“MIRAI ENGINEERING”
—A GRAND OPPORTUNITY FOR THE FUTURE—
ANNUAL REPORT FY2016
For the year ended March 31, 2017
CHIYODA CORPORATION
PROFILE
ANNUAL REPORT FY2016
Chiyoda Corporation is a leading integrated engineering and construction company with a signifi cant
INDEX
INDEX
presence in the global oil and gas market, and customers in more than 60 countries. Especially in the fi eld
of LNG plant engineering and construction, we are a global leader, with a track record of undertaking
projects that account for around 40% of the world’s total LNG plant capacity.
Established in 1948, Chiyoda started with domestic projects in petroleum refining, petrochemicals
and gas processing. Since the 1970s, Chiyoda has developed a powerful global footprint, taking
advantage of the many opportunities in the engineering, procurement and construction of energy-
related plants, while building a first-class reputation for technological capability, safety and reliability.
During its 70-year history, the Chiyoda Group has been growing steadily under the corporate
philosophy of enhancing business by aiming for harmony between energy and the environment, while
contributing to the sustainable development of society. In addition, Chiyoda has expanded business
into the offshore and upstream sectors, new energy and renewable energies.
02 Profile
03 At a Glance
To Our Shareholders
To Our Shareholders
05 To Our Shareholders
Financial Highlights
Financial Highlights
11 Financial Highlights
Business Overview
Business Overview
13 Business Overview
19 Topics
21 Chiyoda’s ESG Initiatives
31 Corporate Governance
35 Directors & Officers
Corporate Governance Dialogue
Corporate Governance Dialogue
37 Corporate Governance Dialogue
39 Risk Management
41 Corporate Information
43 Stock Information
2017
Order awarded for the pilot plant for
production of renewable jet and diesel
fuels for euglena Co., Ltd. in Japan
2003
Order awarded for Sakhalin ll LNG Project
by Sakhalin Energy in Russia,
the first LNG Plant in Russia
1960
Order awarded for
Mitsubishi Oil Mizushima
Refinery Project
1971
Order awarded for LNG Project
on Das island, Abu Dhabi,
the first LNG Project for us
1948
Foundation of the Company
1961
Moved up to
the First Section of
the Tokyo Stock Exchange
1949
1957
Won the first order for
Listed on the Second
a cracking plant of
Koa Oil Company
Section of the Tokyo
Stock Exchange
1965
Order awarded for
Petromin Jeddah
Refinery Project
in Saudi Arabia
1980
Order awarded for Petromin
Mobil Yanbu Export Refinery
Project in Saudi Arabia
2001
Gained ISO14001
2004
Order awarded for Qatargas II LNG Project in Qatar,
the largest LNG plant
(Production Capacity per Train: 7.8 million ton/year)
1993
Order awarded for Qatargas
LNG Project in Qatar
2009
Order awarded for Papua New Guinea
LNG Project
2014
Order awarded for Cameron LNG Project in
the US and Yamal LNG Project in Russia
2013
Confirmed proof of concept for
SPERA Hydrogen,
a system and technology for
massive H2 storage and transportation
1948
1958
1968
1978
1987
1988
1998
2008
2018
1st decade
2nd decade
3rd decade
4th decade
5th decade
6th decade
7th decade
01
02
CHIYODA CORPORATION
AT A GLANCE
Chiyoda Corporation is a world-leading, integrated engineering and construction company.
The Chiyoda Group has developed its cutting-edge technology in this highly challenging industry
and a wealth of experience throughout the last seven decades.
The Chiyoda Group provides excellent services backed by ample experience and technical
knowledge, while striving for vital business with “Energy and Environment in Harmony.” Existing major
projects and key data are reflected on this page.
MAJOR PROJECTS IN PROGRESS (As of March 2017)
~40%
of the world’s total
LNG plant capacity
Yamal LNG
65.51 mil.
Safe man-hours
without LTI*
in PNG LNG Project
New Ulaanbaatar
International Airport
Titanium Sponge Plant
RasGas Helium 3
New Bohol Airport
RAPID
Tank Terminal
Copper Smelter
Jangkrik FPU
Tangguh Tr. 3
Mozambique Area 1
Ichthys
More than
60 countries
(Plant design & construction)
More than
20 locations
(including major overseas
subsidiaries & affi liated
companies)
ANNUAL REPORT FY2016
FY2016
Revenues
603.7
billions of yen
FY2016
New Orders
351.8
billions of yen
FY2016
Backlog of
Contracts
876.8
billions of yen
Japan
Overseas
Business Field
LNG/Gas
Petrochemical/Refi nery
Metal
Offshore
Infrastructure
EPC: Engineering, Procurement
and Construction
FEED: Front-end Engineering
and Design
*LTI: Lost time incident
More than
5,300
employees
Refi nery
More than
800
Freeport LNG
Cameron LNG
Non-hydrocarbon
More than
1,800
More than
3,000
projects
Domestic receiving
LNG terminals
75
Petrochemicals
More than
500
03
04
CHIYODA CORPORATION
TO OUR SHAREHOLDERS
Masaji Santo
President & CEO
05
The world is facing major challenges today, including climate change, the digital revolution and
changes in the structure of energy supply and demand. Many of these issues affect us deeply here at
Chiyoda Corporation but my personal philosophy is that change offers unique, often ideal,
opportunities for organizations to adapt and to embrace the chance to reorient the Company for future
success. I am confident in these prospects and would like to share my clear vision of what should be
expected by our customers, our shareholders and our employees.
I am Masaji Santo. It is my great honor and privilege
• Consolidation of Resources—enhancing competi-
to have become CEO of Chiyoda Corporation.
tiveness and reinforcing the profitability of the entire
We just published Chiyoda’s new Medium-Term
Chiyoda Group as keys to the Group’s future
Management Plan, “Mirai Engineering—A Grand
development. To achieve this, we will fully develop
Opportunity for the Future,” a four-year strategy
the human resources of all the Group companies.
blueprint for our business development based on a
thorough analysis of macrotrends and assessment of
This will be challenging, but when I consider
the previous management plan.
Chiyoda’s major assets—reputation, experience,
For the initial two years we will prioritize structural
financial stability and, above all, employees’ exper-
reforms to create a solid management base and
tise—I am confident that we will succeed. Critical to
simultaneously pursue a growth strategy. Specific
our success is the concept of “Chiyoda—One Team,”
plans for growth are (1) building an energy value
with management and all employees striving together
chain business, (2) expanding the global environmen-
to enrich the sustainable corporate value of the entire
tal business and (3) developing a new business
Chiyoda Group and respond to the needs and
model for the digital society.
expectations of all clients, shareholders and other
In preparing for my role as CEO of Chiyoda I have
stakeholders.
decided on three major themes to serve as the
I believe valuing that relationship and strengthen-
foundation for a turnaround:
ing the connection to our shareholders through
continuous interactions and consultations will be
• Challenges Bring Opportunities—using the cycles
major ways to create an open dialogue with all
in global energy markets and recent financial
stakeholders. I look forward to the challenges to
challenges at Chiyoda to restructure our business
come and to your continued support.
in a strong, risk-resilient manner;
• How to Change Our Company—putting greater
Respectfully yours,
focus on allocation of resources, including during
the post-EPC phase of our projects, more empha-
sis on environment-friendly facilities and methodol-
ogies and the use of artificial intelligence (AI) to
increase efficiency and effectiveness;
August 2017
06
ANNUAL REPORT FY2016 CHIYODA CORPORATION
ANNUAL REPORT FY2016
Key Management Issues over the Medium Term
“MIRAI ENGINEERING” —A GRAND OPPORTUNITY FOR THE FUTURE—
Chiyoda Group has released a new medium-term management plan,
STRUCTURAL REFORM
“MIRAI ENGINEERING—A GRAND OPPORTUNITY FOR THE FUTURE” for the period
starting from fiscal year 2017 to 2020 (the MTMP). The aim of the MTMP is for Chiyoda
Group to be a global top-tier “Integrated Engineering and Service Provider” in the fields of
energy and environment.
1
Assessment of the previous
medium-term management plan
“SEIZE THE MOMENT,
OPEN UP NEW FRONTIERS”
(the previous MTMP)
2
New medium-term
management plan
“MIRAI ENGINEERING
— A GRAND OPPORTUNITY
FOR THE FUTURE”
The previous MTMP during the period
Given macrotrends such as changes in
from fi scal year 2013 to 2016 was
the supply and demand structure for
executed and, as a result, the Chiyoda
energy, heightened awareness of the
Group maintained its No. 1 position in
global environment and digital
(1) Further strengthen risk management
fi xed costs with the aim of balancing basic earnings
capabilities
and costs, and redefi ne the domestic and global
We will strengthen the structure for execution and
operational structure.
profi tability management of EPC projects on a
consolidated basis. We will also establish a structure
(3) Further expand human resource base
for expansion of business fi elds and the transforma-
To reinforce our technical strength and project
tion of the business model.
execution capabilities, we will realign the human
resource development system with a medium- to
(2) Increase basic earnings strength and
long-term outlook and implement optimal assignment
enhance resilience to downturns
of human resources for continuous earnings growth.
We will seek to expand basic earnings by reinforcing
Through these efforts, we will foster a stronger corpo-
technological strength and project execution capabili-
rate culture and foundation with high loyalty and a
ties and cost competitiveness, reduce consolidated
willingness to pursue new challenges.
GROWTH STRATEGY
LNG and steadily progressed in new
innovation driving changes in industrial
(1) Expansion of business fi elds and transfor-
two key business fi elds of “energy” and the “environ-
business areas including life science
structure, Chiyoda Group will
and new energy. However, the Chiyoda
Group now faces challenges such as
redefi ning the business portfolio,
including offshore and upstream, and
further strengthening risk
management capabilities.
1) provide technological strength and
project execution capabilities, as
the core value, that achieve
harmony between energy and the
environment;
2) contribute to the development of
a sustainable society;
3) and create a corporate
management structure that
resonates with all stakeholders
and earns their recognition
and trust.
In the MTMP, we will seek to simultaneously pursue (i) creating a solid management base
for future growth (Structural Reform) and (ii) expanding business fi elds and transforming the
business model looking ahead 10 years (Growth Strategy).
mation of the business model
ment.” And we aim to innovate EPC execution and
The fi elds of EPC, LNG, gas, petroleum, chemicals
diversify our business into investment and service
and metal resources will remain the Chiyoda Group’s
areas by utilizing innovative digital technologies.
core businesses. In addition, we plan to expand the
Energy
Present
LNG, gas, petroleum,
chemicals,
metal resources
New energy,
industrial facilities,
life sciences
Asset holding *1
Asset management *2
Gas to Power *3
Investment &
Service
Electric power solution
New energy -related
Hydrogen supply chain
Life science
*1. Asset holding: Businesses that gain earnings from holding and managing assets like floater (floating facilities) and onshore plants
*2. Asset management: Businesses that gain earnings by providing various technological services to holders of assets
*3. Gas to Power: An integrated business of LNG liquefaction, LNG regasification, and power generation
Environment
Maintain core businesses
led by LNG, as well as gas,
petroleum, chemicals, and
metal resources
Innovation of
EPC execution
EPC
Dispersion in energy &
energy storage
New materials
Advance pharmaceutical &
medical fields
07
08
CHIYODA CORPORATION
ANNUAL REPORT FY2016
Key Management Issues over the Medium Term
“MIRAI ENGINEERING”—A GRAND OPPORTUNITY FOR THE FUTURE—
(2) Build energy value chain business
energy), the environment, energy conservation and
We plan to enhance the upstream segment (enter
industrial facilities (technologies that reduce
QUANTITATIVE TARGETS
and strengthen fl oater business), midstream
environmental impact and conserve energy for
We regard fi scal year 2020 as a milestone for the
businesses. For the 10 years from fiscal year
(comprehensively strengthen and expand LNG
industrial facilities and metal resources fi elds) and
next 10-year growth strategy, achieving consolidated
2017 (toward fiscal year 2026) and beyond, we
lineup) and downstream (build up orders in petro-
life science (pursue business opportunities and
net profi t of ¥20.0 billion with double-digit ROE
look to continue expansion of earnings through the
leum, chemicals and metal resources responding to
models in cellular, tissue and gene therapies).
based on increased earnings strength through
growth strategy.
shale and increasing demand from newly developing
structural reform and the strengthening of existing
countries. Also, enter the Gas to Power business). In
(4) Develop new business model for
addition, we aim to move into the asset holding
a digital society
business and asset management business.
For promotion of the use of digital technologies
Companywide, innovative EPC execution and
(3) Expand global environmental
encouraging its application in the asset management
engineering business
business, we will work on cultivating capable human
We will increase the contribution to profi t with new
resources, partnering with cutting-edge digital
energy (integration of renewable energy with energy
technology companies and innovating project IT with
storage, electricity storage as well as dispersion
artifi cial intelligence (AI) and others.
Consolidated
net profit
FY2020
¥20
billion
Earnings increase
from the Growth Strategy
Increased earnings strength
from Structural Reform and
strengthening of existing businesses
Present
FY2020
In 10 years
(FY2026)
Energy solutions
Energy solutions
Environmental solutions
Environmental solutions
-- Build energy value chain business
Build energy value chain business --
-- Expand global environmental engineering business
Expand global environmental engineering business --
INVESTMENT STRATEGY
“Mirai Engineering”
“Mirai Engineering”
Integrated Engineering & Service to contribute to a sustainable
Integrated Engineering & Service to contribute to a sustainable
society creating harmony between Energy and Environment
society creating harmony between Energy and Environment
through combination of CHIYODA’s comprehensive strengths and
through combination of CHIYODA’s comprehensive strengths and
innovative digital technologies
innovative digital technologies
Technology and
Technology and
innovation
business model innovation
business model
-- Develop new business
model for a digital society --
Develop new business model for a digital society
Our profi t distribution policy is to allocate 50% of
business fi elds and realize the three growth strategies.
consolidated net profi t each fi scal year to investment
With respect to the investment size, we will set an
for business growth, while maintaining proper
aggregate of roughly ¥30.0 billion to ¥50.0 billion over
fi nancial health.
four years, using cash on hand in addition to invest-
In terms of investment areas, we will carefully select
ment funds under the profi t distribution policy, on the
projects that will contribute to reinforcing core
premise of thorough investment discipline.
POLICY ON RETURNS TO SHAREHOLDERS
We will strive to achieve a consolidated dividend
growth strategy and the investment strategy together
payout ratio of at least 30% during the MTMP period.
with the operating environment. A minimum full-year
The actual dividend amount each fi scal year will be
dividend of ¥6 per share is set.
determined in consideration of progress under the
09
10
CHIYODA CORPORATION
FINANCIAL HIGHLIGHTS
Chiyoda is facing major global challenges due to a shift in the supply and demand structure for energy
and increasing consciousness of the environment. These conditions represent an excellent opportunity
to transform the company, aiming to build a business foundation for future growth and combining
expansion plans with a business model supporting growth strategies for the next decade.
Revenues and Backlog
Billions of yen
1,416.9
611.5
603.7
1,072.2
446.1
900.6
398.9
1,165.0
481.0
430.0
876.8
800
600
400
200
0
FY2012
FY2013
FY2014
FY2015
FY2016
FY2017
(forecast)
Revenues (left scale) Backlog (right scale)
Billions of yen
1,600
• Revenues remained close to record levels in
FY2015 and FY2016 due to successful projects.
• Lower forecast for FY2017 revenues assumes
limited new contracts but continued contributions
from major ongoing projects.
• The backlog remains robust, about twice the
forecast for revenues.
1,200
800
400
0
Profi t (Loss) Attributable to Owners of Parent
Billions of yen
• A loss attributable to owners of parent of ¥41.1
billion for FY2016 was largely due to the ECS-related
extraordinary loss in the third quarter.
• In FY2017, Chiyoda launched the new Medium
Term Management Plan, “MIRAI ENGINEERING
—A GRAND OPPORTUNITY FOR THE FUTURE,”
a business portfolio in alignment with the Compa-
ny’s structural reforms and strategies ensuring
further growth.
• Chiyoda forecasts profi t attributable to owners of
parent of ¥5 billion for FY2017, getting back on a
profi table path.
• In FY2016, Chiyoda paid an annual dividend of ¥6
per share.
16.1
13.4
11.0
20
10
0
5.0
3.4
−41.1
FY2012
FY2013
FY2014
FY2015
FY2016
FY2017
(forecast)
Dividends
Yen
19
16
13
10
6
6
FY2012
FY2013
FY2014
FY2015
FY2016
FY2017
(forecast)
20
15
10
5
0
11
ANNUAL REPORT FY2016
A MESSAGE FROM THE CFO—CHIYODA’S FINANCIAL STRATEGIES
I was appointed the CFO at Chiyoda Corporation in June 2017,
a challenging time for the Company. After a net loss of ¥41.1 billion in
FY2016, mainly due to the ECS investment, revenues and backlog are
expected to decline in FY2017. To deal with these challenges I have
identifi ed four key missions to carry out. By realizing these, the Chiyoda
Group will reverse downward trends and enhance shareholder value.
As the CFO, I will undertake the following:
1
Provide fi nancial support to implement
the new Medium-Term Management Plan
2
3
Improve the Group’s capital effi ciency and profi tability
Ensure the Company’s fi nancial stability to
support sustainable growth
4
Enhance communication with stakeholders
Hirotsugu Hayashi
Senior Executive Vice President & CFO
Specifi cs of those initiatives include:
1. Financial support for the new Medium-Term Management Plan
• The new Medium-Term Management Plan develops a business strategy that focuses on areas where
Chiyoda has a distinct competitive advantage and prioritizes areas with the highest potential.
• Providing adequate financial support to implement this business strategy is a key to the plan’s success.
• Using enhanced risk management techniques is essential for creating optimum opportunities.
2. Capital effi ciency and profi tability
• Emphasize capital efficiency as a strong lever for future success.
• Create a lean operating structure capable of dealing with challenging market conditions while
delivering profitability.
• Evaluate returns to ensure management resources are being used to best advantage.
• Prioritize investment in opportunities with the highest potential.
• Focus on managing business on a Groupwide basis to maximize the soundness and profitability of
Chiyoda as an integrated group.
3. Financial position
• With a core business of LNG and other plant construction, it is important to have abundant liquidity and a
solid financial position.
• Recognize that the Company’s strong financial position supports high-level operating capabilities.
• Maintain an optimum capital policy and fi nancial strategy that provide a pathway to sustainable future growth.
• Chiyoda will maintain a payout ratio of at least 30%
4. Communication with stakeholders
for the next four years (MTMP period) and a
minimum full-year dividend of ¥6 per share.
• Chiyoda determines the dividend amount each
fi scal year in consideration of progress under
growth and investment strategies and the operating
environment.
• Strengthen our communication with stakeholders both inside and outside the Company.
• Listen and respond to shareholder concerns, both at the executive level and through our IR team.
• Communication with stakeholders inside the company is a key to implementing the business and fi nancial strategy.
• Improve the transparency of corporate governance.
Together, these policies can enhance our corporate values, especially when leveraging the Group’s natural
synergies on a global basis.
12
CHIYODA CORPORATION
BUSINESS OVERVIEW
The Company has developed a wealth of skills and experiences over the last decades in this highly
challenging industry. The world-class services offered by Chiyoda are supported by extensive technological
expertise in pursuit of “Energy and the Environment in Harmony.” The industry is highly complex, requiring a
long-term commitment of capital, human resources, know-how and experience, and the ability to develop
technological superiority at all levels of the business. Chiyoda Corporation meets those goals.
OUR CONSOLIDATED BUSINESS
ANNUAL REPORT FY2016
During the fi scal year ended March 31, 2017, global
advantage for future projects, taking strategic steps
through its U.K. subsidiary, Xodus Group Ltd., to
confi dence remained under pressure, adversely
that included participation in the design of highly
clients in Japan and worldwide.
affected by the protracted civil war in Syria and
feasible expansion projects.
On a consolidated basis, new contracts totaled
repeated terrorist attacks in several parts of the
Meanwhile, the Chiyoda Group posted unanticipat-
¥351.8 billion in the latest fi scal year (down 12.8%
world. The global economy also underperformed, due
ed non-operating expenses and an extraordinary loss
from the previous fi scal year). The contract backlog
to the impact on macroeconomics. Chiyoda’s
in the fi rst nine months of the fi scal year, due to
totaled ¥876.8 billion (down 24.7% year on year); net
operating conditions remained challenging in a time
operating diffi culties at EMAS CHIYODA Subsea Ltd.
sales of completed construction contracts reached
of a changing global business landscape.
