The 6th Mid-Term Business Plan (FY2016 - FY2018) Evolving into a solution service company with maintenance and engineering services

A Look Back on the 5th Mid-Term Business Plan (FY2013 -FY2015)

Aim to be “Total Plant Maintenance Company” that will be able to support all plants with engineering capabilities Second step for changing business portfolio

A Look Back on the 5th Mid-Term Business Plan

3

1. Expanding Maintenance Share of Existing Customers

2. Pioneering New Area/New Customers

3. Strengthening Overseas Business Structure

Targets in Business Strategy

Results

- Received an order for a part of regular repair work for fiscal 2014 from the JX Nippon Oil & Energy Oita Refinery.

In January, 2016, established an office on the premises of Oita Refinery.

- Received an order for a part of regular repair work for

fiscal 2014 from the JX Group Kashima Oil Co., Ltd. Continually received orders for construction and started

daily maintenance also. - Received orders for rebuilding of tanks and a part of

remodeling construction work for TonenGeneral Sekiyu K.K., thus for the first time achieving the entry into the tank business.

The work implemented was highly regarded and the Company managed to expand tank maintenance work further for repair work on tank floating roofs, etc.

- In-company joint venture received orders for several

large projects including construction at plants manufacturing high-performance products, investments related to industrial complex cooperation, etc.

Points to reflect upon/tasks needing addressing

- In the area of local business bases across the country, there is still much room for new business among affiliated plants.

- Other clients are also very interested in tank construction work, and tank construction work is a promising field that can enable us to expand orders.

- Expansion of orders through in-company joint venture is currently limited to some business establishments only, and we should consider promoting this initiative on a companywide basis.

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A Look Back on the 5th Mid-Term Business Plan

1. Expanding Maintenance Share of Existing Customers - Expanding range of work at customers’ plants - Expanding new orders in remodeling/ new construction that meet customers’ trends and facility planning

2. Pioneering New Area/New Customers - Expanding orders by contacting old customers and area - Winning orders and fortifying sales for work in new area/plants - Expanding orders in remodeling and new construction that use engineering capability/technology - Expanding orders in priority strategic area such as food, gas (LNG) and electric power

Results - Received an order for maintenance work at the

Semboku plant of Osaka Gas Co., Ltd., a new area for the Company. Established an office for Osaka Gas.

- By exploiting new demands with clients we have had transactions with in the past, received orders for daily maintenance work, and opened offices there.

- Found new customers in such areas as general chemistry, food, and medicine, centering on the New Technology Project Department through proposal-type marketing, FS (feasibility study)/FEED.

Although both the number of orders received and transactions with new clients have increased, the scale of each transaction is relatively small and their contribution to expansion of orders is also small.

- The Company made three offices in the northeast area of Japan subordinate to the Sendai Office as a part of system reconstruction initiative.

As a result, inquiries for maintenance and remodeling work in the area increased.

Points to reflect upon/tasks needing addressing

- Need to examine possibilities to revise the system so as to put the capabilities of the New Technology Project Department to even better use.

- Although it was planned to venture into the food, gas (LNG), and electric power industries, the abilities of the Company were not reinforced in each of the areas.

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A Look Back on the 5th Mid-Term Business Plan

3. Strengthening Overseas Business Structure - Winning orders for small-to-medium sized EPC projects in China and Southeast Asia - Winning orders in strategic projects to enter into overseas maintenance business - Expanding and Stabilizing overseas business by strengthening project management structure and

consolidating overseas offices

Results

- Revised all the procedures for overseas business from the marketing stage to cost standards, cost control, construction work plans, and the stage of forming organizations, and restructured the flow from marketing activities to acquisition of orders and implementation of construction work.

[Indonesia: PT.SHINKO PLANTECH]

- Expanded maintenance work for Japanese-affiliated clients.

[China: WUXI SHINKO PLANTECH CO., LTD.]

- Safely brought large EPC projects to completion. The Company is continuing its activities to pave the way for large construction work and entry into the maintenance work area.

[Thailand: SHINKO PLANTECH (THAILAND)]

- Could not go further than orders for small-scale construction work due to tough competition.

[Vietnam]

- Acquired orders for work constructing a new factory for a client we have worked for in China, etc.

Points to reflect upon/tasks needing addressing

- Also, the Company implemented various kinds of measures to reinforce our foundations, including education of overseas employees, new investments in plant and equipment, strengthening of personnel system, as well as enhancement of the project implementation system and risk management system.

[Indonesia: PT.SHINKO PLANTECH]

- Need for improvements in the management capability of the company's staff through education or training sessions.

- Need for establishment of a system of cooperation with local firms.

[China: WUXI SHINKO PLANTECH CO., LTD.]

- Acquisition of orders for new projects.

