Nippon Koei 1954
日本工営
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2022-01-04
2021-11-16
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Summary
Nippon Koei Co., Ltd. consults on civil engineering and construction work (planning, design, surveys, and construction management) for national and regional government bodies that build social infrastructure (such as dams, ports, and structures for preventing erosion and controlling flooding). Clients also include electric power companies and other business operators.
Construction & Engineering
Key dates
2018-12-26
Coverage initiation
Executive summary
Business overview
Nippon Koei Co., Ltd. consults on civil engineering and construction work (planning, design, surveys, and construction management) for national and regional government bodies that build social infrastructure (such as dams, ports, and structures for preventing erosion and controlling flooding). Clients also include electric power companies and other business operators. According to Nikkei Construction, Nippon Koei has the top share of the Japanese market for civil engineering consulting services, as well as the most professional engineers, or PEs, of any domestic civil engineering consulting company. (PEs hold the national qualification necessary for making technical proposals; the number of PEs on staff is important when accepting orders.) Globally, Nippon Koei has handled projects in 160 countries and is the only Japanese company in the global civil engineering consulting industry’s top 50 in terms of revenue, based on a ranking by a US industry publication, Engineering News-Record. The company’s consolidated revenue exceeded the JPY100.0bn mark for the first time in FY06/17; recurring profit rose beyond JPY6.0bn in FY06/18. The company adopted International Financial Reporting Standards (IFRS) from FY06/21.
Consulting accounted for around 68% of revenue (Domestic Consulting for 47% and International Consulting for 21%) of JPY117.9bn in FY06/21. The Power Engineering business generates 13% of revenue, and the Urban & Spatial Development business provides 17%. The Energy business, a segment established in FY06/18, and other businesses account for 1% of revenue. The consulting business generates stable revenue. In Japan, the company receives orders for public works projects from national and regional government bodies. Overseas, orders center on official development assistance (ODA) provided by the Japanese government. In the Power Engineering business, the company builds and sells substations, mainly to Tokyo Electric; provides consulting related to electromechanical equipment; and handles the reinforcement and repair of electrical equipment (planning, evaluation, design, and construction). Business in the Urban & Spatial Development business centers on architectural design provided by BDP Holdings Limited (BDP), a UK firm Nippon Koei acquired in 2016, providing consulting services on public buildings in Europe and Asia.
The addition of the Urban & Spatial Development business broadened Nippon Koei’s consulting business from construction into the architectural field. The company is also expanding into the energy management field after spinning off the Energy business from the Power Engineering business. In addition to widening its business domain, the company is positioning itself to grow in overseas markets where infrastructure demand is solid; notably India, Southeast Asia, and Latin America. These moves are part of Nippon Koei’s strategy for sustaining growth, and the company has begun receiving large orders in potential growth areas, including for refurbishment of the Palace of Westminster in the UK and railway infrastructure in India. (From FY06/22, the company has consolidated five segments into three).
Trends and outlook
In FY06/21, Nippon Koei posted revenue (IFRS) of JPY117.9bn (+8.7% YoY), operating profit of JPY7.1bn (+35.9% YoY), pre-tax profit of JPY7.2bn (+42.7% YoY), and net income attributable to owners of the parent of JPY4.5bn (+46.2% YoY). Orders received were JPY133.3bn (-8.0% YoY), with the decline being reactionary after the company received large orders in the International Consulting and Power Engineering businesses in FY06/20. Despite the impact of the COVID-19 pandemic, revenue grew as work progressed in all segments except Energy. Profitability improvement measures and costs reductions led to improved profitability overall, boosting operating profit 35.9% YoY.
The company’s FY06/22 forecast (IFRS) calls for revenue of JPY131.0bn (+11.1% YoY), operating profit of JPY7.7bn (+8.0% YoY), net income attributable to owners of the parent of JPY4.7bn (+3.7% YoY), and orders of JPY130.0bn (-2.5% YoY). Starting with FY06/22, Nippon Koei is disclosing data for three segments. It aims to improve productivity in the Consulting business (merged Domestic Consulting and International Consulting businesses) by integrating operations of the former separate businesses. In the Urban & Spatial Development business (no change), it will form a business base with its main field being a fusion of civil engineering and architecture achieved through the integrated management of group companies. In the Energy business (merged Power Engineering and Energy businesses), while enhancing the price competitiveness and production systems of existing businesses, it plans to work on building a foundation in growth areas including renewable energy, storage batteries, and aggregation (aggregating distributed energy sources and providing energy services through power market transactions and other means).
