC Group's companies supply flue gas desulfurization catalysts that reduce The JGC Group's companies supply a range of fine ceramics products that harness the
environmental impact and catalysts that remove odors and harmful substances for mechanical and electrical properties of ceramics. Developed using unique technologies,
supply a range of unique products in the functional materials manufacturing field.
home electronics and other applications. JGC’s products meet the needs of clients in various high-tech industries.

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 Targeting Sustainable Growth Value Creation The JGC Group’s Strengths and Management Base Environment and Society Initiatives Management Structure Data Section

Strengthening Human Resources

Basic Stance Human Resources We Aim to Cultivate Outline of Personnel Management

For an engineering company with no assets such as production facilities, people are our most important business asset among the management resources that
support our strengths, such as engineering technology and project management capabilities. We are proactively carrying out initiatives to enhance our training
1. Technology, capabilities, and skills Extensive training system to provide management techniques,
● Advanced technical capabilities and expertise knowledge, and skills through Off-JT, in addition to OJT
system for diverse human resources and improve working conditions.
● Project management capabilities
Off-JT Self-development Cultivation of the
Hiring of human mentality to demonstrate
2. Global business response resources focused OJT organizational strength

Human Resources with a Wide Range of Technical Capabilities and Expertise ● Receptivity toward different cultures and diversity
on diversity
A highly motivational personnel evaluation and remuneration system
Diverse capabilities support the JGC Group’s efforts to create value 3. Demonstration of organizational strength
● Building relationships of trust among employees
● Strong sense of responsibility to complete projects Welfare programs that support a employee-friendly working environment
JGC’s human resources have technical capabilities spanning all of management capabilities to optimize cost, schedule and quality, as well
the various engineering fields required for plant construction projects, as advanced and diverse expertise in areas such as legal/contracts and
including information technology and chemical, civil, mechanical, accounting/taxation.
electrical, control, and safety engineering, and possess project

JGC’s human resources have a wide range of expertise

Training System

JGC conducts the training of human resources with advanced technical approaches: on-the-job training (OJT), off-the-job training (OFFJT), and self-
Project management
Process capabilities and expertise, receptivity to different cultures and diversity, and the development.
Information management
Project HSE mentality required for teamwork by means of a training system based on three
Cost engineering
management Piping
Schedule control
Quality control 21% Engineering
Static equipment
Packaged equipment
■ Off-JT (various training) System
Legal, contracts, accounting,
and taxation
42% Furnace
Rotating equipment
We offer a wide range of training programs, such as programs aimed at knowledge and skills such as technical training, language training, and

9%
Project accounting Corporate affairs division/ providing management skills, including leadership skills, to new and mid- communication/negotiation training.
other Electrical
career employees and management, as well as programs aimed at providing
Instrumentation and
control
Construction/
Civil Enhancing expertise Enhancing management skills Enhancing business skills

Manager
3%
Marketing/ commissioning
Architecture
new business
21% Information and
telecommunications
Division manager training External programs

technology (IT)
Management Overseas company/
4%
Analysis/technical JGC Assessor training Mentor training
Procurement support course domestic
Techno-College*
dispatch training dispatch

Specialist
Diversity Organizational program program
management management
training training English language
training tailored
to each grade

Human Resources We Aim to Cultivate and Outline of Personnel Management Process design,
Role play-based Leadership
Negotiation training

Development rotation
detailed design, Meeting facilitation Negotiation,
training training

Onsite training
project training presentation,
management, professional
JGC employees involved in the engineering business are required to possess human resources both in Japan and overseas, which resonates with the
information and writing, etc.
Staff

Training for employees in

advanced technical capabilities and expertise, the receptivity toward different significant social purpose of the engineering business, not only by hiring new telecommunications Self-management Presentation training
the early stages of
training Training in logical thinking
cultures and diversity that is required to conduct operations in cooperation with graduates in Japan, but also through various methods such as hiring recent technology, etc. their careers
multinational personnel, and the mentality to contribute to the demonstration graduates who have worked for a few years, mid-career hiring, and hiring
of organizational strength, as a JGC employee and as a member of the project persons with disabilities. We also provide labor/benefit programs to create
New employee training
team. worker-friendly conditions and keep our employees highly motivated.
At our head office, we endeavor to hire diverse, outstanding, and motivated *Specialty lectures conducted by employee volunteers with the aim of passing on techniques, skills, and experience from senior staff to young staff

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 Targeting Sustainable Growth Value Creation The JGC Group’s Strengths and Management Base Environment and Society Initiatives Management Structure Data Section

■ Onsite Training System ■ Role Play-Based Training

Preparing our employees for leadership with six-month onsite deployments Learning early on how to optimize entire projects
All new employees hired in the main career track are sent to construction sites plant. Experience gained from the onsite training system is invaluable in their In 2007, we launched a role play-based training course for employees who them the tools and skills to understand and optimize the bigger picture.
in Japan and overseas for six months of onsite training. By actually seeing future roles around the world. have been with JGC for four to nine years to give them experience in preparing
and experiencing the plants that represent JGC’s final products and by being project estimates and negotiating with clients. During the course, which is
involved in the construction phase at an early stage in their careers, our mainly a residential program and lasts for four and a half days, small teams
employees gain an understanding of how the engineering documents they will are given the task of preparing a project quote and proposal documents to win
help create at our Head Office are used in the plant construction process. They a hypothetical order within a set timeframe.
also experience the weight of responsibility related to ensuring quality and The hypothetical projects used in the training are created based on experience
delivering plants to clients on schedule. from many past estimates and projects implemented by JGC, giving our
At overseas construction sites, people from many different countries often work employees a real feel for actual estimate preparation processes, despite
together at a given time. Clients, vendors of materials and equipment, and the Off-JT environment. Every member of a JGC project team is required to
subcontractors involved in plant construction each have their own approaches understand how to optimize entire projects, rather than simply focus on their
and value systems. Even though our new employees are just starting their JGC specific areas. This training is aimed at ensuring employees in the early stages
careers, they need to display the necessary leadership and teamwork skills to of their JGC careers see the importance of taking a broad perspective, giving
ensure onsite staff work together as a team towards the goal of completing the

Fiscal 2017 deployments under the onsite training system (72 employees) Broad perspective
Narrow perspective
(only see own area of responsibility)
Overall optimization

Partial optimization

South Korea（ 18 employees） Japan（ 15 employees）

Kuwait（7 employees）
Bahrain（ 5 employees）

Welfare Programs that Support a Employee-Friendly Environment

Indonesia（ 7 employees）

Australia（ 20 employees） In order to enable all of the employees involved in plant construction work in
the challenging environment overseas to maximize their skills, we create an
environment where employees can maintain their health and work with peace
of mind. We are enhancing our welfare programs through various initiatives to
support health management, as well as enhancement of the leave system.

■ Cultivating the Mentality to Demonstrate Organizational Strength

Building relationships of trust beyond the boundaries of departments and year of employment
It is essential that a relationship of trust is established between the company communication. Groups comprising early-stage employees from different
and employees, and also among employees, in order for each employee to departments who joined the company in different years voluntarily plan
contribute to the demonstration of organizational strength, both as a member and hold various events, such as welcome parties for new employees. We
of JGC and as a member of the project team. promote the establishment of relationships of trust that cross the barriers ■ Home Leave and Medical Examination for Personnel Stationed Overseas
As an initiative targeting employees in the early stages of their careers, of departments and year of employment, by supporting the cultivation of a
from fiscal 2018, we launched the JGC Rapport* System to cultivate the network of people of the same generation. We have a system that allows employees stationed at overseas project sites challenging environment that differs from Japan. We also assist employees in
independence of such employees, with a view toward promoting lively and other locations to take special leave for 9 to 12 consecutive days, once maintaining their health by conducting medical examinations for employees on
every three to four months. The provision of opportunities to take home home leave.
*Rapport
A term in psychology that means “a close relationship of trust.” leave helps to maintain the motivation of employees who live and work in a

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 Targeting Sustainable Growth Value Creation The JGC Group’s Strengths and Management Base Environment and Society Initiatives Management Structure Data Section

Strengthening Our Client Base Strengthening Our Suppliers Base

Basic Stance Basic Stance

Since the 1950s, JGC has been constructing and maintaining plants and other facilities for oil majors and national oil companies in oil- and gas- JGC treats suppliers as partners in value creation, working with them to ensure mutual competitiveness and success through optimum quality,
producing countries, and a wide range of other clients in the energy infrastructure, industrial infrastructure and social infrastructure areas in Japan cost and delivery. We select suppliers based on a fair and comprehensive assessment of factors, such as quality, price, delivery, and technical
and overseas. When our clients decide to invest in new facilities, we put forward proposals that help them increase the value of their businesses and capabilities, while also fully taking into account environmental considerations, human rights, health and safety, and information security during this
work to deliver the best-quality plants and facilities on budget and on time. Our long track record of success has helped us win their confidence, process.
resulting in a strong client base.

Trusted by Oil Majors and National Oil Companies Global Supply Chain

Gaining repeat orders through steady project implementation Emphasizing the importance of suppliers as partners in value creation
By steadily leading projects to completion even under difficult environments, the Company’s engineering technologies and project management capabilities Cooperation with partner companies in countries around the world is essential for plant construction. JGC has created a global supply chain for plant
have become highly valued by oil majors and national oil companies around the world. Due to this strong reputation, we have received more orders for construction thanks to more than half a century of implementing numerous projects overseas. JGC treats suppliers as partners in value creation, working
projects, and by steadily completing these projects, we have established solid relationships of trust that have led to repeat orders from these companies. with them to ensure success through optimum quality, cost, and delivery.

The JGC Group’s General trading companies Financial institutions

The JGC Group’s Main Repeat Clients (Oil Majors and National (Government-Affiliated) Oil Companies) Supply Chain Marketing support, information gathering, etc. Project implementation financing, etc.

[Oil majors] [National (government-affiliated) Oil Companies] Insurance companies

Consulting companies
Insurance for risk hedging, etc.
Algeria Malaysia Vietnam Economic assessments, etc.

EPC Business
Saudi Arabia Kuwait Japan Domestic and overseas Clients
EPC contractors FS FEED Engineering Procurement Construction O&M National oil companies,
Joint-venture partners, etc. oil majors, etc.

Indonesia Bahrain United Arab Emirates

Licensors Subcontractors
Process licensing Construction work

Nigeria Qatar Venezuela

Engineering design subsidiaries Transportation companies
Design work and project implementation support Suppliers Equipment and materials transportation
Equipment manufacturing, materials supply

Featured Projects
Fostering a Culture of Quality

To ensure the quality of plant facilities – JGC’s final products – we have margins. We aim to improve quality while delivering projects on time and
to drive improvements in quality at suppliers in Japan and overseas, maintaining margins. These approaches and initiatives support what we
which make up our supply chain. To achieve that goal, it is important for call a culture of quality, and we work hard on an ongoing basis to ensure
our suppliers to take steps based on their own initiative. At JGC, there that culture permeates throughout our supply chain.
is no trade-off between quality and factors such as delivery and profit
GTL (gas to liquids) plant for Qatar Shell GTL LNG plant for INPEX Oil refining plant for PetroVietnam
Completed: 2012 Completed: 2018 Completed: 2009 TOPICS JGC Quality Forum
On February 5, 2018, we held the 3rd JGC Quality Forum,
which provided partner companies with an opportunity
to share the details and outcomes of initiatives aimed
at fostering a culture of quality and to learn about new
activities for quality enhancement. The forum, which
was held at our Yokohama Head Office, featured a lively
exchange of opinions between at least 200 participants
LNG plant for BP Berau Gas gathering and separation plant for Sonatrach Oil refining and petrochemical complex for Petro Rabigh from 44 client companies and vendors in Japan and
Completed: 2009 Completed: 2013 (a joint venture between Saudi Aramco and Sumitomo Chemical) overseas. Panel discussion in session
Completed: 2008

37 JGC Report 2018 38

 Chapter 4
Basic Stance on ESG

Guided by the Group’s corporate philosophy, the JGC Way (see page 1 for more details), we are targeting sustainable

Environment and Society Initiatives growth in corporate value while ensuring high ethical principles, addressing the needs of society and our clients,
respecting diverse human resources and utilizing a wide range of technologies. We create environmental and social
value in each phase of project implementation and through the operation of plants and facilities after completion.
ESG information disclosure in this report references the Global Reporting Initiative (GRI), fourth generation (G4)
Sustainability Reporting Guidelines and the Sustainable Development Goals (SDGs), in line with the core subjects of
39 Basic Stance on ESG
ISO 26000.
41 Environmental Initiatives
45 Working with Local Communities
47 Human Rights and Diversity

Key Themes JGC Group’s Initiatives Environmental and Social Value Created by JGC

E
Realize a sustainable, Engineering Procurement Construction
　 　 　
Environment

low-carbon society
Environmental factors incorporated into designs Environmental factors taken Environmental factors incorporated
●
Use resources in a rational way (Minimize use of energy, plant materials and equipment, etc.) into account in transportation into construction work Lower emissions of
●
Address climate change issues (Conservation of ecosystems, etc.) greenhouse gases
●
Protect the environment around construction sites Highly efficient facilities
Environmental Initiatives
that use less energy
Related LNG plant construction Propose environmental technologies
P.41-44 SDGs
Promote wider use of renewable energy Support wider use of hydrogen energy

Support economic and industrial Engineering Procurement Construction

　 　 　
development in emerging economies
Collaborate with overseas Select local materials and Select local construction
and resource-producing countries Equipment and facilities
Group companies equipment manufacturers companies
that support industrial

S
●
Work with local communities
development
Social

Actively promote technology transfers

(Transfer to overseas Group companies, local material and equipment manufacturers, local construction companies)

Improve access to energy Growth in energy supply

Social Initiatives
Satisfying rising demand for energy,
Construct various types of energy plants in regions worldwide driven by emerging economies
P.45-47
Contributing to energy security in
resource-importing nations

Respect for human rights Use fair recruitment practices based on human rights
Support diversity within Group organizations Diversity
Build a global supply chain

39 JGC Report 2018 40

 Targeting Sustainable Growth Value Creation The JGC Group’s Strengths and Management Base Environment and Society Initiatives Management Structure Data Section

Environmental Initiatives Common Initiatives in Project Implementation

Basic Stance Incorporate Environmental Considerations into Designs
Economic development and population growth in emerging countries is spurring increased interest in environmental
conservation, protecting biodiversity and other efforts to realize sustainable societies. Based on our belief that The JGC Group works to reduce the energy used by facilities and equipment through process designs that optimize processing flow and equipment
engineering business has an inherent role to play in conserving the environment, we understand that protecting configuration.
nature and ensuring co-existence with the environment are key issues in our business activities. With that in mind, we
implement a range of initiatives to protect the global environment, in line with the principles of our Environmental Policy. TOPICS Optimization Technology for a Bulk Condensate Desulfurization and Distillation System
The JGC Group has developed a technology for the bulk desulfurization of condensate (JUSTTM Condensate), and acquired patents in Japan and overseas. According to
Related SDGs estimates made for a plant, this process will enable a reduction of approximately 50% in the amount of fuel gas used and a reduction of approximately 30% in the amount of
electricity used during plant operations.
As use of natural gas expands due to its low CO2 impact, the use of the condensate, which is obtained in association with natural gas production, will expand as well. This
technology facilitates the process necessary to efficiently use the condensate as a petrochemical material. Accordingly, it is expected to contribute to an overall reduction in
the environmental impact of the energy value chain.
Environmental Improvement Activities by the JGC Group

We believe it is important to solve environmental issues and support the sustainable development of society through its business activities, which also helps
create corporate value and improve the Group’s competitiveness. Based on this thinking, the JGC Group tackles environmental issues directly and indirectly
through its business activities. Incorporate Environmental Considerations into Construction Work

Realize a Sustainable, Low Carbon Society ■ Reduction of Environmental Impact through Efficient Construction Work

We believe that enhancing the efficiency of construction work is during construction work, through the optimization of construction
Rational use of resources Response to the issue of Environmental conservation one of the most important initiatives that an engineering contractor sequences and appropriate resource management, while adopting
climate change around construction sites can undertake, as it can yield benefits such as improved delivery advanced concepts and technologies such as AWP* and IoT.
●
Reduce the quantity of plant ●
Reduce greenhouse gas emissions ●
Treat flue gas and waste fluids management, profitability, and construction safety, as well as benefits in
materials and equipment ●
Save energy appropriately terms of environmental impact, including reductions in CO2 emissions due *AWP: Advanced Work Packaging
●
Recycling of waste ●
Ecosystem conservation to construction machinery and power generation facilities operating for 　Advanced Work Packaging is a project management methodology proposed by the Construction
Industry Institute (CII) in the US and the Construction Owners Association of Alberta (COAA) in
shorter amounts of time.
Canada, with the aim of reducing idle time and improving construction efficiency through the
Based on this policy, the JGC Group will continue to pursue efficiency centralized management (packaging) of designs, materials, and equipment information.

■ Ecosystem Conservation around Construction Sites

Common Initiatives in Project Implementation Projects that Contribute to Greenhouse Gas Reductions
The JGC Group pays careful attention to protecting the natural environments surrounding construction sites and preventing the leakage of pollutants when
Incorporate environmental Incorporate environmental Incorporate environmental LNG plant construction
conducting construction projects for various facilities and equipment in regions around the world.
considerations into designs considerations into transport considerations into ● Lowest fossil fuel CO2 emissions per unit of heat
construction work
● Improve process efficiency ● Optimize transport routes ● Draw up environmental and social TOPICS Targeting Zero Leaks
Development of environmentally friendly technologies
● Save energy etc. impact assessment (ESIA) reports
● Minimize plant materials and ● Take ecosystem conservation into ● SOx and NOx removal systems
JGC takes into account environmental considerations in every
equipment consideration ● CO2 separation, capture and storage technologies
● Treat flue gas and waste fluids phase of plant and facility construction projects implemented
appropriately by the Group in different fields around the world. At overseas
etc. Wider use of renewable energy

E P C
construction sites, which are more difficult to manage
● Construction of solar power plants than sites in Japan, all employees share and implement a
● Development of electrical storage and systems to utilize rigorous approach to site management to prevent any leaks of
distributed power sources contaminants. Our employees, as well as people working for
construction subcontractors, undergo training to encourage a
Use of hydrogen energy
deeper understanding of this management approach. On some
● Development of technologies to utilize ammonia as a hydrogen
Engineering Procurement projects, several thousand onsite personnel participate in the
Construction energy carrier
training program.

Environmental improvement activities through the JGC Group’s business activities Training to increase awareness for prevention of oil spills

41 JGC Report 2018 42

 Targeting Sustainable Growth Value Creation The JGC Group’s Strengths and Management Base Environment and Society Initiatives Management Structure Data Section

Environmental Initiatives

Environmental Assessments of Domestic Construction Sites Contributing to the Wider Use of Renewable Energy

JGC conducts an annual evaluation of environmental performance at its rate is lower than last year, due to a lack of transport vendors or intermediate ■ Construction and Operation of Solar Power Plants
construction sites in Japan based on three criteria: industrial waste recycling processing vendors capable of supporting electronic manifests in some of the
rate, number of contaminant leaks and CO2 emissions per unit of energy. regions where projects were under way. The JGC Group has been involved in the construction of 17 solar power Through these initiatives, the JGC Group will drive wider use of renewable
In fiscal 2017, JGC made good progress, achieving its internal environmental plants, including projects still under way. The combined output of the energy in Japan and overseas and help create a recycling-oriented
targets through concerted efforts across its project sites. Although one leak plants is nearly 700 MW, or enough to power roughly 220,000 households society that addresses issues related to climate change.
incident occurred in fiscal 2017, it was reported immediately to the relevant for one year. JGC is one of the most experienced contractors in Japan’s Under
Environmental Performance Indicators for Domestic Construction Sites (FY) JGC solar power plant projects in Japan Completed
authorities, followed by prompt, appropriate action, essentially preventing solar power plant construction market. In addition to construction work, construction
Environment indicators Units 2013 2014 2015 2016 2017
the JGC Group provides plant operation and maintenance services and 1 Koshimizu-cho, Hokkaido 12 Mimasaka City, Okayama
external damage. Industrial
Result 94.2 94.1 96.3 98.1 97.7
waste recycling ％ is involved in solar power plant operation helping to spur wider uptake of 2 Iwamizawa City, Hokkaido 13 Kitakyushu City, Fukuoka 1
However, CO2 emissions per unit of energy during fiscal 2017 increased (Target) (97.0) (97.0) (98.0) (97.0) (97.0)
rate 2
3
solar power in Japan through its involvement in various phases of solar 3 Kushiro City, Hokkaido 14 Iizuka City, Fukuoka
relative to the previous fiscal year, due to the frequent use of power generators Number of leaks
Result 0 0 0 0 1
of hazardous Leaks power businesses. 4 5 ‌Karumai-machi, Kunohe- 15 Oita City, Oita
at sites without a power supply, an increase in large-scale projects with a high (Target) (0) (0) (0) (0) (0)
substances, etc.
CO2 emissions Leveraging our wealth of experience in solar power plant construction and gun, Iwate 16 ‌Kokonoe-machi, 4 5
proportion of civil engineering work, and an increase in the use of construction Result kgCO2/ 0.58 0.63 0.64 1.43 3.52
per unit of 6 Osato-cho, Miyagi Kusu-gun, Oita
machinery and equipment. energy
(Target) hour (0.9) (0.9) (0.9) (0.8) (0.8) operation in Japan, we are also working with JGC subsidiaries around the
6
Adoption rate world to actively target solar power plant construction projects overseas. 7 Nasushiobara City, Tochigi 17 Soo City, Kagoshima
In terms of the adoption rate of electronic manifests, although the basic of electronic Result ％ - - 79.4 96.0 64.2 8 Futtsu City, Chiba 7
policy is to select vendors that support electronic manifests, the adoption manifests
In March 2018, we received an order for one of the largest mega-
solar power plant construction projects in Vietnam, and are currently 9 Kamogawa City, Chiba 8
12 9
11 10
constructing a power plant that will produce the energy equivalent to the 10 Mihama-cho, Aichi 13

Projects and Technologies that Contribute to Addressing Global Warming

14 15
11 Matsusaka City, Mie 16
annual consumption of 47,000 general households in Vietnam.
17

Expanded Use of Hydrogen Energy

■ Development of Power System Technologies
■ Using Ammonia as a Hydrogen Energy Carrier
Accompanying the expansion of renewable energy power generation to develop new power system technologies, such as the virtual power
There are high expectations surrounding the use of hydrogen, which does not Development of a new process for ammonia synthesis using hydrogen as a raw material in Japan, various challenges have emerged that have an impact on plant (VPP) and solar storage, in order to achieve a balance between
emit CO2 during combustion, in addressing energy diversification and a low- The current issue with ammonia synthesis is the large volume of CO 2 the power system (the system that integrates power generation, continuing the expansion of renewable energy uses and stabilizing the
carbon society, both of which are global challenges. However, due to many emissions from the process of producing hydrogen using natural gas as raw transformation, and transmission, and the distribution of electricity), power system.
issues regarding both cost and safety involved in transporting and storing material. including output fluctuations and surplus power. The company is working
gaseous hydrogen, it must be converted into an energy carrier such as In order to reduce the CO 2 generated in conventional synthesis, the
ammonia, liquefied hydrogen, or organic hydride to facilitate use. development of hydrogen production methods involving electrolysis of water TOPICS Power Systems Technologies Being Developed
Ammonia generates power through direct combustion and emits no CO2 using renewable energy has been anticipated. However, energy efficiency has
● Virtual Power Plant (VPP)
during the process because of its hydrogen and nitrogen composition. Also, remained an issue due to pressurization of hydrogen for conventional ammonia Solar Storage
A virtual power plant (VPP) is an approach that aims to stabilize the power system
infrastructure related to the transportation and storage of ammonia already synthesis, which is a necessary process as synthesis using renewable energy
and make surplus power profitable by aggregating multiple distributed power Solar power business Consumer power generation facilities
exists. For those reasons, we are focusing on ammonia as a hydrogen energy generates hydrogen at low pressure. In response to this issue, the company
sources (renewable energy power sources, such as solar and wind power, storage Solar storage system Plant Factory Building
carrier and are working to develop related technologies. has developed a new catalyst for ammonia synthesis using low pressure
batteries, privately-owned power generation facilities, etc.) and running them as a
hydrogen, and constructed a demonstration plant for producing ammonia
single virtual power source.
at lower temperatures and pressures than conventional methods, using this The company is using its technologies and expertise as an engineering company PCS
catalyst. Going forward, we aim to establish hydrogen power generation to develop a system that aggregates and controls distributed power sources
technologies using ammonia as a fuel, and to conduct research on the further and makes flexible adjustments depending on the balance between supply and
development of these technologies aimed at commercialization. VPP
demand.
Electricity sales
Use of Ammonia as a Hydrogen Energy Carrier
Power Transmission
● Solar Storage station
Power system
lines
Renewable energy
Solar storage is a system for storing power generated from solar energy and
Ammonia synthesis process discharging during rainy weather, cloudy weather and at nighttime, smoothing
CO2-free hydrogen production
the distribution of solar power. One of the features of our solar storage system is Individual
Consumer Factory Building
households
Hydrogen that it can be mounted regardless of the form of the power conditioner (PCS), as
it also stores the output that exceeds the capacity of the PCS for conversion of a
Power
Nitrogen Pressurization Synthesis Ammonia Transportation direct current (DC) power supply into an alternating current (AC) power supply.
generation

