JGC Report 2019 Corporate Philosophy JGC Way As of October 1, 2019, the JGC Group will adopt a holding company structure. Through this reform, we are seeking to evolve into a corporate group with a balanced The corporate philosophy of the JGC Group, the “JGC Way,” is the fundamental platform pursuant to which the business activities of the revenue structure from multiple business segments. Overseas oil and gas will remain a group are promoted and furthermore is followed by each and every JGC Group employee and executive in their activities. central Group business as we also allocate suitable management resources to overseas infrastructure, domestic EPC business, and functional materials manufacturing. Mission We are committed to creating a more prosperous future for our clients, for people and for society through integrating our core capa- bilities and technical expertise to generate innovative solutions. Values We are driven by our shared values and commitments. These elements express our strengths and represent the basis for how we work and deliver solutions to our clients and stakeholders: Shared Values Challenge We venture into new business fields, overcome tech- nical hurdles and establish innovative methodologies. Create We remain dedicated to developing results-focused, thoughtful solutions that fully meet the needs of our clients and benefit society as a whole. Integrate We bring together a wide range of technologies, innovative tools and a diverse team dedicated to increasing value to all stakeholders. Deliver We commit to overcoming obstacles through diligence and our “never-give-up” philosophy, and to delivering quality products and services to our clients and society. Professional Commitments Respect We undertake to foster mutual respect and support among all those involved in our activities and to emphasize the importance of safety for all. Integrity We pledge to maintain the highest ethical standards in everything we do. Vision We bring a new generation of innovative solutions to the energy and infrastructure industries by utilizing our core competencies in engineering and project management. at investors) (Primarily aimed Narrow CONTENTS Chapter 2 JGC Group Strengths and Management Chapter 4 Environmental and Social Initiatives Editorial Policy Base Supporting These Strengths Corporate Philosophy・Editorial Policy 01 JGC Group Materiality 59 JGC Report Purpose of This Report Information Provided (Integrated Report) JGC Group Strengths 29 Achieving a Sustainable, The purpose of the JGC Report, which was first Chapter 1 Toward Sustainable Growth The JGC Report summarizes and presents the Target Management Base Supporting Strengths 35 Environmentally Friendly Society 61 published in 2015, is to explain to stakeholders most relevant information related to the JGC JGC Website Message from Chairman & CEO 05 Working with Local Communities around the World 64 how the JGC Group works to generate sustain- Group and society. For detailed and compre- Chapter 3 Management Structure and Broad Message from President & COO 09 Human Rights, Diversity, Quality of Work 65 able growth and increase corporate value over hensive financial and non-financial information Promotion of Corporate Governance Reform of the Group Management Structure 13 Ensuring Occupational Health and Safety 66 the medium to long term. JGC uses this report about the Group, please visit the JGC website. Detailed Critical as a tool to communicate with stakeholders as (Comprehensive) Content Messages from Outside Board Members 41 JGC STORY 15 part of its efforts to deliver sustainable growth Forward-looking Statements Corporate Governance 43 Financial Information 1 Growth Trajectory Chapter 5 Business Outlook through continuous, constructive dialogue. Data and forecasts disclosed in this report are Management Structure 51 based on judgments and information available Earnings data, etc. 2 Value Creation Process https://www.jgc.com/en/ir/ Dialogue with shareholders and investors Total Engineering Business 69 3 JGC Group Business Period Covered at the time of publication. The Company Functional Materials Production Business 72 (disclosure of information and IR activities) 52 In principle, the report covers the period April provides no guarantee for targets, forecasts Non-financial Information 4 Adapting to Change Risk Management 53 2018 to March 2019 (fiscal 2018), but also and earnings projections, which may change Sustainability information http://www.jgc.com/en/esg-hsse/ Message from CFO 23 Quality Management System 54 Chapter 6 Data Section 75 includes information related to events from due to a range of factors. Financial and Non-financial Highlights 25 Compliance 55 April 2019. 1 JGC Report 2019 JGC Corporation 2 Chapter 1 Toward SustainableToward Growth Toward Sustainable Growth This chapter describes historical growth of the JGC Group and how the Group creates value. Responses to developments in the business environment and current measures in line with the Beyond the Horizon medium-term business plan are discussed by the chairman and president, with insight on financial strategy from the chief financial officer. Message from CEO p.05 Message from COO p.09 Reform of the Group Management Structure p.13 JGC STORY p.15 1 Growth Trajectory 2 Value Creation Process 3 JGC Group Business 4 Adapting to Change Message from CFO p.23 Financial and Non-financial Highlights p.25 Masayuki Sato Tadashi Ishizuka Representative Director, Representative Director, Chairman, and Chief Executive Officer President, and Chief Operating Officer 3 JGC Report 2019 JGC Corporation 4 Chapter 1 Toward Sustainable Growth 1. Reforming the group management structure SustainableToward Growth Of the many companies around the world that have grown more valuable over time, all have at one point undertaken and proven what they can do. The nature of this reform varies. For some, reform is the only way to break free from a management crisis. Others undertake reform to become more robust, in response to market changes affecting their main business. And for others who anticipate future market changes, proactive Message reform expands business, as core competencies are from applied from main business segments. CEO My decision to reform the group management structure, as world-class companies have done, was motivated by the awareness that now is the time for proactive reform in anticipation of future market changes, to expand business by applying core competencies from For a management main business segments as the plant market steadily recovers. In retrospect, it has been a longstanding challenge structure unaffected for us to diversify our business portfolio to avoid overreliance on the overseas oil and gas segment, as a company whose record has been shaken about once a by changes in the natural decade by turbulence in the natural resource market. The fact remains that despite our past attempts to move resource market into and invest in EPC business in non-hydrocarbon sectors – and our success in cultivating EPC segments such as life sciences, healthcare, and nonferrous metals – these efforts did not substantially change our business portfolio itself. In my view, there were primarily two reasons for this. First, as long as we kept receiving orders on the scale of billions of dollars for oil and gas projects, that is where Masayuki Sato the attention of our top management was focused and Representative Director, Chairman, our resources went, which undermined a sustained and Chief Executive Officer (CEO) commitment to expanding our portfolio. And second, we can generalize that in the new segments we ventured into in the past, our core competencies Since joining JGC in 1979, Masayuki Sato of broad technical expertise in engineering, advanced has worked throughout the company in functional materials manufacturing, and superior finance and accounting, in charge of finance for projects in the Middle East, North Africa, project execution capabilities, were not sufficiently Southeast Asia, and CIS countries. relevant, or that we did not find a good match for these He was appointed director in June 2010. competencies. He served as managing director, senior general manager of the Corporate In anticipation of future market changes, we are moving Administrative & Financial Affairs Division, to the new group management structure in order to and Chief Financial Officer (CFO) from July expand business, building on core competencies. 2011 and was appointed executive vice However, what greatly distinguishes this reform from president and director in June 2012. Since June 2017, he has held the positions of past diversification is the change to a holding company representative director, chairman, and CEO. structure, in which separate companies will pursue separate business. Our intention here is to be a corporate group with a multi-business portfolio. In total engineering, 5 JGC Report 2019 JGC Corporation 6 Chapter 1 Toward Sustainable Growth our portfolio consists of three businesses: the fossil energy sources in primary energy sources as a plant construction projects in our main segment of oil SustainableToward Growth main overseas oil and gas segment, the overseas whole must inevitably decline if a variety of measures and natural gas, which are fossil fuel sources, as we infrastructure segment (applying technical expertise are enacted for the 2°C scenario. actively diversify our business portfolio under the new and project management capabilities accumulated In this context of anticipating future developments, I