Message from General Manager

Senior Managing Executive Officer, Member of the board;
Chief of Civil Engineering Division;
Deputy Chief of Corporate Planning Office

Shigeyoshi Tanaka

Overview of Segment

Sales / Operating margin

Sales in the Civil Engineering segment decreased 3.3% year on year, to ¥455.7 billion reflecting lower sales in the Company and its consolidated subsidiaries, while operating income jumped 53.1% to ¥50.7 billion due to an improvement in gross profit margin.

The above figures include intersegment transaction.

Opportunities

  • A growing number of projects requiring advanced technologies such as the Linear Chuo Shinkansen project
  • An increasing number of works on energy field projects including nuclear power plants, thermal power plants, and renewable energy projects
  • Rising renewal and replacement demand due to the aging of expressways and other social infrastructure

Risks

  • Risk of production capacity declining due to labor shortage
  • Risk of construction demand diminishing due to surging labor costs
  • Risk of the occurrence of a quality incident that may potentially compromise the Company's credibility

Actively Participating in National-Level Projects and Responding to the New Business Environment

The domestic market has continued to enjoy a boom due to ongoing national-level projects, and Taisei Corporation has steadily been acquiring work orders for mainly large projects such as for the Linear Chuo Shinkansen Southern Alps Tunnel (Yamanashi Section) and facilities related to the Tokyo 2020 Olympics and Paralympic Games (the Bajikoen Horse Park and the Sea Forest Waterway).

Sea Forest Waterway

A long rowing and canoeing (sprint) basin for the 2020 Tokyo Olympics is being designed and constructed by a cross-industry JV consisting of Taisei, Toyo Construction, Swing Corporation, and Hitachi Zosen.

Meanwhile, with the shortage of engineers and skilled construction labor becoming a cause of concern, new industry-wide endeavors are now underway, including promotion of the i-Construction initiative* and improvement of the treatment of construction workers such as the reduction of working hours. The Civil Engineering Division will actively respond to the new business environment by establishing an ICT supervising department to pursue operations across the country.
A great deal of attention is paid to projects for stable power supply, including nuclear power plant restarts and thermal power generation projects. In Fiscal 2015, Taisei Corporation also cooperated with the restart of the Sendai Nuclear Power station operated by Kyushu Electric Power Co., Inc.
Going forward, the Company will continue to pursue business activities that contribute to improving the safety, security and convenience of the public, including electrical power-related works, post-earthquake reconstruction works and public transport infrastructure development.

Our Efforts on Three Challenges towards Achieving Further Growth

In the Civil Engineering Division, we have been making efforts on challenges specified as: 1) production capacity expansion; 2) profitability enhancement; and 3) overseas business earnings stabilization.
To expand production capacity, it is essential to secure and develop diverse human resources and allocate the right person in the right place. We utilize experienced employees and assign junior employees to revitalize the organization and achieve further growth. Moreover, we seek to raise project productivity by pursuing labor- and energy-saving efforts through the introduction of techniques such as information-based work implementation, precast work methods, and further mechanization.
In an effort to enhance our profitability, we arrange for a project team to be set up early on a project-by-project basis, and the team works closely with the sales side to conduct an order acquisition strategy designed to deliver maximum value-added to the customer. Moreover, in addition to bolstering our procurement capabilities by maximally leveraging the Company's size, we devise price-competitive work implementation plans by utilizing safety and other technologies, thereby enhancing our profitability.
With regard to overseas business earnings stabilization, the Company established the Overseas Business Strategy Committee in Fiscal 2015, developing a foundation on which to grow soundly.
We will continue to engage in order acquisition activities with a focus on regions and fields where our strengths can be leveraged.
We will improve our project management methods, seeking to stabilize our earnings. Moreover, we will strive to foster international workforce with an eye on the future.

Seeking to Become Number One Player by Developing Technologies and Building Business Models for the Next Generation

In line with the Medium-Term Business Plan, we are continuing to develop technologies and build business models with an eye towards the next generation. The Company has been developing differentiated technologies such as for shield tunnel branching and joining sections. In the coming years, we will exercise and further improve our comprehensive technologies for highly challenging works such as in national-level projects.
To help resolve social challenges, the Company will focus its efforts on social infrastructure reinforcement initiatives such as the measures to address the aging of expressways and other infrastructure as well as the frequent occurrence of natural disasters.
In the renewal and replacement fields, we will engage in research and development on large-scale renovation of expressways and their life extension, thereby capturing new demand. In addition, we will pursue a sales strategy on a group-wide basis, including joint technology development with group companies.
Through the endeavors discussed above, we aim to become number one in more respects and achieve higher recognition and presence in the market.

i-Construction: A new initiative for improving construction site productivity by leveraging ICT comprehensively, unifying standards and work timing.