In June 2021, the company formulated a new long-term management strategy, called NKG Global Strategy 2030. This plan targets revenue of JPY250.0bn, OPM of 10%, and ROE of 15% in FY06/30 (the final year of the plan). The long-term plan has three basic strategies: (1) reorganize business segments to realize a one-stop system for providing the company’s services, (2) promote greater self-reliance and cooperation, and (3) realize the embodiment of the NKG brand and NKG quality. Also, on August 13, 2021, the company announced Building Resilience 2024, its new medium-term management plan based on NKG Global Strategy 2030. The plan positions the period from July 2021 to June 2024 as a period of transformation to fortify the group as a whole and focuses on building resilience, aiming to expand businesses in the global market through independent growth in three business domains, matrix management by business and region, and establishing the NKG brand and NKG quality. In FY06/24, the final year of the plan, it aims for revenue of JPY155.0bn, operating profit of JPY11.5bn, OPM of 7%, and ROE of 9%.
Strengths and weaknesses
Strengths
1) Japan’s largest company in its sector, with extensive experience in bidding on public works projects
2) Technical capabilities backed by Japanese and international patents, utility model rights, and design rights gained by having one of the industry’s largest basic research institutions
3) Securing certified PEs through expanded program for cultivating human resources
Weaknesses
1) Highly reliant on public investment and therefore affected by national policy
2) Uncompetitive in projects that involve combined design and construction due to a lack of construction capabilities
3) Low asset efficiency
Key financial data
Notes: Figures may differ from company materials due to differences in rounding methods.
FY06/13 was a three-month term due to a change in accounting periods.
The company conducted a one-for-five reverse stock split on January 1, 2017. Per-share data has been adjusted accordingly.
FY06/21 forecast is based on Japanese GAAP standards.
Reflects revisions to past financial results announced on December 14, 2020.
Notes: Figures may differ from company materials due to differences in rounding methods.
FY06/13 was a three-month term due to a change in accounting periods.
The FY06/21 revenue forecasts for the Energy and Real Estate Leasing segments are included in “Other.”
The FY06/21 operating profit forecast for the Real Estate Leasing segment is included in “Corporate, other.”
In FY06/16, BDP became a consolidated subsidiary, and the Urban & Spatial Development segment was added. (Orders are BDP’s order backlog as of April 1.)
In FY06/17, the company introduced a new standard for recording orders. This method has been retroactively applied to orders in FY06/16. (The previous standard is used for YoY comparisons).
Reflects revisions to past financial results announced on December 14, 2020.
Segment operating profit forecasts are based on comments in the company’s financial results.
Recent updates
Announcement of MOU with Surbana Jurong and DH
Nippon Koei Co., Ltd. has announced the formation of a memorandum of understanding (MOU) with Singapore-based Surbana Jurong Private Limited of Singapore and DHI in Denmark.
On January 20, 2022, the company signed a memorandum of understanding indicating its intention to collaborate with Surbana Jurong Consultants Pte. Ltd., an urban planning consultancy in Singapore (and a wholly owned subsidiary of Temasek Holdings Limited), and DHI (DHI Water & Environment (S) Pte Ltd; an unlisted company), a Danish water and environment consultancy company.
Surbana Jurong conducts multipurpose urban development and infrastructure development (including smart city projects) in Asia, while DHI provides consulting and engineering services related to water and the environment in more than 140 countries around the world. The company has indicated that it will leverage the strengths of the three companies to facilitate and strengthen climate change countermeasures and disaster prevention in Asia and the rest of the world while promoting the expansion of business operations related to sustainable urban development (including those categorized as smart city operations).
Trends and outlook
Quarterly trends and results
Notes: Figures may differ from company materials due to differences in rounding methods.
The company conducted a one-for-five reverse stock split on January 1, 2017. Per-share data has been adjusted accordingly.
In FY06/18, the company changed its method of recording revenue from the completed-contract method to the percentage-of-completion method.
Reflects revisions to past financial results announced on December 14, 2020.
Notes: Figures may differ from company materials due to differences in rounding methods.
In FY06/16, BDP became a consolidated subsidiary, and the Urban & Spatial Development segment was added. (Orders indicate BDP’s order backlog as of April 1.)
