Tsukishima Kikai : Integrated Report 2021(10.5MB)

Contributing to the world with environmental technologies

Tsukishima Kikai Co., Ltd.

Address inquiries to:

Public Relations Office, Corporate Administration Division

3-5-1 Harumi, Chuo-ku, Tokyo 104-0053

Tel: [phone]

Fax: [phone]

Tsukishima Kikai Corporate Website

https://www.tsk-g.co.jp/en/

Tsukishima Kikai Group

Integrated Report 2021

Corporate Policy

For more than a century since our founding in 1905, our Company has consistently responded to the needs of society and the people living within it through the provision of our technologies. Specifically, we have been offering systems and plant facilities which serve as foundations for industry,

water and wastewater treatment facilities essential to our daily life, as well as environmental protection facilities. We plan to continue to advance our technologies still further in line with our corporate policy:

to make contribution to the society, the company will dedicate to the industry development and environmental protection by making advantage of its leading edge technology.

Additionally, through environmental technologies, we will help combat global warming, a serious issue the entire global community faces.

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To make contribution to the society, the company will dedicate to the industry development and environmental protection by making advantage of its leading edge technology.

Primarily targeting satisfaction of market demand, the company will provide best products and services possible to customers.

While adhering to originality and vitality-based sustainable development, the company is proud to be a profitable enterprise that deserves the loyalty of its staff.

Tsukishima Kikai, contributing to the world with environmental technologies

Contents

1. About Tsukishima Kikai		3.	Value Creation Results
Top Message.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3		Water Environmental Business.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Special Feature: Realizing a Carbon-neutral Society. . . . . . . . . . . . . . .	7		Industrial Business.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Tsukishima Kikai's History of Value Creation.. . . . . . . . . . . . . . . . . . . . . . . .	11		R&D. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Tsukishima Kikai's Value Creation Process.. . . . . . . . . . . . . . . . . . . . . . . . . .	13		Human Resources.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Business Domains.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15		Quality and Environmental Management.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Tsukishima Kikai's Strengths. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17		Risk Management.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Recycling-based Society That Tsukishima Kikai Seeks to Create.. .	19	4.	Business Foundation
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6. Financial Data		7. Company Profile
Consolidated Financial Data.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	55	Executive Team. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Consolidated Balance Sheets.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	57	Company Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

Consolidated Statement of Income.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

Consolidated Statement of Comprehensive Income.. . . . . . . . . . . . . . . 60

Consolidated Statement of Cash Flows.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

Independent Auditor's Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

Global Business Development	21	Corporate Governance.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
2. Value Creation Strategy		Compliance.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Medium-termManagement Plan.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23	5. ESG Data
Financial Strategies.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	25	Environmental Data.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Advancing Continued Strategic Investment.. . . . . . . . . . . . . . . . . . . . . . . . .	26	Social Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

ESG Strategies.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

About the cover

The cover presents images of water and vegetation, symbolic of the recycling-based society we seek to achieve, in addition to equipment and technologies that help realize this society.

Terminology

EPC: Engineering, Procurement, and Construction of plants and machinery O&M (Operation and Maintenance):

After-sales services including operation management, repairs, and parts supply PFI (Private Finance Initiative):

Method for efficiently providing public services, using private sector funding and expertise in the design, construction, maintenance, and operation of public facilities and other projects

DBO (Design Build Operate):

Business method similar to PFI under which the public sector is responsible for raising funds while the private sector handles design, construction, and operation

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1. .AboutAboutTs kishimaTsukishimaKi ai Kikai

Message from the Chairman

Initiatives in response to increasingly challenging social issues

─1 Kikai About

Tsukishima

Global environmental degradation has been advancing in recent years, as seen from the frequent natural disasters caused by global warming and loss of biodiversity. In regions including Southeast Asia and China, rapid economic growth along with population increases and urbanization have led to the manifestation of issues related to water pollution. The Japanese government has declared its aim of realizing carbon neutrality and a decarbonized society by 2050, in response to the needs of addressing climate change. While the Tsukishima Kikai Group has promoted energy saving in water purification and sewage treatment and industrial infrastructure, we realize that advancing energy saving efforts alone will not be enough to achieve the major goal of a carbon-neutral society. For this reason, we have been shifting our focus from energy-saving businesses to energy-creation businesses. Along with the development and advancement of schemes for realizing a recycling-based society through the biogas power generation business, in which carbon-neutral solid fuel is produced from sewage sludge (a biomass resource), our related business activities are growing across Japan. We also deliver solutions in Japan and around the world related to equipment for

manufacturing materials used in secondary batteries, which will help to realize a carbon-neutral society, and processes for recycling useful materials from waste. We believe that in the future we will face even stronger demand from society for growing businesses in areas such as these.