43 JGC Report 2018 44

 Targeting Sustainable Growth Value Creation The JGC Group’s Strengths and Management Base Environment and Society Initiatives Management Structure Data Section

Working with Local Communities Promoting the Transfer of Technologies

■ Initiatives by Overseas Group Companies

Basic Stance

The JGC Group recognizes it has a responsibility to contribute to the development of society through our The JGC Group has established Group companies overseas and actively promoted the transfer of technologies to employees of these Group companies through our
business, in addition to increasing economic value. We are working to fulfill our corporate social responsibility while engineers, and in doing so, has contributed to the development of the engineering industry in the respective countries.
always seeking to coexist with society. Through our projects, we will contribute to the sustainable development of
society, including regional communities, by creating employment opportunities and implementing various activities such
as education, training and guidance programs for local workers. TOPICS Initiatives at JGC Philippines
Related SDGs
As part of efforts to increase corporate value, JGC Philippines has implemented
initiatives on an ongoing basis to enhance the capabilities of its engineers. The
company has trained engineers in the latest design technologies through courses
at its own offices and JGC’s Head Office and given them opportunities to gain
project experience and skills through deployments to some of JGC’s projects
Industrial Development in Countries where Plants are Located: a Case Study in Malaysia worldwide. Outstanding engineers are actively promoted to division manager
positions, as well as senior manager roles, helping to increase motivation and
loyalty.
■ Constructed Plant Serving as a Basis for Regional Industrial Development
This ongoing program has enhanced the engineering skills of JGC Philippines
as an engineering base. The company is now also capable of implementing EPC
The Bintulu LNG Complex, which is owned by Malaysia’s state-owned oil LNG production volume by Petronas
projects after securing a construction license in the Philippines in 2016 (AAAA
company Petronas, is one of the largest LNG production centers in Asia. The (10,000 tons) category).
facility currently has nine trains with a combined annual LNG production 2,500
Completion of Trains
capacity of roughly 26 million tons. For more than 30 years, starting in the 2,000 4 to 6 Training at a construction site
Cultivating the next generation of human resources with partners in
● ‌

1980s, JGC has carried out engineering, procurement, construction and 1,500
Completion of Trains academia
commissioning (EPCC) work for all the plant’s nine trains, as well as ongoing 1 to 3 Completion of Trains
1,000 JGC Philippines offers internships as part of its social initiatives. After undergoing
7 to 8
work to increase capacity and upgrade facilities after completion. 500 training in office and general skills, interns are given practical experience by
The Bintulu region in Sarawak, Malaysia, where the complex is located, is participating in actual projects while rotating between various departments. The
currently one of the major regions for the oil and gas industry in Malaysia, and 1980 1985 1990 1995 2000 2005 2010 2015 (Year) internship program has led to various links with local universities and colleges,
the LNG plant which was constructed by JGC has played a central role in the giving JGC Philippines the opportunity to contribute to local communities and the
industrial development of this region. development of human resources in the Philippines.

■ Actively Procuring Materials and Equipment from Malaysian Manufacturers Technical training at JGC Philippines

In the construction of the LNG plant in the Bintulu region of Sarawak, Malaysia, we to provide technical assistance, depending on the manufacturing capabilities of
have not only created jobs for many construction workers, but have also contributed local facilities and the skill levels of local engineers, and help them acquire new
to the development of industry surrounding the plant, through active business with technologies. Such efforts, which contribute to the growth of Malaysian materials ■ Training Programs for Human Resources in Resource-Producing Countries
local materials suppliers and equipment manufacturers. suppliers and equipment manufacturers, have received high praise from Petronas,
When placing orders with local manufacturers for equipment that requires a high a state-owned oil & gas company. Over the past several decades, the company has conducted various Although the contents of these programs differ according to the objectives and
degree of precision, we dispatch our engineers to the manufacturing plant in order training programs for engineers and students specializing in fields such as learning outcomes set by companies and universities that send participants
chemical engineering from resource-producing countries for the purpose to the program, as well as the training period, the programs primarily consist
of strengthening relationships with such countries. Many of the participants of practical lectures and OJT in project management and various design
in these programs have contributed to resource development and industrial technologies that take advantage of our characteristics as an engineering
TOPICS Vendor Technical Support Group Activities development in their own countries after returning home, which has also led to company with an extensive project completion track record in countries around
In the Train 9 LNG plant construction project for Petronas that was completed in 2017, we stationed engineers increased business for the company with these countries. the world.
from JGC vendor technical support group at four manufacturers in Malaysia from the start of the project to provide
production support for a total of 140 units of equipment weighing 3,000 tons, including towers, vessels, and heat Selected Training Programs Finished in Fiscal 2017
exchangers. Companies and universities Number of
trainees accepted Duration
Thanks to the technical assistance provided based on comprehensive judgments made regarding the capabilities State Oil Company of the Azerbaijan Republic 6 8 months
of each manufacturer and the difficulty of the ordered equipment, these relatively inexperienced manufacturers Trainees from
King Fahd University of Petroleum and Minerals (Saudi Arabia) 4 to 6 2 to 8 months
succeeded in manufacturing equipment that fulfilled the quality requirements, on schedule. The new track record Mozambique
Mozambique Ministry of Mineral Resources, and others (*1) 14 1 month (Along with
established through this project will help these manufacturers to obtain equipment orders for other projects. The
the company’s
company views the positive relationships with suppliers that have been achieved as a result of these efforts as Training for welders National oil / gas companies, etc. (*2) 126 Half to a few days
Chairman & CEO
valuable business partner assets, and for this reason, actively provides technical assistance to manufacturers. *1 Contracted project from the Japan Oil, Gas and Metals National Corporation and President &
*2 Contracted project from the Japan Cooperation Center Petroleum COO)

45 JGC Report 2018 46

 Targeting Sustainable Growth Value Creation The JGC Group’s Strengths and Management Base Environment and Society Initiatives Management Structure Data Section

Chapter 5
Human Rights and Diversity
Management Structure
Basic Stance

Fair personnel management that emphasizes human rights is fundamental to the JGC Group. We are working to enhance the diversity In this chapter, we look at JGC’s management structure, which supports the Group’s value
of our workforce through equitable recruitment practices and personnel systems that give a greater role to non-Japanese personnel, creation. The chapter includes a dialogue with outside directors and explains how we are
seniors, people with disabilities and female employees. JGC is also implementing various measures to respect different lifestyles,
reinforcing corporate governance, risk management and compliance.
increase the motivation of every employee and create working environments that enable all personnel to maximize their skills and
potential, which will be vital to create different types of value and drive sustained growth.

Related SDGs

Personnel Diversity

JGC’s large overseas projects rely on teamwork between many different

Different lifestyles
specialists and human resources with diverse cultural backgrounds and
values – teams that genuinely embody diversity. JGC believes diversity is Women

a crucial ingredient in creating social and economic value and is actively Seniors
Promoting diversity
implementing various measures to promote even greater diversity in the Systems and measures
to create a healthy work-life
and increasing employee
workforce. balance that respects different lifestyles motivation to
drive new value creation

People with
Global human resources
disabilities

■ Promoting Global Recruitment ■ Recruiting People with Disabilities

JGC is hiring more people from different countries to work at its head Under a law designed to promote the employment of people with disabilities,
office in order to strengthen its ability to implement multinational projects. JGC is actively working to achieve legally stipulated employment ratios for
We run recruitment campaigns at universities overseas and actively hire disabled employees. Efforts are also being made to upgrade and improve
exchange students in Japan. Around 100 foreign employees from over workplace environments to cater for different types and levels of disability.
20 different countries currently work at the head office, accounting for JGC is creating employment opportunities for people with disabilities and as
more than 4% of head office staff. As our workforce has become more a part of those initiatives, has introduced a health keeper system (in-house
international, we have taken steps to respect different cultures and make therapeutic nurses) to help manage the health of employees.
the working environment welcoming for everyone, such as providing a
prayer room for Muslim employees.
■ Empowering Women
49 Outside Director Dialogue
■ Supporting Active Careers for Seniors JGC has introduced a family care system and taken other steps to improve 53 Corporate Governance
working conditions for women. By working with the Kanagawa Women’s 55 Risk Management
In 2000, JGC has raised the mandatory retirement age to 65 to create Career Support Group and talking to our female employees, we aim to
57 Compliance
workplaces where motivated older employees can continue to work with encourage wider use of these systems. We are also taking steps to boost
peace of mind, giving them the opportunity to utilize their extensive 60 Quality Management System
career awareness among female employees, providing more opportunities
experience and specialist knowledge and play an active role for as long as for them to fulfill their potential and promoting them to leadership positions. 61 Occupational Health and Safety
possible. In addition to continuing their main duties, senior staff pass on The number of women in management positions is increasing each year. 63 IR Activities
their skills, provide advice and make a major contribution to the training We are also working to raise awareness of our industry as a sector where 64 Management Structure
of young engineers. women have job opportunities, for example by holding company briefing 65 ESG Data Highlights
sessions for new graduates aimed specifically at female students.

Number of women in management positions (FY)

2013 2014 2015 2016 2017
10 11 15 17 19

47 JGC Report 2018 48

 Targeting Sustainable Growth Value Creation The JGC Group’s Strengths and Management Base Environment and Society Initiatives Management Structure Data Section

Special Interview

Outside Director Dialogue

JGC has decided to refocus its energies on its core EPC business. In line
Q1 In June 2017, Tadashi Ishizuka was appointed
with that policy, assets accumulated through business investments, which
In fiscal 2017, JGC returned to profit after a net loss in the previous fiscal year. President and COO with the key mission of
had become an area of concern, have been streamlined, and the Group's
There are also emerging signs of a recovery in the plant facility market. turning round the EPC business. Since then, the
Company has implemented a range of measures structure and thinking is increasingly EPC-oriented. That process has only
Against that backdrop, outside directors Shigeru Endo and Masayuki Matsushima
to achieve that goal. How well has JGC done in just begun, but I think Mr. Ishizuka has made a very strong start in his first
evaluate JGC’ s business results and corporate governance in the past year and the past year? year.
discuss issues that need to be tackled to ensure sustained growth.

It was a solid first year for the new

Q2 What is your view on the new tighter approach to
President. His focus on tighter project management, and are there any
management bodes well for the future. comments by Mr. Ishizuka during board meet-
ings that left a strong impression?

■ Endo In the year since he was appointed President to tackle JGC’s

losses in fiscal 2016, Tadashi Ishizuka has made steady progress,
Mr. Ishizuka is a man of action.
announcing a string of concrete initiatives to address issues that caused
the losses. The Company has also moved quickly to implement those He is focusing on restoring JGC’s
initiatives. That helped JGC move back into profit in fiscal 2017. earnings capabilities and technical skills.
Amid a recovery in the plant facility market, JGC secured an order for a
major LNG plant in Canada in early fiscal 2018. In the last year, Mr. ■ Endo I understand that Mr. Ishizuka has been talking to many mid-ca-
Ishizuka has also been focusing on tighter project management, which is reer and younger employees as part of his efforts to change JGC’s
extremely important for JGC right now. Signs of that approach are already approach.
appearing, but I hope to see even clearer evidence of tighter management He’s held face-to-face meetings with around 400 employees, providing an
in the project implementation process and in project outcomes. excellent opportunity to communicate his strategy and talking directly to
employees. That personal approach speaks volumes about Mr. Ishizuka’s
■ Matsushima I’m sure Mr. Ishizuka faced plenty of challenges in his first character.
year as President, but I think he has made a good start. My long-held view is that JGC needs to increase its earnings capabilities.
Positive signs started to emerge in fiscal 2017 results, but I expect to see From that perspective, I give high marks to Mr. Ishizuka for the way he has
Outside Director Outside Director even clearer signs as the Company pushes ahead with his initiatives. been personally approaching clients to highlight JGC’s technical superiority

Shigeru Endo Masayuki Matsushima in the plant facility market. When a new project order was reported to the
board, I asked Mr. Ishizuka why the client selected JGC. His answer was
very clear – technical skills and expertise made all the difference. The way
Profile Profile
he has been encouraging JGC to emphasize its technical strengths to
Apr. 1974 Joined the Ministry of Foreign Affairs Apr. 1968 Joined Bank of Japan
Apr. 2001 Director-General, Middle Eastern and African Affairs Bureau Jun. 1998 Executive Director, in charge of the Bank’s International Affairs increase earnings capabilities left a strong impression on me.
Feb. 2002 Director-General, Consular and Migration Affairs Department Jun. 2002 Senior Advisor, the Boston Consulting Group
Aug. 2003 Ambassador to The Permanent Mission of Japan to the United Nations and Other International Feb. 2005 Senior Executive Advisor, Credit Suisse Securities (Japan) Limited
Organizations in Geneva and Consul General, Consulate General of Japan in Geneva Jun. 2008 Chairman, Credit Suisse Securities (Japan) Limited
■ Matsushima After listening to Mr. Ishizuka’s remarks at board meetings,
Mar. 2007 Ambassador extraordinary and plenipotentiary to the Republic of Tunisia May 2011 Senior Advisor, the Boston Consulting Group
Jul. 2009 Ambassador extraordinary and plenipotentiary to Saudi Arabia Jun. 2011 Outside Director, Mitsui O.S.K. Lines, Ltd. (current post) my overriding impression is that he’s a man of action – somebody who
Oct. 2012 Retired from the Ministry of Foreign Affairs Jun. 2011 Outside Director, Mitsui Fudosan Co., Ltd. (current post)
Jun. 2013 Outside Director, JGC CORPORATION (current post) Sep. 2014 Senior Advisor, Integral Corporation (current post) backs up his words with meaningful actions. That type of strong leadership
Jun. 2013 Outside Director, IINO KAIUN KAISHA, LTD. (current post) Jun. 2016 Outside Director, JGC CORPORATION (current post)
Apr. 2014 Special Assistant to the Minister for Foreign Affairs (current post)
is also having a positive impact on employees working around him.
In meetings with project leaders, he often asks them where the risk is in
Significant Positions Concurrently Held
Significant Positions Concurrently Held ●
Outside Director, Mitsui O.S.K. Lines, Ltd.
●
Outside Director, IINO KAIUN KAISHA, LTD. ●
Senior Advisor, Integral Corporation
●
Special Assistant to the Minister for Foreign Affairs

49 JGC Report 2018

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 Targeting Sustainable Growth Value Creation The JGC Group’s Strengths and Management Base Environment and Society Initiatives Management Structure Data Section

their projects and what they are doing to manage that risk. With the recent creating a business model that can address the needs of emerging managing numerous resources, including the assets of equipment company.
major LNG plant order in Canada, it’s very clear to me that Mr. Ishizuka is economies, such as tackling environmental issues and transferring manufacturers and subcontractors. Seeing first-hand the challenges that
doing everything in his power to make sure we don’t take our eye off the technologies, given rising international interest in ESG and the sustainable staff face onsite brought home to me the complexity and social significance ■ Matsushima As a company active in the global market, we need to
ball and complete the project successfully. development goals (SDGs). of JGC’s EPC business. raise our game in two key areas. The first is business acumen. To reliably
He is adept at seeing to the heart of any issue, which helps him develop Those are areas where we can leverage our strengths as an engineering deliver projects in today’s highly uncertain and fluid international business
and implement measures in the right sequence and timing to solve any company and play a meaningful role by providing value to society. environment, we have to do more than simply avoid risk. JGC needs to
problems. In fiscal 2017, JGC focused first on rebuilding the Group’s improve its business acumen to understand country risk and a whole host
earnings capabilities. In the next two years, I hope we can build on that ■ Matsushima JGC made some good improvements to corporate of other risks. That means carefully analyzing what type of risks our
progress and address longer-term issues, such as improving personnel governance in fiscal 2017, such as enhancing reporting to the Board of business faces and where those risks are likely to come from as part of the
training and reinforcing our technical skills. Directors and giving outside directors and outside auditors more opportuni- risk management process.
ties to observe EPC projects overseas. The role of outside directors is to The second is multifaceted thinking. Today’s world maps are largely based
provide oversight and advice to the board from an outside perspective. on the 16th century Mercator projection, but looking at the world using
However, I think we should be involved more in tackling the Group’s satellite imagery and other modern viewpoints shows more clearly that
longer-term challenges, which would contribute to JGC’s corporate value, around 70% of the earth’s surface is covered by ocean. That hints at the
rather than focusing on short-term management issues. I hope more JGC’s outside directors and outside auditors attend a project briefing by onsite staff opportunities in the offshore space – a potentially vast market for JGC. And
proposals related to the Group’s long-term strategic direction and vision just as our concept of time in Japan differs to the way it is perceived in
are referred to the board so that outside directors can also play a part in the other countries and regions, there are contrasting viewpoints in the plant
discussions. sector about the outlook for the oil and gas sector. Some say the oil and
Q5 The EPC market is picking up again amid signs of a
recovery in capital investment by state-run oil gas era is over, while others say there are still major opportunities for
companies and oil majors. Against that backdrop, growth, spurred by rising demand for natural gas. In short, JGC has to be
what issues does JGC need to address to maintain
Q4 Please tell us about your visit to the Ichthys LNG less myopic – and I include myself in that – and use a multifaceted
Project construction site in Australia in fiscal 2017. growth over the medium and long term? approach to tackle issues in its business.

Q3 Over the last year, JGC steadily strengthened corpo- ■ Endo JGC is anchored by a workforce of highly capable people. They are
rate governance to support the Group’s sustained The scale of the construction site We need resilience and business
our greatest strength.
growth and development. What is your take on those
and plant facilities is incredible. acumen to sustain long-term growth. The plant facility market is on track for recovery, but we have to consistent-
efforts?
ly put the highest priority on training personnel, whatever the conditions in
■ Endo In short, the visit was inspiring. Motivation was high among onsite ■ Endo We live in uncertain times. When we look back on 2018, I think we the market. As an outside director, I plan to make my views clear on how

JGC has taken some pragmatic staff, with young JGC employees doing an excellent job of running large will see it as only the first step on the road to recovery. JGC should improve the mindset and actions of its employees.
morning meetings involving many site workers. In Darwin, workers are To remain competitive amid widespread uncertainty in the international
steps to improve corporate responsible for connecting modules made by yards in China, Thailand and community, we have to make our organization more resilient. We will no ■ Matsushima I believe one of my jobs as an outside director is to give
governance. other countries to tolerances of 1 millimeter. Seeing the high level of doubt make mistakes or take a tumble, but we have to strengthen our JGC’s executives and employees a fresh perspective by introducing
sophistication and skills with my own eyes was a revelation. ability to bounce back and recover from any setbacks by improving our different opinions from outside the company. Most of all, I intend to actively
■ Endo JGC, like many companies, is strengthening corporate governance project management skills, technical expertise and workforce skills. give advice to the board about how I think JGC should sustain growth over
as a natural part of supporting sustained growth and increasing corporate ■ Matsushima I was amazed by the scale of the construction site and Increasing the resilience of our employees is vital to strengthening our the medium and long term.
value. I support the various steps JGC is taking to make the Board of plant facilities. When we met JGC’s onsite project team leader, he was workforce.
Directors more effective, as well as broader efforts to upgrade corporate working extremely hard to complete the facilities while keeping on top of Advances in AI and IoT are not only changing the way we work, but also
governance on an ongoing basis. numerous elements of the project. The team leader's role is to generate raising questions about what it means to be a true professional in our
Meanwhile, to remain a truly global company, JGC also has to focus on profits from the project by responding to any unexpected event and industry. These are questions that we need to seriously consider as a

51 JGC Report 2018

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 Targeting Sustainable Growth Value Creation The JGC Group’s Strengths and Management Base Environment and Society Initiatives Management Structure Data Section

Corporate Governance Status of Internal Control System

JGC’s Board of Directors determines the basic principles of the internal authority, which regulate the duties and authority of executives and
Basic Stance control system and revises them as necessary. The Internal Auditing employees, resulting in clear lines of responsibility in corporate
Office monitors, evaluates and improves the effectiveness of the internal management and business execution. We have also formulated and
JGC’s priority management goal is to achieve sustained improvement in corporate value. To realize that goal, we need a
control systems of JGC and the JGC Group and conducts separate audits implemented management rules for Group companies to ensure efficient
corporate governance system that ensures fair, transparent and efficient management in order to win and retain public trust.
as necessary. We have also formulated rules assigning management and appropriate operations across the Group.
JGC is also working to strengthen compliance in accordance with the values of the JGC Group, which stress upholding high
ethical principles and acting with honesty. Going forward, we will continue to engage with shareholders and investors while
also monitoring the effectiveness of the Board of Directors, designing appropriate executive remuneration systems and
Executive Remuneration
improving compliance.
We will also further enhance corporate governance to support sustained growth in corporate value in response to the
The basic principle of executive remuneration at JGC is to attract be delivered from the time orders are received. Given the nature of the
Corporate Governance Code, which was revised on June 1, 2018.
the necessar y management personnel to increase JGC’s global EPC business, we take into account medium- to long-term improvements
competitiveness as an engineering company and to deliver sustained in corporate value when evaluating operations supervised by each
Corporate Governance Framework growth in corporate value. In line with that principle, remuneration director and their contribution to earnings in each fiscal year. To ensure
received by executives is decided within the limits approved at the 113th objectivity in performance evaluations, the contribution to earnings is
Ordinary General Meeting of Shareholders held on June 26, 2009. discussed and decided by the Assessment Committee, which includes
JGC is a company with a Board of Directors and an Audit & Supervisory appointments and compensation. In principle, the committees meet once a year.
Currently, the combined upper limits are ¥690 million for directors and outside directors. Outside directors receive only fixed remuneration to
Board. We have also introduced an executive officer system to clarify Operations Steering Committee ¥88 million for audit & supervisory board members. ensure they appropriately oversee management from a standpoint that is
responsibility and authority in business execution and to improve the
In principle, the Operations Steering Committee meets twice a month to Remuneration for directors comprises fixed remuneration and independent of business execution.
speed and efficiency of decision-making and business execution. To
discuss items related to business execution by JGC and the JGC Group. performance-based remuneration. The fixed portion is determined by the Audit & supervisory board members also receive only fixed remuneration
reinforce management oversight and enhance transparency, we have
The committee is made up of members appointed by the president. Audit position and duties of the director. The performance-based portion is paid due to the Audit & Supervisory Board’s position as an independent body
appointed outside directors and outside audit & supervisory board
& supervisory board members also attend meetings. from a total pool of up to 1% of net income for each fiscal year and is overseeing the executive actions of directors to ensure the appropriate
members who satisfy the criteria for independent officers. The main
Strategy Committee for EPC/Business Investment Projects designed to incentivize directors to improve the Company’s earnings. In operation of the corporate governance system.
elements of JGC’s corporate governance system are described below.
In principle, the council meets once a month to discuss tender strategies the mainstay EPC business, it typically takes several years for projects to
Board of Directors
related to JGC’s and the JGC Group’s EPC project and business investment.
The Board of Directors has 11 directors, including two outside directors. The The council mainly comprises directors and executive officers.
Breakdown of Executive Remuneration
Company’s five audit & supervisory board members, including three outside
Investment and Loan Committee
members, also attend meetings, which are held once a month in principle. Breakdown of remuneration, etc.
In principle, the committee meets once a month to discuss JGC’s and the
Audit & Supervisory Board Total value Fixed remuneration Performance-based remuneration
JGC Group’s investments and loans. The committee mainly comprises Category
of remuneration, etc.
The Audit & Supervisory Board has five members, including three outside audit Number of eligible Number of eligible
directors and executive officers. Total amount provided Total amount provided
& supervisory board members. In principle, meetings are held once a month. executives executives
Independent Auditor
Nominating Committee and Remuneration Committee Ten directors
The certified public accountants (CPA) who audit JGC’s accounts are (Outside directors not 394.57 million yen Ten 322.05 million yen Nine 72.52 million yen
Outside directors sit on the Nominating Committee and the Remuneration Michitaka Shishido and Yoshinori Saito of KPMG AZSA LLC. Four other eligible)
Committee to enhance fairness and transparency in decisions related to executive CPAs and eight other individuals assist in carrying out these audits.
Two audit &
supervisory board
members
33.60 million yen Two 33.60 million yen - -
Corporate Governance System (Outside audit &
* “—” denotes “Direct” and “Report”
supervisory board
General Meeting of Shareholders members not eligible)

Appoint/Dismiss Appoint/Dismiss
Five outside executives
Disclose/Explain Appoint/Dismiss Audit & Supervisory Board Independent Auditor
(Two outside directors
and three outside 39.12 million yen Five 39.12 million yen - -
Audit Audit audit & supervisory
board members)
Nominating Committee Board of Directors (Note 1) ‌The figure for fixed remuneration above includes remuneration for one who stepped down at the conclusion of the 121th Ordinary General Meeting of Shareholders held on June 29, 2017.
Remuneration Committee Directors and Outside Directors (Note 2) ‌As of the end of fiscal 2017, the Board of Directors comprised 11 directors (including two outside directors) and the Audit & Supervisory Board comprised five audit & supervisory board members (including three outside audit &
supervisory board members).