In FY06/17, the company introduced a new standard for recording orders. This method has been retroactively applied to orders in FY06/16. (The previous standard is used for YoY comparisons).
Segment operating profit forecasts based on comments in the company’s financial results.
Reflects revisions to past financial results announced on December 14, 2020.
IFRS figures through Q3 FY06/21 retroactively adjusted
Q1 FY06/22 results (out November 15, 2021)
Overview
Results for Q1 FY06/22 (July–September 2021)
*Net loss attributable to owners of the parent
Business environment and performance trend
In Q1, performance in the company's mainstay Consulting business and Urban & Spatial Development business remained at almost the same level as in Q1 FY06/21, but orders declined by 6.5% YoY due to the absence of large-scale projects as were received in the Energy business in Q1 FY06/21.
The business environment for the Consulting business in Japan is characterized by the government's budget remaining at a high level, particularly for the building of national resilience, an acceleration in digital reforms, and growing management business demand. In terms of the overseas environment, despite travel restrictions and risks to the advancement of the company's business due to the COVID-19 pandemic, the Japanese government has set a lofty target for orders as part of its 2025 Policy Program for Promotion of Overseas Infrastructure, with the company expecting demand to remain firm.
In the Urban & Spatial Development business, demand is robust for urban rebuilding projects in Japan, Europe, and the US. Demand is also firm for urban redevelopment work, including urban infrastructure work, in developing markets. For the Energy business, competition and new business opportunities are emerging in Japan as the country targets the realization of carbon neutrality by 2050, while demand is expanding across the globe for the development of renewable energy and increased efficiency in energy usage.
Revenue increased 13.8% YoY, as sales at all three segments grew, reflecting strong orders in FY06/21. Contributing significantly were overseas projects in the Consulting business (formerly, International Consulting), which was adversely affected by COVID-related travel restrictions. Revenue was +JPY6.3bn (+42.8% YoY) on a former segment basis. The operating loss narrowed by JPY1.1bn, to JPY264mn. This was due to elimination of the provision for construction losses (recorded in the former Power Engineering business) booked in Q1 FY06/21, and limited growth in SG&A expenses (an increase of JPY6.9bn, +3.8% YoY) in addition to the recovery in overseas projects in the Consulting business.
Adoption of International Financial Reporting Standards (IFRS)
Starting with Q4 FY06/21, Nippon Koei is disclosing consolidated financial statements in accordance with IFRS and has also retrospectively adjusted its FY06/20 results to conform to IFRS. The company has applied the exemptions allowed under IFRS 1 First-time Adoption of International Financial Reporting Standards in regard to business combinations, currency translation differences for foreign operations, stock-based compensation, leases, borrowing costs, and designation of previously recognized financial instruments.
Performance by business
Results by segment for Q1 FY06/22 (July–September 2021) are as follows:
Consulting
The company worked to improve productivity through DX and entrench revenue management, quality management, risk management, and safety management. The company also worked to advance and develop on a global basis disaster prevention and mitigation technologies, expand the transport-related business, promote services contributing to decarbonization, and advance its full-scale entry in the management field.
Orders were down 0.1% YoY. In the domestic business, orders rose 0.6% YoY to JPY16.8bn (based on the former Domestic Consulting business) as orders received from national and local governments remained stable. In overseas business, orders dropped 3.2% YoY, to JPY3.6bn (based on the former International Consulting business). In domestic business, revenue remained essentially flat YoY, while overseas business generated revenue of JPY6.3bn (+42.8% YoY), as sales activities resumed. The company typically records operating losses in 1H due to the timing of sales recognition. In Q1 FY06/22, the operating loss narrowed YoY due to an increase in overseas sales.
Urban & Spatial Development
In addition to promoting urban development and the smart city business, the company worked to respond to changes in the UK market, expand its business in the Canadian market, and grow its business in Asia through greater collaboration between group companies.
Orders were down 1.4% YoY, mainly due to the deferral of low-profit projects at BDP, a major subsidiary in the UK. Revenue increased 11.4% YoY as the company completed backlogged projects from orders received in 1H FY06/21. Operating profit declined, due to the transfer of domestic projects to the Consulting business and to higher SG&A at BDP, as the COVID-19 pandemic eased in the UK.