At the same time, water purification and sewage treatment and industrial infrastructure in Japan are faced with the pressing issues of aging infrastructure and decreasing field engineers. It is becoming increasingly difficult to secure skilled engineers in today's era of low birth rates and an aging population. In response, we are aiming to improve efficiency and optimize operations by supplementing the workforce needed for plant maintenance and management by means such as the incorporation of artificial intelligence (AI) and Internet of things (IoT) technologies into machinery and plant operation, maintenance, and management. We believe these technologies will prove extremely important in ensuring the sustainability of Japan's social infrastructure, and we must build further on the Group's strengths and strategies by generating innovation through the unceasing development of new technologies.

We contribute to the progress of society and climate- change solutions by responding to stakeholders' needs

Toward increased corporate value and sustained growth

based on our corporate policy of contributing

to the world through environmental technologies.

The value the Tsukishima Kikai Group delivers to stakeholders

In 2019, for the purpose of strengthening our corporate governance structure, we established the Nomination and Remuneration Advisory Committee, chaired by an outside Director, to increase the independence, objectivity, and transparency of decisions on matters such as the appointment and remuneration of Directors. We also facilitate the exchange of objective and diverse opinions by enhancing prior explanations on proposals for Board of Directors meetings

to outside Directors. We intend to continue strengthening governance throughout the Tsukishima Kikai Group as a way to pass on more value to stakeholders.

change have massive impacts on economic and social activities. Under such conditions, it is essential to secure sustainability by responding to risks on a global scale.

Business conditions can be expected to change even further in the future as globalization accelerates and we face developments such as the need to respond to pandemics, decarbonization, and digital transformation, among other factors. The Tsukishima Kikai Group will strive to increase corporate value and realize sustained growth by identifying various needs present around the world and further building on and delivering technologies and services it has cultivated,

Based on our corporate policy of contributing to the world through environmental technologies, we have been responding to industrial progress and global environmental issues while appropriately adapting to changing times and meeting the needs of society. The words "contributing to the world" embody

of people's lives, as well as the design, manufacture, and sale of machinery and plants that support industry. Through these businesses, we interact with a wide range of stakeholders.

Each of our stakeholders-the customers to whom we deliver equipment and the people who work for them, national

The environment in which we do business is undergoing substantial changes, as the COVID-19 pandemic spreads around the world and natural disasters caused by climate

targeting solutions to societal challenges on a global basis. We appreciate the continued support and understanding of all our stakeholders.

the meaning of contributing to our stakeholders and to society at large. This concept reflects our approach of enhancing relations with all stakeholders involved in our businesses, including shareholders as well as employees, while placing value on contributing to society.

In the Tsukishima Kikai Group, our business activities include the design, construction, and maintenance and management of the water infrastructure that is an essential part

and local governments, trading partners, shareholders, and investors-has its own unique needs and concerns, and these may vary among different regions and societies as well.

Since we consider the satisfaction of stakeholder needs to be vital to business continuity, we continuously strive to meet customer needs through technology to contribute to solving increasingly challenging social issues on a global scale.

Chairman & Representative Director

Kazuhiko Yamada

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1. About Tsukishima Kikai

Message from the President

Continuing to deliver new value through the application of core technologies suited to society's needs

─1 Kikai About

Tsukishima

After getting our start in the business of plants for foodstuffs and chemicals, we applied our technological base to the water purification and sewage treatment business during post-war Japan's period of rapid economic growth, and we have continued to grow through expansion into the environmental and energy businesses. Through application and development of core technologies to meet the needs of society, our business model has changed. Even so, we have remained steadfast in our goal of contributing to the world through environmental technologies. We have expanded the value and utility that we provide to society based on a technological core.

We consider these efforts to be the source of our competitive strength that has enabled us to continue to grow in each of our business areas-building on our track record of contributing to the global environment while maintaining the top share of the sewage sludge treatment market-even as society's needs and the external environment have changed in recent years.

We believe that from now on it will be of the utmost importance for us to be able to deliver new value in order to build a business model that satisfies the needs of society and all stakeholders, in addition to providing solutions to economic and environmental issues.

Human resources are a vital management resource as well as the source of our competitive strength

We will help build a recycling-based,carbon-neutral society by supporting a paradigm shift from energy saving to energy creation.

We recognize that securing human resources is an important topic related to the sustainability of the business of a manufacturing and engineering firm such as Tsukishima Kikai. We are a company that recognizes the importance of operations in the field. We deepen our understanding of engineering work through hands-on experience with the actual outcomes at construction sites of operations that began in the office as conceptual designs. In this time of dramatic change, instead of relying solely on our in-house technologies, we are also promoting open innovation via technologies drawn from around the world and forming alliances with other companies

and organizations. As part of such initiatives, we also are promoting diversity and development of our engineers through measures such as exchanges of human resources with design sites overseas.

As part of our efforts to develop human resources and improve working conditions, we are also advancing workstyle reforms. While we adopted a remote work system and other systems during the states of emergency declared in response to COVID-19, we recognize the need for further enhancement of these systems and the development of related infrastructure.