(ECS). ECS is a provider of engineering, procurement,
¥603.7 billion (down 1.2% year on year); and operating
For example, OPEC members cut production
construction and installation (EPCI) services for
income amounted to ¥15.7 billion (down 2.1% year on
during 2016 but oil prices have yet to make a defi ned,
subsea projects that received investment capital from
year). In comparison with consolidated ordinary
consistent recovery. Also, market observers believe
Chiyoda Corporation in March 2016. Market condi-
income of ¥16.2 billion recorded in the previous fi scal
that liquefi ed natural gas (LNG) remains in oversupply.
tions, as previously discussed, were diffi cult and grew
year, the Group suffered a consolidated ordinary loss
Combined, these two factors are acting as a brake on
signifi cantly worse during the course of the fi scal year.
of ¥3.1 billion, mainly attributable to the extraordinary
fi nal investment decisions in large new projects
In consequence, ECS and its subsidiaries fi led for
loss at ECS described previously. The Group also
around the world, a key element for Chiyoda’s
protection under Chapter 11 of the U.S. Bankruptcy
posted ¥41.1 billion in consolidated loss attributable to
short-term outlook. In Japan, however, there are
Code in February 2017 and later obtained confi rma-
owners of parent, compared with ¥3.4 billion in
increasing expectations about the government’s
tion of the proposed reorganization plan from the U.S.
consolidated profi t attributable to owners of parent
recent economic measures, and it is hoped that
Bankruptcy Court, Southern District of Texas. Under
achieved in the previous fi scal year.
capital investment plans will begin to accelerate.
the reorganization plan, ECS is now wholly owned by
The Chiyoda Group deeply regrets reporting these
Despite the sluggish environment, activity in
Subsea 7 S.A. Going forward, Chiyoda will hold
results, which are substantially lower than the forecasts
existing construction projects for LNG, a core
discussions with partners, including Subsea 7, about
announced at the beginning of the fi scal year. The Group
operating area for the Group, progressed smoothly,
the development of its offshore and upstream
is determined to improve its assessment of investment
notably in the U.S., Australia and Russia. In addition,
business, using the knowledge gained from the ECS
projects and regain the trust of shareholders through the
the Chiyoda Group received a new order from
experience. In addition, Chiyoda will continue to
successful management of its businesses.
Indonesia. The Group also maintained its competitive
provide offshore and upstream consulting services
Outlook for the next fi scal year
The consolidated backlog of contracts currently
stands at approximately ¥900 billion. The Group
will continue to make steady progress on current
contracts including LNG projects in Australia, the
U.S., Indonesia and Russia while considering
slight delays of new investment in large-scale
LNG projects. The Chiyoda Group will also focus
on new business in pharmaceuticals, the
environment and alternative forms of energy.
Under these operating conditions and on a
consolidated basis, the Company forecasts new
contracts of ¥350.0 billion, operating income of
¥8.5 billion, ordinary income of ¥10.0 billion and
profi t attributable to owners of parent of ¥5.0 billion
in the fi scal year ending March 31, 2018, assuming
an exchange rate of ¥110 to the U.S. dollar.
Yamal Tianjin Office, Tianjin
13
Courtesy of ExxonMobil PNG Limited
CIMIC CMO Co., Ltd.
14
CHIYODA CORPORATION
ANNUAL REPORT FY2016
LNG PLANTS & OTHER GAS-RELATED WORK
REFINERIES/PETROCHEMICALS/METALS
Natural gas consumption has increased rapidly in recent years due to its abundance, relatively low
Beyond basic refining, the petrochemical industry produces a wide variety of chemical products from
cost and environmentally friendly nature. Transportation of natural gas presents major technological
the raw materials of petroleum, natural gas, LPG and other hydrocarbons. Chiyoda Corporation has been
challenges and a critical infrastructure has been developed to accommodate the needs of liquefaction
engaged in the design and construction of ethylene plants and many other downstream petrochemical
and regasification. Chiyoda Corporation is one of the world’s leading companies in the design,
and chemical plants for several decades. Originally focused on the Japanese market, the Company’s
planning and procurement, construction, installation and management of these vital LNG facilities.
achievements now include one of the world’s largest ethylene plants, built in the Middle East.
Overseas — The Chiyoda Group completed
Strategy for future LNG projects — As the global
Overseas — The Group completed an oil refi nery
Japan — The Group continues to focus on working
front-end engineering and design (FEED) work for
leader in LNG plant construction, the Group is
project in Qatar in December 2016, and fi nished EPC
with petroleum companies, modifying existing
LNG plants in the U.S. and Russia. Currently, the
determined to stay ahead of the competition,
work for an oil refi nery and petrochemical complex in
facilities in accordance with directives that emphasize
Group is undertaking engineering, procurement and
regardless of short-term market conditions. Consid-
Vietnam. Projects currently under way include
the safety, resilience and quality of life of the Japa-
construction (EPC) work in Australia, the U.S., Russia
ering new opportunities, the Chiyoda Group will
engineering, procurement, construction and commis-
nese people by enhancing the energy effi ciency of
and Indonesia and is continuing pre-contract work in
compete strongly for new projects in the U.S.,
sioning (EPCC) work for a residue fl uid catalytic
these facilities and preventing the deterioration of the
Mozambique, where it was selected as an EPC
Canada, Russia and East Africa through its early
cracking project and EPC work for petrochemical
country’s petrochemical plants.
contractor. Group companies are also performing
planning capabilities, placing the Group in a strong
tank terminal facilities, both in Malaysia. In addition,
the Group is engaged in project management for
refi neries, chemical production and other down-
stream projects in Asia, operating under long-term
contracts, and is conducting EPC work for a titanium
sponge plant in Saudi Arabia.
Outlook
• Focus on expanding downstream projects in the
U.S. and copper smelter projects in Indonesia
• Receive modifi cation/expansion projects for
existing refi neries and petrochemical complexes
(domestic businesses)
engineering, procurement and construction manage-
position once the projects are offi cially launched.
ment (EPCM) work to modify and revamp existing
LNG and gas processing plants that were previously
built by the Company, in addition to EPC work at
helium production facilities in Qatar.
Japan — The Group is performing EPC work to
modify and revamp the LNG receiving terminals built
by the Company.
Recent achievements — Despite the limited
number of new projects launched in 2016, Chiyoda
was awarded an EPC contract for the Tangguh
Outlook
Given the currently stagnant energy prices and
imbalances in supply and demand, Chiyoda
Corporation’s clients remain cautious about fi nal
investment decisions in large new projects.
Nevertheless, in the medium to long term, it is
quite clear that LNG usage, and therefore
demand, will continue to increase, driven by a
society dedicated to lowering carbon emissions
and accelerating the recent shift from coal to
Expansion Project (Tangguh LNG Train 3) in Indonesia,
gas consumption.
amid strong competition. Construction of large LNG
projects in Russia (Yamal), Australia (Ichthys) and the
U.S. (Cameron and Freeport) progressed smoothly.
LNG Demand Supply
(mmtpa)
600
400
200
Under Construction
Operational
Demand as of 2017 1Q
Demand as of 2016 3Q
Under Construction as of 2016 3Q
Operational as of 2016 3Q
0
2008
2010
2015
2020
2025
2030
2035
(Source: Wood Mackenzie)
Courtesy of Qatargas Operating Company Limited
15
16
CHIYODA CORPORATION
ANNUAL REPORT FY2016
PHARMACEUTICALS/BIOCHEMISTRY/GENERAL CHEMISTRY/ENVIRONMENT/INFRASTRUCTURE
NEW BUSINESS FIELDS
Pharmaceutical and food manufacturing centers require impeccable standards of hygiene and safety
The utilization of renewable energy is essential for the sustainable growth of human society. Hydrogen
and depend on highly skilled design and construction experts to provide the proper facilities. Chiyoda
is expected to play a key role in building a low-carbon society for the future. Chiyoda has developed
Corporation’s expertise stretches across boundaries from its core businesses of LNG, petrochemicals
the necessary technology for storing and transporting hydrogen in large volumes, enabling it to be
and pharmaceuticals to a multitude of complex engineering and construction projects, in the
liquefied and transported at ambient temperatures and pressure. This world-first technology will
environmental and infrastructure fields.
overturn conventional wisdom regarding the use and functionality of hydrogen.
Overseas — The Chiyoda Group is performing EPC
Other current projects include EPC work for food
Offshore and upstream — ECS and its subsidiaries
Artifi cial intelligence (AI) technologies — In a fi eld
work for a new international airport in Mongolia and
factories that adhere to the latest safety and hygiene
fi led for protection under Chapter 11 of the U.S.
related to digital innovation, the Company established
the New Bohol Airport in the Philippines. In the
standards; research institutes; and facilities capable
Bankruptcy Code earlier in 2017 and have com-
a business alliance agreement with GRID, Inc., one of
environment fi eld, the Group is providing the Chiyoda
of handling high-potency pharmacologically active
menced restructuring activities as stated previously.
the leaders in AI technologies in Japan, and started
Thoroughbred 121 (CT-121) Process, a fl ue gas
agents and therapeutic antibodies, including
Meanwhile, Xodus Group (Holdings) Ltd., the
studies for enhancing the productivity of plants by
desulfurization technology, at coal-fi red power plants
cutting-edge production facilities, drug substance
Group’s strategic alliance partner in Britain, continues
using AI technologies. The Company has started
in high-growth India. The Chiyoda Group is also
plants and biomedicine production facilities.
to provide offshore and upstream expertise to natural
demonstration projects of AI technology application
executing a project to demonstrate artifi cial light
equipment for plants in Dubai, UAE and intends to
promote this technology in markets centered on
Russia and the Middle East.
Japan — The Group is performing EPC work for
large-scale photovoltaic power plants (“mega solar
plants”) in various parts of the country. In another
example of Chiyoda’s environmental expertise, the
Group is performing EPC work on a demonstration
plant for bio-jet and diesel fuel production.
Outlook
• Follow up in the pharmaceutical fi eld including
investigational activities in new and synthetic
drugs, and projects for mega solar plants where
continued investments are expected
• Continue business development activities in
various fi elds including environmental protection
for coal-fi red power stations, food factories, etc.
Purification
Cell Processing
resource companies and other clients, including
for several clients.
design, consulting and other services associated with
both the construction of offshore development facilities
and the safe removal of deteriorated structures. The
Chiyoda Group takes the view that these fi elds will
continue to develop in the long term, due to the
overwhelming need for stable supplies of energy. The
Group will continue to focus on these business fi elds
based on Chiyoda’s philosophy of harmony between
energy and the environment.
Hydrogen — In another fi eld related to alternative
forms of energy, the Group is planning a major
demonstration project, scheduled for implementation
in 2020, that uses hydrogen gas procured in Asia as
fuel in Japan. The project is aimed at commercializing
a hydrogen supply chain that uses technologies for
massive hydrogen storage and transportation
developed by the Company with the long-term goal
of building a society based on hydrogen energy.
Outlook
• Refocus business strategy for offshore and
upstream fi elds including Xodus, and restruc-
ture ECS
• Continue business development activities for
demonstration project targeting commercializa-
tion of hydrogen supply chain
• Provide new service for enhancing productivity of
plants by utilizing AI and big data technologies
I’ROM Group Co., Ltd./ID Pharma Co., Ltd. GMP Vector Manufacturing Plant for Tissue Engineering
Demonstration Plant, Koyasu Office & Research Park
17
18
CHIYODA CORPORATION
TOPICS
Chiyoda Corporation constantly searches for ways to leverage its expertise in the adoption of
new businesses and technological applications. Examples of projects currently under way include:
Artifi cial Intelligence
Looking to optimize technological breakthroughs
in big data analysis and artifi cial intelligence while
delivering solutions to customers, Chiyoda has
established a business alliance with GRID, Inc.,
a leader in the fi eld of AI. Through this agreement,
made in December 2016, Chiyoda’s engineering
technologies will be merged with GRID’s state-of-
the-art AI technology, allowing Chiyoda to offer
advanced services such as plant operation
optimization and enhanced maintenance support.
Renewable Jet and Diesel Fuels
In February 2016, Chiyoda signed a construc-
tion contract with euglena Co., Ltd. for Japan’s
fi rst pilot plant for bio-jet and diesel fuel
production. Through construction of this plant
(scheduled completion: October 2018) the
Company continues its commitment to the
broad use of bio-jet and diesel fuels in Japan
and the associated reduction in greenhouse
gas emissions.
Oil Refi nery Projects
The oil refi nery in Qatar was completed in
November 2016 and handed over to the client.
This project was a major feat of civil engineering,
with 1.2 million cubic meters of soil moved and
replaced at the installation site. Construction
continued throughout high summer, when
workers experienced temperatures exceeding
40 degrees Celsius, causing a host of diffi cul-
ties. However, a concerted effort involving the
customer, partners and construction contractors
ensured that the project was brought to
conclusion without incident.
ANNUAL REPORT FY2016
Environmental Technology—SPERA Hydrogen
and Flue Gas Desulfurization Technology
Chiyoda attended the Kawasaki International
Eco-Tech Fair 2017, where it showcased Chiyoda’s
SPERA Hydrogen, winner of the Grand Prize at the
Nikkei Global Environmental Technology Awards in
2016. Participation in such exhibitions allows Chiyoda
to provide stakeholders with detailed insights into its
activities in the hydrogen fi eld.
Chiyoda is also active in India, a country that suffers
from severe pollution due to rapid economic growth.
Chiyoda provides fl ue gas desulfurization technology
for coal-fi red power plants to Larsen & Toubro, one of
India’s largest heavy industry manufacturers. Chiyoda’s
CT-121 process already enjoys more than a 20%
market share in the Japanese and American coal-fi red
power plant markets, countries that operate under
strict environmental regulations. Similar activities in
India should have a signifi cant impact on air pollution
abatement in this rapidly emerging market.
Hydrogen Storage Tank
Dealing with Challenges in the Field of LNG
The Yamal LNG project currently under way in
Russia faces special challenges. The plant is
situated in the Arctic Circle at a latitude of 72
degrees north, experiences lengthy periods
without sun during winter and sees tempera-
tures falling to minus 50 degrees Celsius.
Despite these conditions, construction
continues, including installation of construc-
tion modules, some weighing over 6,000 tons,
which have been delivered by boat from
fabrication yards across Asia.
On the other side of the world, steady
progress is being made on the Freeport LNG
and Cameron LNG projects under way in the
U.S. Combined, these two projects employ
more than 10,000 people. In March, the
Cameron project reached a record of 20
million man-hours without an accident,
illustrating the commitment of all staff to the
Company’s safety-fi rst policy.
Courtesy of Cameron LNG, LLC
Courtesy of Freeport LNG Development, L.P.
Yamal LNG, Yamal, Russia
Courtesy of Qatargas Operating Company Limited
19
20
CHIYODA CORPORATION
CHIYODA’S ESG INITIATIVES
The Chiyoda Group has embraced “Energy and Environment in Harmony” since its foundation, understanding the
contribution of such collaboration to the sustainable development of society. We recognize the unique
responsibilities of major corporations in the energy engineering sector, and the obligation to search for business
strategies that benefi t all members of society. In that regard, we promote open, transparent communication with all
our stakeholders about the operations of the Chiyoda Group including its ESG initiatives.
Environment
• Climate Change
• Water Consumption
• Biological Diversity
• Pollution & Resources
• Supply Chain/Environment-oriented Proposals in Project Work
Social
• Safety, Quality, Environment and
Information Security (SQEI)
Management
• Labor Standards
• Human Rights
• Reliability
• Supply Chain/Knowledge Sharing
• Long-term Contribution to
Local Communities
Environment
Social
Governance
Governance
• Enhanced Corporate
Governance Policy
• Risk Management
• Tax Transparency
• Anti-corruption Practices
• Enhanced Compliance Program
Creating Shared Values
An important outcome of a vigorous approach to ESG issues is Creating Shared Value for the Company and its
stakeholders. Creating Shared Value can be defi ned as the product of Sustainable Growth using Sustainable
Means: the creation of long-term growth for the Company by methods that address important environmental and
social challenges with corporate governance duly practiced. At the Chiyoda Group, our Shared Value approach is
built on a social responsibility-oriented culture that recognizes the risks inherent in the energy engineering
business, and aims to realize “Energy and Environment in Harmony” using all the resources available.
Our Sustainable Development Goals
The Group believes that providing fi nancial disclosure and emphasizing compliance are not enough to fulfi ll social
responsibilities under this code, and has decided to integrate the principles of the SDGs into the Company’s pursuit of
long-term, sustainable growth for society. The Group realizes that achievement of these goals requires collaboration
with the government, the private sector and civil society.
Chiyoda supports the SDGs
• Plant Construction & Providing Infrastructure
• Cultural Advancement & Support of Communities
• Sharing Technical Knowledge & Job Creation
• Working in Partnership with Local Communities
• Technical Development for a Low-carbon and
Carbon-free Society
• Environmental Protection & Climate Change Aversion
• Stable, Safe, Affordable Energy Production
• Effective Use of Natural Resources
ANNUAL REPORT FY2016
A MESSAGE FROM MR. SHUICHI WADA,
HEAD OF CORPORATE PLANNING & MANAGEMENT DIVISION
Q
Q
How can Chiyoda Corporation continue to add value for all its stakeholders?
• Maintaining the highest level of customer satisfaction is a key metric at Chiyoda. I believe that we can develop
our relationships with stakeholders through continuous, open and direct dialogues that recognize their
different interests.
• Other key Company objectives include profi table, sustainable growth and enhancement of the Group’s
corporate values. To achieve these, in 2015, we established the “Chiyoda Corporation Corporate Governance
Policy,” designed to enhance the strength and transparency of management. Further, it acts as a constant
reminder of the need for a sound corporate governance culture.
Chiyoda celebrates its 70th anniversary in 2018. As we refl ect on Chiyoda’s past, what
message would you send to the Company’s stakeholders regarding future development of
corporate value?
• We want to be seen as a fi rst-class, highly reputable and universally admired, reliable company. By
• We want to be seen as a fi rst-class, highly reputable and universally admired, reliable company. By
recognizing diversity and being open to everyone, including employees, customers and all other stakehold-
recognizing diversity and being open to everyone, including employees, customers and all other stakehold-
ers, we set the highest corporate standards.
• Backed by our cutting-edge technologies and engineering expertise in various
• Backed by our cutting-edge technologies and engineering expertise in various
businesses, we are dedicated to maintaining our strong presence in the LNG sector
businesses, we are dedicated to maintaining our strong presence in the LNG sector
and expanding our contribution to the market.
• We believe that Chiyoda is identifi ed as a company with high accountability,
• We believe that Chiyoda is identifi ed as a company with high accountability,
sustainability and timely project execution. We are eager to further develop our
sustainability and timely project execution. We are eager to further develop our
worldwide reputation for excellence in the years ahead.
• As a market leader in the LNG business and with involvement in “new energy”
businesses, including SPERA Hydrogen®, Chiyoda as a leading integrated engineer-
, Chiyoda as a leading integrated engineer-
ing company is ready to adapt itself to dynamic changes in the energy market.
Q
Communication of the Company’s economic and social values
to stakeholders is important. What are your thoughts about
disclosure of information in the form of an integrated report?
• Our Investor Relations Team regularly engages with the market, giving and
gathering information on our corporate performance. In addition, we value
opportunities to provide more detailed information, to talk about our
longer-term business strategy and the Company’s future development.
• Along with recent changes in senior management, we intend to
increase the number of opportunities to talk to investors, to introduce
the Company’s new leadership and to thoroughly explain the
philosophy and current and future strategies.
• Refl ecting the above thoughts, we are planning to report in an
integrated approach that gives us the opportunity to present a holistic
look at our organization including aspects of both a fi nancial and
non-fi nancial nature within the context of the markets we serve: our
customers, communities, employees and shareholders.
Shuichi Wada
Division Director
Corporate Planning & Management Division
21
22
CHIYODA CORPORATION
ANNUAL REPORT FY2016
OUR INITIATIVES WITH THE ENVIRONMENT
TECHNOLOGY
“Serving Society with Technology” is the philosophy of Chiyoda’s foundation. Bearing this in mind,
we have undertaken research and development, demonstration projects and commercialization of
energy and advanced environment-related technologies.
Making the most of our strengths as an engineering firm, we are able to take such a
comprehensive approach to research and development as it is integrated with process
development, design and system analysis. With this approach, we have carried out technology
development both on our own and in cooperation with our clients and technology owners, aiming
for commercialization and problem-solving based on society’s ever-changing demands.
We will continue our efforts to contribute to solving new issues including materializing a low-
carbon and carbon-free society.
We will continue this domestic demonstration
of the Environment’s Green Purchasing Law so that
project, aiming to improve the produced-water
we utilize construction materials and construction
fi ltering technology that supplies oil more economical-
methods with less of an environmental impact.
ly, increases oil fi eld longevity and decreases the
environmental burden.
*Produced-water: Formation water produced alongside crude oil and natural gas
THE DISSEMINATION OF TECHNOLOGY TO
PREVENT AIR POLLUTION
CT-121 licensing of technology to one of
India’s major heavy industry manufacturers
In November 2016, Chiyoda concluded a technology
ENVIRONMENT-ORIENTED PROPOSALS IN 2016
Site preparation plans that minimize surplus
1
soil generated after construction
Adoption of energy-conserving, low-noise
2
equipment
Pier design optimization plans to reduce jungle
3
deforestation
GREEN PROCUREMENT
Use of portland blast furnace cement (material
1
designated under the Green Purchasing Law)
Use of base coat paint (anticorrosive) (material
2
designated under the Green Purchasing Law)
Use of EM electric wires and cables
3
(eco-friendly material)
NEXT-GENERATION CLEAN ENERGY
A demonstration plant for renewable jet and
diesel fuels
With know-how accumulated through engineering
license agreement with India’s major heavy industry
and the construction of oil refi neries, we continue to
manufacturer Larsen & Toubro (L&T) to provide its
collaborate in the commercialization of this technology
proprietary “Chiyoda Thoroughbred 121 (the CT-121)”
As a business partner in the “Domestic Biofuel
and further contribute to reducing CO2 emissions.
fl ue gas desulfurization process (FGD) technology for
Project,” led by euglena Co. Ltd. (Euglena), we are
currently participating in the construction of Japan’s
fi rst renewable jet and diesel fuel demonstration plant
(to be completed in October 2018).