Energy
In the mainstay electric power equipment business, the company worked to strengthen its production system and develop new products. In the renewable energy and other power generation businesses, the company worked to grow revenue by working on new projects. In the energy management business, it focused on storage battery businesses, mainly in Europe, and developing a base for the aggregation business (aggregating distributed energy sources and providing energy services through power market transactions and other means) in Japan.
Orders were down 43.9% YoY, reflecting an absence of the large-scale project orders received in Q1 FY06/21, as well as to accounting irregularities in some projects. Revenue rose 16.1% YoY thanks to the elimination of a temporary construction delay in the Engineering division (construction work in the former Power Engineering segment), which occurred during Q1, and solid performance from the Production division (production work in the former Power Engineering segment). The company returned to profitability at the operating level due to the elimination of a one-off provision for construction losses recorded in Q1 FY06/21, and to positive effects from shifting operations from the Production division in-house.
Other
Full-year company forecast for FY06/22
Notes: Figures may differ from company materials due to differences in rounding methods.
Reflects revisions to past financial results announced on December 14, 2020.
Full-year FY06/22 forecast (IFRS; out August 13, 2021)
*Net income attributable to owners of the parent
Background to earnings outlook
At end-Q1 FY06/22, the company maintained its initial forecast, including the segment outlook announced at the beginning of the fiscal year. The company’s FY06/22 forecast calls for orders of JPY130.0bn (-2.5% YoY). Starting with FY06/22, Nippon Koei is disclosing data for three segments. It aims to improve productivity through the integrated operation of the Domestic Consulting and International Consulting businesses. In the Urban & Spatial Development business, it will form a business base with its main field being a fusion of civil engineering and architecture achieved through the integrated management of group companies. In the Energy business, while enhancing the price competitiveness and production systems of existing businesses, it plans to work on building a foundation in growth areas including renewable energy, storage batteries, and aggregation (aggregating distributed energy sources and providing energy services through power market transactions and other means). The earnings outlook for the main business segments is as follows.
Outlook by key segment
Consulting business (former Domestic Consulting and International Consulting businesses)
The order forecasts under the previous segment breakdown are Domestic Consulting, JPY62.0bn (-0.1% YoY) and International Consulting JPY33.0bn (-7.6% YoY). The company expects domestic projects to be roughly level YoY, and its forecasts for overseas projects are the aggregate of assumed projects, not factoring in any major projects. The company forecasts 11.1% YoY growth in revenue as it works through an ample order backlog. It expects lower profit, as pandemic-related travel restrictions ease, causing expenses to rebound.
Urban & Spatial Development business (business name and activities unchanged)
The company expects orders to decline in a reaction to strong public-sector projects and additional orders to restore Westminster in FY06/21. It expects solid revenue as it works through its order backlog. However, it expects a 33.8% decline in operating profit as it does not anticipate a repeat of subsidies received by BDP in FY06/21 during the COVID-19 pandemic. Shared Research estimates that if the subsidies are excluded, that profit would be roughly in line with FY06/21.
Energy business (merged Power Engineering and Energy businesses)
The order forecasts under the previous segment breakdown are Power Engineering, JPY15.0bn (+8.1% YoY) and Energy JPY0mn (no change). The company expects revenue growth from working through its order backlog, absence of a negative impact from the extended hydropower projects in the former Power Engineering business, and growth for substation facilities in the manufacturing division. The company is focusing on revenue in the production division from Q2 onward. On the profit front, the temporary provisions booked in FY06/21 (affect operating profit under IFRS accounting standards), which pushed up costs, will drop out, so the company expects operating profit to move into the black.
Note: Reflects revisions to past financial results announced on December 14, 2020.
Outlook
Review of medium-term management plan, NK-Innovation 2021 (FY06/19–FY06/21)
In July 2018, the company formulated a medium-term management plan (NK-Innovation 2021) for the period from FY06/19 to FY06/21. By FY06/21 (after moving to IFRS standards), the company targeted revenue of JPY140.0bn, operating profit of JPY12.6bn, OPM of JPY9.0%, and ROE of 12.7%. The COVID-19 pandemic took hold during the plan period, and FY06/21 results were revenue of JPY117.9bn, operating profit of JPY7.1bn, OPM of 6.0%, and pre-tax return on assets of 4.7%.
While results fell short of initial forecasts, revenue increased by 50% over the six years of previous long term plan (from FY06/16 to FY06/21). In addition, new businesses launched including the Urban & Spatial Development (established as a segment in FY06/16 with the BDP acquisition) and Energy (launched in FY06/19) contributed to growth.