Internal Auditing Office

Operations Steering Committee
Legal & Compliance Office
Strategy Committee for EPC/Business Investment Projects
Risk Management Committee
Investment and Loan Committee
Security Management Office

Business Divisions/Sections Group Company

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 Targeting Sustainable Growth Value Creation The JGC Group’s Strengths and Management Base Environment and Society Initiatives Management Structure Data Section

Risk Management TOPICS Ensuring the safety of employees as a top priority Information Security Response to Prevent Information Leakage

JGC recognizes that protecting its employees, who represent its only asset, from natural Handling large volumes of information (specification documents, design plans,
disasters, large-scale accidents, acts of terrorism, and other risks and ensuring their safety reports, etc.) is a natural part of project execution, in particular. Much of this
Basic Stance
is a top-priority risk measure. We are able to provide 24/7 support in times of emergency, information consists of confidential data, including the know-how of clients
The JGC Group classifies risks that inhibit sustained corporate growth into two categories: “corporate risk” associated in order to ensure the safety of employees who make more than 5,000 overseas trips and business partners. Protecting such information is one of our expected
with the survival of the company and safety of employees, such as natural disasters, large-scale accidents, violations each year and roughly 500 personnel who are stationed overseas in 30 countries. In responsibilities.
of laws and ordinances, and information leakage, and “project risks” that significantly impact income (loss). The addition, during normal times, we proactively conduct activities to prevent such risks, We continuously invest in information-related systems, including information
JGC Group has established a management system to comprehensively reduce risks by systematically assessing and including reinforcement of the collection and analysis of information on local conditions, security measures, to prevent the leakage of confidential data of clients and
managing the management items and risk items specified in each category. enhancement of preventive measures, and implementation of awareness-raising activities. business partners.
In particular, among JGC’s businesses, overseas sales in the total engineering business generates more than 80%
of total net sales, and as such, we recognize that it is essential to expeditiously and appropriately respond to various
risks in countries where we implement projects and surrounding areas.
Project Risk
Role of Risk
The occurrence of risks during project execution may not only adversely (risk assessment) of projects during the project selection and bidding
Category Details affect the profitability of the project, but also significantly impact the stage, and formulate a risk control policy for each risk area at the project
Corporate Risk Risks associated with the survival of the company and safety of the lives of employees income (loss) of the company, as a whole. planning stage. Risk management is then carried out, based on that
Project Risk Risks associated with project profitability and the income (loss) of the company as a whole JGC has long been making efforts to strengthen its risk management policy during project execution.
capabilities in project execution. We conduct risk evaluation/analysis

Project Risk Management Flow 案件選別・見積り段階 プロジェクト遂行段階

Corporate Risk
Assessment/Determination
Identification Management
of response
JGC undertakes maximum efforts on a daily basis to mitigate and prevent Response to corporate risk
Risk area Policy concerning measures Management systems/initiatives
risks, mainly at the Corporate Administrative & Financial Affairs Division,
Security Management Office, Quality Assurance, Safety & Environment Office, Response policy
Project
Legal & Compliance Office, and other corporate affairs divisions, as well as Estimate/
<At the time of prevention> selection
bidding stage Risk avoidance
the Data Intelligence Division. At the same time, when risks materialize, JGC Mitigation and prevention of risks stage Response by the project team
Contract with a small burden
works to minimize the impact of, and loss from such risks, by responding Project manager plays a central role in
<At the time of materialization> Feasibility of on the contractor, etc. addressing each risk area,
expeditiously and appropriately. Minimize the impact through an appropriate and expeditious response project plan in accordance with
Technical
the management policy formulated at
expertise,
Risk area Clear scope the time of project commencement
experience
of services

Risk area Department in charge Requirements Prevention/reduction of risk

Natural disaster and difficulty Reinforcement of the execution
Corporate Administrative & Financial Affairs Division (General Affairs Dept.,
Public Relations & Investor Relations Dept., Finance & Accounting Dept., Talent & level of the management system, etc.
Large-scale accident
Organization Development Dept., Group Companies Management Office) technology and
Act of terrorism Country risk delivery schedule Quarterly project review
Legal & Compliance Office
Monitoring focused on items
Deterioration of work environment Security Management Office Whether or not related to quality, cost, and
Violation of laws and ordinances Data Intelligence Division there is the delivery schedule
excessive
Information leakage Quality Assurance, Safety & Environment Office contractual Diversification of risk
liability Formation of joint ventures, etc.
Assignment
of engineers
Supply-demand
trends for
materials and
equipment
Top management/
business divisions/
Whether or not Other
Competitive
corporate affairs division
collaborators Insurance and recording
environment
(Finance & Accounting
have experience of reserve funds, etc.
Department, etc.)
and capabilities.
Financial position

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 Targeting Sustainable Growth Value Creation The JGC Group’s Strengths and Management Base Environment and Society Initiatives Management Structure Data Section

Compliance The Key Compliance Personnel Program

Since the beginning of fiscal 2017, we have deployed key compliance

Basic Stance personnel to each department for the purpose of promoting mutual
communication between the JGC Compliance Office and our employees,
Guided by our corporate philosophy, the JGC Way, the JGC Group has positioned compliance as the cornerstone of
in order to foster an awareness of compliance. During fiscal 2017,
management, based on two keywords in its list of shared values – Respect and Integrity.
we held activities led by these key compliance personnel to check the
As a member of the international community, the JGC Group believes that compliance with the laws of Japan and
knowledge and compliance awareness in each department, and to provide
all other countries where the Group operates, as well as fair and equitable business practices in accordance with
feedback from the JGC Compliance Office regarding questions and
corporate ethics, are essential to the pursuit of sustainable business development. Based on this belief, the Group has
opinions received from employees in this process. These key compliance
developed the JGC Group Code of Business Conduct. The code, which must be followed by all employees, contains
personnel have also led activities such as making posters with managers
key points to ensure that the JGC Group’s corporate philosophy is implemented in practice.
of all departments at the company pledging to observe compliance, as
well as displaying these posters in common areas within the company.
Posters on display

Measures to Prevent Bribery

Establishing the JGC Group Code of Business Conduct JGC works to ensure fair business practices, in line with its basic policy of the UK Bribery Act 2010.
complying with all anti-bribery rules and regulations, such as provisions The table below shows the JGC Group’s regulations and programs related
Although the company formulated the Code of Business Conduct in in Japan’s Unfair Competition Prevention Law prohibiting the bribing of to preventing bribery, based on provisions in the JGC Group’s corporate
2002, since then the demands of society towards compliance efforts foreign public officials, the US Foreign Corrupt Practices Act (FCPA) and philosophy and Code of Business Conduct.
required of companies have become more diverse and in-depth. In April
2018, the JGC Group revised the previous Code of Business Conduct in The JGC Group’s corporate philosophy
response to these changes in social conditions, and established the new
JGC Group Code of Business Conduct in order to make its contents more The JGC Group Code of Business Conduct
comprehensive and concrete.
This JGC Group Code of Business Conduct specifically indicates the Bribery Prevention Regulations
standards for actions and decisions that we should follow, as we put our
corporate philosophy, the JGC Way, into practice. The JGC Group Code of Business Regulations to prevent bribery by employees Regulations to prevent bribery by business partners Regulations to ensure effective operation of bribery prevention programs
Conduct
Gifts, entertainment and travel policy Anti-corruption policy for international commercial representative Rules related to the JGC Group Compliance Hotline
http://www.jgc.com/en/01_about_jgc/
code_of_business_conduct.html
Policy on charitable donations Anti-corruption policy for joint ventures Bribery risk management guidelines

Policy on political contributions Anti-corruption policy for vendor and subcontractor Bribery prevention training guidelines

Compliance monitoring guidelines

Group Compliance System

■ Preventing Bribery by Suppliers and Subcontractors
The JGC Group has established a Group compliance system that ensures lively discussions about the issues and risks faced by each company, as
business activities conform to the highest ethical principles at all Group well as ideas about effective measures to resolve and mitigate risks and JGC requires all suppliers and subcontractors to comply with rules and to JGC’s anti-bribery policy and stating a commitment that they will
companies. Each Group company has appointed compliance officers, issues. regulations prohibiting bribery. Before starting a business relationship not engage in bribery. In cases where the risk of bribery is deemed to
creating a single contact point for compliance issues in with a company, JGC assesses the company’s links with public officials be high, JGC conducts a further round of rigorous due diligence and
order to improve the effectiveness of compliance activities. and evaluates its governance and compliance systems. Business partners only decides to begin a business relationship if all concerns have been
The compliance officers are responsible for evaluating are also required to sign declarations or business contracts agreeing completely eliminated.
compliance risks specific to their companies and develop
and implement compliance measures tailored to those ■ Initiatives in Regions with a High Risk of Bribery
risks. Compliance officers from across the Group regularly
meet to share information and promote closer cooperation, JGC addresses risks specific to each project, conducting assessments Number of EPC projects under way, order backlog in countries
while also working to develop systems and implement at the bidding stage to identify the risk of bribery in the order and ranked in bottom 20 in Corruption Perceptions Index
(FY)
measures that raise awareness about compliance issues. implementation phases of each project. 2013 2014 2015 2016 2017
In fiscal 2017 compliance officers from domestic and For projects in regions with a high risk of bribery, the JGC Compliance
Number of EPC projects
overseas Group companies gathered at our Head Office Office takes a rigorous approach, visiting construction sites midway under way
2 2 2 1 1
and in Singapore (JGC SINGAPORE PTE LTD) to attend through project implementation to conduct intensive monitoring, evaluate Outstanding contracts
31.3 27.7 24.1 23.4 23.1
Group Compliance Conferences. The conferences featured efforts to prevent bribery and recommend any necessary improvements. (Billions of yen)

Compliance personnel of JGC and overseas Group companies

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Governance Targeting Sustainable Growth Value Creation The JGC Group’s Strengths and Management Base Environment and Society Initiatives Management Structure Data Section

Compliance Quality Management System

Basic Stance
Compliance Training
In our business, quality assurance is an essential part of achieving safe plant operation and stable production. Led by
the Quality Assurance Committee, JGC’s quality management system is designed to achieve continuous improvements
JGC conducts compliance training programs tailored to different employee grades and topics in order to raise compliance awareness.
in quality. Each department and section sets its own quality targets and works to address quality issues, aiming to nip
Objectives and number of participants (course completion rate) for employee grades-based training any issues in the bud and identify underlying causes as part of a proactive stance on resolving quality issues.
(FY)

Objective 2013 2014 2015 2016 2017

New employees Acquire essential knowledge about compliance as a member of 86 95 105 67 81

(April and October) society and learn about JGC’s compliance systems (100%) (100%) (100%) (100%) (100%)
Acquire fundamental understanding of compliance, learn about global trends 48 117 80
Basic compliance training - -
and understand issues related to compliance during project implementation (8%) (27%) (40%)

Intermediate compliance training

Acquire compliance knowledge needed for managerial positions and 44 84 46 67 21 Using QMS to Improve Quality Performance
consider corporate ethics issues (51%) (53%) (54%) (62%) (74%)
Understand the role senior managers need to play to foster ethical 21 78 19 13 20 JGC obtained ISO 9001 certification for its quality management system quality targets in line with the policy. Each fiscal year, they identify any
High-level compliance training
corporate behavior and rigorous compliance (74%) (73%) (80%) (84%) (89%) Chapter 5: Management Structure | Security Risk Management
(QMS) in 1993. At the time, QMS certification was essential, especially for organizational issues and formulate operating policies and action plans
* The low course completion rate for basic compliance training is mainly due to the relatively recent start of the course (fiscal 2015). JGC aims to improve the completion rate by continuing to implement the course.
Compliance Training G
overseas projects, and we worked to acquire and retain QMS certification
Security Risk Management
(“Plan”), implement them (“Do”), evaluate them (“Check”) and improve
JGC conducts compliance training programs tailored to different employee grades and topics in order to raise compliance awareness.
Governance
from a third-party certifying body. them on the basis of the evaluation process (“Act”). This PDCA cycle is
Basic Stance
Compliance Training Programs Since 2009, we have implemented
JGC works on a daily basis tofundamental QMS
mitigate and prevent reforms
risk. When andwith serious designed to drive continuous improvement in organizational performance.
JGC is faced
security risks, our security risk management team prioritizes the safety of employees
■ Topic-Based Training Objectives and number of participants (course completion rate) for employee grades-based training actively improved and
ouraddresses
organization oncarefully,
the situation a continuous
appropriatelybasis, ledaiming
and rapidly, by the
to minimize any ISO 9001 was significantly revised in 2015. Using that as an opportunity
Objective Fiscal 2012 Fiscal 2013 Fiscal 2014 Fiscal 2015 Fiscal 2016 negative impact while ensuring business continuity.
Acquire essential knowledge about compliance as a
Quality Assurance Committee, with the aim of improving organizational to further improve JGC’s organizational performance, we revised our QMS
New employees 75 86 95 105 67
member of society and learn about JGC’s compliance
In addition to grade-based training, JGC runs topic-based training Courses are led by employees with in-depth experience in each (100%)
(April and October) systems (100%) (100%) (100%) field or
(100%) performance as appropriate to the type of work performed. in line with the updated 2015 version of ISO 9001 and started operation
Reinforce governance
Acquire fundamental understanding of compliance, learn
targeting specific areas of compliance, such as bribery, anti-social
Basic forces,
compliance
training
about by external
global trends andexperts.
understand The issues hybrid
related to programs – of –lectures,– workshops 48
(8%)
and 117case
(27%)
Every year, JGC’s president releases an operating policy. This policy is of the new QMS in February 2017.
compliance during project implementation
anti-monopoly law and business ethics for engineers. These courses are
Intermediate compliance Acquirestudy methods
compliance knowledge ensure
needed for thorough
managerial learning
51 44and long-term84 awareness
46 67 of treated as a quality policy by each department and section, which set
training positions and consider corporate ethics issues (48%) (51%) (53%) (54%) (62%)
designed for specific employee groups and are run intensivelyHigh-level
at certaincompliance
each topic.
Understand the role senior managers need to play to foster 29 21 78 19 13
(69%) (74%) (73%) (80%) (84%)
times to achieve the greatest impact. They typically pinpoint training
key topics, ethical corporate behavior and rigorous compliance
In addition, in fiscal 2017, harassment workshops were held for multiple Security Management Office
* The low course completion rate for basic compliance training is mainly due to the relatively recent start of the course (fiscal 2015). JGC aims to improve the completion rate by

such as risk areas identified in internal compliance awareness surveys

continuing to implement the course.
departments and three Group companies, further strengthening internal JGC executives and employees make more than 5,000 over- terrorism, conflict, pandemics, crime, public unrest, traffic acci-
seas trips each year and around 500 JGC personnel are dents, illness and other incidents. The office has two operating
Topic-based training
or risk assessments, or issues raised by corporate scandals in the news. training initiatives.
In addition to grade-based training, JGC runs topic-based training targeting specific areas of compliance, such as bribery, anti-so- Quality Assurance Committee
stationed overseas in 30 countries. JGC has established the
Security Management Office to provide rapid 24-7 support to
postures:

cial forces, anti-monopoly law and business ethics for engineers. These courses are designed for specific employee groups and overseas employees in the event of natural disasters, acts of
Number of topic-based training courses and participants are run intensively at certain times to achieve the greatest impact. They typically pinpoint key topics, such as risk areas identified
(FY)
in internal compliance awareness surveys or risk assessments, or issues raised by corporate scandals in the news. Courses are Crisis Management The Operations
Quality Assurance Committee meetspolicies, monthly andandreports
manuals directly to
safety standards Role of Quality Assurance Committee
The Security Management Office leads the implementation 3. Assess levels of public safety, analyze potential threats
2013 2014 2015 2016 led by2017
employees with in-depth experience in each field or by external experts. The hybrid programs of lectures, workshops and
case study methods ensure thorough learning and long-term awareness of each topic. For example, in fiscal 2016, Yasuko Okada, the president.
of crisis management The oncommittee
measures based the risk levelis
in chaired byevaluate
and the senior general
risk related manager
to specific projects, develop
Number of Representative Director of Cuore C3 Co., Ltd. and an expert on tackling harassment, was invited to run a workshop on changing a given area, in line with the Basic Rules for Risk Manage- and implement security measures
8 8 19 14 13 ment. of the Design Engineering Division and4.comprises executive-level
Monitor activities general
related to items 1-3 and provide guid- President Management Review
courses awareness about harassment in the workplace. Senior managers from project departments also attended the workshop.
* Examples: Restrictions on overseas business trips, prepa- ance to ensure improvement
managers.
ration and implementation of temporary employee evacua- 5. Provide education and training for crisis management
Participants 220 312 600 434 418
Number of topic-based training courses and participants tions, etc. The Quality Assurance Committee implements 6. Coordinate and aliaise
range of remedial
with related organizations (govern-
Preventive Operations ment agencies, external consultants, etc.) Quality Assurance Committee
Fiscal 2012 Fiscal 2013 Fiscal 2014 Fiscal 2015 Fiscal 2016

Number of
measures
1. Collect, analyze to ensure
and communicate the quality of products and services provided to
risk information Chairman: Senior General Manager of
27 8 8 19 14 2. Update standard documentation such as crisis response
courses the Design Engineering Division
clients consistently meets their specifications. Members: Senior General Managers or General-
Participants 996 220 312 600 434
It also Management
evaluates the impact of those measures to drive ongoing Manager-level staff in each department
JGC Group Compliance Hotline Information Security
Handling large volumes of information (specification docu-
improvements.
ments, design plans, reports, etc.) is part and parcel of proj- Groupwide System to Promote Information Security
JGC Group Compliance Hotline
Onceof athisyear,
ect execution. Much the president
information conducts
is confidential data aWemanagement review ofsecurity
have developed information the Quality
regulations and oper- Relevant Departments
We have established the JGC Group Compliance Hotline to We have established the JGC Group Compliance Hotline to help rapidly identify,
help rapidly The JGC Group Compliance Hotline received from clients and business partners, as well as JGC’s ating frameworks based on the ISO/IEC 27001 international

identify, mitigate and prevent compliance risks. The hotline

mitigate and prevent compliance risks. The hotline allows employees to seek
allows
advice or report any concerns has twotocontact
related compliance points – one
violations internal
or activities that
Gray is almost black Assurance
proprietary know-how. ProtectingCommittee's
these informationactivities,
assets is with the forpresident
standard information leading efforts tosystems and
security management
one of the expected responsibilities of an engineering contrac- JGC’s track record in projects, which can vary significantly in
may constitute a violation of compliance rules. tor. continuously improve the quality assurance organization.
terms of client specifications and operating conditions. We also
employees to seek advice or report any concerns related toAny compliance (English
reports or requests for advice aboutlanguage)
violations are and one external
investigated thoroughly However, JGC also has to ensure its employees, clients and work to improve information security from both a technological
and appropriate responses or feedback are implemented and provided on a business partners can safely access the information they and human perspective.
violations or activities that may constitute a violation of compliance rules. (Japanese language).
timely basis. need to support the smooth delivery of projects worldwide. To
Any reports or requests for advice about violations are investigated
Extreme care is taken to ensureThewhistleblowers
former is run bysuffer
do not thedetrimental
Compliance treat- this end, we actively invest in information systems, including Certification for Information System Platforms
ment. security measures. These investments support continuous The Corporate Administrative & Financial Affairs Division, the
thoroughly and appropriate responses or feedback are implemented and Department and the latter by
The JGC Group Compliance Hotline has two contact points – one internal
a third- improvements in information security, ensuring security levels Corporate IT Office and the relevant department in Fujitsu
satisfy the needs of our clients and business partners. Engineering Technologies Ltd., which are collectively respon-
provided on a timely basis. party (Japanese
(English language) and one external organization that specializes in
language).
sible for planning, building, operating and managing JGC’s IT
The former is run by the Compliance Department and the latter by a third-party
Extreme care is taken to ensure whistleblowers do not sufferorganization
detrimental that specializes whistleblower reporting.
in whistleblower reporting. Employees
Employees can report
infrastructure, acquired ISO/IEC 27001 certification in 2006 as
part of efforts to ensure the stable operation of the Group’s
concerns anonymously by phone or email.
treatment. can report concerns anonymously by information system platforms. Certification entails continuous
screening on an annual basis and a review process every
phone or email.
Number of Reports Received by Hotlines
Consult before it becomes a big problem
three years to renew certification. JGC underwent evaluation in
July 2016 for certification renewal and passed the continuous
Number of Reports Received by Hotlines
JGC Compliance Hotline
Fiscal 2012 Fiscal 2013 Fiscal 2014 Fiscal 2015 Fiscal 2016
0120-075-538 screening process in July 2017.
4 (FY)
2 3 5 12 [email protected]
【 English：[email protected] 】 Compliance Office

2013 2014 2015 2016 2017 Internal Whistleblowing System Publicity poster
Internal Whistleblowing System Publicity
57 | JGC Report 2017 JGC CORPORATION | 58
2 3 5 12 18 poster

59 JGC Report 2018 60

 Targeting Sustainable Growth Value Creation The JGC Group’s Strengths and Management Base Environment and Society Initiatives Management Structure Data Section

Occupational Health and Safety HSSE Management System Process Flow

Stage 1 Formulation and implementation of plans, measures, and guidelines Within four months of project commencement

Basic Stance
P hase 1 P hase 2 Pha se 3
Safety is one of the highest priorities for an engineering contractor. In accordance with JGC’s Health and Safety ●Identification of major risks and measures ● Development of a program for cultivating a safety culture and
●Planning of the contact method, conferences, etc., related to
Policy, and under the leadership of senior management, JGC works to prevent worksite accidents and traffic ●Review of the necessary documents and health, safety, and environment health, safety and environment management planning of BBS (Behavior Based Safety) programs
management plan for commencement of initial construction Establishment of basic worksite rules concerning health, safety and ● Preparation of an accident report and accident response
accidents involving its own employees and those of partner companies. In the last few years, our Incident- and Injury- ●Planning of education at the time of entrance and special education
●

management plan
environment management
Free (IIF) activities, which are implemented at all worksites, have achieved a dramatic improvement in awareness regarding dangerous tasks ●Implementation of a waste management plan ● Preparation of emergency countermeasures and a training plan
●Planning and thorough communication of emergency responses Risk management meetings, registration and management of
about occupational health and safety and traffic safety at construction projects in Japan and overseas. Going forward, ●Deployment of guidelines concerning the health, safety, and
●

major risks, and formulation of measures against risks

we will continue to rigorously enforce worksite and traffic safety measures across the JGC Group. environment management required for initial construction