EFFECTIVE UTILIZATION OF OIL FIELDS
Yabase oil fi eld produced-water treatment
demonstration plant
promotion in the Indian market.
Coal accounts for 75% of the power supply in
India, which, with its robust and rapid economic
growth, is in need of power plants to sustain develop-
Using technology that was introduced by our
Global energy needs are growing, for one reason,
ment. The demand for FGD plants is increasing
technology owner in the United States, Chevron Lummus
because water production from oil fi elds increases as
signifi cantly, as the demand for coal is fi rmly rooted in
Global, Euglena is executing the design, procurement
oil fi elds age. To maintain high levels of productivity in
its cheap and stable price. While coal-fi red thermal
and construction according to Japanese standards.
oil and gas production while concurrently abiding by
power provides 42% of the world’s energy, that fi gure
Led by METI (the Ministry of Economy, Trade and
environmental regulations, more advanced pro-
is expected to reach 44.5% by 2030.
TECHNOLOGY DEVELOPMENT OF
HYDROGEN ENERGY
SPERA Hydrogen® system receives the top
prize of the Nikkei Global Environmental
Technology Awards
Industry) and MLIT (the Ministry of Land, Infrastructure,
duced-water* treatment technology is needed.
Under these conditions, CT-121, the environmen-
Hydrogen is considered a clean next-generation
Transport and Tourism), the project aims to switch to
To resolve the problem of produced-water
tal technology highly evaluated by L&T, will continue
energy, and the dissemination of hydrogen fuel cell
biofuel by 2020 to reduce the extent of CO2 emissions.
treatment, the Japan Oil, Gas and Metals National
to meet the demands of India’s economic growth
vehicles and ENE-FARM (home-use fuel cells) as well
The international framework of the ICAO (International
Corporation’s project known as “Small-Scale
while helping to resolve its environmental issues.
as practical realization of hydrogen electricity
Civil Aviation Organization) to prevent CO2 emissions
Demonstration of Produced-Water Treatment
from exceeding the 2020 standard means that the need
Technology” is being jointly conducted by four
for jet biofuel is becoming greater than ever.
companies: the Japan Oil, Gas and Metals National
Corporation, INPEX, METAWATER and Chiyoda.
ENVIRONMENT-CONSCIOUS ACTIVITIES IN
PROJECT EXECUTION
Environmental Proposals/Green Procurement
generation are being promoted by the government. In
this respect, it is essential to develop a technology for
hydrogen to be “stored” and “transported” in a stable
state and in large quantities like natural gas and oil.
For the project, a demonstration plant was constructed
Chiyoda approaches the design, procurement and
Such technology has never been available until now.
at the Yabase oil fi eld in Akita Prefecture, with operations
construction stages of every project with consider-
In 2014, we became the fi rst in the world to
begun in March 2017 and planned for seven months.
ation for the environment. Improving on the plans
complete technological development to resolve this
Because the ceramic membrane fi lter requires no
provided by our clients and proactively engaging in
issue. This system has been named “SPERA,”
pretreatment such as that for coagulation, the use of
environmental proposals, we aim to construct plants
meaning “hope” in Latin. There are high expectations
chemicals can be greatly reduced. Further, as the
with a lower environmental impact.
for this technology, which has been highly evaluated
membrane can be washed and used repeatedly, no
Over the past fi ve years we have submitted an
both domestically and internationally, and has received
disposable waste will be generated, reducing the
average of 319 proposals annually. In 2016, 221
numerous technology awards such as the top prize in
environmental burden. It is expected that the fi ltered
proposals were accepted by our clients. Our project
the Nikkei Global Environmental Technology Awards.
water will be reused as injection water for reservoir
procurement operations are implemented on our
We will continue to meet these high expectations and
Yabase oil field produced-water treatment verification plant
pressure maintenance in oil fi elds.
green procurement guidelines based on the Ministry
to contribute to the global environment.
23
24
CHIYODA CORPORATION
ANNUAL REPORT FY2016
CONTRIBUTING TO SOCIETY THROUGH BUSINESS
WHY
HOW
The social responsibility of engineering fi rms is to address issues surrounding society
and provide solutions for those issues. In this respect, we are assigned the mission of
providing superlative services and products in partnership with our clients, using skills
and expertise accumulated from experience in engineering and constructing plants
and consistently offering services with the full use of cutting-edge technologies.
• Adding value by integrating cutting-edge technologies
• Forming and promoting a culture of safety
• Human resource development and technology transfer in countries where we
have projects
participants in these programs last year was 73. The
fi ve consecutive years, the Chiyoda Group has hosted
training provided in Japan also includes the opportu-
a total of eight graduate students in internships
nity to experience Japanese culture.
involving classroom lectures and on-site inspections
Thus, through engineering training and cultural
for a month and a half. The Japanese government
exchange, we collaborate with countries where plants
also works in close cooperation, fostering engineering
are constructed to help create a basis for the
skills and human resource development.
innovation of their industries and technologies as well
as develop their human resources.
DEVELOPING HUMAN RESOURCES WITH
THE GOAL OF ESTABLISHING INDUSTRIAL
INFRASTRUCTURE
Opening up internships for the Masdar
Institute of Science and Technology (MIST)
Diverse human resource development at
Chiyoda Almana in accordance with the Qatar
National Vision 2030
Our overseas Group companies contribute to
developing various human resources. Chiyoda
Almana Engineering LLC supports the development
of human resources, an important aspect of the
SAFETY FIRST
Best international safety practices to benefi t
project execution
Chiyoda applies the “Safety First” concept to all
our clients. Through the “Design Safety” course, we
Through subsidiary aid granted by the Agency for
Qatar National Vision 2030. Chiyoda Almana
plan to apply the best international safety practices
Natural Resources and Energy in the Ministry of
supports Qatar by nurturing diverse human resources
The Chiyoda Group conducts all activities with
domestically. By promoting such a culture of safety
Economy, Trade and Industry, internships have been
and career development.
“Safety First” as a core value. Furthermore, for our
awareness, Chiyoda will continue to provide safe
provided to the United Arab Emirates’ Masdar Institute
In 2016, the company sponsored many educa-
clients, a safe plant is usually their highest priority.
and highly reliable plants to our clients. This will
of Science and Technology (MIST), with the Japan
tional opportunities in the fi eld of hydrocarbon
While some industries apply “destructive testing” of
enable all our employees to be proud of the
International Cooperation Center (JICE) as the point of
processing technology. With the goal of enriching the
their products (think of crash tests for cars), this
achievements we deliver.
contact. The project was founded with the goal of
technical experience of those in the fi eld, Chiyoda
approach would be obviously unacceptable in the
design of hydrocarbon plants. We verify the safety of
our plant design by incorporating international,
industry and client-based safety standards. However,
safety standards vary for each country and are
DEVELOPING EXCELLENT
HUMAN RESOURCES THROUGH
TECHNOLOGY TRANSFER
Deployment of international client training
promoting fellowship and strengthening cooperation
Almana and Chiyoda Global Headquarters facilitated
between Japan and the United Arab Emirates. Within
training programs geared toward RasGas and
the fi elds of renewable energy, smart communities
Qatargas engineers.
and green technology, Japanese companies annually
On November 2 and 3, 2016, we presented an
accept MIST students of UAE nationality, with 2016
important overview of the basic operation of LNG
continually being updated. In addition, each plant’s
In addition to carrying out many international projects,
marking the fi fth year so far. After arriving in Japan,
plants to young engineers of Qatargas. We are also
confi guration and specifi cations are unique. There-
the Chiyoda Group also concentrates on developing
MIST interns receive a basic introduction to life in
proactively involved with developing human resources
fore, a complete understanding of the relevant codes
human resources in those countries.
Japan. Training is provided for each enterprise. Over
in regional communities.
and standards and the skills to undertake thorough
Starting with the acceptance of trainees from the
safety studies are required when we design a plant.
Kingdom of Saudi Arabia in 1976, followed by training
To deal with the various safety requirements, our
including on-site technical education in the Federal
company offers a “Design Safety Induction Course”
Republic of Nigeria in 1978, collaborative training with
that targets all engineers involved in project execu-
external organizations has been in practice since
tion. To date, over 400 engineers have participated in
1982. The training offered to foreign clients is highly
the course, which begins with consideration of the
esteemed both domestically and overseas. The
concept of plant safety. By the end of the course, we
United Arab Emirates joined in 2010, and the State of
plan to have taught participants how to achieve safe
Qatar joined in 2012, while the number of countries
plant design. The participants review relevant case
participating in training continues to grow, including
studies, study the work fl ow and relationships
the Kingdom of Saudi Arabia, the Republic of Korea,
between the various required safety studies, look at
the Republic of Mozambique and the Islamic
how interdisciplinary safety matters are addressed
Republic of Iran. The training provided to foreign
and learn the effects on costs and schedules when
clients can be conducted both in Japan and by
safety studies/activities affect the design of a plant.
dispatching lecturers abroad. The number of
University students of United Arab Emirates' Masdar Institute of
Qatargas professionals at Chiyoda Almana Brownfield Management Masterclass 2016
Science and Technology (MIST)
25
26
CHIYODA CORPORATION
RESPECT FOR HUMAN RIGHTS
At the Chiyoda Group, human resources are valuable assets. We aim to maintain a corporate culture of
which all employees and their families are proud.
The Group operates worldwide and, under an initiative promoted by the Japanese government,
recognizes the need for changes in work style that refl ects the development of global human resources
and respects diversity.
INITIATIVES FOR CHANGES IN WORK STYLE IN FY2016
We have been encouraging reform through changes in our employees’ mindsets and organizational
operations as well as improvements in the operating bases where Chiyoda is 1) a company whose employ-
ees are motivated to continue working on a long-term basis and 2) a company that is continually able to
develop its competitiveness and strength.
We have developed systems for reduced working hours and for leaves of absence for employees
constrained by child care or nursing care. Among our achievements in FY2016, we embraced diversity,
made the child care and nursing care systems more fl exible and introduced a system to afford retired
employees new re-employment opportunities. Additional steps include:
1) Leaves of absence for employees working in Japan or overseas to be off with their spouses
2) Re-employment opportunities for people who have left the company for child care, nursing care or to
accompany spouses who have been transferred
3) Work-at-home (teleworking) opportunities on a trial basis (Note: Full-scale introduction was launched
in May 2017.)
These steps were taken to secure human resources willing and able to work and to help retired employ-
ees be re-employed when their circumstances change, all enabling us to increase our workforce in an
effective manner. We will continue to take steps to increase our productivity and competitiveness by
promoting such changes in work style.
In FY2016, Chiyoda Corporation received “Kurumin,” a certifi cation for companies recognized for their
enthusiastic efforts to cultivate the next generation, granted by the Kanagawa Labor Bureau of the Ministry
ANNUAL REPORT FY2016
SAFETY FIRST CRISIS MANAGEMENT
SUPPORT TO PREPARE FOR ALL
EMERGENCIES
Business Continuity Plan/Disaster prevention
Crisis management activity at the fi eld offi ce
in Yanbu, Kingdom of Saudi Arabia
At the construction site of a sponge titanium plant
that was mechanically completed in May 2017 with
In 2015, the Chiyoda Group formulated a Business
Non LTI for Advanced Metal Industries Cluster and
Continuity Plan (BCP). Covering all kinds of disasters,
Toho Titanium Metal Company Limited, we worked
including fi res and large earthquakes, disaster
with the client to implement various crisis manage-
prevention practice and BCP training are conducted
ment measures in terms of both hardware and
with the basic principle of “life comes fi rst.”
software to ensure the safety of the client and fi eld
In 2016, we practiced fi re drills from buildings and
offi ce staff from around the world.
dealing with disrupted transportation networks to
As part of this activity, we conducted evacuation
help people return home safely in the event of a large
drills several times to ensure prompt evacuation and
earthquake. While Chiyoda Global Headquarters
confi rm the effectiveness of the Emergency Plan and
continued its BCP training from last year, training has
Emergency Response System.
expanded on a larger scale to the Koyasu Offi ce &
Practical training was carried out while the
Research Park and the corporate Group this year. In
diffi culty level was continuously raised according to
addition, the “Nighttime/Holiday Initial Response
the progress of construction and the number of fi eld
Training” outlines the procedures necessary for the
offi ce staff.
smooth resumption and execution of business after a
major crisis. In addition to verifying the safety of
employees, we also strive to ensure the safety of their
families. In the event of a disaster, employees’ family
members will receive e-mails to confi rm their safety if
they are registered on the relevant system.
Further, our Group company Arrowhead Interna-
tional makes all the arrangements for our employees’
business trips. Providing adequate support that puts
safety fi rst for the various risks that may occur
between departure and return, the Arrowhead Travel
Risk Management System (A-TRIMS) provides safer
and more reliable crisis management. This system
of Health, Labour and Welfare. Companies can gain this certifi cation by achieving the goals specifi ed in their
verifi es the itineraries of those traveling overseas and
BCP Training
action plans and by satisfying the criteria set by the bureau.
Chiyoda Corporation obtained the certifi cation after achieving the targets set for the period from April 1,
2010 to March 31, 2015 and for being highly appreciated for the following new initiatives to take from now:
1) Extending application of a program of shorter working hours to employees with elementary school
children up through the sixth academic year, fostering a better balance between work and child care
2) Consideration of fl exible work styles
3) Reduction of total working hours by enforcing stoppage of work after 20:00 and on holidays
We will continue our efforts to create an environment where employees can perform to the best of
their potential.
ensures their safety by thoroughly checking through
e-mail and mobile phone. The Group as a whole
supports stronger crisis management and puts the
safety of employees fi rst.
27
28
CHIYODA CORPORATION
ANNUAL REPORT FY2016
CHIYODA’S DIVERSITY
Chiyoda Corporation believes in the philosophy and integrity of diversity in the workplace and
actively encourages employees to think and act accordingly.
Ms. Kaoru Nakamura, a Chiyoda employee for 31 years, has been assigned to the position of
General Manager in the Project Logistics & Construction Planning & Administration Unit. We
posed these questions to her:
Q
Q
What does the issue of “diversity” mean to you?
Particularly in Japan, most people have the impression that diversity is an issue only about women. That is not
correct. To consider diversity in a large corporation properly is to include, along with gender, nationality, age,
the challenged, family care and other issues. The subject of diversity involves everybody, and all of us should
consider discussing this subject.
Why should Chiyoda embrace diversity?
Chiyoda has already accepted the philosophy of diversity. Project teams and construction sites are fi lled with
multinationals working for the common goal of a successful project. At CGH, we respect and value each other,
regardless of background or nationality, focusing on the contribution each person makes to Chiyoda’s
success. We enjoy an excellent working environment that enables us to grow individually while improving the
quality and effi ciency of our business. At the same time, we realize that when we lose people for personal
reasons, it is a loss of talent and potential for Chiyoda.
We need to extend the idea of “Diversity & Inclusion” and focus on people within the Company who may
be struggling to care for someone at home or people who feel disadvantaged in their careers because of their
gender or other unfair reason. The fi rst step to the goal of true diversity is not just to provide a framework but
to change our mindset.
Q
What can the Change Mindset Task Team achieve?
I have been part of the Change Mindset Task Team for four
years now. Through activities including lectures by visiting
experts and internal discussions, we have offered learning
opportunities about “Diversity for Chiyoda” to all personnel.
We believe one way to improve our diversity might be to
change our working style, by “reforming the way of working
(hataraki-kata kaikaku)” to improve our Work/Life Balance. We
hope that with such reforms all employees will achieve a good
work/life balance of their own regardless of gender, nationality
and so on, and enhance each individual performance, thereby
helping us to realize our corporate goals. This is something we
will be very proud to achieve.
Kaoru Nakamura
General Manager
Project Logistics & Construction
Planning & Administration Unit
CHIYODA’S CSR ACTIVITIES
Educational support/
Human resource
development
• Internships
Operating in 7 companies
• Student visits to the company
38 students
• University lectures
Held at 2 universities
• Grade school campaign drive
270 people
Contributions to
health and welfare
• Table for Two (meal program)
(facilitated domestically by the Chiyoda Group)
37,200 yen
(1,860 meals provided)
• Eco-cap collection
196,166 caps recycled
(providing 228 vaccinations)
• Blood donation
503 donors
Support for people with
special needs
Assistance to areas
hit by disasters
• In-house sale of products made by
• Remittance of donations for
people with special needs (CGH, Koyasu Offi ce)
earthquakes in Italy, Ecuador and Kumamoto
• Employee volunteer dispatching to areas
hit by disasters
7 visits
70 participants
• Providing food to the victims of
large-scale disasters
500 people
• Sale of products from areas hit by disasters
(held at CGH, Koyasu Offi ce)
10 gatherings
15 gatherings
• Japan Philharmonic performance of
Beethoven’s “9th Symphony” concert invitations
provided to those with visual impairments
25 sets
50 people invited
Environmental
Conservation
• Tree planting
43 participants
200 trees planted
• Cleaning operations
Over 350 participants
29
30
CHIYODA CORPORATION
CORPORATE GOVERNANCE
CHAIRMAN’S MESSAGE
ANNUAL REPORT FY2016
The Company pledges to constantly strive for sustainable growth and to enhance the corporate values
of the Chiyoda Group on a mid- to long-term basis. To achieve this goal, the Group established in
October 2015 the “Chiyoda Corporation Corporate Governance Policy,” which developed the Group’s
basic views and guidelines on corporate governance. The Group will continue to actively secure the
CORNERSTONE OF OUR COMMITMENT
We believe a broader range of outside views will
soundness and transparency of its corporate management through the policy.
Along with our corporate philosophy, “Energy
enrich the quality of our decision-making
and Environment in Harmony,” the Chiyoda
process. One of Chiyoda’s management
Group, while recognizing its responsibility as an
priorities is having Board Members with
CORPORATE GOVERNANCE SYSTEM
Audit and Supervisory Committee
integrated engineering company, reaffi rms its
independent views, a policy that we encourage
To further reinforce its corporate governance
The newly established Audit and Supervisory
commitment to the sustainable development of
throughout our corporate governance in pursuit
structure, the Company has shifted to a “Company
Committee is composed of three directors (includ-
the global society.
of profi table, sustainable growth.
with an Audit and Supervisory Committee.” The
ing two independent officers) as Audit and Supervi-
It is of the highest priority to ensure the
Company has established the Corporate Risk
sory Committee members who closely monitor the
health and safety of everyone concerned with
KEEP MOVING FORWARD
Management Division, which presides over the
execution of duties of directors and executive
Chiyoda’s activities and to mitigate the environ-
The longest journey begins with a single step.
Compliance Unit, the SQEI (Safety, Quality, Environ-
officers. The Audit and Supervisory Committee
mental impact of our global operations. To
This management team is characterized by its
ment and Information Security) Management Unit, the
members attend meetings of the Executive
maintain the highest standards in our business
potential for development, providing investors
Crisis Management Unit and the Internal Audit Unit.
Committee and express their opinion when
practices, we have clearly defi ned policies and
with a long-term opportunity for sustainable
The Corporate Risk Management Division and the
necessary. In addition, their responsibilities include
processes that thoroughly apply to all employ-
returns and continued engagement with all of
Internal Audit Unit report directly to management to
deciding the content of resolutions submitted to the
ees, including management.
our stakeholders. I intend to deepen the trust we
our stakeholders. I intend to deepen the trust we
raise the quality and transparency of management,
General Meeting of Shareholders, such as the
STRONG CORPORATE GOVERNANCE
FOR SUSTAINABLE GROWTH
Recently we have seen major changes in the
Recently we have seen major changes in the
global energy landscape. The energy mix is
shifting, driven by changes in supply and
demand, technological developments and
growing environmental concerns. As an
integrated contractor mainly in the hydrocarbon
integrated contractor mainly in the hydrocarbon
and chemical industries, Chiyoda needs to be
and chemical industries, Chiyoda needs to be
fl exible in adapting to changes in the business
fl exible in adapting to changes in the business
climate. To enable swift responses to the
changing environment, the new corporate
management is committed to a foundation of
management is committed to a foundation of
effective leadership, fi rm governance and
strong stewardship.
In the 2016 fi scal year, we increased the
number of external Directors to four, out of 12,
number of external Directors to four, out of 12,
to provide more diversifi ed, transparent and effi -
to provide more diversifi ed, transparent and effi -
cient oversight of the Company’s management.
cient oversight of the Company’s management.
Katsuo Nagasaka
Katsuo Nagasaka
Chairman of the Board
Chairman of the Board
have cultivated with our stakeholders, and I ask
have cultivated with our stakeholders, and I ask
for your continued support in our many endeav-
for your continued support in our many endeav-
ors ahead.
ors ahead.
enable timely responses to stakeholders and reinforce
appointment or dismissal of accounting auditors,
the risk management and the compliance system.
auditing consolidated financial documents in close
To ensure speedy and accurate decision-making to
cooperation with the accounting auditors and
deal with rapidly changing social and economic
preparing audit reports.
environments, the Company has adopted the
executive offi cer system, which separates the
Executive Offi cer System
functions of directors, who are responsible for
Where necessary, executive offi cers cooperate with
management supervision, from those of executive
outside specialists such as corporate lawyers in
offi cers, who are responsible for business operations.
carrying out duties assigned to them at meetings of
By becoming a Company with an Audit and Supervi-
the Board of Directors and the Executive Committee.
sory Committee, with new functions, the Company will
Executive offi cers provide regular progress reports at
improve and implement the soundness and transpar-
executive offi cer and Executive Committee meetings
ency of management and prompt decision-
attended by directors and corporate auditors.
making, and further enhance its corporate value.