Managing Executive Officer, Member of the board;
Chief of Building Construction Division;
Deputy Chief of Corporate Planning Office

Norihiko Yaguchi

Overview of Segment

Sales / Operating margin

Sales in the Building Construction segment declined 0.2% year on year, to ¥1,015.4 billion reflecting lower sales in the Company, while operating income expanded 130.6% to ¥56.4 billion due to an improvement in gross profit margin.

The above figures include intersegment transaction.

Opportunities

  • Utilize our know-how and develop new original technologies through participating in national-level projects and focused deals
  • Growing domestic demand remaining high until 2020 through strengthening our production system further
  • Improve our overseas business operations in preparation for the post-2020 years, thereby obtaining greater opportunities to participate in infrastructure export projects

Risks

  • Risk of our production capacity potentially deteriorating due to a shortage of engineers and skilled construction labor
  • Risk of our earnings becoming pressured by labor cost surging after work start
  • Risk of the Company losing the trust and confidence of the public due to an occurrence of a quality defect or an accidental death

Participating in National-Level Projects and Strengthening Our Production System

In December 2015, Taisei Corporation was selected as a preferential negotiation right holder for the design works and construction works of new National Stadium Japan, a national-level project for the Tokyo 2020 Olympics and Paralympic Games.

Design Works and Construction Works of New National Stadium Japan

Our JV (Taisei Corporation, Azusa Sekkei, Co., Ltd. and Kengo Kuma and Associates) was chosen as an entity with priority negotiating rights for the development project of the New National Stadium—the main stadium of Tokyo 2020 Olympic and Paralympic Games.

Our work order acquisition environment is favorable as many projects including large hotel rebuilding projects and large-scale redevelopment projects are planned for the Tokyo metropolitan area. However, with the implementation of these large projects peaking in a short period of time from the next fiscal year, there are concerns over a potential shortage of work capacity including that of engineers and skilled construction labor.
For this reason, the Building Construction Division will strengthen its production system as an urgent task and steadily meet customer needs related to both construction cost and work term, thus striving to win greater trust and confidence.
In an effort to contribute to supplying power stably in Japan, we will work actively on projects for enlarging thermal power plans and nuclear power plant restarts.
Furthermore, we will actively contribute to forming safe and secure national land through the post-Great East Japan Earthquake and post-2016 Kumamoto Earthquake restoration and reconstruction works.

Working on Focused Challenges towards Realizing Further Growth

The Building Construction Division has designated as three priority challenges, and is working on: 1) the strengthening of our production system described above; 2) the enhancement of profitability; and 3) the complete elimination of serious quality defects and accidental deaths.
Regarding the strengthening of our production system, we make strong efforts to streamline operations further by using ICT, develop energy-saving work methods, and collaborate with "Souyu-kai," the organization of the Company’s main cooperating companies in preparation for the production site potentially becoming even busier.
To achieve the enhancement of profitability, we deliver high value-added by steadily meeting customer needs, including for renewal works.
With regard to the complete elimination of serious quality defects and accidental deaths, we strengthen and perform quality and safety control processes with increased rigor, solidifying customer confidence at a time when Taisei Corporation attracts heightened customer attention as an enterprise participating in national-level projects.

Seeking to Become the Construction Industry's Leading Company by Developing Technologies for the Next Generation and Strengthening Our Production System Further

Under the policy of the Medium-Term Business Plan, now in its second year, as well as our long-term vision TAISEI VISION 2020, we strive to establish planning technologies (environmental technologies, wood material use and lawn cultivation technology) and work implementation technologies [shift to precast concrete (PCa), promotion of new frame building technology and ICT with a focus on Building Information Modeling, or Building Information Modeling (BIM*)] as part of our next-generation technology development, thereby strengthening our production system further. At the same time, we work harder to establish next-generation business models in the renewal and replacement fields, representing our focus fields.

TSUMURA&CO. Shizuoka Plant(Example of BIM)

Using a building information model (BIM) to visualize structure, design, and facilities, which were previously handled independently of each other, in 3D, we can now reduce the labor and hours it took previously to check for inconsistencies in drawings.