Stage 2 Evaluation of implementation status and corrections Three months after the end of Stage 1 Stage 3 Implementation of regular audits
Basic Policy
P hase 4 P hase 5 Until the project completion
We established universal principles for HSSE and formulated the JGC ●Implementation of self-assessment by the project, prior to the Implementation of an audit by the head office auditor, based on
HSSE Fundamental Principle ●Accident reporting and management of accident statistics, report
Group Basic HSSE* Guidelines with a view toward sharing them with the to the head office health, safety, and environment management audit by the the annual plan for the health, safety, and environment
　‌To create safe, secure and healthy workplaces head office management audit of the head office
whole JGC Group, and distributed them to employees across the JGC in which all staff can carry out their functions ●Correction of nonconformities identified during self-assessment
Group. In project execution conducted by the JGC Group in Japan and with confidence
overseas, we undertake sincere initiatives related to HSSE as a common HSSE Slogan
pursuit that is in line with these guidelines, an attitude which has been 　Respect & Care
highly appreciated by our clients. HSSE Individual Code of Behavior
　●Be a willing observer of basic rules
　●Be mutually supportive, and appreciate the contributions made by others Overview of Fiscal 2017 Activities
　●Be prepared to take the lead
* ‌H S S E s t a n d s f o r H e a l t h , S a f e t y, S e c u r i t y a n d t h e E n v i r o n m e n t .
In fiscal 2017, under the leadership of top management, we implemented 2017, we failed to achieve our priority target of zero fatal accidents for two
activities to further increase an awareness of HSSE among JGC Group consecutive years. Based on this result, we are currently running a Groupwide
employees, with the aim of further disseminating the JGC Group Basic HSSE campaign aimed at eliminating major disasters.
Guidelines, which were formulated in 2015, within the Group. We have On the other hand, regarding our road safety program, as a result of the
introduced a new program called “Starting Strong,” and made a commitment thorough enforcement of our Seven Golden Rules for Safe Driving, no major
HSSE Organization
to ensure safety from the start of a project, by all of the staff involved in the traffic accidents occurred.
project.
The HSSE Committee discusses and deliberates on important safety HSSE Organization
Regarding Groupwide disaster statistics for 2017, the Lost Time Incident Rate *1 Lost Time Incident Rate (LTIR)
matters for the whole JGC Group. It also reports to the Operations = (Number of accidents accompanied by lost work time) x 200,000 / (Total project working hours) (OSHA base)
Operations Steering Committee (LTIR)*1 was 0.02, while the Total Recordable Injury Rate (TRIR)*2 was 0.14,
Steering Committee chaired by the president. Matters decided by the (Chaired by the President)
*2 Total Recordable Injury Rate (TRIR)
both of which fell within the targets. However, regarding major disasters, due to
HSSE Committee are promptly implemented by the Company’s divisions. = (Total number of recordable accidents) x 200,000 / (Total project working hours) (OSHA base)
HSSE Committee Quality Assurance, one fatal accident each at projects undertaken in Japan and overseas in fiscal
An audit group appointed by the chairman of the HSSE Committee is Safety & Environment Office
tasked with conducting health and safety audits at principal construction
sites in Japan and overseas and submits audit reports to the Operations Health Management
Center, Human Resources Oil & Gas
Process
and Organizational Technology
Steering Committee. Project Division Each department
Development Department, Division
Corporate Administrative & and office
Financial Affairs Div. Infrastructure
Project Division
HSE Systems
Department
■ JGC Safety Day 2017
HSE Group

JGC Safety Day Campaign

Construction Department Project teams
From June to July every year, JGC conducts a Groupwide campaign that
HSE Control Team Project HSE Managers
focuses on traffic and construction site safety. In addition to the Yokohama
Head Office, this campaign covers all of the Group’s construction sites, offices
and affiliates in Japan and overseas.
At the HSSE Forum/Conference held at our Yokohama Head Office on July
HSSE Management System 25, 2017, representatives from the Group’s work sites and overseas bases
each explained the safety activities and initiatives that were carried out with a
JGC has established a mechanism to systematically monitor the status implementing them (“Do”), monitoring and evaluating them (“Check”), focus on “Returning to basics,” and held lively discussions to enhance HSSE
of activities, in order to ensure that measures based on the HSSE including internal audits conducted twice per year, and providing guidance performance. During the campaign period, a poster contest was held based
Guidelines are implemented at construction sites. Through a PDCA cycle and making corrections (“Action”) at construction sites, we are aiming to on the theme of safety for the JGC Group’s employees and their families, in an HSSE Conference held on July 25, 2017
of formulating measures based on JGC’s HSSE Guidelines (“Plan”), continuously raise the level of HSSE across the entire JGC Group. effort to raise HSSE awareness across the entire Group.

61 JGC Report 2018 62

 Targeting Sustainable Growth Value Creation The JGC Group’s Strengths and Management Base Environment and Society Initiatives Management Structure Data Section

IR Activities Management Structure

(As of June 28, 2018)

Basic Stance

The JGC Group recognizes that dialogue (engagement) with shareholders and investors is vital to increasing corporate
value. Based on this premise, we proactively provide information to stakeholders through the timely disclosure of Representative Chairman and Chief Masayuki Sato Executive Senior Executive Yutaka Yamazaki*
information, business briefings by senior management, Q&A sessions at results briefings, and other means. We Directors Executive Officers Vice Presidents
Officer (CEO) Tsutomu Akabane*
also listen carefully to the opinions of shareholders and investors regarding our business, and reflect feedback into
management, in order to further increase corporate value and create the right conditions for stably holding shares in President and Chief Tadashi Ishizuka Executive Vice Satoshi Sato*
Operating Presidents
JGC, over the long term. Officer (COO) Eiki Furuta*
Senior Executive Vice Yutaka Yamazaki Hitoshi Kitagawa
President and Chief
Project Officer (CPO) Kiyotaka Terajima*
Directors Tsutomu Akabane Senior Executive Kenichi Yamazaki
IR Initiatives in Fiscal 2016 Officers
Masanori Suzuki*
Satoshi Sato Shigeru Abe
In response to the needs of all of our shareholders and investors, we to access information that
conducted IR activities last fiscal year with a particular awareness of the affects investment decisions, Terumitsu Hayashi
following four points, in order to realize continued growth and further while enhancing the disclosure Eiki Furuta Yasuhiro Okuda
increase corporate value. of information.
Masurao Fujii

(i) Promote dialogue by the new president Chief Financial Officer Kiyotaka Terajima Akio Yoshida
(CFO)
In the fiscal year that ended March 31, 2017, JGC reported losses in Tetsuya Muramoto*
Investor Relations (IR) information is shown on the JGC
its core EPC business in the oil and gas area. A new president was website.
Masanori Suzuki Masahiro Aika
appointed to tackle the urgent task of rebuilding the EPC business. In
the IR activities following the appointment of the new president, we (iii) Changes in market conditions Executive Officers Hisakazu Nishiguchi
have promoted dialogue by The plant market was weak due to a decline in motivation for capital Tetsuya Muramoto Nobuhiro Kobayashi
the new president through investment by clients, as a result of a drop in the crude oil price from
Toru Amemiya
carefully explaining not only late 2014. However, since the crude oil price has stabilized since 2016,
the new president’s operating the market is beginning to shift toward a recovery. We conducted IR Shigeru Endo Outside Masayasu Endo
Director
policy, but also the specific activities with the intention of giving investors hope for JGC’s medium- Yuji Tanaka
initiatives, achievements, and to long-term growth, by carefully explaining in detail this trend in market
Masayuki Matsushima Outside Takaya Matsuoka
humanity of the president, conditions to the stock market. Director

among other points. Aya Yamazaki

Press conference to announce the appointment of the new (iv) Enhancing the Integrated Report Audit & Yukihiro Makino Yasuharu Yamaguchi
president. Supervisory
We identified improvements to be made through dialogue with ESG Chief Digital Officer
Board Members (CDO) Takuya Hanada
investors, for the purpose of enhancing the contents of the Integrated
(ii) Enhancing the disclosure of information Report. Through this effort, we enhanced the contents of ESG-related Yasumasa Isetani Takeshi Kawasaki
With the aim of holding constructive dialogue with our shareholders and information with the cooperation of relevant departments in the company, Tadashi Yamagishi
investors, we began disclosing the contents of Q&A conducted in results in addition to JGC’s value creation model. As a result, in 2017, JGC
Masao Mori Outside Hiroyuki Ishizaki
briefings and conference calls, as well as summaries of financial results, was selected for publishing a “Most-improved Integrated Report” by the Auditor

on our website. In this manner, we enhanced the fairness of opportunities domestic asset managers entrusted by the GPIF. Mutsuto Tone
Chief Technology Officer
Koichi Ohno Outside
(CTO) Yutaka Yamanaka
Auditor
Annual IR Activity Schedule
Katsuki Yamamoto
Results
2nd-quarter announcement Dec. Jan. Results
3rd-quarter announcement Main IR Activities
Norio Takamatsu Outside
Auditor
Shoji Yamada

Results briefing
Nov. Feb. Conference call No. of No. of Akira Sugiyama
IR activity
cases companies
Overseas IR Oct. Annual
Mar. Response to request for information, phone calls from institutional Takehiko Hirose
1 investors in Japan / overseas
192 216
Schedule
Sep. Apr. Financial results
briefing
2 Results briefing conference call 2 113 Koji Sakurai
3 Results briefing by senior management 2 119
Results
1st-quarter announcement
Aug. May Results
Year-end announcement
4 ESG-related meetings 4 4
Moriyuki Aida

Conference call
Jul. Jun. Ordinary General
Shareholder’s Meeting 5 Oversease IR road shows by senior management 2 11 *Concurrently Serving as Director

63 JGC Report 2018 64

 Targeting Sustainable Growth Value Creation The JGC Group’s Strengths and Management Base Environment and Society Initiatives Management Structure Data Section

Chapter 6
ESG Data Highlights This table introduces our initiatives related to the environment, society, and

Data Section
governance (ESG) and our key performance indicators (KPI).

JGC’s main KPI Units Fiscal 2013 Fiscal 2014 Fiscal 2015 Fiscal 2016 Fiscal 2017

Report on Environmental Initiatives (E)

Industrial waste recycling rate (Domestic construc-
tion sites)
% 94.2 94.1 96.3 98.1 97.7
Number of incidents of leaks of hazardous substances,
etc. (Domestic and overseas construction sites)
Incidents 0 0 0 0 1
Energy-related CO2 emissions (Domestic construc- 67 Six-Year Summary
tion sites)
kgCO2/hr 0.58 0.63 0.64 1.43 3.52
68 Analysis of Performance and Financial Position
Rate of diffusion of electronic manifests % – – 79.4 96.0 64.2
Environment-related Initiatives Crude oil 72 Business Risks
•C  ontribution to environmental protection Energy consumption (Yokohama Head Office) (*1)
equivalent (kl) 2,908 2,770 2,579 2,405 2,248
• E nvironmental Improvement Activities in 73 Consolidated Balance Sheets
Ratio of copy paper compliant with Act on Promoting
Line with Our Business Green Purchasing (Yokohama Head Office)
% 100 100 100 100 100
• P romotion of the Zero Emissions Initiative
75 Consolidated Statements of Operations
Yokohama Head Office power consumption 1,000 kWh 7,530 7,308 6,720 5,974 5,571
Consumption of chilled water by Yokohama Head 76 Consolidated Statements of Comprehensive Income
Office
1,000 MJ 19,058 17,112 16,195 15,857 14,071
77 Consolidated Statements of Changes in Net Assets
Consumption of steam by Yokohama Head Office 1,000 MJ 8,617 8,252 8,021 8,886 9,153
78 Consolidated Statements of Cash Flows
Volume of waste disposal by Yokohama Head Office 1,000 kg 309 258 224 209 212
79 Notes to Consolidated Financial Statements
Rate of recycling of waste by Yokohama Head Office % 65.4 63.2 66.6 64.9 65.7
Report on Social Initiatives (S) 96 Independent Auditor’s Report
Number of women in management positions Persons 10 11 15 17 19 97 Supplemental Explanation
Rate of employment of people with disabilities % 1.70 1.91 1.75 1.81 1.82 98 Internal Control Report (Translation)
Number of re-employed employees (*2) Persons 191 209 208 189 159
99 Independent Auditor’s Report (Translation)
Number of non-Japanese employees (*2) Persons 71 85 97 94 100
Number of employees taking childcare leave (Male) Persons 0 2 1 2 8 101 JGC Group
Number of female employees taking childcare leave (Rate 102 Outline of JGC
of reinstatement of female employees taking childcare Persons (%) 12（94.7） 20（100） 29（100） 27（96） 24（100）
leave)
Number of employees taking spousal childbirth leave Persons 75 76 72 81 81
Initiatives related to human rights and labor
Number of employees taking sick or injured childcare
practices
leave Persons 119 113 125 115 123
• Promotion of diversity
• S upport for realization of work-life balance Number of employees taking nursing care leave Persons 3 2 4 8 20
• S upport for employee career formation Number of employees taking temporary retirement
for nursing care Persons 1 1 2 2 1
Number of employees working reduced hours for
childcare Persons 37 33 37 44 42
Number of employees working reduced hours for
nursing care Persons 0 0 1 1 2
Rate of utilization of annual leave % 48 50 53 53 57
Number of employees dispatched for onsite training/
onsite instruction Persons 112 125 98 62 72
Number of employees dispatched to overseas
companies, etc. Persons 3 3 2 5 5
Initiatives related to health and safety Total project working hours 1,000 hrs. 140,309 206,831 185,433 128,036 81,072
• F ostering of culture of health and safety
•H  SSE leadership by top management Number of fatal accidents Accidents 0 0 0 3 2
• E nhancement of HSSE management system Number of accidents accompanied by lost work time Accidents 3 12 14 8 9
for investment projects
•O  ngoing implementation of traffic safety Number of restrictions on work Restrictions 48 60 37 25 6
measures Number of conditions requiring specialized treatment Conditions 77 124 99 65 41
• F urther development of in-house health and
Rate of frequency of accidents accompanied by lost
safety education
work time (*3) 0.004 0.012 0.015 0.012 0.022
• E nhancement of Head Office construction
HSSE functions Rate of frequency of recordable accidents (*4) 0.18 0.19 0.16 0.16 0.14
Report on Governance (G)
Initiatives related to fair business practices Number of times compliance training implemented/
• Realization of increased compliance awareness number of employees receiving compliance training
Times (People) 8（220） 8（312） 19（600） 14（434） 13（418）

Initiatives related to the promotion of

information security
Number of serious information security-related
• Information management awareness verifi-
incidents
Incidents 0 0 0 0 0
cation surveys and voluntary inspections
•D  rills against targeted threats

Reinforcement of governance system Number of outside directors Persons 1 1 1 2 2

(*1) Energy consumption (Yokohama Head Office): Targets for fiscal 2015 and fiscal 2016 have been set as an average annual reduction of 1%, with 2013 as the base year.
(*2) Number of re-employed employees and number of non-Japanese employees = (Number of employees in April + Number of employees in March) ÷ 2
(*3) Rate of frequency of accidents accompanied by lost work time = Number of accidents accompanied by lost work time × 200,000 ÷ Total project working hours
(*4) Rate of frequency of recordable accidents = (Number of fatal accidents + Number of accidents accompanied by lost work time + Number of restrictions on work + Number of conditions requiring specialized treatment) × 200,000 ÷ Total project
working hours

65 JGC Report 2018

66
 Targeting Sustainable Growth Value Creation The JGC Group’s Strengths and Management Base Environment and Society Initiatives Management Structure Data Section

Six-Year Summary Analysis of Performance and Financial Position

(As of March 31 of each year)

Consolidated Our View of the Operating Environment ⃝ Liabilities

(Millions of yen) During the consolidated fiscal year under review, the JGC Group’s operating As of March 31, 2018, current liabilities totaled ¥215,773 million, a decline of
2013 2014 2015 2016 2017 2018
environment continued to improve, despite some uncertainties, with stable oil prices ¥10,683 million from the end of the previous fiscal year, largely reflecting a drop of
Net Sales 624,637 675,821 799,076 879,954 693,152 722,988
since 2016 spurring oil- and gas-producing countries to restart capital investment ¥9,442 million for provision for loss on construction projects. Long-term liabilities
Operating Income (Loss) 64,123 68,253 29,740 49,661 (21,497) 21,495
Net Income (Loss) Attributable to Owners programs. JGC expects oil- and gas-producing countries to push ahead with totaled ¥73,450 million, an increase of ¥36,875 million from the end of the previous
46,179 47,178 20,628 42,793 (22,058) 16,589
of Parent
investment in major oil and gas projects to address growing demand for energy and fiscal year. Long-term loans payable declined ¥8,336 million, but the main factor
Total Current Assets 460,231 575,886 533,538 522,747 480,866 532,974
Total Current Liabilities 262,439 333,353 286,533 225,203 226,458 215,773 electricity amid population growth and economic expansion in their own countries, and behind the increase in non-current liabilities was ¥50 billion in corporate bonds issued

Working Capital 197,792 242,533 247,005 297,544 254,408 317,200 to increase energy exports as a source of foreign currency. to meet the JGC Group’s funding needs.
Current Ratio (%) 175.4 172.8 186.2 232.1 212.3 247.0
As a result, total liabilities at the end of fiscal 2017 were ¥289,223 million, an increase
Net Property and Equipment 71,708 70,290 78,560 76,255 69,878 55,222
Results of Operations of ¥26,192 million from the end of the previous fiscal year.
Total Assets 628,757 746,102 719,754 689,782 646,292 685,002
Total Net Assets 336,083 379,882 388,496 419,673 383,260 395,779 In the consolidated fiscal year under review, the JGC Group reported net sales of

New Contracts 594,091 818,161 769,680 320,626 506,293 547,826 ¥722,988 million (up 4.3% year on year), operating income of ¥21,495 million
Outstanding Contracts 1,549,813 1,767,814 1,772,036 1,192,625 1,019,621 886,601
(compared with an operating loss of ¥21,497 million in the previous fiscal year), and ⃝ Net Assets
Net Income (Loss) per Share (in yen) 182.91 186.90 81.73 169.60 (87.42) 65.75
net income attributable to owners of parent of ¥16,589 million (compared with a net As of March 31, 2018, net assets totaled ¥395,779 million, an increase of ¥12,518
Cash Dividends per Share (in yen) 45.5 46.5 21.0 42.5 30.0 25.0
Number of Employees 6,721 7,005 7,332 7,489 7,554 7,610 loss of ¥22,058 million in the previous fiscal year). ROE was 4.3%. million from the end of the previous fiscal year. The main items in net assets were net

income attributable to owners of parent of ¥16,589 million and cash dividends paid of

⃝ Assets ¥7,569 million. As a result, the shareholders’ equity ratio was 57.6%, compared with

As of March 31, 2018, current assets totaled ¥532,974 million, an increase of 59.1% at the end of the previous fiscal year.

¥52,108 million from the end of the previous fiscal year. That mainly reflected a

combined increase of ¥54,809 million for short-term loans receivable and accounts

receivable, outweighing a decline of ¥14,392 million for costs on uncompleted

construction contracts. Non-current assets totaled ¥152,028 million, a decline of

¥13,397 million from the end of the previous fiscal year. The main reason for the

decline was a drop of ¥14,655 million for property, plant and equipment, which

outweighed an increase of ¥816 million for investments and other assets.

As a result, total assets at the end of fiscal 2017 were ¥685,002 million, an increase

of ¥38,710 million from the end of the previous fiscal year.

67 JGC Report 2018 68

 Targeting Sustainable Growth Value Creation The JGC Group’s Strengths and Management Base Environment and Society Initiatives Management Structure Data Section

Segment Information ⃝ Other Business Cash Flow 2016.3 2017.3 2018.3

⃝ Total Engineering Business In the other business, JGC continued to operate independent water and power (IWPP) On a consolidated basis, cash and cash equivalents for the consolidated fiscal year Shareholders’ equity ratio 60.7 59.1 57.6
Shareholders’ equity ratio
In the engineering, procurement and construction (EPC) business, JGC worked to businesses in the Middle East and large-scale solar power generation (mega-solar) under review (“net cash”), increased ¥49,791 million from the end of the previous 61.6 75.5 85.2
(market basis)

secure orders in Japan, Southeast Asia, the Middle East, Africa, North America, businesses in Japan. fiscal year to ¥235,394 million. Net cash provided in operating activities was ¥5,539 Interest-bearing liabilities
to cash flow ratio
－ － 12.2
Russia/CIS and other markets. In the oil & gas area, JGC was awarded a contract On March 1, 2018, wholly owned consolidated subsidiary Kamogawa Mirai Solar Co., million, compared with net cash used in operating activities of ¥28,884 million in the Interest coverage ratio － － 12.1
for the construction of a floating liquefied natural gas (FLNG) facility offshore the Ltd. sold its solar power generation business. previous fiscal year. The main uses of cash were before income taxes of ¥31,666 Notes: ‌Shareholders’ equity ratio: (Total net assets – Minority interests) / Total assets
Shareholders’ equity ratio (market basis): Total market capitalization / Total assets
Republic of Mozambique in June 2017, and JGC and Group company JGC Algeria million and decrease in inventories. Net cash used in investing activities was ¥11,737 Interest-bearing liabilities to cash flow ratio: Interest-bearing liabilities / Cash flow
Interest coverage ratio: Cash flow / Interest expense
S.p.A. won an order for the construction of crude oil gathering and processing million, compared with net cash used of ¥12,979 million in the previous fiscal year. The * ‌All indicators are calculated using consolidated financial figures.
* ‌“Interest-bearing liabilities” includes all liabilities on the consolidated balance sheet on which interest
facilities in Algeria, also in June 2017. In July 2017, JGC and its partners secured main uses of cash were proceeds from sales of property and proceeds from business is paid. “Cash flow” is cash flow from operating activities shown in the consolidated statements of cash
Net Sales by Reporting Segment
flow. “Interest expense” is the amount of interest paid shown in the consolidated statements of cash
an order for the construction of a large-scale LNG plant in the US. However, the separation. Net cash used in financing activities was ¥33,782 million, mainly reflecting
Total Engineering Business Functional Materials Manufacturing Business flows.
client is likely to make the final investment decision on the project in 2019, so issuance of bonds. * ‌In fiscal years where cash flow is negative, the interest-bearing liabilities to cash flow ratio and the
(Billions of yen) interest coverage ratio are denoted by a dash.
JGC expects to book the order amount in 2019 or later. In addition, in December 900
828.4
800 745.0
2017, JGC and Group company PT. JGC Indonesia were awarded a contract for
700 643.3
670.0 Shareholders’ Equity and Shareholders’ Equity Ratio
624.8 Free Cash Flows
the construction of a gas processing plant in Indonesia. In the infrastructure area,
600 576.6 Shareholders’ Equity (left scale) Shareholders’ Equity Ratio (right scale)

JGC and Group company JGC Vietnam Co., Ltd. secured an order in March 2018 to 500 (Billions of yen)
(Billions of yen) 60.7 59.1 (%)
400
57.6 120
construct a mega-solar power generation plant in Vietnam. 450 53.8 60 101.8
53.4
300 50.2 418.6
382.2 394.7 90
In the investment business, JGC made the decision in November 2017 to take 387.4
200 335.5
374.6 60 56.6
a stake in a business that owns and charters floating production storage and 100 300 40
38.5 37.1 37.4 37.6 39.9 42.1
30
offloading (FPSO) vessels for oil and gas fields offshore Ghana, aiming to gain 0
2013.3 2014.3 2015.3 2016.3 2017.3 2018.3 17.2
broader knowledge and expertise in the offshore field. 0
150 20
-30
-41.0 -41.8
⃝ Functional Materials Manufacturing Business -60
0 0
In the catalysts business, the Group focused on winning back market share 2013.3 2014.3 2015.3 2016.3 2017.3 2018.3 -90
-94.8
in Japan, increasing sales in export projects, and maintaining and increasing -120
2013.3 2014.3 2015.3 2016.3 2017.3 2018.3
collaboration with clients. Those efforts led to growth in sales of FCC catalysts and

supported firm sales of chemical catalysts and environmental catalysts.

In the fine chemicals business, shipments of cosmetics ingredients, functional

coating materials and other products increased, and the business secured strong

orders for components used in semiconductor cleaning equipment and OLED

exposure equipment.