The Board of Directors and
Meetings of the Board of Directors
REINFORCING INTERNAL CONTROLS
The Chiyoda Group constantly conducts self-
assessments of existing internal control functions and
The Board of Directors is composed of 13 directors.
reinforces internal control systems. In addition, its
Important matters concerning the Company are
Internal Audit Unit, as an autonomous unit, performs
reported and resolved at meetings of the Board of
evaluations, including auditing the development and
Directors. The Executive Committee, made up of the
operation of a suitable overall internal control
four representative directors, examines matters
framework and constituent components, and submits
before they are submitted for resolution at meetings
reports to the Executive Committee. The unit aims to
of the Board of Directors. It makes decisions about
ensure the establishment of an integrated framework
business execution matters by unanimous resolution.
of internal controls and a real-time monitoring system
for management.
31
32
CHIYODA CORPORATION
ANNUAL REPORT FY2016
CORPORATE GOVERNANCE AND INTERNAL CONTROLS
General Shareholders’ Meeting
3) Mikio Kobayashi
sound management through audits conducted
Mr. Kobayashi has gained experience as President
from an objective and independent perspective.
and Representative Director of Ryoshin Credit
Election
Report
Election
Service Co., Ltd. and Deputy President and
4) Yukihiro Imadegawa
Accounting
Auditor
Representative Director of Japan Property
The Company expects that as a lawyer and
Solutions Co., Ltd., after working for Mitsubishi
specialist in corporate legal matters,
UFG Trust and Banking Corporation as an
Mr. Imadegawa will contribute to its sound
Executive Offi cer. The Company expects that he
management through audits conducted from a
will build on such experience and contribute to its
professional and objective perspective.
Report
REMUNERATION FOR DIRECTORS AND AUDIT & SUPERVISORY BOARD MEMBERS
Total amount of remuneration for Directors and Audit & Supervisory Board Members of the term under review
Election
Submit/Report
Board of Directors
Directors
(excluding Audit and Supervisory
Committee Members)
Audit/
Supervision
Audit and Supervisory Committee
Report
Directors (Audit and Supervisory Committee Members)
Election
Supervision
Election
Submit/
Report
Survey,
Report Request
Survey,
Report Request
Supervision
Report
Supervision
Audit Referral
(advice) Submit/Report
Executive
Offi cer Meeting
Executive Offi cers
Executive
Committee
4 Representative
Directors
Submit/
Report
Compliance
Committee
Internal Controls
Management
Committee
Scheduled Reports
(deliverables, etc.)
Organization
Staffing
Submit/
Report
Report
Department Internal Controls
Group
Companies
Business
Execution
Departments
(Risk Manager)
Group Operation Unit
Corporate Planning Unit
Corporate Services Unit, HR* Unit
Finance & Accounting Unit
Legal & Project Audit Unit
Self-Assessment
*HR: Human Relations
Internal Audit Unit
Corporate Risk Management Division
SQEI Management Unit
Compliance Unit
Crisis Management Unit (Crisis Manager)
: Important units and arms of the Company
: Departments with internal control functions
Financial Audit
OUTSIDE DIRECTORS
1) Nobuo Tanaka
of Mitsubishi Corporation and others, and is very
well versed in a wide range of business fi elds such
The Company expects that, as an outside director,
as infrastructure including that of oil and gas,
Mr. Tanaka will properly fulfi ll his duties by drawing
power generation and new energy. He has also
on his abundant knowledge and experience
been involved in the management of investee
acquired from international organizations such as
companies and business groups in Japan and
those specializing in international energy.
overseas. The Company expects that by leverag-
2) Hiroshi Sakuma
Mr. Sakuma has served as President of Diamond
Generating Corporation, Executive Vice President
ing his experience and knowledge, he is capable
of carrying out his duties as an outside director.
No. of persons
Base remuneration
(millions of yen)
Performance-based
remuneration
(millions of yen)
Remuneration for
purchase of
treasury stock
(millions of yen)
Directors
(excluding Audit and Supervisory Committee members)
Directors
(Audit and Supervisory Committee members)
Audit & Supervisory Board Members
9
3
3
219
43
13
—
(N/A)
(N/A)
43
(N/A)
(N/A)
Following are details of the policy on the decision of content of remuneration for directors and the calculation
method thereof as well as the process for deciding such a policy:
The Company’s system of remuneration for directors was established based mainly on performance, sharing
values with shareholders and increasing offi cers’ motivation and morale toward improving performance. The system
was approved by resolution at the FY2015 Ordinary General Meeting of Shareholders, held on June 23, 2016.
Category
Concept of Remuneration
Outline of System of Remuneration
Base Remuneration
Corresponds to roles
and responsibilities
Remuneration for Directors is 300 million yen or
less per annum.
Directors
Performance-based
Remuneration
Corresponds to the
achievements for
each term
Remuneration for
Purchase of
Treasury Stock
Linked to long-term
achievement
improvement
Taking into account the levels of net income and
dividend for the consolidated fi scal year under
review and qualitative elements such as the degree
of achievement of management objectives, the
amount is kept within 200 million yen or 1% of the
amount of profi t attributable to owners of parent.
Directors (excluding Outside Directors) acquire
treasury shares of 90 million yen or less per annum
through the Directors Holding Association for
continuous holding until retirement from positions.
Audit & Supervisory
Board Members
Base Remuneration
Corresponds to roles
and responsibilities
Remuneration for Audit & Supervisory Board
Members is 84 million yen or less per year.
33
34
CHIYODA CORPORATION
DIRECTORS & OFFICERS
(As of June 26, 2017)
10
5
11
7
12
6
8
MEMBERS OF THE BOARD
REPRESENTATIVE DIRECTORS
9
3
1
2
4
Katsuo Nagasaka
1
Masaji Santo
2
Arata Sahara
3
Hirotsugu Hayashi
4
DIRECTORS
Masahiko Kojima
5
Ryosuke Shimizu
6
Nobuyuki Uchida
7
Nobuo Tanaka*
8
Hiroshi Sakuma*
9
*External director as provided for in Article 2-15 of the Companies Act.
DIRECTOR, AUDIT & SUPERVISORY COMMITTEE MEMBERS
MEMBERS OF THE AUDIT & SUPERVISORY COMMITTEE
Mikio Kobayashi*
10
Hideaki Takaishi
11
Yukihiro Imadegawa*
12
*External director as provided for in Article 2-15 of the Companies Act.
ANNUAL REPORT FY2016
VICE PRESIDENTS
Eisuke Oki
Deputy Operations Director, ChAS & Life Science Project Operations
Toshiyuki Kariya
Deputy Operations Director, Offshore & Upstream Project Operations
GM, Offshore & Upstream Project Unit
Hideaki Tomiku
Technology Development, Investment and Project Operations
Terunobu Iio
Deputy Operations Director, Downstream & Non Hydrocarbon Project
Operations
GM, Downstream & Chemical Project Unit
Jinei Yamaguchi
Deputy Division Director, Corporate Planning & Management Division
GM, Group Operation Unit
Hiroyuki Shimizu
Deputy Operations Director, Gas & LNG Project Operations No. 1
Toshiaki Furugori
Deputy Division Director, Technology & Engineering Division
Hideo Matsui
Division Director, Business Development Division
GM, Business Development Unit 2
Masaki Kadono
Deputy Division Director, Global Project Management Division
GM, Project Management Unit
Masakazu Fujiwara
Project Director
Munetaka Horiguchi
Business Development Division
EXECUTIVE OFFICERS
PRESIDENT & CEO
Masaji Santo
SENIOR EXECUTIVE VICE PRESIDENTS
Arata Sahara
Operations Director, Downstream & Non Hydrocarbon Project Operations
Hirotsugu Hayashi
CFO
Risk Management
Hiroshi Ogawa
Project Operations
EXECUTIVE VICE PRESIDENTS
Masahiko Kojima
Corporate Planning & Management
Operations Director, Offshore & Upstream Project Operations
Mamoru Nakano
Operations Director, Gas & LNG Project Operations No.1
GM, Gas & LNG Project Unit No.1
SENIOR VICE PRESIDENTS
Ryosuke Shimizu
Operations Director,
Technology Development, Investment and Project Operations
Nobuyuki Uchida
Project Operations - US Projects
Gas & LNG Project Operations No. 2
Hiromi Koshizuka
Operations Director, ChAS & Life Science Project Operations
GM, ChAS Marketing Unit
Akira Fujisawa
Operations Director, Gas & LNG Project Operations No. 2
GM, Gas & LNG Project Unit No. 2
Masao Ishikawa
Division Director, Technology & Engineering Division
Toshihiro Shimazaki
Deputy Operations Director, Technology Development,
Investment and Project Operations
Yasumitsu Abe
Division Director, Project Logistics & Construction Division
Shuichi Wada
Division Director, Corporate Planning & Management Division
GM, Corporate Planning Unit
Masao Fujiwara
Division Director, Global Project Management Division
GM, Project Administration Unit
35
36
CHIYODA CORPORATION
ANNUAL REPORT FY2016
CORPORATE GOVERNANCE
DIALOGUE
Chiyoda’s IR Team brought together Mr. Toshikazu Suzuki, Senior Analyst at Asset Management One, and
Mr. Nobuo Tanaka, External Director at Chiyoda, for an open dialogue on ESG topics, including Chiyoda’s
ESG activities, the potential for SPERA Hydrogen as a future form of energy, carbon taxes, Chiyoda’s
progress on diversifi cation and the composition of the Board of Directors. Some extracts follow.
Mr. Toshikazu Suzuki
Mr. Toshikazu Suzuki is a Senior Analyst
at Asset Management One.
AM One is an asset management
company that was established as a
result of integrating DIAM Co., Ltd.,
Asset Management Division of Mizuho
Trust & Banking Co., Ltd., Mizuho Asset
Management Co., Ltd. and Shinko
Asset Management Co., Ltd. on
October 1, 2016.
Mr. Nobuo Tanaka
Mr. Nobuo Tanaka graduated from the
University of Tokyo in the fi eld of
economics in 1972, then began his
career with the Ministry of Economy,
Trade and Industry (METI). Later, he also
became the Director for Science,
Technology and Industry at the
Organization for Economic Co-operation
and Development (OECD). Before
becoming External Director at Chiyoda
in June 2016, he was a Japanese offi cial
and the former Executive Director of the
International Energy Agency (IEA).
ment, Chiyoda increased the number of external
with shareholders and investors, for example, on
Mr. Tanaka:
directors to four in the past year.
ESG topics. A high criterion especially for an
An important business approach is the creation of
Mr. Suzuki:
How do you evaluate the responsibility of an
external director and what do you think of the
role of external directors at Board meetings in
Mr. Suzuki:
terms of Chiyoda’s corporate governance?
Various factors link corporate ESG initiatives
Mr. Tanaka:
The Corporate Governance Code for listed
Japanese companies was facing a major turning
point. There is a clear trend toward appointing
and investor demand for information on ESG.
What do you think are the key metrics,
achievements and/or future challenges on
ESG for Chiyoda?
external director, but also for an internal director,
so-called “shared value” for the Company as well
is whether our action leads to shareholders’
as for all its stakeholders. Creating shared value
profi ts. As an external director, I cannot evaluate
can be defi ned as the product of sustainable
the business content itself, though I can give an
growth that aims to create long-term growth for the
independent view about the importance of the
Company through actions that are environmentally
Board of Directors’ involvement in terms of
friendly and socially responsible. Chiyoda’s
integrating environmental and social sustainability
corporate philosophy to enhance our business in
into corporate practices, increasing regulatory
aiming for harmony between energy and the
requirements to disclose ESG risks and strategy,
environment saw the development of SPERA
external directors, though there are different
Mr. Tanaka:
the trend toward integrated reporting and the aim
Hydrogen®, the world’s fi rst use of technology that
interpretations about their roles. From my point of
Chiyoda’s management clearly defi ned ESG
of achieving sustainable development goals.
enables the storage and transportation of large
view, the main responsibility of external directors
criteria for transparent progress and achievement
is to provide oversight on management relative to
while consistently incorporating ESG factors into
business decisions. Examining management’s
the business. To demonstrate their effectiveness,
performance in terms of business plans and
corporate boards should increase transparency
developing strategies are essential roles. To
and take charge of relations with shareholders.
enhance external directors’ oversight on manage-
Chiyoda’s top management has regular dialogues
“It is essential that Directors
keep open a clear line of
communication with shareholders.”
Mr. Suzuki:
External directors should ensure the effective-
ness of the corporate governance function as
they openly exchange views and experiences
at Board of Directors’ meetings. Recently CSV
(creating shared value) has become a new
topic at Japanese companies. What are your
thoughts on Chiyoda’s management objec-
tives toward investors on this topic?
volumes of hydrogen gas. Hydrogen is expected to
play a major role in the future development of the
low-carbon society, and the Chiyoda Group is at
the forefront of this exciting opportunity.
Investor Relations
Engagement
Shareholder
and
Investor
Stewardship
37
38
CHIYODA CORPORATION
RISK MANAGEMENT
ANNUAL REPORT FY2016
Risk management is the identification of different types of risk within a company (financial,
operational, etc.) and measures taken to mitigate those risks to an acceptable level.
CORPORATE RISK MANAGEMENT AT CHIYODA
BUSINESS RISKS
Business risks may signifi cantly impact the Chiyoda Group’s business operations and fi nances. These risks have
the potential to impact investor decision-making. Recognizing these risks, the Group has implemented risk
mitigation plans to minimize consequences when such events occur.
The risks below are those we recognize as of the date of the fi scal year ended.
(a) Changes in the business environment; economic,
social and political factors
Various factors may require that modifi cations be made to clients’ investment plans,
project suspension, delay or review. These factors include changes in global
economic, social and political environments, economic sanctions, changes in home
country energy policies and commodity prices such as oil, LNG and metal
resources prices: All the factors may affect the Group earnings. Changes in
economic, social and political environments for clients, joint venture partners,
subcontractors, suppliers and service providers could affect the Group’s project
execution plans, profi tability and, ultimately, its fi nancial strength.The Group
monitors global economic and social trends for a potential impact on business and
strives to reduce such risk through rigorous contract negotiations. Due diligence is
executed for subcontractors, vendors and service providers and remedial action in
the supply chain is taken if necessary.
(b) Earthquakes and natural disasters, terrorism,
wars and other force majeure events
Force Majeure events such as earthquakes, natural disasters, terrorism and wars
have the potential to materially impact project sites or business locations.
Disruption issues may include personnel life crisis, delays in equipment and
materials delivery and/or suspension of fi eld work. The Group puts life and safety
fi rst and has the Crisis Management Unit, to compile and analyze information to
prevent human suffering or harm. The Group has established, and is reinforcing, the
crisis management system, which advocates the employment of professional
security advisors in the regions requiring particular attention. Additionally, the Group
maintains the risk management system to rapidly react to various situations and to
respond to an emergency immediately, including consulting with the clients and/or
the parties concerned to minimize force majeure risk. The Group has formulated a
Business Continuity Plan (BCP) for unexpected events including as a massive
earthquake to act smoothly in the initial stage and execute priority tasks. In that
way, the Group has been prepared to ensure business continuity by conducting
emergency response training.
(c) Fluctuations in equipment and material costs
Under certain contracts, the Group is exposed to material/equipment cost
fl uctuation risk due to the time difference between plant or material quotation and
purchase. Specifi cally the price of steel, which constitutes a major part of plant
construction, could be severely impacted by a rise in commodity prices such as
coal and iron ore. Future market prices of copper, nickel, aluminum and zinc are
similarly unpredictable. The Group avoids such risks (or minimizes the impact) by
diversifying supply sources, placing early orders, maintaining alliances with major
vendors/suppliers and identifying market trends.
(d) Possible shortages of construction
workers/equipment and materials
A project may experience a delay and a cost impact if suffi cient construction labor,
equipment and materials or other resources required for a project cannot be
suffi ciently procured. The Group avoids such risk (or minimizes the impact) by
applying diverse construction methods including modular construction, in the areas
where materials and/or adequately qualifi ed labor are scarce and by establishing
communication and collaboration with reliable subcontractors, vendors and
suppliers. If a plant’s construction is suspended due to labor disputes and the like,
the Group minimizes risk by taking appropriate action in cooperation with clients
and the local authorities.
(e) Plant accidents
Safety risk, the consequences of which could be serious for the Group’s operating
capability, is inherent in the construction industry. Safety is of paramount
importance to the Group, reinforced by the maxim “Safety is the Core Value”.
Through comprehensive Risk Identifi cation and Management procedures,
reinforced by close collaboration with clients, designers, subcontractors and
vendors, all the risks are identifi ed at every stage of project delivery, from feasibility
through design and construction, and measures to negate or mitigate the identifi ed
risks are implemented.
(f) Exchange rate fl uctuations
Some construction projects may involve payment settlements (subcontractors,
vendors and suppliers) in a currency that does not correspond with the currency
received from the client for the work. In such cases, exchange rate fl uctuations can
have an impact on earnings. The Group avoids/minimizes exchange rate risk by
reserving construction payments against such risk in multiple foreign currencies
and by entering into exchange rate forward contracts.
(g) Compliance-related risk
The Group’s global operations are required to comply with local laws, acts and
regulations in the respective countries and regions where its head offi ce,
subsidiaries, business offi ces and construction execution sites are located, both at
home and abroad. Penalties or suspicious action resulting from non-compliance
could have a serious impact on a project’s execution or the business operation of
the Group.
To prevent and/or minimize such compliance-related risk, the Group runs
training courses for employees including assembled induction and e-learning.
Those are intended for them to understand and strictly observe the updated laws,
acts, regulations or rules related to its business operations including those for
human rights and anti-bribery. The Group also makes every effort to comprehend
the present trend of stakeholders including the authorities concerned and clients,
both at home and abroad. Additionally, the Group has incorporated compliance
response in its operating processes based on its Code of Conduct by establishing
a Compliance Committee under the direct control of the Executive Committee and
the Compliance Committee of the Chiyoda Group under its wing, consisting of
Group company representatives.
(h) Information security risk
The Group takes great care in managing information obtained from clients,
subcontractors, equipment and materials suppliers and other service providers.
The information is necessary in the performance of its business. The Group also
possesses confi dential information related to technologies, sales, and other
businesses. Many core corporate operations and business transactions are
conducted by making full use of the IT systems at global subsidiaries. The Group
operations are subject to system failure, information leakage and loss of important
business information due to infection by computer viruses, external unauthorized
access and cyber-attacks. The Group, including the main subsidiaries and global
headquarters, holds an ISMS (Information Security Management System) certifi cate
and performs competent information security management which includes training,
auditing, and defensive and minimizing measures under its business continuity
plan.
(i) Business investment risk
The Group makes business investment to pursue the growth strategy such as the
establishment of a new company or the purchase of the existing company to
construct a new business model. The Group is exposed to several risks, such as
changes in the business environment, lower earnings obtained than planned, a
downturn in business and incurring extra costs. Prior to deciding on business
investment, the Group does assess the feasibility through our standards and rules.
After making an investment, the Group regularly monitors the progress in the
business and provide various types of support as necessary, to avoid or minimize
any loss.
Yasuyuki Maeda
Division Director
Corporate Risk Management Division
With reference to the rather fresh concept of “Strategic Risk Management,” I should say that,
at Chiyoda, we ensure that corporate management leaders are able to manage risks and seize
opportunities and to make strategic decisions in business fi elds of volatility, uncertainty, complexity and
ambiguity, based on the well-run “Business Risk Management” by all organizations as described below.
Through this one-team approach, Chiyoda strives to create additional shareholder value in
our continuing challenges.
I have been studying the various methodologies a
That concept is illustrated by ISO 31000, an
company can employ to manage business risk,
International standard initiated in Japan. Using this
including fi nancial, operational, legal, reputational,
approach, we have created a corporate-wide risk
environmental and social, some identifi ed as shared
map of 97 items, measured by probability, repeatabili-
risks and some more specifi c. In my opinion, one of
ty and magnitude of impact, further ranked by priority,
the most effective ways to approach corporate risk
for which individual countermeasures have been
management could be to align the different types of
identifi ed, subject to regular reviews and updates.
risk with the company’s organizations and functions.
A project manager assesses risks to avoid or to
Chiyoda has taken the unique approach of
mitigate potential negative impact in the execution
dividing business risk into two major categories:
of a project. Exposure to such risks often ends at
Project Risk and Non-Project Risk. This aligns with
the completion of the project contract, thus
our matrix organization, which is divided into two
confi ning the nature of Project Risk to a specifi c
axes: Project Operations and Shared Services, each
period of time. On the other hand, Non-Project Risk
with six separate divisions. All the divisions within
can be lifetime in its nature and is more closely
these two groups implement an independent risk
related to the sustainability of the Company. The
management approach that directly identifi es and
sharing of supply services, appointment of
creates responses to their own specifi c risks daily.
top-quality engineers and determination to remain
In reality, Project Risk is the larger contributor to
at the cutting edge of technology for each project
corporate risk at Chiyoda. But by considering Project
and service we provide should always be effi cient
Risk and Non-Project Risk together, the Corporate
and add value. A joint management approach
Risk Management team looks to achieve a balance
across Project Risk and Non-Project Risk is the key
between risks and opportunities for the Company.
to our success.