Outcomes and issues
The company sees the following items involved in business development and corporate management, in terms of outcomes and issues related to NK-Innovation 2021.
The company thinks that business development outcomes include expansion of the Urban & Spatial Development business and business creation and international expansion in the Consulting business. In Urban & Spatial Development, the company and BDP have aimed at winning Asian urban development projects and smart city development projects combining civil engineering and architectural experience. Bringing Canada-based Quadrangle Architects into the group under BDP facilitated expanding into markets outside the UK. While it is a work in progress, the company collaborated with BDP to make inroads into the Asian markets.
Outstanding issues include increasing productivity in railroads and establishing the Energy business. Railroads are important social infrastructure for developing nations. The company aimed to improve its project management capabilities through alliances with local companies and strengthening the capabilities of engineers in the region. While it won multiple large project contracts, it suffered ongoing labor shortages. In the Energy business overseas, primarily in Europe, it established a local subsidiary but project development was delayed.
To establish a one-stop marketing structure for customers, the company made progress in setting up a sales headquarters in charge of sales across segments. It also made solid progress in integrating technological development themes and established a leading-edge R&D center. To strengthen group governance, it set up business management guidelines and adopted IFRS accounting standards. However, in FY06/21, Nippon Koei had to retrospectively revise financial results due to issues with business management, and will continue to focus on strengthening governance.
Building Resilience 2024 formulated to achieve goals in NKG Global Strategy 2030, long-term strategic plan
Formulation of NKG Global Strategy 2030, long-term strategic plan for FY06/22 and beyond
Outline of advance announcement (at the time 1H FY06/21 results were published)
As a continuation to the current medium-term management plan ending in FY06/21, the company formulated a long-term strategic plan spanning 10 years after publication of its 1H FY06/20 results, and stated that the content of this plan would be announced by June 2021 (material from the financial results briefing of February 18, 2021). 2030 is a target year for Sustainable Development Goals (SDGs) adopted by the United Nations, and for Japan’s Basic Energy Plan (energy mix for a low-carbon society, use of renewable energy). At the time of the announcement of 1H FY06/20 results, the company initially set its mission, business strategy, and targets with the understanding of global trend, and announced the outline of its functional strategies, including the business operations mechanisms to achieve its targets.
The new long-term management plan is called NKG Global Strategy 2030, and the company outlined the plan in March 2020, with three key points. The first two points are the concept of technology innovation and integration. The final point is the concept of providing new value.
(1) Operating in three business domains
The company will consolidate and reform its five business groups into three.
In the Consulting business, the current Domestic and International Consulting businesses will be merged. Additionally, the R&D center will be incorporated, and the business will be reorganized to enable more agile operations. The Urban & Spatial Development business aims to integrate civil engineering and architecture and become a comprehensive producer of urban and regional revitalization projects. The Power Energy business will merge the current Power Engineering and Energy businesses and provide one-stop solutions for power energy.
(2) Realization of one-stop services and agile business operations
The company aims to respond to a wide range of social needs by building a sales structure that integrates and presents services in new domains across the board.
(3) Full-scale entry in the management field
The company plans to enter into a variety of areas such as business investment (PPP, PFI), administrative support (PM, CM businesses, comprehensively evolve project management overseas), and data management (business that responds to customer needs through AI, big data technologies, and needs-based R&D. Plans to implement practical knowledge of Geoplan Namtech, which became a group company as of FY06/20).
Announcement of plan outline (June 10, 2021)
The company officially announced an outline of the long-term management plan in June, 2021. At that point, it was specified that the long-term management plan targets revenue of JPY250.0bn, OPM of 10%, and ROE of 15% in FY06/30, the final year of the plan.
The plan is to enhance the group’s corporate value by continuing to strengthen its foundations and establish systems to enhance its ability to respond to changes in the environment in Japan and overseas. * The company has established "Co-creation for challenging the future without limits" as the new plan’s core concept. Nippon Koei says it is the group’s mission to contribute to the creation of a sustainable society by adding new technologies and know-how to the technological and management capabilities it has cultivated to date. To fulfill that mission and continue to provide new value, the company recognizes that it must seek new knowledge and technological innovation and integration through co-creation efforts with various internal and external partners. The company plans to provide a detailed explanation of the long-term management plan after the announcement of its full-year FY06/21 results.