- Reinforcement of the maintenance system do deal with inquiries for in-plant maintenance.

[Thailand: SHINKO PLANTECH (THAILAND)]

- Reinforcement of marketing force.

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A Look Back on the 5th Mid-Term Business Plan

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A Look Back on the 5th Mid-Term Business Plan [Business results] ● The works completed in the 2015 fiscal year (term ended March, 2016), which is the final year of the 5th Mid-Term Business Plan, fell short of the figure set as a goal in the financial plan (10,000 million yen) due to suppression of maintenance costs and investments by the clients. ● As regards the dividend, the Company continued following the same dividend policy at 30 yen per share.

[Plans regarding the next mid-term business plan.] Although it is yet unclear whether we will be able to accommodate the changes of business environment of our main clients, we shall endeavor to provide appropriate solution services to the increasingly diversified and sophisticated needs of our clients as “Total Plant Maintenance Company”.

[Initial targets for the final year of the 5th Mid-Term Business Plan on consolidated base and actual results]

Targets for FY2015 (term ended March, 2016) initially stated in the 5th Mid-Term Business Plan

New Contracts 1,000 Works Completed 1,000 Operating Income 82.0

(%) 8.2% Ordinary Profit 83.0

(%) 8.3% Profit Attributable to

Owners of Parent 50.0

(%) 5.0 Dividend 30 yen

Actual results of the FY2015 (term ended March, 2016), final year of the 5th Mid-Term Business Plan

New Contracts 922 Works Completed 894 Operating Income 67.9

(%) 7.6% Ordinary Profit 65.9

(%) 7.4% Profit Attributable to

Owners of Parent 38.9

(%) 4.4% Dividend 30 yen

(Unit: 100 Millions of Yen) (Unit: 100 Millions of Yen)

The 6th Mid-Term Business Plan (FY2016 - FY2018)

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On the whole, the world economy is showing a moderate growth centering on the developed countries

The slowdown of the Chinese economy is a risk factor for the world economy.

Influence of a decline of prices for crude oil and energy

Economy of Japan is showing signs of gradual recovery due to economic stimulus measures by the Abe administration (Abenomics).

Trend of recovery of personal consumption and upward tendency of investments in plant and equipment following an improvement in employment and income environment

Future problems of low birthrate and aging of population

Reorganization of petroleum companies is getting concretized and a new system will emerge by fiscal 2017.

The capability of the petrochemical industry is also still excessive, and there is a possibility for further consolidation and integration.

There is a problem of maintenance of stable operation at high rate of aging equipment

We can expect investments related to efforts to make equipment more efficient, more reliable, and more energy saving amidst inter-regional association.

There will be an increase in the degree of dependence on contractors for client maintenance business

Shift to heighten the added value and switch to high performance products in the selection/concentration of business in the chemicals industry

Diversification of business proprietors and equipment with deregulation of power industry, progress in use of renewable energy, and popularization of hydrogen energy.

Ⅰ. Business Environment during the Period of the 6th Mid-Term Business Plan

Retirement due to aging of skilled laborers who have shouldered work on site and decrease of young people coming to the industry

Influence of the new legislation making social insurance mandatory in the construction industry, etc.

Decrease of construction technicians who have supported maintenance industry so far

Due to further protraction of the continued plant operation time, there was a decrease in experience of maintenance work in regular repair work and decrease of opportunities to acquire such experience.

Due to centralization of regular repair work, fluctuations in periods of demand for labor have expanded further.

Together with an increase in the degree of dependence on contractors for client maintenance business, the demands for supervision to ensure less quality-related troubles and higher labor safety will get more strict

A tendency for decline in leadership accompanying retirement of skillful laborers and increase in work-related accidents due to increasing proportion of laborers with insufficient hands-on experience

There is a need more than ever to ensure labor safety and prevent quality troubles

Further reinforcement of legal compliance and a compliance system in corporate activities

1. Economic Environment 2. Customer Environment

3. Business Environment of Maintenance Industry 4. Safety, Quality and Social Responsibility

We shall strive to enhance our abilities in the area of services including technologies and construction for maintenance and engineering and offer appropriate solution services matching the increasingly diversified needs of our clients.

[Management Philosophy]

[Management Vision]

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Be providing high-quality maintenance and engineering services, Shinko Plantech will achieve lasting development, contribute to our customers’ improved productivity, and contribute to both social prosperity and environmental preservation.

Ⅱ. Management Policy

With "One to One Maintenance" as our business concept, we will strive to achieve continuous growth and increase corporate value on a medium- and long-term basis as a "Total Plant Maintenance Company" that will be able to support all plants with engineering capabilities.

We will not only maintain and expand our top share in petroleum/petrochemical industry, but also accumulate highly specialized know-how and track record in the areas of chemistry, food, and medicine, promote diversification of our business portfolio further, and strive to achieve further growth paving our way to the future and fortify our management foundations.