69 JGC Report 2018 70

 Targeting Sustainable Growth Value Creation The JGC Group’s Strengths and Management Base Environment and Society Initiatives Management Structure Data Section

Business Risks

Analysis of New Contracts Business Outlook The following describes business and other risks faced by the JGC Group that may 3. Investment Risk

In the fiscal year under review, orders received totaled ¥547,826 million. ⃝ Total Engineering Business have a material impact on investment decisions. The JGC Group conducts investments in such areas as the oil and gas development

The tables below provide a breakdown of new contracts in the total engineering In the plant market, the implementation of capital investment projects is gradually Forward-looking statements in this section are based on information available as of business, the power generation and desalination business, and the agriculture, urban

business by sector and region. gaining momentum amid a projected increase in demand for energy due to March 31, 2018 and take into account the whole JGC Group. development and infrastructure maintenance business. The JGC Group conducts

population growth in emerging economies. In addition, despite some uncertainties, appropriate risk management by carrying out risk assessments when making new

the Group’s operating environment continues to improve, including emerging signs 1. Overseas Risk investments and reinvestments and by performing timely monitoring of existing
New Contracts by Business Sector (Billions of yen)

2018.3 of a pickup in large LNG projects. JGC will continue to focus on securing projects Overseas businesses generate more than 80% of the JGC Group’s total net sales. Such businesses. However, the JGC Group’s performance may be affected by unanticipated
2017.3 2018.3 (Percentage of new
contracts) with adequate margins by increasing added value and improving competitiveness. businesses are subject to country risks including economic risks and socio-political events such as dramatic changes in the investment environment exemplified by
Oil and gas development
1,595 1,299 23.7% In line with the medium-term business plan, “Beyond the Horizon,” JGC will risks. Specific risks include political instability, war, revolution, civil unrest, terrorism, sudden price changes for oil, gas and other energy resources, as well as changes in
projects
Petroleum refining projects 254 199 3.6% also expand the Group’s operations further by growing the EPC business in the changes in economic policy or conditions, default on foreign debt and changes estimated reserves.
LNG projects 1,026 2,245 41.0%
infrastructure field, while also continuing to develop the EPC business in the core oil to exchange and taxation systems. To minimize the impact of those risks on its
Chemical projects 504 772 14.1%
Other projects 1,681 961 17.6% and gas field. businesses, the JGC Group continuously reviews and reinforces its risk management 4. Foreign Exchange Risk

system, uses trade insurance, recovers project receivables as early as possible, forms Almost all the JGC Group’s overseas sales are paid under agreements denominated in

⃝ Functional Materials Manufacturing Business joint ventures and takes various other steps. However, the JGC Group’s performance foreign currencies. The JGC Group uses a number of approaches to hedge associated
New Contracts by Region (Billions of yen)

2018.3 In the catalysts business, realignment in the oil refining industry is leading may be affected if changes in the business environment are more extreme than exchange rate risks, such as executing project contracts denominated in multiple
2017.3 2018.3 (Percentage of new
contracts) to the integration of facilities and oil refiners are increasingly focusing on anticipated and projects are canceled, suspended or delayed. currencies, conducting overseas procurement, securing orders in overseas currencies
Japan 1,946 1,495 27.3%
improving productivity and supplying high-value-added products. Amid those and entering into forward foreign exchange agreements. However, sudden exchange
Asia 458 594 10.8%
Africa 1,280 1,786 32.6% trends, the Group will develop new catalysts, increase overseas sales and 2. Project Execution Risk rate fluctuations may affect the JGC Group’s performance.
Middle East 327 479 8.7% domestic market share for FCC catalysts, establish a new business to sell Most contracts for projects in which the JGC Group participates are lump-sum, full-
Oceania and Other 1,048 1,122 20.6%
catalyst raw material zeolite to external customers, and actively market NOx turnkey contracts. However, to hedge some of the risks in these contracts, the Group

removal catalysts, particularly in Southeast Asia. uses cost-plus-fee contracts and contracts based on the cost disclosure estimate

The fine chemicals business will actively respond to rising demand for optical method, depending on the project. The JGC Group draws fully on its past experience

communication components, work to win orders for energy-related substrates to anticipate and incorporate into each contract provisions for dealing with risks that

and abrasives, expand sales and applications for functional coating materials, could materialize during project execution. However, the profitability of projects may

and further increase cosmetics ingredient supply capacity. be adversely affected due to unforeseen impediments to project execution, including

sudden steep rises in the costs of materials, equipment, machinery and labor, natural

disasters and outbreaks of disease, or if the JGC Group’s actions or a problem during

project execution should cause a major accident, which may affect the JGC Group’s

performance.

71 JGC Report 2018 72

 Targeting Sustainable Growth Value Creation The JGC Group’s Strengths and Management Base Environment and Society Initiatives Management Structure Data Section

Consolidated Balance Sheets

(March 31, 2018 and 2017)

(Thousands of U.S. dollars) (Thousands of U.S. dollars)

(Millions of yen) (Note 1) (Millions of yen) (Note 1)

Year ended Year ended Year ended Year ended Year ended Year ended
ASSETS LIABILITIES AND NET ASSETS
March 31, 2018 March 31, 2017 March 31, 2018 March 31, 2018 March 31, 2017 March 31, 2018
CURRENT ASSETS: CURRENT LIABILITIES:
Cash and deposits (Notes 3, 12 & 16) ¥195,394 ¥ 185,603 $ 1,839,175 Short-term loans and current maturities of long-term debt (Notes 2 & 3) ¥ 13,363 ¥ 14,052 $ 125,781
Notes and accounts receivable (Notes 2 & 16) 186,672 196,200 1,757,078 Notes and accounts payable (Notes 2 & 16) 89,164 97,613 839,270
Inventories (Note 4) 29,881 43,970 281,260 Advances received on uncompleted contracts (Note 2) 47,428 45,041 446,423
Short-term loans receivable (Notes 2, 9,12 & 16) 46,475 11,663 437,453 Reserve for job warranty costs 1,444 2,850 13,592
Deferred tax assets (Note 11) 11,654 12,412 109,695 Reserve for losses on contracts 21,819 31,262 205,375
Other current assets (Notes 2, 9 & 16) 63,189 32,530 594,776 Income taxes payable 4,815 3,523 45,322
Allowance for doubtful accounts (291) (1,512) (2,739) Provision for loss on guarantees — 2,815 —
TOTAL CURRENT ASSETS 532,974 480,866 5,016,698 Other current liabilities (Notes 2, 3, 9 & 16) 37,740 29,302 355,233
TOTAL CURRENT LIABILITIES 215,773 226,458 2,030,996

PROPERTY AND EQUIPMENT (Note 3):

LONG-TERM LIABILITIES:
Land (Notes 13 & 15) 18,550 25,046 174,605
Long-term debt, less current maturities (Notes 3 & 16) 54,295 12,631 511,060
Buildings and structures (Note 15) 56,057 62,369 527,645
Net defined benefit liability (Note 5) 16,121 16,210 151,741
Machinery and equipment 64,357 71,217 605,770
Deferred tax liabilities for land revaluation (Notes 11 & 13) 1,015 3,126 9,554
Construction in progress 2,386 284 22,459
Other non-current liabilities (Notes 2, 3 & 11) 2,019 4,607 19,004
Other 4,385 4,436 41,274
TOTAL LONG-TERM LIABILITIES 73,450 36,574 691,359
145,735 163,352 1,371,753
TOTAL LIABILITIES 289,223 263,032 2,722,355
Less accumulated depreciation (90,513) (93,474) (851,968)
NET PROPERTY AND EQUIPMENT 55,222 69,878 519,785
CONTINGENCIES (Note 6)

INVESTMENTS AND OTHER ASSETS: NET ASSETS (Note 7):

Investments in unconsolidated subsidiaries and affiliates (Notes 8 & 16) 30,220 21,450 284,450 SHAREHOLDERS’ EQUITY
Investment securities (Notes 3, 8 & 16) 39,599 38,380 372,732 Common stock
Long-term loans receivable (Notes 2 & 16) 3,368 5,731 31,702 Authorized — 600,000,000 shares,
Deferred tax assets (Note 11) 5,076 12,447 47,779 Issued — 259,052,929 shares in 2018 and 2017 23,511 23,511 221,301
Net defined benefit asset (Note 5) 425 190 4,000 Capital surplus 25,609 25,609 241,048
Other 18,118 17,350 170,538 Retained earnings 355,572 341,764 3,346,875

TOTAL INVESTMENTS AND OTHER ASSETS 96,806 95,548 911,201 Treasury stock, at cost

6,744,765 shares in 2017 and 6,745,465 shares in 2018 (6,737) (6,736) (63,413)
TOTAL ASSETS ¥ 685,002 ¥ 646,292 $6,447,684 TOTAL SHAREHOLDERS’ EQUITY 397,955 384,148 3,745,811

The accompanying notes are an integral part of these statements. ACCUMULATED OTHER COMPREHENSIVE INCOME
Net unrealized holding gains on securities (Notes 8 & 16) 11,169 7,955 105,130
Deferred losses on hedges (Note 9) (518) (432) (4,876)
Revaluation reserve for land (Note 13) (10,919) (6,131) (102,777)
Foreign currency translation adjustments (1,170) (756) (11,013)
Remeasurements of defined benefit plans (Note 5) (1,816) (2,569) (17,093)
TOTAL ACCUMULATED OTHER COMPREHENSIVE INCOME (3,254) (1,933) (30,629)
NON-CONTROLLING INTERESTS 1,078 1,045 10,147
TOTAL NET ASSETS 395,779 383,260 3,725,329
TOTAL LIABILITIES AND NET ASSETS ¥ 685,002 ¥ 646,292 $ 6,447,684

73 JGC Report 2018 74

 Targeting Sustainable Growth Value Creation The JGC Group’s Strengths and Management Base Environment and Society Initiatives Management Structure Data Section

Consolidated Statements of Operations Consolidated Statements of Comprehensive Income

March 31, 2018 and 2017 March 31, 2018 and 2017

(Thousands of U.S. dollars) (Thousands of U.S. dollars)

(Millions of yen) (Note 1) (Millions of yen) (Note 1)

Year ended Year ended Year ended Year ended Year ended Year ended
March 31, 2018 March 31, 2017 March 31, 2018 March 31, 2018 March 31, 2017 March 31, 2018
NET SALES (Note 10) ¥ 722,988 ¥ 693,152 $ 6,805,233 NET INCOME (LOSS) ¥ 16,812 ¥ (21,843) $ 158,245
COST OF SALES 678,039 691,700 6,382,144
Gross profit 44,949 1,452 423,089 OTHER COMPREHENSIVE INCOME (Note 18):
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 23,454 22,949 220,764 Net unrealized holding gains on securities (Notes 8 & 16) 3,214 890 30,252
Operating income (loss) 21,495 (21,497) 202,325 Deferred gains (losses) on hedges (Note 9) (73) 87 (687)
Translation adjustments (414) (4,828) (3,897)

OTHER INCOME (EXPENSES): Remeasurements of defined benefit plans (Note 5) 726 265 6,834

Interest and dividend income 5,681 6,504 53,473 Share of other comprehensive income (loss) of affiliates accounted for using equity
method 28 (2) 264
Interest expense (512) (662) (4,819)
TOTAL OTHER COMPREHENSIVE INCOME ¥ 3,481 ¥ (3,588) $ 32,766
Gain on sales of investment securities 51 1,648 480
TOTAL COMPREHENSIVE INCOME ¥ 20,293 ¥ (25,431) $ 191,011
Loss on impairment of fixed assets (Notes 10 & 17) — (5,928) —
Exchange loss, net (2,620) (1,534) (24,661)
Comprehensive income attributable to owners of JGC Corporation ¥ 20,057 ¥ (25,661) $ 188,790
Equity in earnings of affiliates 814 632 7,662
Comprehensive income attributable to non-controlling interests ¥ 236 ¥ 230 $ 2,221
Reversal of allowance for investment loss 774 3,399 7,285
The accompanying notes are an integral part of these statements.
Gain on liquidation of subsidiary — 1,867 —
Gain on sales of fixed assets (Note 15) 6,549 86 61,643
Loss on provision for guarantees — (1,514) —
Loss on valuation of investment securities (Notes 8 & 11) (5,198) (2,926) (48,927)
Provision of allowance for doubtful accounts (4,909) — (46,207)
Gain on sales of shares of subsidiaries and affiliates 1,394 13 13,121
Gain on transfer from business divestitures 8,936 — 84,111
Bond issuance cost (213) — (2,005)
Other, net (Note 15) (576) 562 (5,421)
10,171 2,147 95,735
Income (loss) before taxes on income 31,666 (19,350) 298,060

TAXES ON INCOME (Note 11):

Current 10,591 9,974 99,689
Deferred 4,263 (7,481) 40,126
NET INCOME (LOSS) 16,812 (21,843) 158,245

NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTERESTS 223 215 2,099

NET INCOME (LOSS) ATTRIBUTABLE TO OWNERS OF
JGC CORPORATION ¥ 16,589 ¥ (22,058) 156,146

Yen U.S. dollars (Note 1)

AMOUNTS PER SHARE OF COMMON STOCK:

Net income (loss) ¥ 65.75 ¥ (87.42) $ 0.62
Cash dividends applicable to the year ¥ 25.00 ¥ 30.00 $ 0.24

The accompanying notes are an integral part of these statements.

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 Targeting Sustainable Growth Value Creation The JGC Group’s Strengths and Management Base Environment and Society Initiatives Management Structure Data Section

Consolidated Statements of Changes in Net Assets Consolidated Statements of Cash Flows

March 31, 2018 and 2017 March 31, 2018 and 2017

Common stock (Thousands of U.S. dollars)

(Millions of yen) (Note 1)
Net unrealized
holding gains on Deferred losses Revaluation Foreign currency Non- Year ended Year ended Year ended
Retained Treasury stock, securities on hedges reserve for land translation Remeasurements of Controlling
Shares Amount Capital surplus earnings at cost (Notes 8 & 16) (Note 9) (Note 13) adjustments defined benefit plans Interests March 31, 2018 March 31, 2017 March 31, 2018
(Thousands of CASH FLOWS FROM OPERATING ACTIVITIES:
(Millions of yen)
shares) Income (loss) before taxes on income and Non-Controlling Interests in earnings of
Balance at April 1, 2016 259,053 ¥ 23,511 ¥ 25,609 ¥ 374,625 ¥ (6,736) ¥ 7,065 ¥ (503) ¥ (6,115) ¥ 4,072 ¥ (2,832) ¥ 978 ¥31,666 ¥ (19,350) $298,060
consolidated subsidiaries
Net loss attributable to owners of Adjustments to reconcile income before taxes on income and Non-Controlling interests in
(22,058)
JGC Corporation
earnings of consolidated subsidiaries to net cash provided by (used in) operating activities:
Effect of change in scope of
(96) Depreciation and amortization 7,427 8,013 69,908
consolidation
Cash dividends (10,723) Increase in allowance for doubtful accounts 6,445 785 60,665
Decrease of land revaluation 16 (Decrease) Increase in reserve for losses on contracts (9,214) 10,157 (86,728)
Gain on disposal of treasury stock 0 1 (Decrease) Increase in net defined benefit plans (65) 614 (612)
Net unrealized holding gains on
890
Interest and dividend income (5,681) (6,504) (53,473)
securities Interest expense 512 662 4,819
Net deferred losses on hedges 71
Exchange loss 112 546 1,054
Foreign currency translation
adjustments
(4,828) Equity in earnings of affiliates (814) (632) (7,662)
Increase of treasury stock (1) Gain on sales of investment securities (51) (1,648) (480)
Remeasurements of defined benefit Gain on sales of property and equipment (6,542) (45) (61,578)
263
plans Loss on valuation of investment securities 5,198 2,926 48,927
Net changes during the year (16) 67 Loss on impairment of fixed assets — 5,928 —
Balance at March 31, 2017 259,053 ¥ 23,511 ¥ 25,609 ¥ 341,764 ¥ (6,736) ¥ 7,955 ¥ (432) ¥ (6,131) ¥ (756) ¥ (2,569) ¥ 1,045 Gain on liquidation of subsidiary — (1,867) —
Net income attributable to owners Gain on transfer from business divestitures (8,936) — (84,111)
16,589
of JGC Corporation
Gain on sales of shares of subsidiaries and affiliates (1,394) (13) (13,121)
Cash dividends (7,569)
Decrease (Increase) in notes and accounts receivable 5,061 (21,439) 47,637
Decrease of land revaluation 4,788
Decrease in inventories 13,931 6,386 131,128
Gain on disposal of treasury stock 0 0
Net unrealized holding gains on
(Increase) Decrease in other assets (21,377) 1,497 (201,214)
3,214 Decrease in notes and accounts payable (5,612) (11,239) (52,824)
securities
Net deferred losses on hedges (86) Increase in advances received on uncompleted contracts 2,515 7,035 23,673
Foreign currency translation
(414)
Other (3,855) (6,464) (36,285)
adjustments
Subtotal 9,326 (24,652) 87,783
Increase of treasury stock (1)
Interest and dividends received 6,104 6,707 57,455
Remeasurements of defined benefit
plans
753 Interest paid (460) (630) (4,330)
Net changes during the year (4,788) 33 Income taxes paid (9,431) (10,309) (88,771)
Balance at March 31, 2018 259,053 ¥ 23,511 ¥ 25,609 ¥ 355,572 ¥ (6,737) ¥ 11,169 ¥ (518) ¥ (10,919) ¥ (1,170) ¥ (1,816) ¥ 1,078 NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 5,539 (28,884) 52,137
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for purchases of property and equipment (7,190) (6,175) (67,677)
Net unrealized
holding gains on Deferred losses Revaluation Foreign currency Non- Proceeds from sales of property and equipment 15,238 1,107 143,430
Retained Treasury stock, securities on hedges reserve for land translation Remeasurements of Controlling Payments for purchase of investment securities (7,329) (635) (68,985)
Common stock Capital surplus earnings at cost (Notes 8 & 16) (Note 9) (Note 13) adjustments defined benefit plans Interests
Proceeds from sales of investment securities 1,947 3,324 18,326
(Thousands of U.S. dollars)(Note 1)
Proceeds from business separation 14,879 — 140,051
Balance at April 1, 2017 $ 221,301 $ 241,048 $ 3,216,905 $ (63,404) $ 74,878 $ (4,067) $ (57,709) $(7,116) $ (24,181) $ 9,836
Increase in short-term loans receivable (4,993) (6,016) (46,997)
Net income attributable to owners
156,146 Other (815) (4,584) (7,672)
of JGC Corporation
Cash dividends (71,244) NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 11,737 (12,979) 110,476
Decrease of land revaluation 45,068 CASH FLOWS FROM FINANCING ACTIVITIES:
Gain on disposal of treasury stock 0 0 Proceeds from issuance of bonds 50,000 — 470,633
Net unrealized holding gains on Proceeds from long-term loans 3 3 28
30,252
securities Repayments of long-term loans (7,270) (8,060) (68,430)
Net deferred losses on hedges (809)
Payments for purchase of treasury stock (1) (0) (9)
Foreign currency translation
adjustments
(3,897) Cash dividends paid (7,569) (10,724) (71,244)
Increase of treasury stock (9)
Cash dividends paid to non-controlling interests (204) (164) (1,920)
Remeasurements of defined benefit Other (1,177) (729) (11,080)
7,088
plans NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 33,782 (19,674) 317,978
Net changes during the year (45,068) 311
Balance at March 31, 2018 $ 221,301 $ 241,048 $ 3,346,875 $ (63,413) $ 105,130 $ (4,876) $ (102,777) $ (11,013) $ (17,093) $ 10,147 EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
(1,267) (809) (11,926)
The accompanying notes are an integral part of these statements.
CASH EQUIVALENTS
NET INCREASE (DECREASE) IN CASH AND
49,791 (62,347) 468,665
CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 185,603 247,948 1,747,016

INCREASE IN CASH AND CASH EQUIVALENTS FROM
2
NEWLY CONSOLIDATED SUBSIDIARIES — —
CASH AND CASH EQUIVALENTS AT END OF YEAR (Note 12) ¥ 235,394 ¥ 185,603 $ 2,215,681

The accompanying notes are an integral part of these statements.

77 JGC Report 2018 78

 Targeting Sustainable Growth Value Creation The JGC Group’s Strengths and Management Base Environment and Society Initiatives Management Structure Data Section

Notes to Consolidated Financial Statements

Note 1 : SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Consolidated subsidiaries Location Capital Share translated at the historical rates. Income statements of consolidated overseas If the market value of available-for-sale securities declines significantly, such
(a) BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS 2018 2017 subsidiaries are translated at average rates except for transactions with the securities are restated at fair market value and the difference between fair market
The accompanying consolidated financial statements of JGC Corporation (Nikki JGC PLANT INNOVATION CO., LTD. Japan 100% 100% Company, which are translated at the rates used by the Company. value and the carrying amount is recognized as loss in the period of decline (See
Kabushiki Kaisha, the “Company”) and its consolidated subsidiaries have been JGC PLANTECH AOMORI CO., LTD. Japan 100% 100% Note 8). For equity securities with no available fair market value, if the net asset
prepared in accordance with the provisions set forth in the Japanese Financial JGC Catalysts and Chemicals Ltd. Japan 100% 100% (e) UNIFICATION OF ACCOUNTING POLICIES APPLIED TO FOREIGN value of the investee declines significantly, such securities are required to be written
Instruments and Exchange Act and its related accounting regulations, and in JAPAN FINE CERAMICS CO., LTD. Japan 100% 100% SUBSIDIARIES FOR CONSOLIDATED FINANCIAL STATEMENTS down to the net asset value with the corresponding losses in the period of decline.
conformity with accounting principles generally accepted in Japan (“Japanese NIKKI BUSINESS SERVICES CO., LTD. Japan 100% 100% The Accounting Standards Board of Japan has issued ASBJ Practical Issues Task In these cases, such fair market value or the net asset value will be the carrying
GAAP”), which are different in certain respects as to application and disclosure JAPAN NUS CO., LTD. Japan 89% 89% Force No. 18 “Practical Solution on Unification of Accounting Policies Applied to amount of the securities at the beginning of the next year.
requirements from International Financial Reporting Standards. JGC-ITC Rabigh Utility Co., Ltd. Japan 100% 100% Foreign Subsidiaries for Consolidated Financial Statements” (“PITF No. 18”).
The accounts of consolidated overseas subsidiaries are prepared in accordance JGC Mirai Solar Co., Ltd. Japan 51% 51% PITF No. 18 requires that accounting policies and procedures applied by a parent (h) ALLOWANCE FOR LOSSES ON INVESTMENT
with either International Financial Reporting Standards or U.S. generally accepted Kamogawa Mirai Solar Co., Ltd Japan 100% 100% company and its subsidiaries to similar transactions and events under similar To prepare for estimated losses to be incurred in the future, allowance for losses
accounting principles, with adjustments for the specified four items as applicable. JGC SINGAPORE PTE LTD Singapore 100% 100% circumstances should, in principle, be unified for the preparation of the consolidated on investment is stated in amounts considered to be appropriate based on
The accompanying consolidated financial statements have been translated JGC PHILIPPINES, INC. Philippines 100% 100% financial statements. PITF No. 18, however, as a tentative measure, allows a parent financial condition of investments. In Investments And Other Assets, the amount of
into English (with some expanded descriptions) from the consolidated financial JGC Gulf International Co. Ltd. Saudi Arabia 100% 100% company to prepare consolidated financial statements using foreign subsidiaries’ Allowance for losses on investment is deducted from Investments in unconsolidated
statements of the Company prepared in accordance with Japanese GAAP and filed JGC Gulf Engineering Co. Ltd. Saudi Arabia 75% 75% financial statements prepared in accordance with either International Financial subsidiaries and affiliates and Investment securities.
with the appropriate Local Finance Bureau of the Ministry of Finance as required JGC OCEANIA PTY LTD Australia 100% 100% Reporting Standards or U.S. generally accepted accounting principles. In this case,
by the Japanese Financial Instruments and Exchange Act. Certain supplementary JGC America, Inc. U.S.A. 100% 100% adjustments for the following four items are required in the consolidation process (i) PROVISION FOR LOSSES ON GUARANTEES
information included in the statutory Japanese language consolidated financial JGC (GULF COAST), LLC *1 U.S.A. 100% 100% so that their impacts on net income are accounted for in accordance with Japanese To provide for losses on guarantees, the Company makes a provision for potential
statements, but not required for fair presentation, is not presented in the JGC Exploration Eagle Ford LLC U.S.A. 100% 100% GAAP unless the impact is not material. losses at the end of the fiscal year.
accompanying consolidated financial statements. JGC EXPLORATION CANADA LTD. Canada 100% 100% (1) Goodwill not subjected to amortization
PT. JGC INDONESIA Indonesia 100% 100%
In addition, certain reclassifications have been made to present the (2) Actuarial gains and losses of defined benefit plans recognized outside profit or (j) RECOGNITION OF SALES, CONTRACT WORKS IN PROGRESS AND
accompanying consolidated financial statements in a format which is more familiar to loss ADVANCES RECEIVED ON UNCOMPLETED CONTRACTS
readers outside Japan. Furthermore, certain reclassifications of previously reported Affiliates under the equity method Location Capital Share (3) Capitalized expenditures for research and development activities Sales on contracts for relatively large projects, which require long periods for
amounts have been made to reconcile the consolidated financial statements for the 2018 2017 (4) Fair value measurement of investment properties, and revaluation of property, completion and which generally include engineering, procurement (components,
year ended March 31, 2017 to the 2018 presentation. Nikki -Universal Co., Ltd. Japan 50% 50% plant and equipment, and intangible assets parts, etc.) and construction on a full-turnkey basis, are recognized on the
The translation of the Japanese yen amounts into U.S. dollars is included solely percentage-of-completion method, primarily based on contract costs incurred to
Investments in non-consolidated subsidiaries and affiliates not accounted for by the
for the convenience of readers outside Japan, using the prevailing exchange rate (f) ALLOWANCE FOR DOUBTFUL ACCOUNTS date compared with total estimated costs for contract completion.
equity method are carried at cost, adjusted for any substantial and non-recoverable
at March 31, 2018, which was ¥106.24 to U.S. $1. The convenience translations Notes and accounts receivable, including loans and other receivables, are valued Contract works in progress are stated at cost determined by a specific
decline in value. The effect on net income and retained earnings from those
should not be construed as representations that the Japanese yen amounts could be by providing for individually estimated uncollectible amounts plus the amounts for identification method and comprised of direct materials, components and parts,
investments not accounted for under the equity method is immaterial.
converted into U.S. dollars at this or any other rate of exchange. probable losses calculated by applying a percentage based on collection experience direct labor, subcontractors’ fees and other items directly attributable to the
to the remaining accounts. contract, and job-related overheads. Selling, general and administrative expenses
*1 At the year ended March 31, 2017, JGC (GULF COAST), LLC was included in the
(b) PRINCIPLE OF CONSOLIDATION In Investments And Other Assets, the amount of Allowance for doubtful accounts are charged to operations as incurred and are not allocated to contract job work
scope of consolidation because its effect on the consolidated financial statement
The consolidated financial statements include the accounts of the Company and is deducted from long-term loans receivable and other. costs.
became significant.
its significant subsidiaries that include less than 50% owned affiliates controlled The Company normally receives payments from customers on a progress basis
*2 At the year ended March 31, 2017, JGC Energy Development (USA) Inc. and
through substantial ownership of majority voting rights or existence of substantial (g) MARKETABLE SECURITIES, INVESTMENTS IN UNCONSOLIDATED in accordance with the terms of the respective construction contracts.
JMD Greenhouse-Gas Reduction Co., Ltd. were excluded from the scope of
control. All significant inter-company transactions and account balances are SUBSIDIARIES AND AFFILIATES, AND INVESTMENT SECURITIES
consolidation and the equity method respectively, because these companies
eliminated in consolidation. The Company and its consolidated subsidiaries are required to examine the intent of (k) INVENTORIES
were liquidated during this fiscal year.
Investments in non-consolidated subsidiaries and affiliates over which the holding each security and classify those securities as (1) securities held for trading Inventories of the Company and its consolidated subsidiaries are stated at cost
Company has the ability to exercise significant influence over operating and financial purposes, (2) debt securities intended to be held to maturities, (3) equity securities determined using the moving-average method (which writes off the book value of
(c) CONSOLIDATED STATEMENTS OF CASH FLOWS
policies of the investees are accounted for by the equity method. issued by subsidiaries and affiliates, and (4) all other securities that are not classified inventories based on decreases in profitability) except for contract works in progress
In preparing the consolidated statements of cash flows, cash on hand, readily
The number of consolidated subsidiaries and affiliates accounted for using the in any of the above categories (hereafter, “available-for-sale securities”). The as stated in Note 1(j).
available deposits and short-term highly liquid investments with negligible risk of
equity method at March 31, 2018 and 2017, was as follows: Company and its consolidated subsidiaries did not have the securities defined as (1)
changes in value, and maturities not exceeding three months at the time of purchase
above for the years ended March 31, 2018 and 2017. (l) OPERATING CYCLE
2018 2017 are considered to be cash and cash equivalents.
Available-for-sale securities with available fair market values are stated at Assets and liabilities related to long-term contract jobs are included in current assets
Consolidated subsidiaries 19 19
fair market value. Unrealized gains and losses on these securities are reported, and current liabilities in the accompanying consolidated balance sheets, as they will
Affiliates under the equity method 1 1 (d) CONVERSION OF FOREIGN CURRENCIES AND TRANSLATION OF
net of applicable income taxes, as a separate component of net assets. Realized be liquidated in the normal course of contract completion, although it may require
STATEMENTS
Consolidated subsidiaries and affiliates accounted for using the equity method at gains and losses on the sale of such securities are computed using the moving- more than one year.
Receivables and payables denominated in foreign currencies are translated into
March 31, 2018 and 2017, was as follows: average method. Other securities with no available fair market value are stated at
Japanese yen at the year-end rates.
moving-average cost. Equity securities issued by subsidiaries and affiliates, which (m) PROPERTY AND EQUIPMENT, DEPRECIATION AND FINANCE LEASES
Balance sheets of consolidated overseas subsidiaries are translated into
are not consolidated or accounted for using the equity method, are stated at moving- Property and equipment are stated at cost, except for certain revalued land
Japanese yen at the year-end rates except for net assets accounts, which are
average cost. as explained in Note 13. Depreciation of property and equipment is calculated