Basic strategies
1. Reorganizing business divisions to realize a one-stop model: The company will work to develop a new system of three business domains (Consulting, Urban & Spatial, and Energy), realize a one-stop system for providing services and enabling more agile operations, and full-scale expansion into the business management field.
2. Promoting greater self-reliance and cooperation: This strategy is based on pillars of shifting to a pure holding company structure that enables autonomy and collaboration, as well as more rapid decision-making and the coexistence of diversity, and the implementation of matrix management focused on both business and region.
3. Embodying the NKG brand and NKG quality: The company plans to take measures such as realizing its technology strategies by developing world-class human resources and promoting digital transformation (DX).
New medium-term management plan Building Resilience 2024
On August 13, 2021, Nippon Koei announced Building Resilience 2024, its new medium-term management plan aimed at realizing the long-term management strategy NKG Global Strategy 2030. In FY06/24, the final year of the newly unveiled plan, it aims for revenue of JPY155.0bn, operating profit of JPY11.5bn, OPM of 7%, and ROE of 9%. In order to maintain a sound financial position, it targets a shareholders’ equity ratio of 40%, and a dividend payout ratio of 30% to provide ample shareholder returns with stable dividends commensurate with profits.
The plan covers three years from FY06/22 through FY06/24. The company sees it as a period of transformation to fortify the group as a whole and released specific measures in Building Resilience 2024. The key focus is building resilience through three strategies: (1) independent growth in three business domains, (2) matrix management by business and region, and (3) establishing the NKG brand and NKG quality. Nippon Koei aims to grow its business in the global markets by pursuing these strategies. The company plans growth investment including M&A of roughly JPY32.0bn over three years.
Resilience strategy 1 (Independent growth in three business domains): Consulting business
The business environment for the Consulting business in Japan features growing public works budgets, including the Japanese government’s five year initiatives for building national resilience, with a FY2021 national budget of about JPY8.5tn. Local governments are also increasing budgets for disaster prevention and mitigation and regional digitalization initiatives. Overseas, the Japanese government has released a strategy aimed at promoting infrastructure overseas, targeting infrastructure orders of JPY34tn in 2025.
Business direction entails integrating capabilities of the company’s domestic and international consulting operations and R&D Center to strengthen its advantages from the standpoint of technology and quality in international markets. Strategies include enhancement and global rollout of disaster prevention and mitigation technologies; expansion of transport related businesses aimed at establishing transport infrastructure and developing smart cities; services such as wind power and small-scale hydro that support decarbonization to mitigate global warming; and expansion in management areas related to urban disaster mitigation.
Resilience strategy 1 (Independent growth in three business domains): Urban & Spatial Development business
The business environment for the Urban & Spatial Development business in Japan starts with the revitalisation market (renovation and utilization) for publicly and privately owned buildings, and the smart city and area management markets are growing. Overseas, sectors involved with development of transport and peripheral infrastructure are growing due to increasing urbanization of the population.
Business direction aims at taking on overall charge of urban and regional revitalisation projects in Japan and overseas and tapping into new markets with integrated groupwide management in the segment (urban development and smart cities). Specifically, one-stop services for town redevelopment, development of smart city projects aimed at decarbonization, safety and security, expanding BDP’s business in North America, and a full-scale move into the urban management field.
Resilience strategy 1 (Independent growth in three business domains): Energy business
In the context of the government’s 2050 carbon neutral target, the business environment for the Energy business in Japan features ambitions to make renewable energy a core source of power, the use of hydrogen, reinforcement and improved operation of the power grid, and growth in the power trading market. Upgrading of ageing existing facilities to ensure a stable power supply is also necessary. Overseas, renewable energy markets are growing worldwide.
Business direction entails building platforms for the power generation and energy management businesses, such as storage batteries and aggregation, through internal and external collaboration, the development of new products to stabilize the manufacturing business, and reinforcing the consulting and engineering business organizations.
Note: In FY03/26, the planned transfer of consolidated subsidiaries is likely to result in lower revenue in the Consulting business and higher revenue in the Urban & Spatial Development business.
Resilience strategy 2 (Matrix management by business and region): Organizational strategy
Nippon Koei aims to become a pure holding company around FY06/24. The aim is to speed up decision-making with an integrated corporate group. To facilitate this, the medium-term plan involves reorganizing the group structure with matrix management by business and region. This entails a business axis with three segments and a geographical axis with six focus regions (Japan, Southeast Asia, South Asia, Sub-Saharan Africa, Europe, and the Americas). This is to ensure comprehensive management of each region worldwide and streamlined, more efficient operations. The ultimate goal is to enable the company to put forward optimal solutions in a timely manner in response to the social issues and needs of each individual region.