Addressing climate change requires a paradigm shift from energy saving to energy creation

Tsukishima Kikai's technologies and services that contribute to the global environment

We are therefore shifting our focus from energy-saving businesses to energy-creation businesses to create carbon- neutral energy.

models and schemes in accordance with the circumstances of each community. A regionally distributed, recycling-based society can be realized only by first building a consensus with

Since our founding, Tsukishima Kikai has met the needs of society and the people who live in it through technology, including our core businesses of machinery and plant facilities that serve as foundations for industry as well as the provision of water purification and sewage treatment facilities essential to our daily life and environment-related facilities.

In the Water Environmental Business, our greatest

strengths are in sewage sludge treatment, and last year we received an order from Iwaki City, Fukushima Prefecture, for a new project to promote local production and local consumption by recycling resources and energy in the community. In this

business approach is intended to help realize a carbon-neutral society by reducing the use of fossil fuels at the sewage treatment plant.

The Industrial Business is making progress on technological and business development related to secondary batteries. This is made possible in manufacture of cathode materials for secondary batteries through the use of crystallization technologies that we have developed in the sugar refining field ever since our founding. The secondary battery market is expected to grow with dissemination of electric vehicles toward a future carbon-neutral society. We intend to

To efficiently collect and utilize biomass from sewage sludge and other sources available in the community, it is essential to build a recycling-based society in which the energy created

is consumed nearby. It is further necessary to transform this energy supply from a centralized structure to a distributed one. To respond to the global challenge of climate change, it will be vital to combine the formation of a recycling-based society to realize local production and local consumption of energy with the creation of renewable energy to help realize a carbon- neutral society. There is also a need to transform business

all stakeholders involved in our businesses and generating new technologies and solutions suited to society's needs.

We will continue proposing business models to reduce greenhouse gas emissions in ways that are economically rational for all stakeholders involved in our businesses. We aim to realize our corporate policy of contributing to the world through environmental technologies, by not only contributing to the global environment but also by properly identifying the needs of society and advancing technologies and services to provide new business models to satisfy the demands of all stakeholders.

President

project, sewage sludge itself is used to generate the energy needed to operate the sewage treatment plant. This new

continue contributing to the community environment through our technologies as we adapt to anticipated societal changes.

Yoshiyuki Fukuzawa

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1. About Tsukishima Kikai

Special Feature: Realizing a Carbon-neutral Society ①

Building a recycling-based society starting from sewage treatment plants

Starting from sewage treatment plants, the Water Environmental Business is striving to build a regional resource recycling-based society through circulating water, resources, and renewable energy within the community.

Converting sewage sludge into renewable energy (solid fuel)

-Sewagesludge-to-fuel conversion-

─1 Kikai About

Tsukishima

The international community, centered on Europe, is accelerating efforts towards the realization of a circular economy in response to intensifying environmental problems such as climate change. Particularly in the field of sewage systems, Tsukishima Kikai is engaged in the business of supplying renewable energy to local communities using carbon-neutral fuels such as sewage sludge generated from sewage treatment plants and local biomass resources. This energy supply is made possible through the application of the core technologies we have built up since our founding.

Tsukishima Kikai will contribute to the realization of a carbon-neutral society by building a regional resource recycling-based society in which local resources are put to efficient use through centralization at sewage treatment plants and provided back to the community through conversion to renewable energy.

We hope to continue our sustainable growth while responding to the demands of society by deploying model projects for realizing such a regional resource recycling-based society in various locations.

	Realizing a carbon-neutral society
Converting biogas	through the promotion of clean energy
into renewable energy (electricity)
-Biogas power generation utilizing the FIT system-

Orders received

in Japan:

No. 1

We help reduce the use of fossil fuels and cut greenhouse gas emissions by converting sewage sludge, a carbon- neutral resource, into the renewable energy source of solid fuel for fueling power plants and boilers. We have the leading track record in sewage sludge-to-fuel conversion in Japan.

Track record

in private-sector construction and operation:

No. 1

We deliver clean electricity generated using biogas produced at sewage treatment plants.

We purchase biogas from local governments, generate electricity using it, and sell the electricity through the feed- in-tariff (FIT) system. We also supply it to local new power producers in some cases.

Renewable

energy resources

Electricity		Fuel
			Building a regional
Fertilizer		Heat
			resource recycling-
			based society

Biomass power

generation

Biogas power

generation facility

Biogas

Solid fuel

Boiler

Reducing fossil fuels

Use of

local biomass

Sewage

Local biomass

Water cycle

Sewage treatment plants

Renewable energy

production

Digestion tanks

(Biogas production) Fuel- and fertilizer- conversion plants

Producing biogas from sewage sludge

-Steel-plate digestion tanks-

Successful

track record:

Construction of Japan's largest tanks

These facilities produce biogas, a renewable energy source, through methane fermentation of sewage sludge. The biogas thus produced is used to generate electricity. Biogas can also be converted to green hydrogen. We have a successful track record in constructing Japan's largest tanks, through fabricating digestion tanks made from steel plates, which can help reduce the cost and time required for construction.

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