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primarily using the straight-line method for buildings used for business operation auditors computed on the assumption that all officers retired at a year-end. (1) If a foreign exchange forward contract is executed to hedge an existing foreign Guidance.
and structures which were acquired since April 1, 2016, and the declining-balance currency receivable or payable, The basic policy of the ASBJ in developing accounting standards for
method for other property and equipment over the estimated useful lives of the (p) RESEARCH AND DEVELOPMENT COSTS (i) The difference, if any, between the Japanese yen amount of the hedged revenue recognition is thought to be setting accounting standards, with the
assets based on the Corporate Tax Code of Japan. Research and development costs for the improvement of existing skills and foreign currency receivable or payable translated using the spot rate at incorporation of the basic principles of IFRS 15 as a starting point, from a
Expenditures for new facilities and those that substantially increase the useful technologies or the development of new skills and technologies, including basic the inception date of the contract and the book value of the receivable standpoint of comparability between financial statements, which is one of the
lives of existing property and equipment are capitalized. Maintenance, repair and research and fundamental development costs, are charged to income in the period or payable is recognized in the statement of income in the period which benefits of ensuring consistency with IFRS 15, and to be adding alternative
minor renewals are charged to expenses as incurred. incurred. The total amount of research and development expenses, included in includes the inception date, and accounting treatments without losing comparability if there is an item that we
The cost and accumulated depreciation applicable to assets retired or otherwise Costs of Sales and Selling, General and Administrative expenses, was ¥5,875 (ii) The discount or premium on the contract (that is, the difference between should take into account in practices, etc. that have been conducted in Japan.
disposed of are eliminated from the related accounts and the gain or loss on disposal million ($55,299 thousand) and ¥5,175 million, respectively, in 2018 and 2017. the Japanese yen amount of the contract translated using the contracted
is credited or charged to income. forward rate and that translated using the spot rate at the inception date of (2) Planned date of application
(q) TAXES ON INCOME the contract) is recognized over the term of the contract. To be applied from the beginning of the fiscal year ending March 31, 2022.
(n) IMPAIRMENT OF FIXED ASSETS The Company and its consolidated subsidiaries provide tax effects of temporary
The Company and its consolidated subsidiaries review their long-lived assets for differences between the carrying amounts and the tax basis of assets and liabilities. (2) If a foreign exchange forward contract is executed to hedge a future transaction (3) Impact of the application of the accounting standards, etc.
impairment whenever events or changes in circumstances indicate the carrying The asset and liability approach is used to recognize deferred tax assets and denominated in a foreign currency, the future transaction will be recorded using The amount of the impact on consolidated financial statements is currently
amount of an asset or asset group may not be recoverable. An impairment loss liabilities for the expected future tax consequences of temporary differences. the contracted forward rate, and no gains or losses on the foreign exchange under review.
would be recognized if the carrying amount of an asset or asset group exceeds the forward contract are recognized.
sum of the undiscounted future cash flows expected to result from the continued (r) RESERVE FOR JOB WARRANTY COSTS (z) CHANGES IN PRESENTATION
use and eventual disposition of the asset or asset group. The impairment loss would A reserve for the estimated cost of warranty obligations is provided for the Also, where interest rate swap contracts are used as hedges and (Consolidated balance sheets)
be measured as the amount by which the carrying amount of the asset exceeds Company’s engineering, procurement and construction work at the time the related meet certain hedging criteria, the net amount to be paid or received under the “Short-term loans receivable”, which was included in “Other current assets” under
its recoverable amount, which is the higher of the discounted cash flows from sales on contracts are recorded. interest rate swap contract is added to or deducted from the interest on the “Current Assets” in the previous fiscal year, is presented separately for the fiscal year
the continued use and eventual disposition of the asset or the net selling price at liabilities for which the swap contract was executed (Special method for interest ended March 31, 2018 due to its increased materiality. As a result, ¥11,663 million
disposition. (s) RESERVE FOR LOSSES ON CONTRACTS rate swap). included in “Other current assets’’ under “Current Assets’’ on the consolidated
A reserve for losses on contracts is provided for an estimated amount of probable balance sheets for the previous fiscal year has been reclassified as “Short-term
(o) RETIREMENT AND SEVERANCE BENEFITS AND PENSION COSTS losses to be incurred in future years in respect of construction projects in progress. (w) ACCRUED BONUSES TO DIRECTORS AND CORPORATE AUDITORS loans receivable’’.
(1) Employees’ severance and retirement benefits Accrued bonuses to directors and corporate auditors are provided by the estimated
The Company and its consolidated subsidiaries provide two types of post- (t) PER SHARE INFORMATION amounts, which are obligated to pay to directors and corporate auditors after the (Consolidated statements of operations)
employment benefit plans, unfunded lump-sum payment plans and funded Net income (loss) per share is computed by dividing net income available to common fiscal year-end, based on services provided during the current period. “Gain on sales of fixed assets” and “Gain on sales of affiliate’s securities”, which
non-contributory pension plans, under which all eligible employees are entitled shareholders by the weighted-average number of common shares outstanding for were included in “Other, net” under “Other Income (Expenses)” in the previous fiscal
to benefits based on the level of wages and salaries at the time of retirement or the period. (x) ACCRUED BONUSES TO EMPLOYEES year, are presented separately for the fiscal year ended March 31, 2018 due to its
termination, length of service and certain other factors. Cash dividends per share have been presented on an accrual basis and include Accrued bonuses to employees are provided by the estimated amounts, which are increased materiality. As a result, ¥86 million and ¥13 million included in “Other,
The Company and its certain consolidated subsidiaries also have a defined dividends to be approved after the balance sheet date but applicable to the year obligated to pay to employees after the fiscal year-end, based on services provided net” under “Other Income (Expenses)” on the consolidated statements of operations
contribution pension plan, which was transferred from a portion of defined then ended. during the current period. for the previous fiscal year has been reclassified as “Gain on sales of fixed assets”
benefit pension plan. and “Gain on sales of affiliate’s securities”, respectively.
The Company and its consolidated subsidiaries provided allowance for (u) AMORTIZATION OF GOODWILL (y) ACCOUNTING STANDARDS NOT YET APPLIED, ETC
employees’ severance and retirement benefits at March 31, 2018 and 2017, Goodwill is amortized over five years on a straight-line basis. Negative goodwill is (Accounting standard for revenue recognition, etc.) (Consolidated statements of cash flows)
based on the estimated amounts of projected benefit obligation, actuarially recognized in income statement immediately. ◊ “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29 on (1) “Loss on valuation of investment securities” and “Gain on sales of affiliate’s
calculated using certain assumptions and the fair value of the plan assets at March 30, 2018, Accounting Standards Board of Japan) securities”, which were included in “Other’’ under “Cash flows from operating
that date. (v) DERIVATIVE TRANSACTIONS AND HEDGE ACCOUNTING ◊ “Implementation Guidance on Accounting Standard for Revenue Recognition” activities’’ in the previous fiscal year, are presented separately for the fiscal year
The method of attributing the amount of expected retirement benefit in The accounting standard for financial instruments requires companies to state (ASBJ Guidance No.30 on March 30, 2018, Accounting Standards Board of ended March 31, 2018 due to their increased materiality. As a result, ¥2,926
each period is a benefit formula basis. derivative financial instruments at fair value and to recognize changes in the fair Japan) million and ¥13 million included in “Other,” under “Cash flows from operating
The Company and its consolidated subsidiaries recognize past service value as gains or losses unless the derivative financial instruments are used for activities” on the consolidated statements of cash flows for the previous fiscal
costs as expenses using the straight-line method over 12 years within the hedging purposes. (1) Overview year have been reclassified as “Loss on valuation of investment securities” and
average of the estimated remaining service lives of the employees, and If derivative financial instruments are used as hedges and meet certain The International Accounting Standards Board (IASB) and the Financial “Gain on sales of affiliate’s securities”, respectively. And “Loss on sales and
actuarial gains and losses as expenses using the declining-balance method hedging criteria, the Company and its consolidated domestic subsidiaries defer Accounting Standards Board (FASB) in the United States jointly developed disposal of property and equipment’’, which was stated as a separate account
over 12 years within the average of the estimated remaining service lives. recognition of gains or losses resulting from changes in fair value of derivative comprehensive accounting standards for revenue recognition and published item under “Cash flows from operating activities’’ in the previous fiscal year,
However, certain consolidated subsidiary recognized actuarial differences financial instruments until the related losses or gains on the hedged items are the “Revenue from Contracts with Customers” (IFRS 15 in the IASB and Topic is incorporated in “Other”, for the fiscal year ended March 31, 2018 due to its
as expenses in the period incurred. recognized. 606 in the FASB) in May 2014. Given that IFRS 15 will be applied from a fiscal decreased materiality. As a result, ¥188 million presented as “Loss on sales
However, in cases where foreign exchange forward contracts are year starting on or after January 1, 2018 and that Topic 606 will be applied and disposal of property and equipment’’ under “Cash flows from operating
(2) Officers’ severance and retirement benefits used as hedges and meet certain hedging criteria, foreign exchange forward from a fiscal year starting after December 15, 2017, the Accounting Standards activities” on the consolidated statements of cash flows for the previous fiscal
Consolidated domestic subsidiaries provide for liabilities in respect of lump- contracts and hedged items are accounted for in the following manner Board of Japan (ASBJ) has developed comprehensive accounting standards year has been reclassified as “Other”.
sum severance and retirement benefits to directors and corporate statutory (Allocation Method): for revenue recognition and published them in step with the Implementation (2) “(Increase) Decrease short-term loans’’, which was stated as a separate

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account item under “Cash flows from financing activities’’ in the previous (Thousands of (a) DEFINED BENEFIT PLAN (4) Retirement benefit expenses
U.S. dollars)
fiscal year, is incorporated in “Other”, for the fiscal year ended March 31, (1) Movement in retirement benefit obligations
(Millions of yen) (Note 1)
(Thousands of
2018 due to its decreased materiality. As a result, ¥406 million presented as March 31, 2018 2017 2018 U.S. dollars)
(Thousands of
“Decrease short-term loans’’ under “Cash flows from financing activities” on (Millions of yen) (Note 1)
Land ¥— ¥ 4,280 $— U.S. dollars)
the consolidated statements of cash flows for the previous fiscal year has been (Millions of yen) (Note 1) March 31, 2018 2017 2018
Buildings and structures, at net book value 211 2,749 1,986
reclassified as “Other”. March 31, 2018 2017 2018 Service cost ¥ 2,139 ¥ 2,100 $ 20,134
Machinery and equipment, at net book
value 4,649 11,271 43,759 Balance at beginning of year ¥ 51,025 ¥ 50,642 $ 480,280 Interest cost 223 218 2,099

Cash and deposits 1,041 1,850 9,799 Service cost 2,138 2,100 20,124 Expected return on plan assets (524) (524) (4,932)

Investments securities 1,638 1,638 15,418 Interest cost 223 218 2,099 Net actuarial gain and loss amortization 675 1,039 6,353
Note 2 : RECEIVABLES FROM AND PAYABLES TO UNCONSOLIDATED
Total ¥ 7,539 ¥ 21,788 $ 70,962 Actuarial loss 6 376 56 Past service cost amortization (222) (330) (2,090)
SUBSIDIARIES AND AFFILIATES
Benefits paid (2,138) (2,192) (20,124) Total retirement benefit expenses ¥ 2,291 ¥ 2,503 $ 21,564
Significant receivables from and payables to unconsolidated subsidiaries and affiliates
The annual maturities of long-term debt outstanding at March 31, 2018 were Past service costs (178) - (1,675)
at March 31, 2018 and 2017, were as follows:
as follows: Other (71) (119) (668)
Amount (5) Remeasurements of defined benefit plans
(Thousands of Balance at end of year ¥ 51,005 ¥ 51,025 $ 480,092
(Thousands of
U.S. dollars) U.S. dollars)
(Thousands of
(Millions of yen) (Note 1) Year ending March 31, (Millions of yen) (Note 1)
U.S. dollars)
March 31, 2018 2017 2018 2019 ¥ 1,917 $ 18,044 (2) Movement in plan assets (Millions of yen) (Note 1)

Notes and accounts receivable ¥ 989 ¥ 1,197 $ 9,309 2020 434 4,085 March 31, 2018 2017 2018
Short-term loans receivable 425 — 4,000 (Thousands of Actuarial losses ¥ 1,085 ¥ 696 $ 10,213
2021 20,359 191,632
U.S. dollars)
Other current assets 4,510 1,454 42,451 2022 362 3,408 (Millions of yen) (Note 1) Past service costs (44) (330) (414)
Long-term loans receivable 1,880 2,477 17,696 2023 and thereafter 33,140 311,935 March 31, 2018 2017 2018 Others 6 8 56
Short-term loans 90 69 847 Total ¥ 56,212 $ 529,104 Balance at beginning of year ¥ 35,280 ¥ 35,465 $ 332,078 Total balance ¥ 1,047 ¥ 374 $ 9,855
Notes and accounts payable 670 933 6,306 Expected return on plan assets 524 524 4,932
Advances received on Actuarial gain 416 33 3,916
— 937 —
uncompleted contracts (6) Cumulative effect of remeasurements of defined benefit plans
Contributions paid by the employer 992 997 9,337
Other current liabilities 286 266 2,692 Note 4 : INVENTORIES Benefits paid (1,581) (1,648) (14,881) (Thousands of
Other non-current liabilities 10 10 94 Inventories at March 31, 2018 and 2017 were summarized as follows: U.S. dollars)
Other (30) (91) (282)
(Millions of yen) (Note 1)
Balance at end of year ¥ 35,601 ¥ 35,280 $ 335,100
(Thousands of March 31, 2018 2017 2018
U.S. dollars)
(Millions of yen) (Note 1) Actuarial losses that are yet to be
Note 3 : B
 ORROWINGS AND ASSETS PLEDGED AS COLLATERAL recognized ¥ (4,756) ¥ (5,890) $ (44,767)
March 31, 2018 2017 2018 (3) Reconciliation from retirement benefit obligations and plan assets to net
Short-term loans consisted mainly of unsecured notes and bank overdrafts and Past service costs that are yet to be
Inventories: defined benefit liability and asset. recognized 2,151 2,195 20,247
bore interest at the annual rates of 2.31% and 1.40% at March 31, 2018 and 2017,
Contract works in progress ¥ 20,634 ¥ 35,026 $ 194,221 Total balance ¥ (2,605) ¥ (3,695) $ (24,520)
respectively. Such loans are generally renewable at maturity. Finished goods and merchandise 3,958 3,765 37,255
(Thousands of
U.S. dollars)
Long-term debt consisted of the following: Works in process 2,453 2,211 23,089 (Millions of yen) (Note 1)

Raw materials and others 2,836 2,968 26,695 March 31, 2018 2017 2018 (7) Plan assets
(Thousands of
U.S. dollars) Total ¥ 29,881 ¥ 43,970 $281,260 Funded retirement benefit obligations ¥ 38,117 ¥ 38,570 $ 358,782 Components of plan assets
(Millions of yen) (Note 1)
Plan assets (35,601) (35,280) (335,100)
March 31, 2018 2017 2018 2,516 3,290 23,682
March 31, 2018 March 31, 2017
Secured Loans Unfunded retirement benefit obligations 12,888 12,455 121,310
1.47% loans from Bonds 66% 65%
Note 5 : RETIREMENT BENEFIT PLAN Allowance for officers’ lump-sum
banks
Equity securities 18 18
due serially through 2029 ¥ 4,088 ¥ 11,254 $ 38,479 The significant components of the pension plans as of and for the years ended severance benefits 292 275 2,479
Cash and cash equivalents 1 1
Unsecured Debt March 31, 2018 and 2017 were summarized as follows: Total net defined benefit liability ¥ 15,696 ¥ 16,020 $ 147,741
0.56% – 1.25% loans from Other 15 16
banks and insurance companies
Total 100% 100%
due serially through 2020 (some debt Net defined benefit liability 16,121 16,210 151,741
has no fixed term) 2,124 2,183 19,992 Net defined benefit asset (425) (190) (4,000)
Long-term expected rate of return
0.09% – 0.20% bonds due serially Total net defined benefit liability ¥ 15,696 ¥ 16,020 $ 147,741
through 2022 50,000 — 470,633 Current and target asset allocations and historical and expected returns on various
56,212 13,437 529,104 categories of plan assets have been considered in determining the long-term
Less current maturities (1,917) (806) (18,044) expected rate of return.
Long-term debt due after one year ¥ 54,295 ¥ 12,631 $ 511,060

Assets pledged as collateral for short-term loans, long-term debt, other current
liabilities and other non-current liabilities at March 31, 2018 and 2017, were as
follows:

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(8) Actuarial assumptions statements as of March 31, 2018. Such appropriations are recognized in the period (a) AVAILABLE-FOR-SALE SECURITIES WITH NO AVAILABLE FAIR VALUES: future risks of fluctuation of foreign currency exchange rates with respect to foreign
The principal actuarial assumptions at March 31, 2018 and 2017 were as follows: in which they are approved by the shareholders. currency receivable and payable and mitigating future risks of interest rate increases
(Thousands of
U.S. dollars) and lowering the financing costs with respect to borrowings.
(Millions of yen) (Note 1) Foreign currency forward contracts and interest rate swap contracts are subject
March 31, 2018 March 31, 2017
Note 8 : INFORMATION ON SECURITIES March 31, 2018 2017 2018 to risks of foreign exchange rate changes and interest rate changes, respectively.
Discount rate Principally 0. 25% Principally 0. 25%
A. The following tables summarize acquisition costs and book values stated at the Non-listed equity securities ¥ 12,484 ¥ 16,916 $ 117,508 The derivative transactions are executed and managed in accordance with
Long-term expected rate of
Principally 1.5% Principally 1.5% Subscription certificate 38 38 358
return fair value of securities with available fair values as of March 31, 2018 and 2017. the established policies and within the specified limit on the amounts of derivative
Non-listed affiliate’s bond 920 — 8,660
Expected rate of
Principally 4.1% Principally 4.1%
transactions allowed.
salary increase Total ¥ 13,442 ¥ 16,954 $ 126,526
AVAILABLE-FOR-SALE SECURITIES WITH AVAILABLE FAIR VALUES: The following summarizes hedging derivative financial instruments used by the
(1) Securities with book values exceeding acquisition costs: Company and hedged items:
(b) DEFINED CONTRIBUTION PENSION PLAN (b) UNCONSOLIDATED SUBSIDIARIES AND AFFILIATES:
(Millions of yen) Hedging instruments: Hedged items:
The Company’s contributions were ¥316 million ($2,974 thousand) and ¥263
March 31, 2018 Acquisition cost Book value Difference (Thousands of Foreign currency forward contracts Foreign currency trade receivable, payable
million for the years ended March 31, 2018 and 2017, respectively. U.S. dollars) and future transactions denominated in a
Equity securities ¥ 10,132 ¥ 25,817 ¥ 15,685
(Millions of yen) (Note 1) foreign currency
March 31, 2018 2017 2018 Foreign currency deposit Foreign currency payable and future
(Millions of yen) Securities of unconsolidated subsidiaries ¥ 5,957 ¥ 2,942 $ 56,071 transactions denominated in a foreign
Note 6 : CONTINGENCIES
March 31, 2017 Acquisition cost Book value Difference Securities of affiliates 24,263 18,508 228,379 currency
(1) It is a business practice in Japan for a company to guarantee the indebtedness
Equity securities ¥ 10,124 ¥ 20,670 ¥ 10,546 Total ¥ 30,220 ¥ 21,450 $ 284,450 Interest rate swap contracts Interest on loans payable
of certain of its trading agents, suppliers, subcontractors and certain
subsidiaries and affiliates. The aggregate amount of such guarantees was
The Company evaluates hedge effectiveness semi-annually by comparing the
¥6,045 million ($56,899 thousand) and ¥6,287 million at March 31, 2018 and (Thousands of U.S. dollars) (Note 1)
(c) LOSS ON VALUATION OF INVESTMENT SECURITIES: cumulative changes in cash flows from or the changes in fair value of hedged items
2017, respectively. March 31, 2018 Acquisition cost Book value Difference
The Company recognized loss on valuation for investment securities in the amount and the corresponding changes in the hedging derivative instruments. However,
Equity securities $ 95,369 $ 243,006 $ 147,637
of ¥5,198 million ($48,927 thousand) and ¥2,926 million for the years ended March where the principal conditions underlying the hedging instruments and the hedged
(2) The Company has guaranteed employees’ housing loans and others from
31, 2018 and 2017, respectively. assets or liabilities are similar, the evaluation of hedge effectiveness is not performed.
banks in the amount of ¥11 million ($104 thousand) and ¥7 million at March (2) Securities with book values not exceeding acquisition costs: The Company and its consolidated domestic subsidiaries follow a policy The Company’s financial instrument counter-parties are all prime banks with
31, 2018 and 2017, respectively.
of devaluation of available-for-sale securities. The policy of devaluation for the high ratings, and the Company does not expect non-performance by the counter-
(Millions of yen)
Company and its consolidated domestic subsidiaries is that if the available fair value parties.
March 31, 2018 Acquisition cost Book value Difference
of the securities declines by 50% or more, compared with acquisition cost, all the
Note 7 : NET ASSETS Equity securities ¥ 908 ¥ 340 ¥ (568)
corresponding securities are devalued as such decline is considered to be substantial (a) FAIR VALUE OF UNDESIGNATED DERIVATIVE FINANCIAL INSTRUMENTS
Under the Japanese Corporation Law (“the Law”) and regulations, the entire amount
and non-recoverable in value. In addition, in the case whereby the available fair value Fair value of undesignated derivative financial instruments as of March 31, 2018 and
paid for new shares is required to be designated as common stock. However, (Millions of yen) of the securities declines by more than 30% but by less than 50%, the Company and 2017, is summarized as follows:
companies may, by a resolution of the Board of Directors, designate an amount not March 31, 2017 Acquisition cost Book value Difference its consolidated domestic subsidiaries examine the recoverability of the fair value of
exceeding one-half of the price of the new shares as additional paid-in capital, which Equity securities ¥ 961 ¥ 756 ¥ (205) (Millions of yen)
the securities and devaluate if those securities are considered to be unrecoverable.
is included in capital surplus. Contract amount