39
40
CORPORATE INFORMATION
(As of March 31, 2017)
CORPORATE DATA
GLOBAL NETWORK
Chiyoda Global Headquarters
Minato Mirai Grand Central Tower
4-6-2, Minatomirai, Nishi-ku, Yokohama 220-8765, Japan
Tel: (81) 45-225-7777 (voice guidance)
Established
Paid-in Capital
January 20, 1948
¥43,396 million
Number of Employees
1,505 (Non-consolidated), 5,367 (Consolidated)
Annual Fiscal Close
March 31
Shareholders’ Meeting
June
Organization Chart
(As of April 1, 2017)
Board of Directors
Audit & Supervisory Committee
Executive Committee
President
Secretarial Office
Internal Audit Unit
Corporate Risk Management Division
Global Project Management Division
Offshore & Upstream Project Operations
SQEI Management Unit
Compliance Unit
Crisis Management Unit
Project Administration Unit
Project Management Unit
IT Management Unit
Global Human Resource Planning Unit
Work Process Innovation Task Team
Chiyoda Global Taskforce Team
Change the Mindset
Corporate Planning & Management Division
Technology & Engineering Division
Corporate Planning Unit
IR, PR & CSR Sec.
Corporate Services Unit
Human Relations Unit
Finance & Accounting Unit
Legal & Project Audit Unit
Group Operation Unit
Engineering Operation Unit
Gas & LNG Process Engineering Unit
Refinery, Petrochemical &
New Energy Process Engineering Unit
Integrity Management Unit
Mechanical Engineering Unit
Control System Engineering Unit
Electrical System &
Smart Grid Engineering Unit
Piping Engineering Unit
Civil Engineering Unit
Business Development Division
Project Logistics & Construction Division
Strategic Business Planning &
Administration Unit
Corporate Relations Sec.
Business Development Unit 1
Business Development Unit 2
PLC* Planning & Administration Unit
Procurement Unit
Construction Unit
Commissioning Unit
* PLC: Project Logistics & Construction
** TIP: Technology Development, Investment and Project
41
Offshore & Upstream Business Development Unit
Offshore & Upstream Strategic Project Development Unit
Offshore & Upstream Project Unit
Gas & LNG Project Operations No. 1
Gas & LNG Project Unit No. 1
Strategic Project Development Unit
Gas & LNG Project Operations No. 2
Gas & LNG Project Unit No. 2
Downstream & Non Hydrocarbon Project Operations
Downstream & Chemical Project Unit
International Downstream and Transport Infrastructure
Project Unit
Metals & Mining Project Unit
Global Collaboration Unit
Technology Development, Investment and
Project Operations
TIP** Planning & Administration Unit
Strategic Business & Investment Management Unit
Hydrogen Supply Chain Development Unit
Green Infrastructure Project Unit
Environmental Project Unit
Technology Development Unit
Research & Development Center
ChAS & Life Science Project Operations
ChAS/Life Science Business Planning & Administration Unit
ChAS Marketing Unit
Advanced Process Engineering Unit
Plant Diagnosis Unit
AI Solution Unit
Consulting Unit
Pharmaceutical Industries Project Unit
Space & Bio Engineering Unit
Chiyoda’s global network enables project life cycle
construction through to operation and maintenance.
engineering to be offered all over the world. Chiyoda
With a view toward meeting the ever-changing needs
has expanded its network to provide prompt support
of our customers, we offer services by utilizing local
for customers’ business activities on a global scale.
offices and group companies with thorough knowl-
Our services cover the entire life cycles of projects—
edge of the latest local and global circumstances in
from planning, engineering, procurement and
countries around the world.
Xodus Group (Holdings) Ltd.
Milan Representative Office
Chiyoda Corporation Netherlands B.V.
Sales Base
Engineering Center
Procurement Center
Project Execution Base
Operation Support
Chiyoda International Corporation
UK
The Netherlands
Italy
Chiyoda Tehran Office
Beijing Office
Chiyoda Corporation (Shanghai)
Korea Representative Office
Iran
Saudi Arabia
Qatar
UAE
India
China
Korea
Japan
Chiyoda Global Headquarters
USA
Myanmar
Thailand
Malaysia
The Philippines
Chiyoda Philippines Corporation
Singapore
Indonesia
Mozambique
Australia
Chiyoda Oceania Pty. Limited
Brazil
Chiyoda Mozambique Limitada
PT. Chiyoda International Indonesia
L&T-Chiyoda Limited
Chiyoda Human Resources International (Pte.) Limited
Chiyoda Singapore (Pte.) Limited
Abu Dhabi Office
Chiyoda-CCC Engineering (Pte.) Limited
Middle East Headquarters Doha Office
Chiyoda Almana Engineering LLC
Chiyoda Malaysia Sdn. Bhd.
Chiyoda Sarawak Sdn. Bhd.
Chiyoda (Thailand) Limited
Chiyoda Petrostar Ltd.
Chiyoda & Public Works Co., Ltd.
Chiyoda do Brasil Representações Ltda.
42
CHIYODA CORPORATIONANNUAL REPORT FY2016 Minato Mirai Grand Central Tower
4-6-2, Minatomirai, Nishi-ku,
Yokohama 220-8765, Japan
Tel: (81)45-225-7777 (voice guidance)
http://www.chiyoda-corp.com/en/
MEMO
STOCK INFORMATION
(As of March 31, 2017)
Authorized Shares
Capital Stock Issued
570,000,000
260,324,529
Number of Shareholders
Number of Shares per Unit
20,380
1,000
Stock Code
ISIN: JP3528600004
SEDOL1: 6191704 JP
TSE: 6366
Major Shareholders
Mitsubishi Corporation
The Master Trust Bank of Japan, Ltd. (Trust account)
Japan Trustee Services Bank, Ltd. (Trust account)
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Trust & Custody Services Bank, Ltd.
Mitsubishi UFJ Trust and Banking Corporation
STATE STREET BANK AND TRUST COMPANY
Japan Trustee Services Bank, Ltd. (Trust account 9)
Japan Trustee Services Bank, Ltd. (Trust account 5)
Meiji Yasuda Life Insurance Company
Note: Ratio of Shares Owned excludes treasury shares of 1,351,100.
Number of
Shares Owned
(Thousands of Shares)
Ratio of
Shares Owned
(%)
Breakdown by Shareholder
86,931
20,652
11,593
9,033
6,631
4,274
3,707
3,568
2,970
2,265
33.57
7.97
4.48
3.49
2.56
1.65
1.43
1.38
1.15
0.87
Total Number of
Shares Issued:
260,325
thousand
Financial Institutions
Securities Companies
Other Corporations
Foreign Investors and Others
Individuals and Others
27.81%
3.62%
36.05%
14.29%
18.23%
Monthly Share Price (April 2013 – March 2017)
on the Tokyo Stock Exchange
Share Price (left) Volume (right)
(Thousands of shares)
150,000
100,000
50,000
0
2013
2014
2015
2016
2017
(Yen)
2,000
1.500
1,000
500
0
43
CHIYODA CORPORATIONANNUAL REPORT FY2016 CORPORATE PHILOSOPHY
Enhance our business in aiming for harmony between energy and the environment,
and contribute to the sustainable development of society as an integrated engineering company
through the use of our collective wisdom and painstakingly developed technology.
CONSOLIDATED FINANCIAL STATEMENTS FY2016
For the year ended March 31, 2017, and Independent Auditor’s Report
Chiyoda Corporation and Consolidated Subsidiaries
CONSOLIDATED BALANCE SHEETS
(March 31, 2017)
Consolidated Balance Sheet
March 31, 2017
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note 14)
Short-term investments (Note 14)
Notes and accounts receivable—trade (Note 14)
Costs and estimated earnings on long-term construction
contracts (Notes 4 and 14)
Costs of construction contracts in process
Accounts receivable—other
Jointly controlled assets of joint venture (Note 14)
Deferred tax assets (Note 11)
Prepaid expenses and other (Note 21)
Allowance for doubtful accounts
Millions of Yen
2017
2016
Thousands of
U.S. Dollars
(Note 1)
2017
¥ 138,889
4,483
40,377
¥ 136,919
7,795
35,651
$ 1,240,081
40,034
360,509
19,487
24,220
7,761
164,283
9,586
17,696
(1,541)
33,644
35,053
7,112
179,360
12,889
8,888
(2,285)
173,999
216,257
69,295
1,466,813
85,593
158,006
(13,762)
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Short-term borrowings (Notes 8 and 14)
Current portion of long-term debt (Notes 8 and 14)
Notes and accounts payable—trade (Note 14)
Advance receipts on construction contracts
Income taxes payable (Note 14)
Deposits received
Allowance for warranty costs for completed works
Allowance for losses on construction contracts
Provision for loss on business of subsidiaries and associated
companies
Accrued expenses and other
Millions of Yen
2017
2016
¥
203
10,023
160,096
85,187
668
1,087
319
3,315
22,919
17,360
¥
333
45
150,078
135,667
2,841
1,209
337
3,160
17,432
Thousands of
U.S. Dollars
(Note 1)
2017
$
1,819
89,491
1,429,436
760,599
5,972
9,708
2,855
29,599
204,638
155,008
Total current assets
425,244
455,030
3,796,828
Total current liabilities
301,182
311,106
2,689,131
PROPERTY, PLANT AND EQUIPMENT:
Land
Buildings and structures
Machinery and equipment
Tools, furniture and fixtures
Construction in progress
Total
Accumulated depreciation
5,266
13,892
547
7,236
22
26,965
(13,806)
5,266
13,887
635
7,439
22
27,251
(13,309)
47,018
124,044
4,888
64,607
203
240,763
(123,276)
LONG-TERM LIABILITIES:
Long-term debt (Notes 8 and 14)
Liability for retirement benefits (Note 9)
Provision for treatment of PCB waste
Asset retirement obligations
Other
Total long-term liabilities
Net property, plant and equipment
13,158
13,942
117,487
COMMITMENTS AND CONTINGENT LIABILITIES
INVESTMENTS AND OTHER ASSETS:
Investment securities (Notes 5 and 14)
Investments in and advances to unconsolidated
subsidiaries and associated companies (Note 7)
Goodwill (Note 6)
Software
Asset for retirement benefits (Note 9)
Deferred tax assets (Note 11)
Other assets
Allowance for doubtful accounts
2,748
5,616
2,051
5,989
84
4,967
1,806
(336)
14,113
29,650
3,931
7,079
94
2,894
1,861
(379)
24,540
50,143
18,317
53,481
758
44,353
16,126
(3,002)
Total investments and other assets
22,928
59,247
204,718
(Notes 8, 13, 15, 16 and 21)
EQUITY (Notes 10 and 19):
Common stock—authorized, 570,000 thousand shares;
issued, 260,324 thousand shares in 2017 and 2016
Capital surplus
Retained earnings
Treasury stock—at cost, 1,351 thousand shares in 2017 and
1,340 thousand shares in 2016
Accumulated other comprehensive income (loss):
Unrealized gain on available-for-sale securities
Deferred gain (loss) on derivatives under hedge accounting
Foreign currency translation adjustments
Defined retirement benefit plans
Total
Noncontrolling interests
Total equity
30
1,522
338
1,010
121
3,023
10,036
2,134
340
996
1,477
14,985
275
13,593
3,025
9,018
1,085
26,998
43,396
37,112
72,132
43,396
37,112
115,839
387,467
331,362
644,043
(1,431)
(1,422)
(12,777)
379
499
2,656
592
155,339
1,785
2,386
(1,618)
4,171
300
200,166
1,961
3,392
4,460
23,722
5,290
1,386,963
15,940
157,125
202,128
1,402,903
TOTAL
¥ 461,331
¥ 528,219
$ 4,119,033
TOTAL
¥ 461,331
¥ 528,219
$ 4,119,033
See notes to consolidated financial statements.
- 2 -
01
02
CHIYODA CORPORATIONCONSOLIDATED FINANCIAL STATEMENTS FY2016 Chiyoda Corporation and Consolidated Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
Consolidated Statement of Operations
(Years Ended March 31, 2017 and 2016)
Year Ended March 31, 2017
Chiyoda Corporation and Consolidated Subsidiaries
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Consolidated Statement of Comprehensive Income
(Years Ended March 31, 2017 and 2016)
Year Ended March 31, 2017
Millions of Yen
2017
2016
Thousands of
U.S. Dollars
(Note 1)
2017
Millions of Yen
2017
2016
Thousands of
U.S. Dollars
(Note 1)
2017
¥ 603,745
¥ 611,548
$ 5,390,587
NET (LOSS) INCOME
¥ (41,251)
¥ 3,496
$ (368,321)
REVENUE
COST OF REVENUE
Gross profit
38,223
41,520
341,284
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
(Note 12)
22,543
25,505
201,284
565,521
570,028
5,049,303
OTHER COMPREHENSIVE LOSS (Note 17):
Unrealized loss on available-for-sale securities
Deferred gain on derivatives under hedge accounting
Foreign currency translation adjustments
Defined retirement benefit plans
Share of other comprehensive loss of associates
(2,006)
2,129
(1,102)
291
(451)
(4,831)
441
(1,135)
(775)
(83)
(17,917)
19,017
(9,843)
2,603
(4,030)
Operating income
15,680
16,015
140,000
Total other comprehensive loss
(1,139)
(6,385)
(10,170)
COMPREHENSIVE LOSS
¥ (42,391)
¥ (2,888)
$ (378,491)
TOTAL COMPREHENSIVE LOSS ATTRIBUTABLE TO:
Owners of the parent
Noncontrolling interests
¥ (42,228)
(162)
¥ (2,844)
(44)
$ (377,039)
(1,452)
See notes to consolidated financial statements.
OTHER (EXPENSES) INCOME:
Interest and dividend income
Gain on sales of investment securities
Interest expense
Equity in losses of associated companies (Note 7)
Foreign exchange loss
Loss on valuation of investment securities
Impairment loss (Note 6)
Provision for loss on business of subsidiaries and
associated companies (Note 7)
Loss on sales of shares of subsidiaries and associated
companies
Other—net
2,487
1,937
(209)
(17,106)
(3,455)
(393)
(766)
(22,919)
(1,146)
(477)
2,484
2,686
(216)
(1,318)
(665)
(4,431)
(93)
22,207
17,296
(1,868)
(152,733)
(30,848)
(3,513)
(6,839)
(204,638)
(10,234)
(4,262)
Other expenses—net
(42,048)
(1,554)
(375,435)
(LOSS) INCOME BEFORE INCOME TAXES
(26,368)
14,460
(235,435)
INCOME TAXES (Note 11):
Current
Deferred
15,026
(143)
8,708
2,255
134,164
(1,278)
Total income taxes
14,883
10,963
132,885
NET (LOSS) INCOME
(41,251)
3,496
(368,321)
NET (LOSS) INCOME ATTRIBUTABLE TO
NONCONTROLLING INTERESTS
(135)
121
(1,207)
NET (LOSS) INCOME ATTRIBUTABLE TO
Chiyoda Corporation and Consolidated Subsidiaries
OWNERS OF THE PARENT
¥ (41,116)
¥
3,375
$
(367,113)
Consolidated Statement of Operations
Year Ended March 31, 2017
- 3 -
Yen
2017
2016
U.S. Dollars
2017
(Continued)
- 5 -
PER SHARE OF COMMON STOCK (Notes 2.z and 18):
Basic net (loss) income
Cash dividends applicable to the year
¥ (158.76 )
6.00
¥ 13.03
10.00
$ (1.42 )
0.05
See notes to consolidated financial statements.
03
04
- 4 -
(Concluded)
CHIYODA CORPORATIONCONSOLIDATED FINANCIAL STATEMENTS FY2016 Chiyoda Corporation and Consolidated Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Consolidated Statement of Changes in Equity
(Years Ended March 31, 2017 and 2016)
Year Ended March 31, 2017
Thousands
Outstanding
Number of
Shares of
Common
Stock
Common
Stock
Capital
Surplus
Retained
Earnings
Treasury
Stock
Millions of Yen
Accumulated Other Comprehensive Income (Loss)
Unrealized
Gain on
Available-
for-Sale
Securities
Deferred Gain
(Loss) on
Derivatives
under Hedge
Accounting
Foreign
Currency
Translation
Adjustments
Defined
Retirement
Benefit
Plans
Total
Noncontrolling
Interests
Total
Equity
BALANCE, APRIL 1, 2015
259,001
¥ 43,396
¥ 37,112
¥ 115,831
¥ (1,405)
¥ 7,218
¥ (2,064)
¥ 5,229
¥ 1,076
¥ 206,395
¥ 2,010
¥ 208,405
Net income attributable to owners
of the parent
Cash dividends, ¥13.00 per share
Purchase of treasury stock
Net change in the year
(16)
3,375
(3,367)
(16)
(4,831)
445
(1,057)
BALANCE, MARCH 31, 2016
258,984
43,396
37,112
115,839
(1,422)
2,386
(1,618)
4,171
3,375
(3,367)
(16)
(6,219)
3,375
(3,367)
(16)
(6,269)
(49)
200,166
1,961
202,128
(775)
300
Net loss attributable to owners
of the parent
Cash dividends, ¥10.00 per share
Purchase of treasury stock
Net change in the year
(11)
(41,116)
(2,589)
(8)
(2,006)
2,118
(1,514)
291
(41,116)
(2,589)
(8)
(1,111)
(41,116)
(2,589)
(8)
(1,287)
(175)
BALANCE, MARCH 31, 2017
258,973
¥ 43,396
¥ 37,112
¥
72,132
¥ (1,431)
¥
379
¥
499
¥ 2,656
¥
592
¥ 155,339
¥ 1,785
¥ 157,125
Common
Stock
Capital
Surplus
Retained
Earnings
Treasury
Stock
Thousands of U.S. Dollars (Note 1)
Accumulated Other Comprehensive Income (Loss)
Unrealized
Gain on
Available-
for-Sale
Securities
Deferred Gain
(Loss) on
Derivatives
under Hedge
Accounting
Foreign
Currency
Translation
Adjustments
Defined
Retirement
Benefit
Plans
Total
Noncontrolling
Interests
Total
Equity
BALANCE, MARCH 31, 2016
$ 387,467
$ 331,362
$ 1,034,280
$ (12,697)
$ 21,309
$ (14,452)
$ 37,247
$ 2,686
$ 1,787,205
$ 17,509
$ 1,804,714
Net loss attributable to owners
of the parent
Cash dividends, $0.09 per share
Purchase of treasury stock
Net change in the year
(367,113)
(23,123)
(79)
(17,917)
18,912
(13,524)
2,603
(367,113)
(23,123)
(79)
(9,926)
(1,568)
(367,113)
(23,123)
(79)
(11,494)
BALANCE, MARCH 31, 2017
$ 387,467
$ 331,362
$
644,043
$ (12,777)
$
3,392
$
4,460
$ 23,722
$ 5,290
$ 1,386,963
$ 15,940
$ 1,402,903
See notes to consolidated financial statements.