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2nd Step The 4th Mid-Term

Business Plan 1st Step

Strengthening overseas office structure Globalization of

services

Maintain/expand top shares in petroleum/petrochemical

industries

Domestic Business

Becoming a Total Plant Maintenance Company based on our engineering capabilities

Petroleum/Petrochemical

Domestic and Overseas Business

Evolving into a solution service company with maintenance and engineering services

(1) Maintaining the share/expanding in the petroleum/petrochemical industries

(2) Expanding the general industry (3) Expanding overseas business

(1) Reinforcing maintenance business (2) Reinforcing engineering business (3) Reinforcing tank business (4) Reinforcing management foundations

(1) Expanding maintenance share of existing customers (2) Pioneering new area/new customers (3) Strengthening overseas business structure

Petroleum/Petrochemical General Industry

Qualitative intensification through service solutions

The 5th Mid-Term Business Plan

The 6th Mid-Term Business Plan

- Change of environment that shall translate into an increase in inquiries for construction work because building up for reorganization of the petroleum market, the companies of the industry shall need to conduct measures to curb maintenance and make equipment more efficient and more reliable - Difficulties in securing skilled laborers for regular repair work, which is the key business of the Company

- Growth of demand is projected in the future for tank business centering on repairs

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Ordering strategy 1. Expanding orders by

reinforcement of maintenance business.

Ordering strategy 2. Expanding orders by

reinforcement of engineering business.

Ordering strategy 3. Expanding orders by

reinforcement of tank business.

Striving to become a company that is trusted even further by the stakeholders and the society

Ordering strategy

Reinforcement of management foundations

Offering appropriate solution services matching the needs of our clients

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Efficiently employing our forte of ample track record in maintenance work and our nationwide network, we shall strive to strengthen the maintenance business and expand orders.

Goals (1) Keeping and expanding maintenance share of existing customers (2) Achieving entry into plants we have never worked with/do not have offices at (3) Establishment of new permanent offices

Main policies

(1) Improvement/reinforcement of maintenance framework (2) Training/securing personnel capable of maintenance work (3) Reinforcement of technical capabilities for maintenance work (4) Promotion of proposal-type maintenance marketing (5) Accumulation of know-how for maintenance business in foreign countries

Important issues in the 6th Mid-Term Business Plan ○ Ensuring skilled laborers in the regular repair work, which is an important business segment, where there is an obvious

shortage of such skilled workers. ○ Conducting measures to prevent retirement of skilled laborers in connection with the new legislation making social insurance

mandatory in the construction industry, and reinforcement of education for young people coming to the industry ○ Acceleration of transition of power to the next generation in the company and training of personnel capable of shouldering

support of the customer planning, an area of high demand.

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Goals (1) Expanding orders for construction work at small and medium size plants through entry from FS/FEED (2) Expanding orders for remodeling and refurbishment of large-sized equipment based on efficient use of past track record with highly specialized construction work (3) Expanding orders for new investments centering on general chemistry

Main policies

(1) Enhancement of engineering technology (2) Reduction of engineering costs (3) Training/securing personnel capable of engineering (4) Reinforcement and development of marketing capacity for engineering

Strengthening engineering business and striving to expand orders for remodeling and refurbishment and installation of new facilities.

Important issues in the 6th Mid-Term Business Plan ○ Developing FS/FEED we have been conducting further and also reinforcing solution service type activities in the engineering

aspect to enable us to systematically and actively propose solutions also in the remodeling and refurbishment work, where demand is expected to increase in the future due to consolidation and integration of plant and equipment and equipment aging.

○ Acquiring technology and knowledge in the general chemistry, food, and medicine business sectors and advancing of activities to diversify business sectors' portfolio.

○ In particular, accumulating technology and track record in the food and medicine areas, which we have set as priority areas.

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Strengthening tank business aiming at expansion of orders not only in the petroleum market, but also in other industries such as the power industry.

Goals (1) Expanding orders for maintenance and construction work of tank (2) Securing orders at new plants

Main policies

(1) Improvement of tank business framework (2) Reinforcement of personnel capable of tank work (3) Setting targets for expanding tank business

Important issues in the 6th Mid-Term Business Plan ○ In the tank business, we are conducting maintenance work for the already established clients and shall aim at expanding our

work to new plants and customers to increase orders. ○ Strengthening and expanding the tank business. To do that, we need to accumulate the know-how that would enable us to

achieve entry into the tank maintenance business not only in the petroleum market but also in other industries such as the power industry, and also secure know-how to cope with storing of products and changing of oil types, becoming able to cope with remodeling and refurbishment work.

