■Company Overview of Takuma <6013>

3. Business Description

The company's business activities are broadly classified into four segments: Environmental Energy (Domestic) Business, Environmental Energy (Overseas) Business, Domestic Thermal Energy Business, and Equipment and System Business. For the second quarter of the fiscal year ending March 2025, the revenue distribution by business segment shows that the core Environmental Energy (Domestic) Business accounts for about 77%, followed by the other three segments: Domestic Thermal Energy 13%, Equipment and System 8%, and Environmental Energy (Overseas) Business 2%. Within the approximately 77% of the Environmental Energy (Domestic) Business, the distribution of each product and service is generally as follows: EPC for general waste treatment plants accounts for 29%, After Services 35%, totaling over 60%, followed by Energy Plants 23%, and Water Treatment Plants & Others 12%.

(1) Business Segments

a) Environmental Energy (Domestic) Business

The Environmental Energy (Domestic) Business is further divided into four categories: General Waste Treatment Plant (EPC), General Waste Treatment Plant (After Service), Energy Plant, and Water Treatment Plant. The core focus is on the EPC business and After Services of general waste treatment plants using core combustion technology.

b) Environmental Energy (Overseas) Business

Since the 1950s, the company has supplied a large number of boilers to Southeast Asia, particularly Thailand, and currently provides construction and maintenance services for biomass power plants and waste power plants, focusing on Thailand and Taiwan with local subsidiaries. The biomass power plants in Thailand that use bagasse, the fibrous residue generated from squeezing sugarcane, are expected to continue to see steady demand; however, a competitive environment with Indian and Chinese manufacturers remains intense. Meanwhile, the Thai government is promoting biomass power generation, which is expected to expand demand, including for biomass other than bagasse.

c) Thermal Energy Business for Livelihood.

Centered around Thermo Energy Co., Ltd. in the group, the design, construction, manufacturing, sales, and maintenance of general-purpose boilers used in various industries, including production factories, hotels, hospitals, commercial facilities, and related thermal source devices and systems are carried out.

d) Equipment and System Business.

The group companies, Sanplant Co., Ltd. and Dan Takuma Co., Ltd., are engaged in the design and construction of various building equipment such as air conditioning, water supply and drainage sanitation, and fire protection, as well as the sales and maintenance of various devices for the semiconductor and electronic device industries, including clean rooms, chemical filters, and magnetic shield chambers.

(2) Products and Services.

a) General Waste Treatment Plant (EPC).

The design, procurement, and construction of facilities such as the "stoker-type incinerator," which allows efficient contact between garbage and air to burn even heterogeneous waste reliably, the "biogas recovery plant" that ferments hard-to-burn organic waste such as kitchen refuse and wet paper to use the generated methane gas for biogas power generation, and the "recycling plant" that handles bulky waste, non-combustible waste, and resource waste are undertaken as EPC projects.

Note: A combustion device with grates arranged in a stair-like pattern.

b) General waste processing plants (after-sales service)

Among the general waste processing plants supplied by the company, over 120 facilities are currently operational, supporting safe and stable proper waste treatment in the region through regular maintenance, functional improvements, extension works, and operation management as part of after-sales service. Additionally, utilizing the accumulated rich know-how, long-term repair plans are formulated and maintenance is carried out at optimal timing and content after detailed on-site investigations, maximizing the functionality of the facilities by highly skilled technicians with advanced operation management technology, achieving stable operations. Furthermore, to respond to "long-term comprehensive operational outsourcing projects" such as DBO and O&M, a base for 24-hour remote monitoring of plant operation status and operational conditions has been established to provide operational support. While centralizing the operation and maintenance data of the plants in the comprehensive support system for operation and maintenance, real-time aggregated management of operational status and equipment operation status is being performed.

c) Energy plants

Customized designs and constructions of "biomass power plants" that generate heat and electricity from various biomass sources such as wood chips, bark, PKS, and bagasse, as well as "RPF power plants" that utilize fuel derived from used plastics, contribute not only to improving revenue through fuel utilization of RPF but also to enhancing corporate value and improving the global environment through CO2 reduction, MSCI ESG ETFs, and SDGs, while ensuring long-term stable operations through maintenance.

※1 Refers to the bark of trees.

※2 Abbreviation for Palm Kernel Shell. Refers to the shells obtained after squeezing oil from palm oil (oil extracted from the fruit of the oil palm).

※3 Abbreviation for Refuse Paper and Plastic Fuel. Refers to solid fuel made from used paper and plastics that are difficult to recycle as materials.

d) Water treatment plants

Providing reliable equipment with excellent performance and high energy-saving effects, such as the sand filtration device "Uniflo Sand Filter" applicable for maximum filtration speeds of 1,000 m/day and the low-power vertical mixer "BioBlade Mix." In sludge treatment, the "Stair Furnace Sewerage Sludge Incineration Power Generation System" achieves energy recovery from sewage sludge and contributes to greenhouse gas reduction.

4. Business Model

The company's main business, the Environmental and Energy (domestic) business, is deployed with a stable business model that continuously receives orders for a series of operations from EPC (2 to 5 years) at general waste treatment plants to after-sales services (approximately 20 to 30 years) over the long term. Competitors in the field of general waste treatment plants include Kanadevia <7004>, JFE Engineering Corporation, Nippon Steel Engineering Co., Ltd., Mitsubishi Heavy Industries Environmental & Chemical Engineering Co., Ltd., and others. The company leverages its strength in proposal capability based on experience since the 1960s, responding to diverse needs such as changes in waste properties, environmental regulations, and improvement of energy recovery rates. In the field of general waste treatment plants, the increase in DBT methods, where facility construction and operation are contracted together, and bidding methods that evaluate technical capabilities and comprehensive proposals beyond price are favorable. Among the more than 120 facilities supplied by the company, as of the end of March 2024, 13 facilities are operated under DBO, 6 under long-term O&M, and 5 under O&M.

(Reported by FISCO guest analyst Hiroshi Nakayama)