Under the Law, companies are required to set aside an amount equal to at least Due within one Due after one Profit or loss
(Thousands of U.S. dollars) (Note 1) (d) SALES OF SECURITIES CLASSIFIED AS OTHER SECURITIES March 31, 2018 year year Total Fair value evaluation
10% of cash dividends and other cash appropriations in a legal earnings reserve March 31, 2018 Acquisition cost Book value Difference Forward exchange
until the total of the legal earnings reserve and additional paid-in capital equals 25% Equity securities $ 8,546 $ 3,200 $ (5,346) (Thousands of contracts
(Millions of yen) U.S. dollars)
of common stock. Sell U.S. dollars ¥ 36,971 ¥- ¥ 36,971 ¥ (2) ¥ (2)
March 31, 2018 2017 2017
Under the Law, the legal earnings reserve and additional paid-in capital can be Buy Euro 264 - 264 2 2
B. The following tables summarize book values of securities with no available fair Equity securities:
used to eliminate or reduce a deficit by a resolution of the shareholders’ meeting or Buy IDR 2,187 - 2,187 11 11
Sales proceeds ¥ 101 ¥ 3,048 $ 951
can be capitalized by a resolution of the Board of Directors. values or securities not valued by fair market prices as of March 31, 2018 and
Aggregate gain 51 1,648 480
Additional paid-in capital and legal earnings reserve may not be distributed 2017. (Millions of yen)
Aggregate loss — — —
as dividends. Under the Law, however, additional paid-in capital and legal earnings Contract amount

reserve may be transferred to retained earnings by a resolution of the shareholders’ Due within Due after Profit or loss
March 31, 2017 one year one year Total Fair value evaluation
meeting as long as the total amount of the legal earnings reserve and additional
Forward exchange
paid-in capital remained equal to or exceeded 25% of common stock. Note 9 : DERIVATIVE TRANSACTIONS AND HEDGE ACCOUNTING contracts
The maximum amount that the Company can distribute as dividends is As explained in Note 1 (v), the accounting standard for financial instruments requires Sell U.S. dollars ¥ 1,871 ¥— ¥ 1,871 ¥ 109 ¥ 109
calculated based on the non-consolidated financial statements of the Company in companies to state derivative financial instruments at fair value and to recognize Buy Euro 2,474 41 2,515 (139) (139)
accordance with the Law. changes in the fair value as gains or losses unless derivative financial instruments
At the annual shareholders’ meeting of the Company held on June 28, 2018, are used for hedging purposes.
the shareholders approved cash dividends amounting to ¥6,307 million ($59,366 The Company utilizes foreign currency forward contracts and interest rate
thousand). Such appropriations have not been accrued in the consolidated financial swap contracts as derivative financial instruments only for the purpose of mitigating

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

Contract amount March 31, 2018 Contract amount Reported Segment

Catalysts and fine
Due within Due after Profit or loss Accounting Contract Portion over
method Hedging instruments Hedged item amount one year Fair value Year ended March 31, 2018 Total engineering products Sub-Total Other Total Adjustment Consolidated
March 31, 2018 one year one year Total Fair value evaluation
Allocation Forward exchange Net sales:
Forward exchange method contracts External customers ¥ 670,087 ¥ 42,141 ¥ 712,228 ¥ 10,760 ¥ 722,988 ¥— ¥ 722,988
contracts (Note 1(v)) Buy Euro Accounts Inter-segment 420 5 425 2,127 2,552 (2,552) —
Sell U.S. dollars $ 347,995 $— $ 347,995 $ (19) $ (19) payable $ 41,472 $ 2,504 $ (593) Total ¥ 670,507 ¥ 42,146 ¥ 712,653 ¥ 12,887 ¥ 725,540 ¥ (2,552) ¥ 722,988
Allocation Forward exchange
Buy Euro 2,485 — 2,485 19 19
method contracts Segment profit ¥ 11,542 ¥ 7,199 ¥ 18,741 ¥ 2,607 ¥ 21,348 ¥ 147 ¥ 21,495
Buy IDR 20,585 — 20,585 104 104 (Note 1(v)) Buy AUD Short- Segment assets ¥ 598,203 ¥ 50,550 ¥ 648,753 ¥ 46,193 ¥ 694,946 ¥ (9,944) ¥ 685,002
term loans Depreciation and amortization ¥ 2,933 ¥ 2,426 ¥ 5,359 ¥ 2,124 ¥ 7,483 ¥ (56) ¥ 7,427
Fair value of forward exchange contracts is stated based on the quoted price from receivable 128,181 - (5,318)
Capital expenditures ¥ 5,854 ¥ 2,635 ¥ 8,489 ¥ 578 ¥ 9,067 ¥— ¥ 9,067
Principal Interest rate swap
banks.
method contracts *1. The "Other" category includes business activities of information processing, consulting, management of real estate, power and water supply and oil and gas production.
(Note 1(v)) Receive floating and Pay Long-term *2. Adjustments for segment profit, segment assets and other items represent the elimination of intersegment transactions.
(b) FAIR VALUE OF DERIVATIVE FINANCIAL INSTRUMENTS DESIGNATED AS fixed swap debt 33,283 30,535 (2,071) *3. Segment profit is reconciled to operating income of consolidated statements of operations.

HEDGING INSTRUMENTS Fair value of forward exchange contracts is stated based on the quoted price from (Millions of yen)
Fair value of derivative financial instruments designated as hedging instruments as banks. Reported Segment
of March 31, 2018 and 2017 is summarized as follows: Catalysts and fine
Year ended March 31, 2017 Total engineering products Sub-Total Other Total Adjustment Consolidated
(Millions of yen) Net sales:
Note 10 : SEGMENT INFORMATION External customers ¥ 643,377 ¥ 39,918 ¥ 683,295 ¥ 9,857 ¥ 693,152 ¥— ¥ 693,152
March 31, 2018 Contract amount
(a) OVERVIEW OF REPORTED SEGMENTS Inter-segment 392 107 499 1,669 2,168 (2,168) —
Accounting Contract Portion over Total ¥ 643,769 ¥ 40,025 ¥ 683,794 ¥ 11,526 ¥ 695,320 ¥ (2,168) ¥ 693,152
method Hedging instruments Hedged item amount one year Fair value The reported segments of the Company are those units for which separate financial
Allocation Forward exchange
method contracts
statements can be obtained among the constituent units of the Company and Segment profit (loss) ¥ (29,399) ¥ 6,121 ¥ (23,278) ¥ 1,607 ¥ (21,671) ¥ 174 ¥ (21,497)
(Note 1(v)) regularly examined by Chief Executive Officer for decisions on the allocation of Segment assets ¥ 563,620 ¥ 47,674 ¥ 611,294 ¥ 55,239 ¥ 666,533 ¥ (20,241) ¥ 646,292
Buy Euro Accounts
payable ¥ 4,406 ¥266 ¥ (63) Impairment ¥ 653 ¥— ¥ 653 ¥ 5,275 ¥ 5,928 ¥— ¥ 5,928
management resources and for assessing business performance. The operations Depreciation and amortization ¥ 3,466 ¥ 2,356 ¥ 5,822 ¥ 2,247 ¥ 8,069 ¥ (56) ¥ 8,013
Allocation Forward exchange
method contracts of the Company and its consolidated subsidiaries are classified into two reportable Capital expenditures ¥ 2,565 ¥ 2,477 ¥ 5,042 ¥ 1,118 ¥ 6,160 ¥— ¥ 6,160
(Note 1(v)) Buy AUD Short- segments: the total engineering business and the catalysts and fine products *1. The "Other" category includes business activities of information processing, consulting, management of real estate, power and water supply and oil and gas production.
term loans
business. *2. Adjustments for segment profit (loss), segment assets and other items represent the elimination of intersegment transactions.
receivable 13,618 - (565)
*3. Segment profit (loss) is reconciled to operating loss of consolidated statements of operations.
Principal Interest rate swap Major activities included in the total engineering business are design,
method (Note contracts
1(v)) procurement, construction and performance test services of machinery and plants (Thousands of U.S. dollars) (Note 1)
Receive variable rate and Long-term
Pay fixed rate swap debt 3,536 3,244 (220) for petroleum, petroleum refining, petrochemicals, gas, chemicals, nuclear energy, Reported Segment
metal refining, biochemical, food, pharmaceuticals, medical, logistics, information Catalysts and fine
Year ended March 31, 2018 Total engineering products Sub-Total Other Total Adjustment Consolidated
(Millions of yen) technology, environment conservation and pollution control. Major activities in the Net sales:
March 31, 2017 Contract amount catalysts and fine products business include manufacturing and distribution of External customers $ 6,307,295 $ 396,658 $ 6,703,953 $ 101,280 $6,805,233 $— $ 6,805,233
Inter-segment 3,953 47 4,000 20,021 24,021 (24,021) —
Accounting Contract Portion over chemical and catalyst products (FCC catalysts, hydro treating catalysts, deNOx
method Hedging instruments Hedged item amount one year Fair value Total $ 6,311,248 $ 396,705 $ 6,707,953 $ 121,301 $ 6,829,254 $ (24,021) $ 6,805,233
Allocation Forward exchange catalysts, petrochemical catalysts, etc) and new functional material products
method contracts (colloidal silica, coating materials for surface treatment on cathode ray tubes, Segment profit $ 108,641 $67,761 $176,402 $ 24,539 $ 200,941 $ 1,384 $ 202,325
(Note 1(v)) Buy Euro Accounts Segment assets $ 5,630,676 $ 475,809 $ 6,106,485 $ 434,799 $ 6,541,284 $ (93,600) $6,447,684
payable ¥ 955 ¥ 535 ¥0 material for semiconductors, cathode materials and cosmetic products, etc.).
Depreciation and amortization $ 27,607 $ 22,835 $ 50,442 $19,993 $ 70,435 $ (527) $ 69,908
Principal Interest rate swap The accounting policies of the segments are substantially the same as those Capital expenditures $ 55,102 $ 24,802 $ 79,904 $ 5,441 $ 85,345 $— $85,345
method contracts
(Note 1(v))
described in the significant accounting policies in Note 1.
Receive variable rate and Long-term
Pay fixed rate swap debt 8,948 8,366 (721) The following is information about sales and profit or loss by reported segments
for the years ended March 31, 2018 and 2017:

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(b) RELATED INFORMATION Note 11 : TAXES ON INCOME (Thousands of (Thousands of

U.S. dollars) U.S. dollars)
I. INFORMATION BY GEOGRAPHY Income taxes applicable to the Company and its domestic consolidated subsidiaries
(Millions of yen) (Note 1) (Millions of yen) (Note 1)
comprise corporate taxes, inhabitants’ taxes and enterprise taxes which, in the March 31, 2018 2017 2018 March 31, 2018 2017 2018
(1) Net Sales aggregate, resulted in statutory tax rates of 30.9% for the years ended March 31, Non-current deferred taxes Decrease in short-term loan receivables ¥ 5,525 - $ 52,005
Year ended March 31, 2018 2018 and 2017. Deferred tax assets: Increase in investments in unconsolidated
East and North subsidiaries and affiliates ¥ 5,525 - $ 52,005
Japan Middle East Oceania Other Total Net defined benefit liability ¥ 4,656 ¥ 4,752 $ 43,825
Southeast Asia America
¥ 148,300 ¥ 78,566 ¥ 115,909 ¥ 47,148 ¥ 146,763 ¥ 186,302 ¥ 722,988
(1) The following table summarizes the differences between the statutory tax rate The percentage-of-completion
and the Company’s and its consolidated subsidiaries’ effective tax rate for method 1,416 4,039 13,328
*1. Net sales are classified by the place of customers’ address.
financial statement purposes for the years ended March 31, 2018 and 2017, Tax loss carry forward 1,303 3,669 12,265
*2. Oceania includes Australia ¥146,763 million ($1,381,429 thousand). Note 13 : L AND REVALUATION
*3. Other includes Russia ¥107,044 million ($1,007,568 thousand). Loss on valuation of investment
were as follows: Pursuant to Article 2 of the Enforcement Ordinance for the Law Concerning Land
securities 1,946 1,946 18,317
Year ended March 31, 2017 Revaluation effective March 31, 1998, the Company recorded its owned land used
2018 2017 Other 1,084 1,986 10,204
East and North
Japan Middle East Oceania Other Total Statutory tax rate 30.9% -% Total non-current deferred tax for business at the fair value as of March 31, 2002, and the related revaluation
Southeast Asia America
- assets 10,405 16,392 97,939 difference, net of income taxes, was debited to Land revaluation, net of deferred tax
¥ 138,831 ¥ 100,047 ¥ 127,031 ¥ 33,864 ¥ 125,336 ¥ 168,043 ¥ 693,152 Non-deductible expenses 1.2
Deferred tax liabilities: portion in the Net Assets section. The applicable income tax portion was reported
Non-taxable dividend income (2.0) -
*1. Net sales are classified by the place of customers’ address.
Net unrealized holding gains on as Deferred Tax Liabilities for Land Revaluation in the consolidated balance sheets
*2. Oceania includes Australia ¥125,336 million. Tax credit for research and -
securities (4,925) (3,508) (46,357)
*3. Other includes Russia ¥136,666 million. development expenses (1.6)
at March 31, 2018 and 2017. When such land is sold, land revaluation is reversed
Other (404) (437) (3,803)
Foreign tax credit 5.5 -
Year ended March 31, 2018 and debited to retained earnings.
Total non-current deferred tax
Loss carryforwards with -
Japan
East and
Middle East
North
Oceania Other Total liabilities (5,329) (3,945) (50,160) Fair value of the revalued land as of March 31, 2018 was ¥1,667 million
Southeast Asia America unrecognized tax effects 3.2
Valuation allowances 9.7 -
Net non-current deferred tax assets ¥ 5,076 ¥ 12,447 $ 47,779 ($15,691 thousand) less than the book value as of March 31, 2018.
$ 1,395,896 $ 739,514 $ 1,091,011 $ 443,788 $ 1,381,429 $ 1,753,595 $ 6,805,233
Other (0.0) -
Effective tax rate 46.9% -% Deferred tax liabilities for
(2) Property and equipment land revaluation ¥ 1,015 ¥ 3,126 $ 9,554
Note 14 : R
 ELATED PARTY TRANSACTIONS
(Thousands of This information is not disclosed, as loss before taxes on income was recorded for This information is not disclosed, as this is immaterial for the years ended March
U.S. dollars) Undistributed earnings of foreign
(Millions of yen) (Note 1)
the year ended March 31, 2017. 31, 2018 and 2017.
consolidated subsidiaries ¥ 240 ¥ 236 $ 2,259
Years ended March Year ended March March 31, Others 81 148 762
31,2018 31, 2017 2018 (2) Significant components of the Company’s and its consolidated subsidiaries’
Non-current deferred tax liabilities ¥ 321 ¥ 384 $ 3,021
Japan ¥ 49,471 ¥ 65,870 $ 465,653 deferred tax assets and liabilities as of March 31, 2018 and 2017, were as Note 15 : RENTAL PROPERTY
Other 5,751 4,008 54,132 follows: For the years ended March 31, 2018 and 2017, the valuation allowances of The fair value of investment and rental property on the consolidated financial
Total ¥ 55,222 ¥ 69,878 $ 519,785 ¥23,327 million ($219,569 thousand) and ¥20,941 million have been deducted
(Thousands of statements at March 31, 2018 and 2017, were as follows:
U.S. dollars)
(Millions of yen) (Note 1)
from the gross amount of the non-current deferred tax assets, respectively.
Book value (net of depreciation) Fair value
II. INFORMATION BY MAJOR CUSTOMERS March 31, 2018 2017 2018 March 31, March 31, March 31,
The following is information on major customers which account for 10% or more Current deferred taxes 2016 Decrease 2017 2017

of the net sales on the consolidated statements of operations for the years ended Deferred tax assets: Note 12 : NOTES TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS Millions of yen ¥ 7,459 ¥ (75) ¥ 7,384 ¥ 6,410
March 31, 2018 and 2017: Reserve for losses on contracts ¥ 5,962 ¥ 7,579 $ 56,118 (1) Reconciliation of cash in the consolidated balance sheets and cash and cash
March 31, March 31, March 31,
Accrued employees’ bonuses 2,070 1,864 19,484 equivalents in the consolidated statements of cash flows was as follows: 2017 Decrease 2018 2018
(Thousands of
U.S. dollars) Accounts payable 2,574 1,586 24,228 Millions of yen ¥ 7,384 ¥ (7,384) ¥- ¥-
(Thousands of
Year ended March 31, 2018 (Millions of yen) (Note 1) Related segments
Reserve for job warranty costs 426 874 4,010 U.S. dollars) Thousands of
Ichthys LNG Pty Ltd ¥ 138,850 $ 1,306,947 Total engineering (Millions of yen) (Note 1) $ 69,503 $ (69,503) $- $-
Other 753 623 7,088 U.S dollars (Note1)
JSC YAMAL LNG ¥ 106,703 $ 1,004,358 Total engineering March 31, 2018 2017 2018
Total current deferred tax assets 11,785 12,526 110,928
Cash and deposits ¥ 195,394 ¥ 185,603 $ 1,839,175
Deferred tax liabilities: Rental real estate assets are presented on the consolidated balance sheets net of
Year ended March 31, 2017 (Millions of yen) Related segments Short-term loan receivable with a maturity
Foreign currency hedge — (3) — accumulated depreciation and accumulated impairment loss.
date of three months or less 40,000 — 376,506
JSC YAMAL LNG ¥ 136,567 Total engineering
Other (131) (111) (1,233) Cash and cash equivalents ¥ 235,394 ¥ 185,603 $ 2,215,681
The reason of the decrease was mainly due to the sales of the assets and
Ichthys LNG Pty Ltd ¥ 116,157 Total engineering
Total current deferred tax the depreciation of the assets for the years ended March 31, 2018 and 2017,
liabilities (131) (114) (1,233) respectively.
III. INFORMATION ON IMPAIRMENT LOSS Net current deferred tax assets ¥ 11,654 ¥ 12,412 $ 109,695 (2) Significant non-cash transaction
The fair value was determined by the Company based on “the guidance for
This information is not disclosed, as this information is disclosed in Note 10 (a) for During the year ended March 31, 2018, the Company acquired shares by
appraising real estate”.
the years ended March 31, 2018 and 2017. contribution in kind.
The Company has rental commercial properties (including land) in Kanagawa
Details of the movement resulting from the acquisition of shares by contribution
Prefecture. The rental incomes in the Other income were ¥400 million ($3,765
in kind are as follows:
thousand) and ¥443 million for the years ended March 31, 2018 and 2017,
respectively. The gain on sales of the rental property in the Other income was
¥4,776 million ($44,955 thousand) for the years ended March 31, 2018.

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Note 16 : FINANCIAL INSTRUMENTS the specified limit on the amounts of derivative transactions allowed. The B. FAIR VALUES OF FINANCIAL INFORMATION
A. QUALITATIVE INFORMATION ON FINANCIAL INSTRUMENTS Department periodically provides administrative reports on the results to the (a) FAIR VALUES OF FINANCIAL INSTRUMENTS
(a) POLICIES FOR USING FINANCIAL INSTRUMENTS financial director and treasurer. Fair values of financial instruments as of March 31, 2018 and 2017 were summarized as follows:
The Company manages surplus capital using financial instruments that are short- The financial instruments, whose fair values were difficult to measure, were not included in the table below and were summarized in B (b).
term and carry low risk. The Company uses derivatives to mitigate the risks that are (3) Management of liquidity risk associated with capital procurement (payment
(Millions of yen)
described below, and does not use derivatives for speculative transactions. default risk) March 31, 2018 March 31, 2017
The Company manages liquidity risk by creating and updating a capital Carrying amount Estimated fair value Difference Carrying amount Estimated fair value Difference
(b) FINANCIAL INSTRUMENTS, ASSOCIATED RISKS AND THE RISK deployment plan based on reports from each division. Cash and deposits ¥ 195,394 ¥ 195,394 ¥— ¥ 185,603 ¥ 185,603 ¥—
Notes and accounts receivable net*1 186,672 186,672 — 194,827 194,827 —
MANAGEMENT SYSTEM
Short-term loans receivable 46,475 46,475 — — — —
Notes and accounts receivable expose the Company to customer credit risk. (d) SUPPLEMENTAL INFORMATION ON THE FAIR VALUE OF FINANCIAL Other receivables*2 43,251 43,251 — 23,253 23,253 —
Investment securities are mainly related to the business and capital alliance INSTRUMENTS Investment securities 26,158 26,158 — 21,426 21,426 —
Long-term loans receivable, net*1 3,368 3,370 2 5,731 5,731 —
companies and expose the Company to the changes in market prices. Loans The fair value of financial instruments is based on market prices, or a reasonable
Total Assets ¥ 501,318 ¥ 501,320 ¥2 ¥ 430,840 ¥ 430,840 —
receivable are mainly related to subsidiaries and affiliates. estimate of fair value for instruments for which market prices are not available.
Most notes and accounts payable are due within one year. Some accounts Estimates of fair value are subject to fluctuation because they employ variable Notes and accounts payable ¥ 89,164 ¥ 89,164 ¥— ¥ 97,613 ¥ 97,613 ¥—
Long-term debt 54,295 54,430 135 12,631 12,643 12
payable associated with purchasing machines and construction contracts are factors and assumptions.
Total Liabilities ¥ 143,459 ¥ 143,594 ¥ 135 ¥ 110,244 ¥ 110,256 ¥ 12
denominated in foreign currencies, which expose the Company to the risks of In addition, the contractual amounts of the derivatives transactions discussed
exchange rate fluctuations. The Company generally procures capital required in B (a) below are not an indicator of the market risk associated with derivatives Derivative financial instruments, net ¥ (838) ¥ (838) ¥— ¥ (750) ¥ (750) ¥—

under its business plan through bank loans. Some bank loans and bond expose the transactions.
Company to the risks of interest rate fluctuations, which the Company uses interest
(Thousands of U.S. dollars)(Note 1)
rate swaps to hedge. March 31, 2018
The Company uses derivatives transactions including foreign exchange forward Carrying amount Estimated fair value Difference
Cash and deposits $ 1,839,175 $ 1,839,175 $—
contracts to hedge the risk of exchange rate fluctuations associated with accounts
Notes and accounts receivable, net *1 1,757,078 1,757,078 —
receivable and payable denominated in foreign currencies and interest rate swaps Short-term loans receivable 437,453 437,453 —
to hedge the risk of interest rate fluctuations associated with loans. “Derivative Other receivables*2 407,107 407,107 —
Investment securities 246,216 246,216 —
Transactions and Hedge Accounting” in Note 1(v) and Note 9 presented earlier
Long-term loans receivable, net *1 31,702 31,721 19
explain hedge accounting issues including methods, hedging policies, hedged items Total Assets $ 4,718,731 $ 4,718,750 $ 19
and recognition of gain or loss on hedged positions.
Notes and accounts payable $ 839,270 $ 839,270 $—
Long-term debt 511,060 512,331 1,271
(c) RISK MANAGEMENT SYSTEM FOR FINANCIAL INSTRUMENTS Total Liabilities $ 1,350,330 $ 1,351,601 $ 1,271
(1) Credit risk management (counter-party risk)
Derivative financial instruments, net $ (7,888) $ (7,888) $—
The Company has established internal procedures for receivables under
*1 The amount of individual allowance for doubtful accounts is deducted from notes and accounts receivable and long-term loans receivable.
which the related divisions are primarily responsible for periodically monitoring
*2 Other receivables is included in other current assets on the consolidated balance sheets.
counter-party status. The department manages amounts and settlement dates
by counter-party and works to quickly identify and mitigate payment risk that
may result from situations including deterioration of the financial condition
of counter-parties. Consolidated subsidiaries are subject to the same risk
management rules.
In using derivatives transactions, the Company mitigates counter-party
risk by conducting transactions with highly creditworthy financial institutions.