- 6 -
05
06
CHIYODA CORPORATIONCONSOLIDATED FINANCIAL STATEMENTS FY2016 Chiyoda Corporation and Consolidated Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Consolidated Statement of Cash Flows
(Years Ended March 31, 2017 and 2016)
Year Ended March 31, 2017
Chiyoda Corporation and Consolidated Subsidiaries
Consolidated Statement of Cash Flows
Year Ended March 31, 2017
OPERATING ACTIVITIES:
(Loss) income before income taxes
Adjustments for:
Income taxes paid
Depreciation
Impairment loss
Amortization of goodwill
(Decrease) increase in allowance for doubtful accounts
Decrease in allowance for warranty costs for completed
works
Increase (decrease) in allowance for losses on construction
contracts
Decrease in liability for retirement benefits
Foreign exchange (gain) loss—net
Increase in provision for loss on business of subsidiaries
and associated companies
Loss on sales of shares of subsidiaries and associated
companies
Equity in losses of associated companies
Gain on sales of investment securities
Loss on valuation of investment securities
Changes in operating assets and liabilities:
Decrease (increase) in trade notes and accounts
receivable, and costs and estimated earnings on
long-term construction contracts
Decrease in costs of construction contracts in process
Increase in trade notes and accounts payable
(Decrease) increase in advance receipts on construction
contracts
(Increase) decrease in accounts receivable—other
Decrease in jointly controlled assets of joint venture
Increase in interest and dividend receivable
Other—net
Total adjustments
Millions of Yen
2017
2016
Thousands of
U.S. Dollars
(Note 1)
2017
Millions of Yen
2017
2016
Thousands of
U.S. Dollars
(Note 1)
2017
¥ (26,368)
¥ 14,460
$ (235,435)
(Forward)
¥
(4,375)
¥
55,526
$
(39,066)
Net cash (used in) provided by operating activities—
(13,821)
3,643
766
547
(701)
(15)
154
(428)
(186)
22,919
1,146
17,106
(1,937)
393
8,141
10,786
11,401
(48,668)
(1,901)
13,666
(1,029)
11
21,993
(1,673)
3,589
4,431
1,256
2,387
(21)
(826)
(117)
813
1,318
(2,686)
(16,491)
24,543
13,293
12,184
5,158
3,501
(812)
(8,781)
41,065
(123,409)
32,529
6,839
4,886
(6,262)
(139)
1,380
(3,822)
(1,665)
204,638
10,234
152,733
(17,296)
3,513
72,695
96,305
101,798
(434,543)
(16,978)
122,019
(9,189)
98
196,369
INVESTING ACTIVITIES:
Net decrease (increase) in time deposits
Purchases of property, plant and equipment
Purchases of intangible assets
Payments for purchases of investment securities
Proceeds from sales of investment securities
Payments of loans receivable
Proceeds from collections of loans
Other—net
3,043
(649)
(1,451)
(351)
15,554
(12,188)
6,382
95
(7,739)
(806)
(1,801)
(21,998)
5,463
(382)
489
25
27,170
(5,803)
(12,963)
(3,134)
138,879
(108,825)
56,982
853
Net cash provided by (used in) investing
activities
10,433
(26,750)
93,159
FINANCING ACTIVITIES:
Net decrease in short-term borrowings
Repayments of long-term debt
Payments of cash dividends
Other—net
(50)
(3)
(2,586)
(52)
(498)
(4)
(3,362)
(76)
(450)
(33)
(23,096)
(464)
Net cash used in financing activities
(2,693)
(3,942)
(24,045)
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS
ON CASH AND CASH EQUIVALENTS
(1,395)
(1,159)
(12,462)
NET INCREASE IN CASH AND CASH EQUIVALENTS
1,969
23,673
17,584
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
136,919
113,246
1,222,496
CASH AND CASH EQUIVALENTS, END OF YEAR
¥ 138,889
¥ 136,919
$ 1,240,081
Net cash (used in) provided by operating
activities—(Forward)
¥
(4,375)
¥ 55,526
$
(39,066)
See notes to consolidated financial statements.
- 7 -
(Continued)
- 8 -
(Concluded)
07
08
CHIYODA CORPORATIONCONSOLIDATED FINANCIAL STATEMENTS FY2016 Chiyoda Corporation and Consolidated Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Notes to Consolidated Financial Statements
Year Ended March 31, 2017
1. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been prepared in accordance with the provisions set forth
in the Japanese Financial Instruments and Exchange Act and its related accounting regulations and in accordance
with accounting principles generally accepted in Japan ("Japanese GAAP"), which are different in certain respects
as to the application and disclosure requirements of International Financial Reporting Standards.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to
the consolidated financial statements issued domestically in order to present them in a form which is more familiar
to readers outside Japan. In addition, certain reclassifications have been made in the 2016 consolidated financial
statements to conform to the classifications used in 2017.
The consolidated financial statements are stated in Japanese yen, the currency of the country in which Chiyoda
Corporation (the "Company") is incorporated and principally operates. The translations of Japanese yen amounts
into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been made at the
rate of ¥112 to $1, the approximate rate of exchange at March 31, 2017. Such translations should not be construed
as representations that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate.
Japanese yen figures less than a million yen are rounded down to the nearest million, except for per share data.
U.S. dollar figures less than a thousand U.S. dollars are rounded down to the nearest thousand, except for per share
data.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Consolidation—The consolidated financial statements as of March 31, 2017, include the accounts of the
Company and its 30 (30 in 2016) significant subsidiaries (together, the "Group").
Under the control and influence concepts, those companies in which the Company, directly or indirectly, is
able to exercise control over operations are fully consolidated, and those companies over which the Group has
the ability to exercise significant influence are accounted for by the equity method.
Investments in seven (seven in 2016) associated companies are accounted for by the equity method.
Investments in the remaining unconsolidated subsidiaries and associated companies are stated at cost. If the
equity method of accounting had been applied to the investments in these companies, the effect on the
accompanying consolidated financial statements would not be material.
Most of the foreign consolidated subsidiaries have a December 31 year-end, which is different from that of the
Company. As a result, adjustments have been made for any significant transactions which took place during
the period between the year-end of these subsidiaries and the year-end of the Company.
The excess of the cost of acquisition over the fair value of the net assets of an acquired subsidiary at the date of
acquisition is amortized over a period of 5 to 20 years.
All significant intercompany balances and transactions have been eliminated in consolidation. All material
unrealized profit included in assets resulting from transactions within the Group is also eliminated.
b. Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial
Statements—Under Accounting Standards Board of Japan ("ASBJ") Practical Issues Task Force ("PITF")
No. 18, "Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for the
Consolidated Financial Statements," the accounting policies and procedures applied to a parent company and
its subsidiaries for similar transactions and events under similar circumstances should in principle be unified
for the preparation of the consolidated financial statements. However, financial statements prepared by foreign
subsidiaries in accordance with either International Financial Reporting Standards or generally accepted
accounting principles in the United States of America (Financial Accounting Standards Board Accounting
Standards Codification) tentatively may be used for the consolidation process, except for the following items
that should be adjusted in the consolidation process so that net income is accounted for in accordance with
Japanese GAAP, unless they are not material: (a) amortization of goodwill; (b) scheduled amortization of
actuarial gain or loss of pensions that has been recorded in equity through other comprehensive income;
(c) expensing capitalized development costs of R&D; and (d) cancellation of the fair value model of
accounting for property, plant and equipment and investment properties and incorporation of the cost model of
accounting.
c. Unification of Accounting Policies Applied to Foreign Associated Companies for the Equity Method—
ASBJ Statement No. 16, "Accounting Standard for Equity Method of Accounting for Investments," requires
adjustments to be made to conform the associate's accounting policies for similar transactions and events under
similar circumstances to those of the parent company when the associate's financial statements are used in
applying the equity method unless it is impracticable to determine such adjustments. In addition, financial
statements prepared by foreign associated companies in accordance with either International Financial
Reporting Standards or generally accepted accounting principles in the United States of America tentatively
may be used in applying the equity method if the following items are adjusted so that net income is accounted
for in accordance with Japanese GAAP, unless they are not material: (a) amortization of goodwill;
(b) scheduled amortization of actuarial gain or loss of pensions that has been recorded in equity through other
comprehensive income; (c) expensing capitalized development costs of R&D; and (d) cancellation of the fair
value model of accounting for property, plant and equipment and investment properties and incorporation of
the cost model of accounting.
d. Construction Contracts—Under Japanese GAAP, construction revenue and construction costs are recognized
by the percentage-of-completion method if the outcome of a construction contract can be estimated reliably.
When total construction revenue, total construction costs and the stage of completion of the contract at the
balance sheet date can be reliably measured, the outcome of a construction contract is deemed to be estimated
reliably. If the outcome of a construction contract cannot be reliably estimated, the completed-contract method
should be applied. When it is probable that the total construction costs will exceed total construction revenue,
an estimated loss on the contract should be immediately recognized by providing for a loss on such
construction contracts.
- 9 -
- 10 -
09
10
CHIYODA CORPORATIONCONSOLIDATED FINANCIAL STATEMENTS FY2016 Concerning the construction contracts, the Group applies the following accounting methods:
Unbilled costs on contracts, which are accounted for by the completed-contract method, are stated as costs
of construction contracts in process.
Payments received in excess of costs and estimated earnings on contracts, which are accounted for by the
percentage-of-completion method, and payments received on the other contracts, are presented as current
liabilities.
Costs of preparation work for unsuccessful proposals and other projects that are not realized are charged to
income, as incurred, and are included in cost of revenue.
e. Cash Equivalents—Cash equivalents are short-term investments that are readily convertible into cash and
exposed to insignificant risk of changes in value. Cash equivalents include time deposits, certificates of
deposit, and commercial paper, all of which mature or become due within three months of the date of
acquisition.
f.
g.
Short-Term Investments—Short-term investments are time deposits, which will mature three months after the
date of acquisition. Short-term investments are exposed to insignificant risk of changes in value.
Investment Securities—All marketable securities are classified as available-for-sale securities and are reported
at fair value, with unrealized gains and losses, net of applicable taxes, reported in a separate component of
equity. The cost of securities sold is determined based on the moving-average method.
Nonmarketable available-for-sale securities are stated at cost determined by the moving-average method or at
amortized cost. For other-than-temporary declines in fair value, investment securities are reduced to net
realizable value by a charge to income.
h.
Jointly Controlled Assets of Joint Venture—The jointly controlled assets of the joint venture consist of jointly
controlled cash recognized based on the Company's share of the venture.
i.
j.
Allowance for Doubtful Accounts—The allowance for doubtful accounts is stated in amounts considered to be
appropriate based on the Group's past credit loss experience and an evaluation of potential losses in the
receivables outstanding.
Property, Plant and Equipment—Property, plant and equipment are stated at cost. Depreciation is computed
by the declining-balance method, except for buildings owned by the Company and structures acquired on or
after April 1, 2016, that are depreciated using the straight-line method, at rates based on the estimated useful
lives of the assets. The range of useful lives is from 8 to 57 years for buildings and structures, from 4 to 17
years for machinery and equipment, and from 4 to 15 years for tools, furniture, and fixtures. Equipment held
for lease is depreciated by the straight-line method over the respective lease periods.
Pursuant to an amendment to the Corporate Tax Act, the Company adopted ASBJ PITF No. 32, "Practical
Solution on a change in depreciation method due to Tax Reform 2016," and changed its depreciation method
for structures acquired on or after April 1, 2016, from the declining-balance method to the straight-line
method. The effect of this change on profit and loss is immaterial.
k.
Long-Lived Assets—The Group reviews its long-lived assets for impairment whenever events or changes in
circumstance indicate the carrying amount of an asset or asset group may not be recoverable. An impairment
loss is recognized if the carrying amount of an asset or asset group exceeds the sum of the undiscounted future
cash flows expected to result from the continued use and eventual disposition of the asset or asset group. The
impairment loss would be measured as the amount by which the carrying amount of the asset exceeds its
recoverable amount, which is the higher of the discounted cash flows from the continued use and eventual
disposition of the asset or the net selling price at disposition.
l.
Software—Software for internal use is amortized on a straight-line basis over its estimated useful life (five
years at the maximum).
m. Other Assets—Intangible assets are carried at cost less accumulated amortization, which is calculated by the
straight-line method over their estimated useful lives.
n. Allowance for Warranty Costs for Completed Work—The allowance for warranty costs for completed work is
provided based on past rate experience.
o. Allowance for Losses on Construction Contracts—The allowance for losses on construction contracts is
provided for an estimated amount of probable losses to be incurred in future years in respect of construction
projects in progress. When there are losses on completed-contract method applied contracts, the allowance for
losses on construction contracts is offset against the costs of construction contracts in process in the balance
sheet.
p.
q.
r.
Provision for Loss on Business of Subsidiaries and Associated Companies—The provision for loss on
business of subsidiaries and associated companies is provided for an estimated amount of probable losses at
the end of the fiscal year based on consideration of the financial conditions and business results, etc., of the
subsidiaries and associated companies.
Provision for Treatment of PCB Waste—Provision for treatment of PCB (Poly Chlorinated Biphenyl) waste
is provided based on estimated costs of the treatment for PCB products and equipment as well as their
collection and transportation fees.
Retirement and Pension Plans—The Company and consolidated subsidiaries have funded or unfunded
defined benefit pension plans and defined contribution pension plans for employees. Certain consolidated
subsidiaries have defined benefit corporate pension plans or severance lump-sum payment plans, and calculate
retirement benefit expenses by using the simplified method.
The Company and its domestic consolidated subsidiaries account for the liability for retirement benefits based
on the projected benefit obligations and plan assets at the balance sheet date. The projected benefit obligations
are attributed to periods on a benefit formula basis. Actuarial gains and losses are amortized on a straight-line
basis over 10 years within the average remaining service period.
Actuarial gains and losses that are yet to be recognized in profit or loss are recognized within equity
(accumulated other comprehensive income), after adjusting for tax effects, are recognized in profit or loss over
a certain period no longer than the expected average remaining service period of the employees.
- 11 -
- 12 -
11
12
CHIYODA CORPORATIONCONSOLIDATED FINANCIAL STATEMENTS FY2016 s.
Asset Retirement Obligations—Under Japanese GAAP, an asset retirement obligation is defined as a legal
obligation imposed either by law or contract that results from the acquisition, construction, development and
normal operation of a tangible fixed asset and is associated with the retirement of such tangible fixed asset.
The asset retirement obligation is recognized as the sum of the discounted cash flows required for the future
asset retirement and is recorded in the period in which the obligation is incurred if a reasonable estimate can be
made. If a reasonable estimate of the asset retirement obligation cannot be made in the period the asset
retirement obligation is incurred, the liability should be recognized when a reasonable estimate of the asset
retirement obligation can be made. Upon initial recognition of a liability for an asset retirement obligation, an
asset retirement cost is capitalized by increasing the carrying amount of the related fixed asset by the amount
of the liability. The asset retirement cost is subsequently allocated to expense through depreciation over the
remaining useful life of the asset. Over time, the liability is accreted to its present value each period. Any
subsequent revisions to the timing or the amount of the original estimate of undiscounted cash flows are
reflected as an adjustment to the carrying amount of the liability and the capitalized amount of the related asset
retirement cost.
t.
Research and Development Costs—Research and development costs are charged to income as incurred.
u. Leases—Japanese GAAP require that all finance lease transactions be capitalized by recognizing lease assets
and lease obligations in the balance sheet.
All other leases are accounted for as operating leases.
v.
Income Taxes—The provision for income taxes is computed based on the pretax income included in the
consolidated statement of operations. The asset and liability approach is used to recognize deferred tax assets
and liabilities for the expected future tax consequences of temporary differences between the carrying amounts
and the tax bases of assets and liabilities. Deferred taxes are measured by applying currently enacted income
tax rates to the temporary differences.
The Company and its wholly-owned domestic subsidiaries file a tax return under the consolidated
corporate-tax system, which allows companies to base tax payments on the combined profits or losses of the
parent company and its wholly-owned domestic subsidiaries.
w. Foreign Currency Transactions—All short-term and long-term monetary receivables and payables
denominated in foreign currencies are translated into Japanese yen at the exchange rates at the balance sheet
date. Foreign exchange gains and losses from translation are recognized in the consolidated statement of
operations to the extent that they are not hedged by foreign currency forward contracts.
Derivative financial instruments are classified and accounted for as follows:
(1) All derivatives are recognized as either assets or liabilities and measured at fair value, with gains or losses
recognized in the consolidated statement of operations.
(2) For derivatives used for hedging purposes, if such derivatives qualify for hedge accounting because of
high correlation and effectiveness between the hedging instruments and the hedged items, gains or losses
on derivatives are deferred until maturity of the hedged transactions.
Foreign currency forward contracts are utilized to hedge foreign exchange risks. Certain assets and liabilities
on construction contracts denominated in foreign currencies are translated at the contracted rates if the forward
contracts qualify for hedge accounting.
Foreign currency deposits are held to hedge foreign exchange risks derived from forecasted purchases of fixed
assets denominated in foreign currency.
Interest rate swaps which qualify for hedge accounting and meet specific matching criteria are not remeasured
at market value but the differential paid or received under the swap agreements is recognized and included in
interest expense.
z.
Per Share Information—Basic net income per share is computed by dividing net income available to common
shareholders by the weighted-average number of common shares outstanding for the period, retroactively
adjusted for stock splits.
Diluted net income per share reflects the potential dilution that could occur if securities were exercised or
converted into common stock. Diluted net income per share of common stock assumes full conversion of the
outstanding convertible notes and bonds at the beginning of the year (or at the time of issuance) with an
applicable adjustment for related interest expense, net of tax, and full exercise of outstanding warrants.
Diluted net income per share is not disclosed because there was no potential stock having a dilutive effect for
the fiscal years ended March 31, 2017 and 2016.
Cash dividends per share presented in the accompanying consolidated statement of operations are dividends
applicable to the respective fiscal years, including dividends to be paid after the end of the year.
3. CHANGES IN PRESENTATION
x. Foreign Currency Financial Statements—Balance sheet accounts of consolidated foreign subsidiaries are
(Consolidated Balance Sheet)
translated into Japanese yen at the current exchange rate as of the balance sheet date except for equity, which
is translated at the historical rate. Differences arising from such translation are shown as "Foreign currency
translation adjustments" under accumulated other comprehensive income in a separate component of equity.
Revenue and expense accounts of consolidated foreign subsidiaries are translated into Japanese yen at the
current exchange rate as of the balance sheet date.
y. Derivatives and Hedging Activities—The Group uses derivative financial instruments, including foreign
currency forward contracts and interest swap contracts, as a means of hedging exposure to foreign currency
risks and interest rate risks. The Group does not enter into derivatives for trading or speculative purposes.
"Deferred tax assets," included within "Other assets" of the investments and other assets section until the previous
consolidated fiscal year, is separately stated from the fiscal year ended March 31, 2017, as it has exceeded 1% of
the total assets. The prior period consolidated financial statements have been reclassified in accordance with the
new presentation.
(Consolidated Statement of Cash Flows)
"Increase (decrease) in deposits received" included within operating activities, which had previously been
separately presented, is included in "Other" from the fiscal year ended March 31, 2017, as its materiality has
decreased. The prior period consolidated financial statements have been reclassified in accordance with the new
presentation.
- 13 -
- 14 -
13
14
CHIYODA CORPORATIONCONSOLIDATED FINANCIAL STATEMENTS FY2016 4. CONSTRUCTION CONTRACTS
The information for the available-for-sale securities which were sold during the years ended March 31, 2017 and
2016, was as follows:
Costs and estimated earnings recognized with respect to construction contracts which are accounted for by the
percentage-of-completion method at March 31, 2017 and 2016, were as follows:
March 31, 2017
Millions of Yen
2017
2016
Thousands of
U.S. Dollars
2017
Millions of Yen
Realized
Gains
Realized
Losses
Proceeds
Costs and estimated earnings
Amounts billed
¥ 539,987
(520,499)
¥ 550,114
(516,469)
$ 4,821,314
(4,647,314)
Securities classified as—
Available-for-sale—equity securities
¥ 9,962
¥ 1,937
Net
¥
19,487
¥
33,644
$
173,999
March 31, 2016
5.
INVESTMENT SECURITIES
Investment securities at March 31, 2017 and 2016, consisted of the following:
Millions of Yen
2017
2016
Thousands of
U.S. Dollars
2017
Securities classified as—
Available-for-sale—equity securities
March 31, 2017
Millions of Yen
Realized
Gains
Realized
Losses
Proceeds
¥ 5,467
¥ 2,686
Non-current—Equity securities
¥ 2,748
¥ 14,113
$ 24,540
The costs and aggregate fair values of investment securities at March 31, 2017 and 2016, were as follows:
March 31, 2017
Millions of Yen
Cost
Unrealized
Gains
Unrealized
Losses
Fair
Value
Securities classified as—
Available-for-sale—equity securities
¥ 680
¥ 421
¥ 1,100
March 31, 2016
Millions of Yen
Cost
Unrealized
Gains
Unrealized
Losses
Fair
Value
Securities classified as—
Available-for-sale—equity securities
¥ 8,697
¥ 3,382
¥ 12,080
March 31, 2017
Thousands of U.S. Dollars
Unrealized
Gains
Unrealized
Losses
Fair
Value
Cost
Securities classified as—
Available-for-sale—equity securities
$ 6,072
$ 3,759
$ 5
$ 9,826
Thousands of U.S. Dollars
Realized
Gains
Realized
Losses
Proceeds
Securities classified as—
Available-for-sale—equity securities
$ 88,947
$ 17,296
6.
IMPAIRMENT LOSS OF LONG-LIVED ASSETS
Impairment loss on long-lived assets for the fiscal year ended March 31, 2017, was as follows:
March 31, 2017
Location
Used Status
The United Kingdom
Indonesia
—
—
Category
of Assets
Goodwill
Goodwill
Impairment Loss
Millions of Yen
Thousands of
U.S. Dollars
¥ 469
296
$ 4,191
2,647
Regarding the goodwill recorded in the acquisition of the shares of subsidiaries in UK and Indonesia, the Group
concluded that excess earning power have been damaged, as the business plan considered at the time of recognition
of the goodwill is lower than the performance of each business carried out by the Group subsidiaries in UK and
Indonesia.
- 15 -
- 16 -
15
16
CHIYODA CORPORATIONCONSOLIDATED FINANCIAL STATEMENTS FY2016 Impairment loss on long-lived assets for the fiscal year ended March 31, 2016, was as follows:
Long-term debt at March 31, 2017 and 2016, consisted of the following:
March 31, 2016
Location
Used Status
Category of Assets
Millions of Yen
Thousands of
U.S. Dollars
Impairment Loss
—
—
Goodwill
¥ 4,431
$ 39,217
During the year ended March 31, 2016, the goodwill in relation to the Group subsidiary in UK was impaired in the
amount of ¥4,431 million as other expense following a fall in the long term cash flow forecasts resulting from the
decline in the price of oil. The carrying amount of goodwill was written down to its recoverable amount. The
recoverable amount was measured at its value in use and the discount rate used for computation of the present value
of future cash flows was 16.9%.
7.
INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED SUBSIDIARIES AND ASSOCIATED
COMPANIES
Investments in and advances to unconsolidated subsidiaries and associated companies at March 31, 2017 and 2016,
were as follows:
Investments
Long-term receivables
Total
Millions of Yen
2017
2016
Thousands of
U.S. Dollars
2017
¥ 4,959
656
¥ 28,957
693
$ 44,280
5,862
¥ 5,616
¥ 29,650
$ 50,143
EMAS CHIYODA Subsea Limited ("ECS"), an associated company of Chiyoda Corporation accounted for by the
equity method, experienced financial hardship, brought about by a greater than anticipated slowdown of the subsea
market, and filed for bankruptcy protection under Chapter 11 of the U.S Bankruptcy Code in February 2017. The
Company recorded its share of ECS's net loss in "equity in losses of associated companies" of ¥15,005 million
during the year ended March 31, 2017. In addition, given the current financial state of ECS and its imminent
bankruptcy filing, the Company recognized a "provision for loss on business of subsidiaries and associated
companies" of ¥22,919 million during the year ended March 31, 2017, related to loans and guarantee obligation.
8.
SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Short-term borrowings as of March 31, 2017 and 2016, mainly consisted of notes to banks. The weighted average
interest rates of short-term borrowings as of March 31, 2017 and 2016, were 2.0% and 1.9%, respectively.
Long-term loans principally from banks, due serially
through 2024, with interest rates ranging from
1.3% to 2.0% at 2017 and 2016—Unsecured
Obligations under finance leases
Total
Less current portion
Millions of Yen
2017
2016
Thousands of
U.S. Dollars
2017
¥ 10,008
45
10,053
(10,023)
¥ 10,014
67
10,081
(45)
$ 89,357
409
89,767
(89,491)
Long-term debt, less current portion
¥
30
¥ 10,036
$
275
Annual maturities of long-term debt, excluding finance leases, at March 31, 2017, were as follows:
Year Ending
March 31
2018
2019
2020
2021
2022
2023 and thereafter
Total
Commitment-line contracts at March 31, 2017, were as follows:
Commitment-line contracts
Unused commitments
9. RETIREMENT AND PENSION PLANS
Millions of Yen
¥ 10,004
2
Thousands of
U.S. Dollars
$ 89,321
22
1
13
¥ 10,008
$ 89,357
Millions of Yen
¥ 15,000
¥ 15,000
Thousands of
U.S. Dollars
$ 133,928
$ 133,928
The Company and consolidated subsidiaries have funded or unfunded defined benefit pension plans and defined
contribution pension plans for employees.
Under defined benefit corporate pension plans, all of which are funded, employees are entitled to certain lump-sum
payments or pension payments based on cumulated points which are granted in accordance with years of
continuous employment, occupational classification and performance evaluation. Under severance lump-sum
payment plans, employees are entitled to certain lump-sum payments based on salary and service period.
Certain consolidated subsidiaries have defined benefit corporate pension plans or severance lump-sum payment
plans, and calculate retirement benefit expenses by using the simplified method.
- 17 -
- 18 -
17
18
CHIYODA CORPORATIONCONSOLIDATED FINANCIAL STATEMENTS FY2016 (1) The changes in defined benefit obligation for the years ended March 31, 2017 and 2016, were as follows:
(4) Reconciliation between the liability recorded in the consolidated balance sheet and the balances of defined
benefit obligation and plan assets:
Balance at beginning of year
Current service cost
Interest cost
Actuarial (gains) losses
Benefits paid
Prior service cost
Others
Millions of Yen
2017
2016
¥ 21,732
1,048
179
(46)
(1,630)
(25)
¥ 22,151
966
228
229
(1,999)
32
122
Thousands of
U.S. Dollars
2017
$ 194,039
9,359
1,598
(415)
(14,553)
(231)
Balance at end of year
¥ 21,257
¥ 21,732
$ 189,796
(2) The changes in plan assets for the years ended March 31, 2017 and 2016, were as follows:
Balance at beginning of year
Expected return on plan assets
Actuarial losses (gains)
Contributions from the employer
Benefits paid
Others
Millions of Yen
2017
2016
¥ 20,314
336
126
1,007
(1,614)
(41)
¥ 21,815
418
(852)
947
(1,990)
(24)
Thousands of
U.S. Dollars
2017
$ 181,377
3,007
1,132
8,992
(14,419)
(371)
Balance at end of year
¥ 20,128
¥ 20,314
$ 179,719
(3) The changes in the liability recorded in the consolidated balance sheet by using the simplified method for the
years ended March 31, 2017 and 2016, were as follows:
Balance at beginning of year
Benefit costs
Benefits paid
Contribution to the plans
Others
Millions of Yen
2017
2016
Thousands of
U.S. Dollars
2017
¥ 621
205
(435)
(79)
(2)
¥ 700
288
(97)
(91)
(179)
$ 5,547
1,830
(3,889)
(706)
(25)
Balance at end of year
¥ 308
¥ 621
$ 2,757
Funded defined benefit obligation
Plan assets
Total
Unfunded defined benefit obligation
Net liability arising from defined
benefit obligation
Liability for retirement benefits
Asset for retirement benefits
Net liability arising from defined
benefit obligation
Millions of Yen
2017
2016
Thousands of
U.S. Dollars
2017
¥ 22,151
(21,245)
905
531
¥ 22,892
(21,429)
1,463
576
$ 197,782
(189,694)
8,087
4,746
¥
1,437
¥
2,039
$
12,834
Millions of Yen
2017
2016
Thousands of
U.S. Dollars
2017
¥ 1,522
(84)
¥ 2,134
(94)
$ 13,593
(758)
¥ 1,437
¥ 2,039
$ 12,834
(5) The components of net periodic benefit costs for the years ended March 31, 2017 and 2016, were as follows:
Service cost
Interest cost
Expected return on plan assets
Recognized actuarial losses
Amortization of prior service cost
Benefit costs in simplified method
Millions of Yen
2016
2017
¥ 1,048
179
(336)
243
205
¥ 966
228
(418)
11
(114)
288
Thousands of
U.S. Dollars
2017
$
9,359
1,598
(3,007)
2,171
1,830
Net periodic benefit costs
¥ 1,338
¥ 963
$ 11,952
(6) Amounts recognized in other comprehensive income (before income tax effect) in respect of defined
retirement benefit plans for the years ended March 31, 2017 and 2016, were as follows:
Prior service cost
Actuarial losses (gains)
Total
Millions of Yen
2017
2016
Thousands of
U.S. Dollars
2017
¥ 412
¥
(146)
(1,070)
$ 3,683
¥ 412
¥ (1,217)
$ 3,683
- 19 -
- 20 -
19
20
CHIYODA CORPORATIONCONSOLIDATED FINANCIAL STATEMENTS FY2016 (7) Amounts recognized in accumulated other comprehensive income (before income tax effect) in respect of
a. Dividends
defined retirement benefit plans as of March 31, 2017 and 2016, were as follows:
Unrecognized actuarial gains
¥ (805)
¥ (393)
$ (7,195)
Millions of Yen
2017
2016
Thousands of
U.S. Dollars
2017
Total
(8) Plan assets
a. Components of plan assets
¥ (805)
¥ (393)
$ (7,195)
Plan assets as of March 31, 2017 and 2016, consisted of the following:
Debt investments
Equity investments
General accounts
Others
Total
2017
2016
29 %
34
25
12
26 %
35
25
13
100 %
100 %
b. Method of determining the expected rate of return on plan assets
The expected rate of return on plan assets is determined considering the long-term rates of return which
are expected currently and in the future from the various components of the plan assets.
(9) Assumptions used for the years ended March 31, 2017 and 2016, were set forth as follows:
2017
2016
Discount rate
Expected rate of return on plan assets
Mainly 0.7%
Mainly 1.6%
Mainly 0.7%
Mainly 1.9%
(10) Payables to defined contribution plans of the Company and consolidated subsidiaries for the years ended
March 31, 2017 and 2016, were ¥604 million ($5,399 thousand) and ¥653 million, respectively.
10. EQUITY
Japanese companies are subject to the Companies Act of Japan (the "Companies Act"). The significant provisions
in the Companies Act that affect financial and accounting matters are summarized below:
Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to the
year-end dividend upon resolution at the shareholders' meeting. Additionally, for companies that meet certain
criteria, an Audit & Supervisory Board may declare dividends (except for dividends-in-kind) at any time
during the fiscal year if the company has prescribed so in its articles of incorporation. The Board of Directors
of a company with an audit and supervisory committee (as implemented under the Companies Act effective
May 1, 2015) may also declare dividends at any time because such company, by its nature, meets the criteria
under the Companies Act. The Company is organized as a company with an audit and supervisory committee,
effective June 23, 2016. However, the Company does not meet all the above criteria.
The Companies Act permits companies to distribute dividends in kind (noncash assets) to shareholders subject
to a certain limitation and additional requirements.
Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if the
articles of incorporation of the company so stipulate. The Companies Act provides certain limitations on the
amounts available for dividends or the purchase of treasury stock. The limitation is defined as the amount
available for distribution to the shareholders, but the amount of net assets after dividends must be maintained
at no less than ¥3 million.
b.
Increases/Decreases and Transfer of Common Stock, Reserve, and Surplus
The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve
(a component of retained earnings) or as additional paid-in capital (a component of capital surplus), depending
on the equity account charged upon the payment of such dividends, until the aggregate amount of legal reserve
and additional paid-in capital equals 25% of the common stock. Under the Companies Act, the total amount of
additional paid-in capital and legal reserve may be reversed without limitation. The Companies Act also
provides that common stock, legal reserve, additional paid-in capital, other capital surplus, and retained
earnings can be transferred among the accounts within equity under certain conditions upon resolution of the
shareholders.
c.
Treasury Stock and Treasury Stock Acquisition Rights
The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stock
by resolution of the Board of Directors. The amount of treasury stock purchased cannot exceed the amount
available for distribution to the shareholders, which is determined by a specific formula.
Under the Companies Act, stock acquisition rights are presented as a separate component of equity.
The Companies Act also provides that companies can purchase both treasury stock acquisition rights and
treasury stock. Such treasury stock acquisition rights are presented as a separate component of equity or
deducted directly from stock acquisition rights.
- 21 -
- 22 -
21
22
CHIYODA CORPORATIONCONSOLIDATED FINANCIAL STATEMENTS FY2016 11.
INCOME TAXES
The Company and its domestic subsidiaries are subject to Japanese national and local income taxes which, in the
aggregate, resulted in normal effective statutory tax rates of approximately 31% and 33% for the years ended March
31, 2017 and 2016, respectively.
The tax effects of significant temporary differences and tax loss carryforwards which resulted in deferred tax assets
and liabilities at March 31, 2017 and 2016, were as follows:
Deferred tax assets:
Provision for loss on business of subsidiaries and
associated companies
Tax loss carryforwards
Cost of revenue
Adjustment of percentage of completion for foreign
construction
Allowance for employees' bonus
Allowance for losses on construction contracts
Costs of construction contracts in process
Future deductible depreciation
Allowance for doubtful accounts
Deferred loss on derivatives under hedge accounting
Other
Less valuation allowance
Millions of Yen
2017
2016
Thousands of
U.S. Dollars
2017
¥
7,008
6,140
5,834
5,427
950
925
767
550
391
3,055
(15,675)
$
¥
4,589
4,737
1,067
970
600
674
610
671
3,428
(1,694)
62,578
54,825
52,092
48,459
8,487
8,265
6,849
4,918
3,493
27,285
(139,951)
A reconciliation between the normal effective statutory tax rates and the actual effective tax rates reflected in the
accompanying consolidated statements of operations for the years ended March 31, 2017 and 2016, is as follows:
Normal effective statutory tax rate
Expenses not deductible for income tax purposes
Nontaxable dividend income
Jointly controlled assets of joint venture
Difference in tax base between corporate income tax and enterprise tax
Change in valuation allowance
Higher income tax rates applicable to subsidiaries
Effect of reduction of income tax rates on deferred tax assets
Equity in losses of associated companies
Other—net
Actual effective tax rate
* As loss before income taxes is provided, the amount is abbreviated.
2017
2016
*
33 %
1
(3)
4
4
16
15
5
2
(1)
76 %
New tax reform laws enacted in 2016 in Japan do not impact on effective rates which are used for calculating
deferred tax assets and liabilities, however, there are reclassifications between national tax and local tax. The effect
of this change on the consolidated financial statements is immaterial.
12. RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to income were ¥2,075 million ($18,534 thousand) and ¥1,908 million for
the years ended March 31, 2017 and 2016, respectively.
Total
15,378
15,655
137,304
13. LEASES
Deferred tax liabilities:
Deferred gain on derivatives under hedge accounting
Unrealized gain on available-for-sale securities
Other
Total
226
40
557
824
987
171
1,159
2,023
358
4,974
7,357
Net deferred tax assets
¥ 14,554
¥ 14,495
$ 129,946
Net deferred tax assets as of March 31, 2017 and 2016, were recorded in the accompanying consolidated balance
sheet as follows:
Current assets—Deferred tax assets
Investments and other assets—Deferred tax assets
Long-term liabilities—Other
Millions of Yen
2017
2016
¥ 9,586
4,967
¥ 12,889
2,894
1,287
Thousands of
U.S. Dollars
2017
$ 85,593
44,353
The Group leases certain machinery, computer equipment, and other assets.
Future minimum payments under noncancelable operating leases were as follows:
Due within one year
Due after one year
Total
Millions of Yen
2017
2016
Thousands of
U.S. Dollars
2017
¥
763
1,730
¥
731
1,691
$
6,814
15,451
¥ 2,493
¥ 2,423
$ 22,265
14.
FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES
(1) Group Policy for Financial Instruments
The Group uses financial instruments for cash surpluses, if any, invested in low-risk financial assets, such as
commercial paper. For operating capital, the Group uses bank loans. Derivatives are used, not for speculative
purposes, but to manage exposure to the market risk of fluctuation in foreign currency exchange rates and
interest rates.
- 23 -
- 24 -
23
24
CHIYODA CORPORATIONCONSOLIDATED FINANCIAL STATEMENTS FY2016 (2) Nature and Extent of Risks Arising from Financial Instruments
Receivables, such as trade notes and trade accounts, are exposed to customer credit risk. Although receivables
in foreign currencies are exposed to the market risk of fluctuation in foreign currency exchange rates, the
position, net of payables in foreign currencies, is hedged by using foreign currency forward contracts.
Cash equivalents include commercial paper, which have short maturities and are used for cash surpluses.
Foreign currency forward contracts are controlled under internal guidelines. The position related to particular
construction contracts is identified and is reviewed monthly. Reconciliation of the transaction and balances
with customers' confirmation replies is made, and the transactions related to foreign currency forward
contracts are executed and accounted for under internal guidelines.
Marketable and investment securities are managed by monitoring the market values and financial position of
issuers on a regular basis. The Group assesses the stock price risk quantitatively so as to account for significant
declines in market value as impairment losses.
Short-term investments include time deposits, which will mature three months after the date of acquisition.
Both commercial paper and time deposits are exposed to default risk of the issuing company.
Liquidity risk management
Investment securities are equity securities related to the business, which the Group operates. Marketable
securities are exposed to the risk of fluctuations in stock prices.
Payment terms of payables, such as trade notes and trade accounts, are generally less than one year. Although
payables in foreign currencies are exposed to the market risk of fluctuation in foreign currency exchange rates,
those risks are netted against the balance of receivables denominated in the same foreign currency as noted
above.
Bank loans are used for operating capital. Although they are exposed to the market risks from changes in
interest rates, the risk is hedged by using interest rate swap contracts.
Derivatives are foreign currency forward contracts and interest rate swap contracts, which are used to manage
exposure to market risks from changes in foreign currency exchange rates of receivables and payables, and
from changes in interest rates, respectively. Please see Notes 2.y and 15 for more details about derivatives.
(3) Risk Management for Financial Instruments
Credit risk management
Credit risk is the risk of economic loss arising from a counterparty's failure to repay or service debt according
to the contractual terms. The Group manages its credit risk from receivables on the basis of internal guidelines,
which include monitoring of payment terms and balances of major customers to identify the default risk of
customers at an early stage.
Commercial paper and time deposits are exposed to insignificant default risk because transactions are limited
to companies with high credit ratings.
With respect to foreign currency forward contracts, the Group limits the counterparties to those derivatives to
major financial institutions that can bear losses arising from credit risk.
Market risk management (risk of foreign exchange and interest rates)
Foreign currency trade receivables and payables are exposed to market risk resulting from fluctuations in
foreign currency exchange rates. Such foreign exchange risk is hedged principally with foreign currency
forward contracts.
Interest expense associated with long-term debts is exposed to market risk resulting from changes in interest
rates. Such risk is hedged by interest rate swap contracts.
Liquidity risk comprises the risk that the Group cannot meet its contractual obligations in full on their maturity
dates. The Group manages its liquidity risk by holding adequate volumes of liquid assets along with timely
adequate financial planning.
(4) Fair Values of Financial Instruments
Fair values of financial instruments are based on quoted prices in active markets. If a quoted price is not
available, another rational valuation technique is used instead. Also, please see Note 15 for the details of fair
value for derivatives.
(a) Fair values of financial instruments
March 31, 2017
Cash and cash equivalents
Short-term investments
Notes and accounts receivable—trade
Allowance for doubtful accounts*
Costs and estimated earnings on
long-term construction contracts
Jointly controlled assets of joint venture
Investment securities
Total
Short-term borrowings
Current portion of long-term debt
Notes and accounts payable—trade
Income taxes payable
Long-term debt
Carrying
Amount
¥ 138,889
4,483
40,377
(1,517)
19,487
164,283
1,100
Millions of Yen
Fair Value
¥ 138,889
4,483
40,377
(1,517)
19,487
164,283
1,100
¥ 367,104
¥ 367,104
¥
203
10,004
160,096
668
4
¥
203
10,028
160,096
668
4
Unrealized
Gain (Loss)
¥ 24
Total
¥ 170,977
¥ 171,002
¥ 24
- 25 -
- 26 -
25
26
CHIYODA CORPORATIONCONSOLIDATED FINANCIAL STATEMENTS FY2016 March 31, 2016
Cash and cash equivalents
Short-term investments
Notes and accounts receivable—trade
Allowance for doubtful accounts*
Costs and estimated earnings on
long-term construction contracts
Jointly controlled assets of joint venture
Investment securities
Total
Short-term borrowings
Current portion of long-term debt
Notes and accounts payable—trade
Income taxes payable
Long-term debt
Total
March 31, 2017
Cash and cash equivalents
Short-term investments
Notes and accounts receivable—trade
Allowance for doubtful accounts*
Costs and estimated earnings on
long-term construction contracts
Jointly controlled assets of joint venture
Investment securities
Total
Short-term borrowings
Current portion of long-term debt
Notes and accounts payable—trade
Income taxes payable
Long-term debt
Carrying
Amount
¥ 136,919
7,795
35,651
(2,283)
33,644
179,360
12,080
Millions of Yen
Fair Value
¥ 136,919
7,795
35,651
(2,283)
33,644
179,360
12,080
¥ 403,169
¥ 403,169
¥
333
5
150,078
2,841
10,009
¥
333
5
150,078
2,841
10,062
¥ 163,268
¥ 163,320
¥ 52
¥ 52
Thousands of U.S. Dollars
Carrying
Amount
Fair Value
Unrealized
Gain (Loss)
$ 1,240,081
40,034
360,509
(13,548)
$ 1,240,081
40,034
360,509
(13,548)
173,999
1,466,813
9,826
173,999
1,466,813
9,826
$ 3,277,716
$ 3,277,716
$
1,819
89,321
1,429,436
5,972
36
$
1,819
89,538
1,429,436
5,972
36
$ 217
Total
$ 1,526,586
$ 1,526,803
$ 217
* Allowance for doubtful accounts corresponding to trade receivable is deducted.
Unrealized
Gain (Loss)
The carrying values of the accounts mentioned above approximate fair value because of their short
maturities.
Cash and Cash Equivalents, Short-Term Investments, Notes and Accounts Receivable—Trade, and Costs
and Estimated Earnings on Long-Term Construction Contracts
Jointly Controlled Assets of Joint Venture
The jointly controlled assets of the joint venture consists of cash recognized based on the Company's
share of the venture. The carrying values of jointly controlled assets of the joint venture approximate fair
value because of their short maturities.
Investment Securities
The fair values of investment securities are measured at the quoted market price of the stock exchange for
the equity instruments. Fair value information for investment securities by classification is included in
Note 5.
The above schedules do not include investment securities whose fair value cannot be reliably determined.
Short-Term Borrowings, Notes and Accounts Payable—Trade and Income Taxes Payable
The carrying values of the accounts mentioned above approximate fair value because of their short
maturities.
Current Portion of Long-Term Debt (Bank Loans) and Long-Term Debt (Bank Loans)
The fair value of fixed rate loans is calculated by discounting total principal and interest payments to
present value using a discount rate equal to the rate that would be charged if the loan was newly
borrowed. The fair value of floating rate loans, which are subject to a specific method for interest rate
swaps, is calculated by discounting total principal and interest payments, which are handled together with
interest rate swaps, to present value using a discount rate equal to the rate that would be charged if the
loan was newly borrowed.
Derivatives
Fair value information for derivatives is included in Note 15.