Resilience strategy 2 (Matrix management by business and region): Sales strategy
Under the slogan, “Think Globally, Act Locally,” the company aims to meet regional needs around the world with world-class technologies. To that end, Nippon Koei aims to promote sales of its technologies (products and services) in Japan and overseas as well as cross-segment solutions to enable one-stop services. The company plans to establish autonomous sales sites at its locations worldwide.
Resilience strategy 3 (Establishing the NKG brand and NKG quality)
The company plans to develop arrangements which lift the capabilities of its employees across the group. It plans to set up NKG Global Academy, where its engineers from around the world can exchange and integrate technological information, and also plans to develop and grow relationships with external research organizations such as universities. Nippon Koei plans to undertake groundbreaking initiatives centered on digital transformation (DX), including building digital information infrastructure, AI and big data analysis, building virtual space reproduction technology and associated platforms, and information delivery systems. It also aims at sustainable management by respecting employee diversity and well-being focused management that values the health and happiness of its employees.
Business
Business model
An integrated consultant that provides everything from initial ideas to construction supervision
The company’s scope of activity runs from coming up with initial ideas to handling the conceptual and planning stages for national, regional, or municipal projects. The company also conducts foundational, geological, and environmental assessments, as well as handles design work, construction supervision, and operation and maintenance associated with social infrastructure. The company explains that it works to understand the issues underlying a client’s requests and then searches out solutions for each process from a third-party perspective.
Consulting fees depend on who is placing the order, the consulting details, project scale, and other factors. Nippon Koei explains that such fees generally run to a few percent of total construction costs.
Business overview by segment (classifications until FY06/21)
Domestic Consulting
In Japan, solid core technologies and track record on public-sector projects nation-wide
In this business the company provides consulting work, ranging from initial planning and proposals to construction management, for social infrastructure projects (infrastructure development and maintenance) and regional initiatives (such as implementation of safety measures). The company receives orders in this business from the Ministry of Land, Infrastructure, Transport and Tourism, as well as other national and regional government agencies. Once the plans are endorsed, they are typically executed by general contractors and other construction companies. In some cases, the company supervises the progress of construction. National and regional government agencies provide the majority of revenue in this segment. As project planning is conducted throughout Japan, the company maintains business offices in all 47 Japanese prefectures.
The company’s main activities involve water resources and waterways, dams and power generation, urban and regional development, transportation, disaster prevention, and environmental management.
Water resources and rivers: The company provides technical services for flood control, efficient water use, improvement of water environments, and the water supply and sewerage facilities that are integral for daily living.
Dams and power generation: The company handles all aspects of dam projects, including providing technologies for new dam construction and for redevelopment and service life extension of existing dams.
Urban and regional development: The company’s services in this area include regional development studies; support for policymaking related to urban and regional planning; and investigation, analysis, design, and construction supervision concerning ground conditions and geology.
Transportation: The company provides a wide range of services, such as planning, investigation and design, service life extension and improvement in maintenance of roads, bridges, airports, and other transportation infrastructure.
Disaster prevention: To preserve the land and enable people to live safely and peacefully, the company provides technical services that protect communities from natural disasters such as large earthquakes, volcanic eruptions, and torrential rain.
Environmental management: The company’s business in this sector focuses on balancing development and the environment by preserving air, water, and land environments, as well as biodiversity for a sustainable society that coexists in harmony with nature.
Project management: To meet the need for cooperation and collaboration among government entities, private enterprises, and citizens, the company provides consulting services such as asset management and technical management in public–private partnerships (PPPs).
To receive orders related to public-sector construction projects, companies must meet price points and have technological capabilities. They must also have experience. In March 2009, official operational guidelines were drawn up for bidding methods (proposal method and overall greatest value method [OGVM]) related to civil engineering consulting. Related regulations were later revised, and regulations on the registration of qualified engineers conducting surveys, design, and quality assurance for public-sector construction were announced in 2014. This notice marked the start of the registration system that is in place today. The figure below outlines the Ministry of Land, Infrastructure, Transport and Tourism’s basic perspective on bidding for public-sector construction.