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Goals (1) Achievement of accident-free and disaster-free operations (2) Achievement of zero quality problems (3) Reinforcement of group governance (4) Increase in efficiency by business reform

While continually promoting "accident-free and disaster-free" and "zero quality problems" operations as a permanent target, striving to become a company that is trusted even further by stakeholders and the society.

Main policies

(1) Ensuring of safety and quality (2) Reinforcement of group governance (3) Increasing productivity by business reform

Important issues in the 6th Mid-Term Business Plan ○ Continually promoting "accident-free and disaster-free" and "zero quality problems" operations as a permanent target. ○ Particularly to ensure quality and increase quality of maintenance and construction work, developing an in-company system

enabling functionality of the PDCA cycle. ○ While conducting activities promoting improvement and reinforcement of the group governance system, ensuring compliance-

oriented management and increasing the efficiency of business management, etc. striving to become a company that is trusted even further by stakeholders and the society.

Reinforcement of management foundations

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○ In 2018, which is the final year of the 6th Mid-Term Business Plan, the Company shall aim at consolidated works completed of 95,000 million yen. ○ The company sees return on equity (ROE) as one of the management indexes

and shall aim at posting return on equity (ROE) of 9% or more. ○ We view dividends as the key management issue and strive to set the dividend

so that it reflects the earnings, and also with careful attention to the continuity and stability of dividends, aiming at ensuring the consolidated dividend payout ratio of 30% or more.

○ We shall make investments based on our growth strategy so as to reinforce

management foundations.

Managerial numerical

targets

Ⅲ. Managerial Numerical Targets

Managerial numerical targets

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(1) [Financial plan] Final year of the 6th Mid-Term Business Plan

Performance targets for fiscal 2018 (term ending March, 2019)

(3) [Investment plan]

(2) [Targeted values for management indexes]

Return on equity (ROE) 9% or more

Dividend payout ratio (consolidated) 30% or more

・Pioneering new area, new business

・M&A, technical alliance, obtaining patents

・ R&D

・Purchasing new special machinery, equipment

・Establishing new business office

・Renewal of fixed assets

Other Other

Amount of increase of free cash: 11,400 million yen

Strengthening Management Foundation

Dividend

11,000 million yen

Investment in Growth Strategy

Goal: consolidated dividend payout ratio of 30% or more

Managerial numerical targets

(Unit: 100 Millions of Yen)

Target for FY2018

New Contracts 950

Works Completed 950

Operating Income 66.0

(%) 6.9%

Ordinary Profit 67.0

(%) 7.1%

Profit Attributable to Owners of Parent 40.0

(%) 4.2%

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On organizational changes to be implemented in accordance with the 6th Mid-Term Business Plan (to come into effect as of June 24, 2016)

[Main aim of the changes] Through further integration of the front end activities of the New Technology Project Department and the process design technology, we shall develop FS/FEED further, reinforce our solution service activities actively proposing our services in remodeling and refurbishment work and installations of new facilities centering on the general chemistry and food areas, and strive to expand orders.

[Contents of the changes] (1) Discontinuance of Process & Engineering Department of the Engineering Division and the New Technology Project Department. (2) Newly establishing Solution Technology Department independent of the Engineering Division. (3) Newly establishing Engineering Department under Engineering Division.

Administration GroupTechnical Information Group

Process & Engineering GroupTG Group

Piping Group-1Piping Group-2Piping Group-3

Electrical & Instrument Engineering Group-1Electrical & Instrument Engineering Group-2

New Technology Project Department

Engineering Division

Divisional Administration Department

Process & Engineering Department

Piping Department

Electrical & Instrument Engineering Department

Equipment Engineering Department

Civil Engineering Department

Tank Engineering Department

Solution GroupProcess Group

Administration GroupTechnical Information Group

Piping Group-1Piping Group-2Piping Group-3

Electrical & Instrument Engineering Group-1Electrical & Instrument Engineering Group-2

Engineering Division

Divisional Administration Department

Engineering Department

Piping Department

Equipment Engineering Department

Tank Engineering Department

Electrical & Instrument Engineering Department

Solution Technology Department

Civil Engineering Department

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This material includes management policies, strategies, and projections based on future forecast and plans that was available on May 13, 2016.

There is a possibility that these projections may be greatly different from actual results, affected by risks and uncertain factors, such as economic conditions, demand trends, and customer trends

The 6th Mid-Term Business Plan (FY2016 - FY2018)�A Look Back on the 5th Mid-Term Business Plan (FY2013 -FY2015)スライド番号 3スライド番号 4スライド番号 5スライド番号 6スライド番号 7The 6th Mid-Term Business Plan (FY2016 - FY2018)スライド番号 9スライド番号 10スライド番号 11スライド番号 12スライド番号 13スライド番号 14スライド番号 15スライド番号 16スライド番号 17スライド番号 18スライド番号 19スライド番号 20