(b) Carrying amount of financial instruments whose fair values cannot be reliably determined
Investment securities that do not have a quoted
market price in an active market
Investments in equity instruments that do not
have a quoted market price in an active market
Investments in unconsolidated subsidiaries and
associated companies that do not have a quoted
market price in an active market
Millions of Yen
2017
2016
Thousands of
U.S. Dollars
2017
¥ 1,645
¥
2,030
$ 14,690
2
2
23
4,959
28,957
44,280
The impairment losses on investment securities for the year ended March 31, 2017, were ¥393 million
($3,513 thousand).
- 27 -
- 28 -
27
28
CHIYODA CORPORATIONCONSOLIDATED FINANCIAL STATEMENTS FY2016 (5) Maturity Analysis for Financial Assets and Securities with Contractual Maturities
15. DERIVATIVES
March 31, 2017
Derivative Transactions to Which Hedge Accounting Is Not Applied
Millions of Yen
Due after
1 Year
through
5 Years
Due after
5 Years
through
10 Years
¥ 8
¥ 8
Millions of Yen
Due after
1 Year
through
5 Years
Due after
5 Years
through
10 Years
¥ 3
¥ 3
Due in
1 Year
or Less
¥ 138,847
4,483
58,338
164,283
¥ 365,953
Due in
1 Year
or Less
¥ 136,625
7,795
67,010
179,360
¥ 390,791
Thousands of U.S. Dollars
Due after
1 Year
through
5 Years
Due after
5 Years
through
10 Years
Due in
1 Year
or Less
$ 1,239,712
40,034
520,881
1,466,813
$ 79
$ 3,267,441
$ 79
Cash and cash equivalents
Short-term investments
Notes and accounts receivable, and costs and
estimated earnings on long-term construction
contracts*
Jointly controlled assets of joint venture
Total
March 31, 2016
Cash and cash equivalents
Short-term investments
Notes and accounts receivable, and costs and
estimated earnings on long-term construction
contracts
Jointly controlled assets of joint venture
Total
March 31, 2017
Cash and cash equivalents
Short-term investments
Notes and accounts receivable, and costs and
estimated earnings on long-term construction
contracts*
Jointly controlled assets of joint venture
Total
* Allowance for doubtful accounts is deducted.
Please see Note 8 for annual maturities of long-term debt.
March 31, 2017
Foreign currency forward contracts:
Selling U.S.$/buying yen
Selling Euro/buying yen
Selling GBP/buying yen
Selling AUD/buying yen
Buying U.S.$/selling yen
Selling U.S.$/buying Euro
Selling U.S.$/buying KRW
Total
March 31, 2016
Foreign currency forward contracts:
Selling U.S.$/buying yen
Selling Euro/buying yen
Selling GBP/buying yen
Selling AUD/buying yen
Selling MYR/buying yen
Buying Euro/selling U.S.$
Buying AUD/selling Euro
Buying U.S.$/selling Euro
Buying AUD/selling GBP
Buying U.S.$/selling GBP
Millions of Yen
Contract
Amount
Due after
One Year
¥ 328
30
Contract
Amount
¥ 42,679
7,071
1,471
6,199
30
166
637
Fair
Value
(Loss)
¥ (62)
(5)
(1)
6
(1)
(14)
(25)
Unrealized
Gain (Loss)
¥ (62)
(5)
(1)
6
(1)
(14)
(25)
¥ 58,256
¥ 358
¥ (103)
¥ (103)
Millions of Yen
Contract
Amount
Due after
One Year
Fair
Value
(Loss)
Unrealized
Gain (Loss)
¥ 207
¥ (87)
(1)
¥ (87)
(1)
13
23
(55)
(21)
(3)
(1)
6
23
(55)
(21)
(3)
(1)
6
Contract
Amount
¥ 42,188
6,438
5,088
8,665
1,392
98
575
191
1,029
195
Total
¥ 65,863
¥ 221
¥ (141)
¥ (141)
- 29 -
- 30 -
29
30
CHIYODA CORPORATIONCONSOLIDATED FINANCIAL STATEMENTS FY2016 March 31, 2017
March 31, 2016
Foreign currency forward contracts—
Accounted for under deferred hedge
accounting method:
Selling U.S.$/buying yen
Buying U.S.$/selling yen
Buying Euro/selling yen
Buying Euro/selling U.S.$
Buying KRW/selling U.S.$
Total
Other*1:
Selling U.S.$/buying yen
Buying U.S.$/selling yen
Buying Euro/selling yen
Total
Hedged Item
Contract
Amount
Millions of Yen
Contract
Amount
Due after
One Year
Fair
Value
(Loss)
Foreign currency
forecasted
transaction
¥
6,491
473
302
1,292
1,293
¥
1,465
226
100
¥ (266)
(23)
(12)
(106)
33
¥
9,852
¥
1,792
¥ (376)
Receivables
Payables
¥
415
64
22
¥
502
¥
¥
22
22
Interest rate swaps*2 (fixed rate payment,
Long-term debt
¥ 10,000
¥ 10,000
floating rate receipt)
Total
¥ 10,000
¥ 10,000
Foreign currency forward contracts:
Selling U.S.$/buying yen
Selling Euro/buying yen
Selling GBP/buying yen
Selling AUD/buying yen
Buying U.S.$/selling yen
Selling U.S.$/buying Euro
Selling U.S.$/buying KRW
Thousands of U.S. Dollars
Contract
Amount
Due after
One Year
$ 2,931
271
Fair
Value
(Loss)
$ (558)
(45)
(9)
60
(10)
(128)
(231)
Unrealized
Gain (Loss)
$ (558)
(45)
(9)
60
(10)
(128)
(231)
Contract
Amount
$ 381,069
63,135
13,136
55,351
271
1,490
5,695
Total
$ 520,151
$ 3,203
$ (923)
$ (923)
Derivative Transactions to Which Hedge Accounting Is Applied
March 31, 2017
Foreign currency forward contracts—
Accounted for under deferred hedge
accounting method:
Selling U.S.$/buying yen
Buying U.S.$/selling yen
Buying Euro/selling yen
Buying SEK/selling yen
Total
Other*1:
Selling U.S.$/buying yen
Buying Euro/selling yen
Total
Hedged Item
Foreign currency
forecasted
transaction
Millions of Yen
Contract
Amount
Due after
One Year
Contract
Amount
Fair
Value
(Loss)
¥ 657
141
¥
3,554
237
4
30
¥ (28)
(6)
(1)
¥
3,825
¥ 799
¥ (37)
Receivables
¥
¥
519
11
531
Interest rate swaps*2 (fixed rate payment,
Long-term debt
¥ 10,000
floating rate receipt)
Total
¥ 10,000
- 31 -
- 32 -
31
32
CHIYODA CORPORATIONCONSOLIDATED FINANCIAL STATEMENTS FY2016 March 31, 2017
17. OTHER COMPREHENSIVE LOSS
Thousands of U.S. Dollars
The components of other comprehensive loss for the years ended March 31, 2017 and 2016, were as follows:
Foreign currency forward contracts—
Accounted for under deferred hedge
accounting method:
Selling U.S.$/buying yen
Buying U.S.$/selling yen
Buying Euro/selling yen
Buying SEK/selling yen
Total
Other*1:
Selling U.S.$/buying yen
Buying Euro/selling yen
Total
Hedged Item
Contract
Amount
Contract
Amount
Due after
One Year
Fair
Value
(Loss)
Foreign currency
forecasted
transaction
$ 31,736
2,117
36
269
$ 5,874
1,260
$ (251)
(61)
(5)
(14)
$ 34,160
$ 7,135
$ (332)
Receivables
$
4,638
101
$
4,746
Unrealized loss on available-for-sale securities:
Losses arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect
Total
Deferred gain on derivatives under hedge
accounting:
Gains arising during the year
Reclassification adjustments to profit or loss
Adjustment to acquisition cost of assets
Amount before income tax effect
Income tax effect
Interest rate swaps*2 (fixed rate payment,
Long-term debt
$ 89,285
Total
floating rate receipt)
Total
$ 89,285
Foreign currency translation adjustments—
Adjustments arising during the year
*1 Foreign currency forward contracts, which are applied to the foreign currency translation at the contract rate of
Total
the assets and liabilities on construction contracts denominated in foreign currencies.
Millions of Yen
2017
2016
Thousands of
U.S. Dollars
2017
¥ (1,410)
(1,543)
(2,954)
947
¥ (4,365)
(2,686)
(7,052)
2,220
$ (12,593)
(13,782)
(26,375)
8,458
¥ (2,006)
¥ (4,831)
$ (17,917)
¥
895
351
1,780
3,027
(897)
¥
534
202
(80)
656
(214)
$
7,998
3,138
15,898
27,034
(8,017)
¥ 2,129
¥
441
$ 19,017
¥ (1,102)
¥ (1,135)
¥ (1,102)
¥ (1,135)
¥
169
243
412
(120)
¥ (1,082)
(135)
(1,217)
441
$
$
$
(9,843)
(9,843)
1,512
2,171
3,683
(1,080)
*2
Interest rate swap contracts accounted for under a specific method, are treated as part of the hedged long-term
debt and thus their fair values are integrally computed with those of the hedged long-term debt. See Note 14 for
the fair value of long-term debt.
16. CONTINGENT LIABILITIES
At March 31, 2017, the Group had the following contingent liabilities:
Guarantees on employees' housing loans and others
Performance bond for unconsolidated subsidiaries
and associated companies
Millions of Yen
¥
43
1,300
Thousands of
U.S. Dollars
$
384
11,608
Defined retirement benefit plans:
Adjustments arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect
Total
¥
291
¥
(775)
$
2,603
Share of other comprehensive loss of associates:
Loss arising during the year
Reclassification adjustments to profit or loss
Total
¥ (1,380)
928
¥
(451)
¥
¥
(83)
$ (12,323)
8,292
(83)
$
(4,030)
Total other comprehensive loss
¥ (1,139)
¥ (6,385)
$ (10,170)
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33
34
CHIYODA CORPORATIONCONSOLIDATED FINANCIAL STATEMENTS FY2016 18. NET (LOSS) INCOME PER SHARE
20.
SEGMENT INFORMATION
A reconciliation of the differences between basic and diluted net (loss) income per share ("EPS") for the years
ended March 31, 2017 and 2016, was as follows:
Year Ended March 31, 2017
Millions
of Yen
Net Loss
Attributable
to Owners of
the Parent
Thousands
of Shares
Weighted-
Average
Shares
Yen
U.S. Dollars
EPS
Basic EPS—Net loss available
to common shareholders
¥ (41,116)
258,979
¥ (158.76 )
$ (1.42 )
There is no dilutive effect for the year ended March 31, 2017.
Year Ended March 31, 2016
Millions
of Yen
Net Income
Attributable
to Owners of
the Parent
Thousands
of Shares
Weighted-
Average
Shares
Yen
EPS
Under Japanese accounting standards, an entity is required to report financial and descriptive information about its
reportable segments. Reportable segments are operating segments or aggregations of operating segments that meet
specified criteria. Operating segments are components of an entity about which separate financial information is
available and such information is evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. Generally, segment information is required to be reported on the
same basis as is used internally for evaluating operating segment performance and deciding how to allocate
resources to operating segments.
(1) Description of Reportable Segments
The Group's reportable segments are those for which separate financial information is available and regular
evaluation by the Company's management is being performed in order to decide how resources are allocated
within the Group. The Group globally provides "Engineering" services, including planning, engineering,
construction, procurement, commissioning, and maintenance, adapting the most appropriate functions of each
related company.
(2) Methods of Measurement for the Amounts of Sales, Profit (Loss), Assets, Liabilities, and Other Items for
Each Reportable Segment
The accounting policies of each reportable segment are consistent with those disclosed in Note 2, "Summary
of Significant Accounting Policies."
The profit in reporting segments is based on the operating income. Intersegment income and transfers are
measured at the quoted market price.
(3)
Information about Sales, Profit, Assets, Liabilities, and Other Items
Basic EPS—Net income available
to common shareholders
¥ 3,375
258,990
¥ 13.03
Year Ended March 31, 2017
There is no dilutive effect for the year ended March 31, 2016.
19.
SUBSEQUENT EVENT
The following appropriation of retained earnings at March 31, 2017, was approved at the Company's shareholders'
meeting held on June 26, 2017:
Year-end cash dividends, ¥6.00 ($0.05) per share
¥ 1,553
$ 13,873
Millions of Yen
Thousands of
U.S. Dollars
Millions of Yen
Reportable
Segment
Engineering
Other*1
Total
Reconcili-
ations*2
Consoli-
dated*3
Sales:
Sales to external customers
Intersegment sales or transfers
¥ 600,244
21
¥ 3,501
5,380
¥ 603,745
5,401
¥ (5,401)
¥ 603,745
Total
¥ 600,265
¥ 8,881
¥ 609,147
¥ (5,401)
¥ 603,745
Segment profit
Segment assets
Segment liabilities
Other:
Depreciation
Amortization of goodwill
Investment in associated
companies
Increase in property, plant
and equipment and
intangible assets
¥
15,416
455,596
294,553
¥
265
4,893
1,549
¥
15,682
460,489
296,102
¥
(2)
841
8,103
¥
15,680
461,331
304,206
3,620
517
2,868
22
29
3,643
547
2,868
2,109
21
2,131
3,643
547
2,868
2,131
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35
36
CHIYODA CORPORATIONCONSOLIDATED FINANCIAL STATEMENTS FY2016 Year Ended March 31, 2016
Notes for the year ended March 31, 2017:
Millions of Yen
Reportable
Segment
Engineering
Other*1
Total
Reconcili-
ations*2
Consoli-
dated*3
Sales:
Sales to external customers
Intersegment sales or transfers
¥ 607,693
21
¥
3,855
6,229
¥ 611,548
6,250
¥ (6,250)
¥ 611,548
Total
¥ 607,715
¥ 10,084
¥ 617,799
¥ (6,250)
¥ 611,548
Segment profit
Segment assets
Segment liabilities
Other:
Depreciation
Amortization of goodwill
Investment in associated
companies
Increase in property, plant
and equipment and
intangible assets
Year Ended March 31, 2017
¥
15,662
522,693
316,597
¥
328
4,771
1,476
¥
15,990
527,464
318,074
¥
24
755
8,016
¥
16,015
528,219
326,091
3,568
1,226
26,929
21
29
3,589
1,256
26,929
2,677
20
2,698
3,589
1,256
26,929
2,698
Thousands of U.S. Dollars
Reportable
Segment
Engineering
Other*1
Total
Reconcili-
ations*2
Consoli-
dated*3
Sales:
Sales to external customers
Intersegment sales or transfers
$ 5,359,327
189
$ 31,260
48,037
$ 5,390,587
48,227
$ (48,227)
$ 5,390,587
Total
$ 5,359,517
$ 79,297
$ 5,438,815
$ (48,227) $ 5,390,587
*1 "Other" represents industry segments, which are not included in the reportable segment, consisting of
temporary staffing services and travel services.
*2 The details of the reconciliations are as follows:
(1) The reconciliation in segment profit of ¥(2) million ($(21) thousand) is the elimination of
intersegment trades.
(2) The reconciliation in segment assets of ¥841 million ($7,516 thousand) is the result of the elimination
of intersegment trades of ¥(1,909) million ($(17,050) thousand) and the Group's assets of
¥2,751 million ($24,566 thousand), which are not included in the reportable segment.
(3) The reconciliation in segment liabilities of ¥8,103 million ($72,354 thousand) is the result of the
elimination of intersegment trades of ¥(1,896) million ($(16,931) thousand) and the Group's liabilities
of ¥10,000 million ($89,285 thousand), which are not included in the reportable segment.
*3 The calculation of the segment profit is based on the operating income in the consolidated statement of
operations.
Notes for the year ended March 31, 2016:
*1 "Other" represents industry segments, which are not included in the reportable segment, consisting of
temporary staffing services and travel services.
*2 The details of the reconciliations are as follows:
(1) The reconciliation in segment profit of ¥24 million is the elimination of intersegment trades.
(2) The reconciliation in segment assets of ¥755 million is the result of the elimination of intersegment
trades of ¥(1,994) million and the Group's assets of ¥2,749 million, which are not included in the
reportable segment.
(3) The reconciliation in segment liabilities of ¥8,016 million is the result of the elimination of
intersegment trades of ¥(1,983) million and the Group's liabilities of ¥10,000 million, which are not
included in the reportable segment.
*3 The calculation of the segment profit is based on the operating income in the consolidated statement of
Segment profit
Segment assets
Segment liabilities
Other:
Depreciation
Amortization of goodwill
Investment in associated
companies
Increase in property, plant
and equipment and
intangible assets
$
137,648
4,067,824
2,629,945
$
2,373
43,692
13,830
$
140,021
4,111,517
2,643,776
$
(21) $
7,516
72,353
140,000
4,119,033
2,716,130
operations.
Related Information
202
267
32,326
4,618
25,615
32,529
4,886
25,615
18,836
194
19,030
32,529
4,886
25,615
19,030
(1)
Information about Products and Services
The engineering business represents more than 90% of the total sales of the Group. Accordingly, the
presentation of the information about each service is not required under Japanese GAAP.
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37
38
CHIYODA CORPORATIONCONSOLIDATED FINANCIAL STATEMENTS FY2016 (2)
Information about Geographical Areas
(a) Revenue
Year Ended March 31, 2017
Japan
Australia
Russia
U.S.A.
Others
Total
Year Ended March 31, 2016
Japan
Australia
Russia
U.S.A.
Vietnam
Others
Total
Millions of Yen
¥ 102,434
96,046
147,418
155,142
102,703
Thousands of
U.S. Dollars
$
914,595
857,556
1,316,239
1,385,203
916,992
¥ 603,745
$ 5,390,587
Millions of Yen
¥ 111,464
143,980
117,274
79,750
71,885
87,193
¥ 611,548
Note: Revenue is classified by country or region based on the location of construction sites.
(b) Property, plant and equipment
Year Ended March 31, 2017
Japan
Asia
Others
Total
Year Ended March 31, 2016
Japan
Asia
Others
Total
Millions of Yen
¥ 11,338
1,493
326
Thousands of
U.S. Dollars
$ 101,235
13,338
2,912
¥ 13,158
$ 117,487
Millions of Yen
¥ 11,732
1,704
504
¥ 13,942
(3)
Information about Major Customers
Year Ended March 31, 2017
Name
OJSC Yamal LNG
Cameron LNG LLC
Ichthys Lng Pty Ltd.
Year Ended March 31, 2016
Name
Ichthys Lng Pty Ltd.
OJSC Yamal LNG
Nghi Son Refinery and
Petrochemical LLC
Cameron LNG LLC
Related Segment
Millions of Yen
Revenue
Engineering
Engineering
Engineering
¥ 145,868
130,509
88,950
Thousands of
U.S. Dollars
Revenue
$ 1,302,392
1,165,258
794,196
Related Segment
Millions of Yen
Revenue
Engineering
Engineering
Engineering
Engineering
¥ 134,100
116,803
71,867
63,619
(4)
Information about Impairment Loss on Fixed Assets by Reportable Segment
Impairment loss of goodwill as of March 31, 2017 and 2016, was as follows:
Millions of Yen
Engineering
Total
2017
¥ 766
¥ 766
Thousands of
U.S. Dollars
2017
2016
¥ 4,431
$ 6,839
¥ 4,431
$ 6,839
(5)
Information about Goodwill by Reportable Segment
The ending balance of goodwill as of March 31, 2017 and 2016, was as follows:
Engineering
Other*
Total
* Other involves temporary staffing services.
Millions of Yen
2017
2016
Thousands of
U.S. Dollars
2017
¥ 1,676
374
¥ 3,527
404
$ 14,969
3,347
¥ 2,051
¥ 3,931
$ 18,317
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39
40
CHIYODA CORPORATIONCONSOLIDATED FINANCIAL STATEMENTS FY2016 INDEPENDENT AUDITOR’S REPORT
21. RELATED PARTY DISCLOSURES
The material transactions of the Group with unconsolidated subsidiaries and associated companies for the year ended March
31, 2017, were as follows:
Loan of funds*2
Guarantee obligation*1,*3
Millions of Yen
¥ 12,101
13,632
Thousands of
U.S. Dollars
$ 108,045
121,720
The material balances due to or from these unconsolidated subsidiaries and associated companies at March 31, 2017, were as
follows:
Prepaid expenses and other*3
Millions of Yen
Thousands of
U.S. Dollars
¥ 6,396
$ 57,113
*1 This is a guarantee for bonds, etc. related to constructions of associated company guaranteed by the Company.
*2 Regarding loan of funds applicable interest rates are rationally determined upon taking into account the market rate of
interest.
*3 ¥18,907 million ($168,816 thousand) of the provision for loss on business of subsidiaries and associated companies is
provided for loans and guarantee obligation.
* * * * * *
41
42
CHIYODA CORPORATIONCONSOLIDATED FINANCIAL STATEMENTS FY2016 Minato Mirai Grand Central Tower
4-6-2, Minatomirai, Nishi-ku,
Yokohama 220-8765, Japan
Tel: (81)45-225-7777 (voice guidance)
http://www.chiyoda-corp.com/en/
CORPORATE PHILOSOPHY
Enhance our business in aiming for harmony between energy and the environment,
and contribute to the sustainable development of society as an integrated engineering company
through the use of our collective wisdom and painstakingly developed technology.