(2) Market risk management (risk of exchange rate and interest rate fluctuations)
The Company monitors the balance of the foreign currency receivable and
payable by each currency and every month and utilizes foreign currency
forward contracts and foreign currency deposit to hedge the risk of fluctuations.
The Company uses interest rate swaps to mitigate the risk of interest rate
fluctuations associated with loans.
Regarding marketable securities and investment securities, the Company
periodically examines fair value and the financial condition of the issuing
entities and revises its portfolio based on its relationships with issuing entities.
The derivative transactions are executed and managed by the Finance &
Accounting Department in accordance with the established policies and within

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The following methods and assumptions were used to estimate the fair value of the (b) FINANCIAL INSTRUMENTS, WHOSE FAIR VALUES WERE DIFFICULT TO Note 17 : IMPAIRMENT OF FIXED ASSETS Note 18 : OTHER COMPREHENSIVE INCOME
financial instruments. MEASURE As discussed in Note 1 (n), the Company and its consolidated subsidiaries have Reclassification adjustments of the Company’s and consolidated subsidiaries’ other
The financial instruments, whose fair values were difficult to measure, as of March applied the accounting standard for impairment of fixed assets. comprehensive income for the years ended March 31, 2018 and 2017, were as
Cash and deposits, and Marketable securities 31, 2018 and 2017, were summarized as follows: The Company and its consolidated subsidiaries have grouped their fixed follows:
All deposits and negotiable certificates of deposit are short-term. Therefore, the assets principally based on their business segment, while considering mutual (Thousands of
(Thousands of U.S. dollars)
carrying amount is used for the fair value of these items because these amounts U.S. dollars) supplementation of the cash flows. (Millions of yen) (Note 1)
(Millions of yen) (Note 1)
are essentially the same. The following is information on impairment loss for the year ended March 31, March 31, 2018 2017 2018
March 31, 2018 2017 2018
2017. Net unrealized holding gains on securities
Unconsolidated subsidiaries and affiliates ¥ 30,220 ¥ 21,450 $ 284,450
Notes and accounts receivable Unrealized holding gains arising during
Non-listed equity securities 12,484 17,690 117,508 the year ¥3,171 ¥ 2,933 $ 29,848
Notes and accounts receivable are short-term. Therefore, the carrying amount Location Use Type of assets
Subscription certificate 38 38 358 Reclassification adjustment 1,460 (1,650) 13,742
is used for the fair value of short-term receivables because these amounts are Oil and gas production and
U.S.A. Intangible and other assets Sub-total 4,631 1,283 43,590
Non-listed affiliate’s bond 920 - 8,660 sales business
essentially the same. Deferred gains (losses) on hedges
Deferred losses on hedges arising
The Company grouped the assets for oil and gas production and sales business during the year (711) (8) (6,692)
Short-term loans receivable It is difficult to measure the fair value of these financial instruments because there is no
based on individual countries. Carrying amount of certain assets was devalued to Reclassification adjustment 583 128 5,487
Short-term loans receivable are short-term. Therefore, the carrying amount is used market price available and it is not practical to calculate future cash flow. Therefore, these
their recoverable amounts, since oil and gas business environment had significantly Sub-total (128) 120 (1,205)
for the fair value of short-term receivables because these amounts are essentially financial instruments were not included in the Investment securities described in B (a). Translation adjustments
adversely changed. As a result, the Company recognized loss on impairment in
the same. the amount of ¥5,274 million. The Company used the value in use which was Translation adjustments arising during
(c) MATURITIES OF FINANCIAL INSTRUMENTS the year (414) (2,961) (3,897)
calculated by discounting future cash flows at the discount rates of 10%. Reclassification adjustment — (1,867) —
Other receivables The maturities of the financial instruments at March 31, 2018 were as follows:
Impairment losses other than aforementioned are not disclosed since they are Sub-total (414) (4,828) (3,897)
Other receivables are short-term. Therefore, the carrying amount is used for the fair (Millions of yen) immaterial. Remeasurements of defined benefit plans
value of short-term receivables because these amounts are essentially the same. 2020 - 2025 - 2030 and Defined benefit plans during the year 594 (335) 5,591
Year ending March 31 2019 2024 2029 thereafter Reclassification adjustment 453 709 4,264
This information is not disclosed, as this is no impairment loss for the year
Investment securities Cash and deposits ¥ 195,394 ¥- ¥- ¥- Sub-total 1,047 374 9,855
ended March 31, 2018.
Notes and accounts receivable 186,672 - - - Equity for equity method affiliates
Fair value of Investment securities is the price listed on securities exchanges for
Share of other comprehensive income
equities. In addition, Note 8 provides information on marketable securities by holding Short-term loans receivable 46,475 - - -
of affiliates
intent. Other receivable 43,251 - - - accounted for using equity method
arising during the year 28 (2) 264
Investment securities - 920 - -
Sub-total 28 (2) 264
Long-term loans receivable Long-term loans receivable, net - 3,368 - - Before-tax amount 5,164 (3,053) 48,607
Fair value of long-term loans receivable is estimated as discounted present value of Assets Total ¥ 471,792 ¥ 4,288 ¥- ¥- Income tax effect (1,683) (535) (15,841)
total principal and interest using assumed interest rates for equivalent new loans. Total other comprehensive income ¥ 3,481 ¥ (3,588) $ 32,766
(Thousands of U.S. dollars)(Note 1)

Notes and accounts payable 2020 - 2025 - 2030 and

Year ending March 31 2019 2024 2029 thereafter
Notes and accounts payable are short-term. Therefore, carrying amount is used
Cash and deposits $ 1,839,175 $- $- $-
for the fair value of short-term payables because these amounts are essentially
Notes and accounts receivable 1,757,078 - - -
the same.
Short-term loans receivable 437,453 - - -
Other receivable 407,107 - - -
Long-Term Debt
Fair value of long-term debt is estimated as the discounted present value of total Investment securities - 8,660 - -

principal and interest using assumed interest rates for equivalent new loans Long-term loans receivable, net - 31,702 - -

or bonds. Interest rate swaps subject to special method are used for long-term Assets Total $ 4,440,813 $ 40,362 $- $-

floating-rate loans. Principal and interest of the loans in which these interest rate
swaps are embedded are discounted using a reasonable estimate of the interest rate Please see Note 3 for the maturities of long term-debt.
on the loan at the time of issue.

Derivative financial instruments

Please refer to “DERIVATIVE TRANSACTIONS AND HEDGE ACCOUNTING” in Note
1(v) and Note 9.

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Independent Auditor’s Report

Tax effects allocated to each component of other comprehensive income for the To the Board of Directors of JGC Corporation:
years ended March 31, 2018 and 2017, were as follows:

(Millions of yen)
Before-tax Income tax Net-of-tax
Year ended March 31, 2018 amount effect amount We have audited the accompanying consolidated financial statements of JGC Corporation and its consolidated subsidiaries, which comprise the consolidated balance sheets
as at March 31, 2018 and 2017, and the consolidated statements of operations, statements of comprehensive income, statements of changes in net assets and statements of
Net unrealized holding gains on securities ¥ 4,631 ¥ (1,417) ¥ 3,214 cash flows for the years then ended, and a summary of significant accounting policies and other explanatory information.
Deferred (losses) on hedges (128) 55 (73)
Translation adjustments (414) — (414)
Management’s Responsibility for the Consolidated Financial Statements
Remeasurements of defined benefit plans 1,047 (321) 726
Equity for equity method affiliates 28 — 28
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted
Other comprehensive income ¥ 5,164 ¥ (1,683) ¥ 3,481
in Japan, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material
misstatements, whether due to fraud or error.
(Millions of yen)
Before-tax Income tax Net-of-tax
Year ended March 31, 2017 amount effect amount
Auditor’s Responsibility

Net unrealized holding gains on securities ¥ 1,283 ¥ (393) ¥ 890

Deferred gains on hedges 120 (33) 87 Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards
Translation adjustments (4,828) — (4,828) generally accepted in Japan. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether
Remeasurements of defined benefit plans 374 (109) 265 the consolidated financial statements are free from material misstatement.
Equity for equity method affiliates (2) — (2)
Other comprehensive income ¥ (3,053) ¥ (535) ¥ (3,588) An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend
on our judgement, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk
assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures
(Thousands of U.S. dollars) (Note 1)
Before-tax Income tax Net-of-tax
that are appropriate in the circumstances, while the objective of the financial statement audit is not for the purpose of expressing an opinion on the effectiveness of the entity’s
Year ended March 31, 2018 amount effect amount internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as
Net unrealized holding gains on securities $ 43,590 $ (13,338) $ 30,252 well as evaluating the overall presentation of the consolidated financial statements.
Deferred gains on hedges (1,205) 518 (687)
Translation adjustments (3,897) — (3,897)
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Remeasurements of defined benefit plans 9,855 (3,021) 6,834
Equity for equity method affiliates 264 — 264
Opinion
Other comprehensive income $ 48,607 $ (15,841) $ 32,766

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of JGC Corporation and its consolidated subsidiaries as at March
31, 2018 and 2017, and their financial performance and cash flows for the years then ended in accordance with accounting principles generally accepted in Japan.

Convenience Translation

The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31, 2018 are presented solely for convenience. Our audit
also included the translation of yen amounts into U.S. dollar amounts and, in our opinion, such translation has been made on the basis described in Note 1 to the consolidated
financial statements.

KPMG AZSA LLC

June 28, 2018
Tokyo, Japan

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Supplemental Explanation Internal Control Report (Translation)

NOTE
The following is an English translation of the report on internal control over financial reporting filed under the Financial Instruments and Exchange Act in Japan (“ICOFR under the Act”). This report is presented merely as supplemental
information.
There are differences between the management assessment of ICOFR under the Act and one conducted under the attestation standards established by the American Institute of Certified Public Accountants (“the AICPA”).
In the management assessment of ICOFR under the Act, there is detailed guidance on the scope of the management assessment of ICOFR, such as quantitative guidance on business location selection and/or account selection.
In the management assessment of ICOFR under the attestation standards established by the AICPA, there is no such guidance. Accordingly, based on the quantitative guidance which provides an approximate measure for the scope
of assessment of internal control over business processes, we used a measure of approximately two-thirds of total sales and others for the selection of significant locations and business units.
Internal Control over Financial Reporting in Japan

Under the Financial Instruments and Exchange Act in Japan (“the Act”), which was enacted in June 2006, the management of all listed companies in Japan are required to
[TRANSLATION]
implement assessments of internal control over financial reporting (“ICOFR”) as of the end of the fiscal year and the management assessment shall be audited by independent
auditors, effective from the fiscal year beginning on or after April 1, 2008.
Internal Control Report
1 Framework of Internal Control Over Financial Reporting
We have evaluated our ICOFR as of March 31, 2018, in accordance with “On the Revision of the Standards and Practice Standards for Management Assessment and Audit
Masayuki Sato, Representative Director, Chairman and Chief Executive Officer (CEO), and Kiyotaka Terajima, Chief Financial Officer (CFO) of JGC Corporation (“the
concerning Internal Control Over Financial Reporting (Council Opinions)” published by the Business Accounting Council on March 30, 2011.
Company”) are responsible for establishing and maintaining adequate internal control over financial reporting as defined in the rule “On the Revision of the Standards and
Practice Standards for Management Assessment and Audit concerning Internal Control Over Financial Reporting (Council Opinions)”.
As a result of conducting the evaluation of ICOFR for the year ended March 31, 2018, we concluded that our internal control system over financial reporting as of March
Because of its inherent limitations, internal control over financial reporting (“ICOFR”) may not completely prevent or detect misstatements.
31, 2018 was operating effectively and reported as such in the Internal Control Report.

2 Assessment Scope, Timing and Procedures

Independent Auditor, KPMG AZSA LLC, performed an audit of our management assessment on the effectiveness of ICOFR under the Act.
We have assessed our ICOFR as of March 31, 2018 in accordance with assessment standards for internal control over financial reporting generally accepted in Japan.
We assessed the design and operation of our company-level control and based on this assessment, we analyzed business processes within the scope of the internal
An English translation of the Internal Control Report and the Independent Auditor’s Report filed under the Act is provided on the following pages.
control to be assessed, identified a key control that would have a material impact on the reliability of financial reporting and assessed whether the basic components of
internal control are operating with regard to the key control.
We assessed the effectiveness of ICOFR of the Company, consolidated subsidiaries and equity-method affiliates to the extent necessary in light of their degree of
JGC Corporation
impact on the reliability of financial reporting.
In assessing the effectiveness of internal control, we decided on reasonable scope of assessment for the significant business processes in light of their degree of
quantitative and qualitative impact on financial reporting based on the assessment of the company-level control.
Locations and business units that did not have a material effect on financial reporting were excluded from the scope of assessments.
In assessing the period-end financial reporting process, we decided on reasonable scope of assessment in light of its degree of quantitative and qualitative impact on
financial reporting in a similar manner as company-level control.
In assessing the business processes other than described above, based on the assessment of the company-level controls, we assessed the significant business
locations based on sales levels until combined sales amounts reach approximately two-thirds on a consolidated basis and the business processes which impact the
accounts (sales, accounts receivable and inventory) that were closely associated with the significant business locations’ business objectives.

3 Results of Assessment
As a result of the above assessment, the Company’s management has concluded that, as of March 31, 2018, the Company’s ICOFR was effective.

4 Supplementary Information
Not applicable.

5 Other
Not applicable.

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Independent Auditor’s Report (Translation)

NOTE Opinion
The following is an English translation of the Independent Auditor’s Report filed under the Financial Instruments and Exchange Act in Japan (“the Act”). This report is presented merely as supplemental information.
There are differences between an audit of ICOFR under the Act and one conducted under the attestation standards established by the American Institute of Certified Public Accountants (“the AICPA”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of JGC Corporation and its consolidated subsidiaries as of March
In an audit of ICOFR under the Act, the auditor expresses an opinion on management’s report on ICOFR and does not express an opinion on the company’s ICOFR directly. In an audit of ICOFR under the attestation standards 31, 2018 and their financial performance and cash flows for the year ended March 31, 2018, in accordance with accounting principles generally accepted in Japan.
established by the AICPA, the auditor expresses an opinion on the company’s ICOFR directly.
Also in an audit of ICOFR under the Act, there is detailed guidance on the scope of an audit of ICOFR, such as quantitative guidance on business location selection and/or account selection. In an audit of ICOFR under the
attestation standards established by the AICPA, there is no such guidance. Accordingly, based on the quantitative guidance which provides an approximate measure for the scope of assessment of internal control over business
processes, we used a measure of approximately two-thirds of total sales and others for the selection of significant locations and business units.
Audit of Internal Control
Pursuant to the second paragraph of Article 193-2 of the Financial Instruments and Exchange Act in Japan, we also have audited the Company’s report on internal control over
financial reporting of the consolidated financial statements of JGC Corporation as of March 31, 2018 (“Internal Control Report”).

[TRANSLATION]
Independent Auditor’s Report Management’s Responsibility for the Internal Control Report

June 28, 2018 Management is responsible for the design and operation of internal control over financial reporting and the preparation and fair presentation of the Internal Control Report in

To the Board of Directors of JGC Corporation conformity with assessment standards for internal control over financial reporting generally accepted in Japan. Internal control over financial reporting may not completely
prevent or detect financial statement misstatements.
KPMG AZSA LLC

Designated Limited Liability Partner, Auditor’s Responsibility

Engagement Partner,
Our responsibility is to express an opinion on the Internal Control Report based on our internal control audit. We conducted our internal control audit in accordance with auditing
Certified Public Accountant: Michitaka Shishido
standards for internal control over financial reporting generally accepted in Japan. Those standards require that we comply with ethical requirements and plan and perform the
Designated Limited Liability Partner,
Engagement Partner, audit to obtain reasonable assurance about whether the Internal Control Report is free from material misstatement.
Certified Public Accountant: Yoshinori Saito An internal control audit involves performing procedures to obtain audit evidence about the assessment of internal control over financial reporting in the Internal Control
Report. The procedures selected depend on the auditor’s judgment, including significance of effect on the reliability of financial reporting. Also, an internal control audit includes
Audit of Consolidated Financial Statements evaluating the appropriateness of the scope, procedures and result of the assessment determined and presented by management as well as evaluating the overall internal
control report presentation.
Pursuant to the first paragraph of Article 193-2 of the Financial Instruments and Exchange Act in Japan (“the Act”), we have audited the consolidated financial statements of JGC We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Corporation (the “Company”) and its consolidated subsidiaries included in the Financial Section, namely, the consolidated balance sheet as of March 31, 2018, the consolidated
statement of income, consolidated statement of comprehensive income, consolidated statement of changes in net assets and consolidated statement of cash flows for the Opinion
fiscal year from April 1, 2017 to March 31, 2018, and a summary of significant accounting policies, other explanatory information and consolidated supplementary schedules. In our opinion, the Internal Control Report, in which JGC Corporation states that internal control over financial reporting was effective as of March 31, 2018, presents fairly, in
all material respects, the assessment of internal control over financial reporting in conformity with assessment standards for internal control over financial reporting generally
Management’s Responsibility for the Consolidated Financial Statements accepted in Japan.
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted
in Japan, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material Interest
misstatements, whether due to fraud or error. The firm and the engagement partners do not have any interest in the Company for which disclosure is required under the provisions of the Certified Public Accountants Act of
Japan.
Auditor’s Responsibility
Our responsibility is to independently express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing
standards generally accepted in Japan. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected
depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making
those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit
procedures that are appropriate in the circumstances, while the objective of the financial statement audit is not for the purpose of expressing an opinion on the effectiveness
of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by
management as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

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JGC Group Outline of JGC

As of March 31, 2017 As of March 31, 2017

Established October 25, 1928

Others Total Engineering Functional Materials Manufacturing Capital ¥23,511,189,612
Number of Employees 2,291 (Consolidated: 7,610)
Equipment Procurement JGC Catalysts and Chemicals Ltd.
JGC Trading & Services Co., Ltd. JGC CORPORATION JAPAN FINE CERAMICS CO., LTD.
Major Shareholders

JGC Italy S. r. l. Nikki-Universal Co., Ltd. Number of shares (Thousands) Percentage of total (%)

The Master Trust Bank of Japan, Ltd. (Trust Account) 33,142 13.13
Specialized Consulting Services
JAPAN NUS CO., LTD. Japan Trustee Services Bank, Ltd. (Trust Account) 26,307 10.42

Office Support Services JGC Trading and Services Co., Ltd. 12,112 4.80
JGC PLANT INNOVATION CO., LTD.
NIKKI BUSINESS SERVICES CO., LTD. Sumitomo Mitsui Banking Corporation 11,000 4.35
JGC PLANTECH AOMORI Co., Ltd.
Water & Power Generation Business JGC-S SCHOLARSHIP FOUNDATION 8,433 3.34
Nikki-Universal Co., Ltd.
JGC-ITC Rabigh Utility Co., Ltd. NORTHERN TRUST CO. (AVFC) SUB A/C AMERICAN CLIENTS 7,321 2.90
JGC SINGAPORE PTE LTD
JGC Mirai Solar Co., Ltd. Japan Trustee Services Bank, Ltd. (Trust Account 9) 5,308 2.10
JGC PHILIPPINES, INC.
Oil & Gas Production and Sales Business Japan Trustee Services Bank, Ltd. (Trust Account 5) 3,688 1.46
PT. JGC INDONESIA
JGC (GULF COAST), LLC Trust & Custody Services Bank, Ltd. (Securities Investment Trust Account) 3,581 1.41
JGC Exploration Eagle Ford LLC JGC Gulf International Co., Ltd.
DEUTSCHE BANK TRUST COMPANY AMERICAS 3,562 1.41
JGC EXPLORATION CANADA LTD. JGC OCEANIA PTY LTD
JGC’s treasury stock holdings total 6,745 thousand shares, approximately 2.60% of total shares issued.
JGC America, Inc.
JGC Gulf Engineering Co. Ltd.
Authorized Shares 600,000,000 Distribution of Shareholders (%)
Consolidated subsidiary
Issued and Outstanding Financial institutions 43.73
Equity-method subsidiary or affiliate 259,052,929
Shares
Non-equity-method subsidiary or affiliate Financial instruments
Number of firms 1.07
17,394
Shareholders Other domestic
corporations
11.96
Mitsubishi UFJ Trust and Banking Corp.
Total Engineering Administrator of the
1-4-5, Marunouchi, Chiyoda-ku, Individuals and others 8.86
Business Company Country Capital Capital Share Other Shareholders’ Register
Tokyo 100-8212, Japan
Engineering & Construction JGC PLANT INNOVATION CO., LTD. Japan ¥830,000,000 100% Foreign investors 31.78
Services JGC SINGAPORE PTE LTD Singapore S$2,100,000 100% * JGC 70% Treasury stock 2.60
JGC PHILIPPINES, INC. Philippines PHP1,200,000,000 100% * JGC PLANT INNOVATION 30%
PT. JGC INDONESIA Indonesia US$1,600,000 100%
Figures have been rounded to two decimal places.
JGC Gulf International Co., Ltd. Saudi Arabia SAR187,500,000 100% * JGC 92% Stock Price
JGC OCEANIA PTY LTD Australia A$1,000,000 100% * JGC SINGAPORE 8% JGC Stock Price (Yen)
JGC America, Inc. U.S.A. US$346,200,000 100% * JGC 92% 5,000
JGC Gulf Engineering Co. Ltd. Saudi Arabia SAR500,000 75% * JGC SINGAPORE 8%
Maintenance Services JGC PLANTECH AOMORI Co., Ltd. Japan ¥50,000,000 100% * JGC PLANT INNOVATION 100% 4,000
Process Licensing Services Nikki-Universal Co., Ltd. Japan ¥1,000,000,000 50%
3,000
Functional Materials Manufucturing
2,000
Company Country Capital Capital Share Other
JGC Catalysts and Chemicals Ltd. Japan ¥1,800,000,000 100%
1,000
JAPAN FINE CERAMICS CO., LTD. Japan ¥300,000,000 100%
Nikki-Universal Co., Ltd. Japan ¥1,000,000,000 50% 0
2015 2016 2017 2018
Others 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8
Business Company Country Capital Capital Share Other
Volume (Thousands of shares)
Equipment Procurement JGC Trading and Services Co., Ltd. Japan ¥40,000,000 24.5%
80,000
Specialized Consulting Services JAPAN NUS CO., LTD. Japan ¥50,000,000 88.8%
Office Support Services NIKKI BUSINESS SERVICES CO., LTD. Japan ¥1,455,000,000 100%
60,000
Water & Power Generation Business JGC-ITC Rabigh Utility Co., Ltd. Japan ¥319,000,000 100%
JGC Mirai Solar Co., Ltd. Japan ¥445,000,000 51%
Kamogawa Mirai Solar Co., Ltd. Japan ¥231,000,000 100% 40,000
Oil & Gas Production and Sales JGC (GULF COAST), LLC. U.S.A. US$77,350,000 100%
Business JGC Exploration Eagle Ford LLC U.S.A. US$65,000,000 100% 20,000
JGC EXPLORATION CANADA LTD. Canada C$105,885,000 100%

0
2015 2016 2017 2018
1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8

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