COCOON3(Renewal work)

We refurbished Cocoon 3, a commercial facility in COCOON CITY, which Katakura Industries Co., Ltd. has been developing as an urban development project at the east side of Saitama-Shintoshin Station. The former general merchandise store (GMS) was upgraded to a large commercial complex facility with a construction period of just four months.

In the domestic construction business, we seek to ensure high quality and safety as well as high added value and strengthen our production system, thus building a new production system. In the overseas construction business, we work to improve our operational processes, acquire and develop overseas personnel in a well-planned manner, and establish and promote training programs for local staff, in preparation for the years after 2020, a period in which it is feared that domestic demand will diminish.
Furthermore, we will collaborate and cooperate with Taisei Group companies in an enhanced manner to meet a wide range of customer needs on the back of the Group's comprehensive capabilities. We aim to become the construction industry's leading company through the above-mentioned endeavors.

Building information modeling (BIM) is to an intelligent 3D model-based process that enables to use the information across the whole building life cycle such as design, construction, and maintenance.

Senior Managing Executive Officer
Chief of Urban Development Division

Katsuyuki Kanai

Overview of Segment

Sales / Operating margin

Sales in the Real Estate Development segment fell 11.0% year on year, to ¥127.6 billion reflecting lower sales in the Company and its consolidated subsidiaries, while operating income decreased 22.9% to ¥9.4 billion due to a decline in sales.

The above figures include intersegment transaction.

Opportunities

  • Large development projects actively underway in central Tokyo as infrastructure development for the Tokyo 2020 Olympics and Paralympic Games
  • Need for reconstruction of aged buildings constructed during Japan's high-economic growth era
  • Developing various development schemes by accumulating and utilizing sophisticated development skills

Risks

  • Risk of Investment in overseas development projects
  • Risk of work cost potentially surging for redevelopment projects
  • Risk of construction demand potentially declining in the years after 2020

Providing Strong Support to Customers While Confronting Various Challenges

In central Tokyo, large development projects are currently increasingly more actively underway on the back of the nation's infrastructure development for the Tokyo 2020 Olympics and Paralympic Games as well as the Japanese government's growth strategy involving the National Strategic Special Zones, among others. Meanwhile, the country has no time to waste in dealing with challenges faced by its urban areas, including demand for the aging-induced reconstruction of buildings constructed during Japan's high-growth era as well as resolution of areas with a high density of old timber buildings. In the Urban Development Division, while tackling the abovementioned social developments and various challenges, we provide strong support for customers' development plans and serve as developer to implement a development project. Given that there is a risk of construction demand declining in the years after 2020, we will take on the challenge of new business fields towards achieving sustained growth with an eye on the post-2020 years.

Pursuing Urban Development Business by Leveraging Accumulated Know-How and Experience

Taisei Corporation has been contributing to building local community environments by becoming involved in approximately 20% of the nation's entire city center redevelopment projects, the key field for urban redevelopment. Although the spike in work costs that occurred in the last few years occasionally made operations difficult to run, coordinating carefully with the parties involved enabled the Company to realize relevant construction starts. We will continue to provide support for the implementation of projects in many locations with a focus on the Tokyo metropolitan area, including the Meguro Station Front Redevelopment Project.

Meguro Station Front Redevelopment Project

This urban redevelopment project is in the area in front of Meguro Station where JR Yamanote Line and other lines link. After a group of companies including Taisei won the bid for the project (cooperation), we formed a consensus among landowners and leaseholders, and consulted with the administration with the aim of developing a "forest," offices, commercial buildings, and residential buildings that are open to the local community.

Moreover, while leveraging know-how accumulated through redevelopment projects, we are pursuing initiatives for resolving areas with a high density of old timber buildings in close collaboration with group companies such as Taisei-Yuraku Real Estate Co., Ltd., TAISEI U-LEC CO., LTD. and TAISEI HOUSING CORPORATION.
Furthermore, we have leading experience in conducting PFI projects, which are being steadily recognized as a new method of developing public facilities. In December 2014, we accomplished the grand opening of the Ehime Prefectural Central Hospital, a hospital PFI project involving not only the development of the facility but also its operation. In March 2017, the construction of the Nagasaki Harbor Medical Center City Hospital is scheduled to be completed.

Nagasaki Harbor Medical Center City Hospital

This 18-year PFI project involves constructing the city hospital and providing maintenance operations.
Our proposal to build a local base hospital that can serve as a disaster center hospital, based on our expertise acquired through past experience with other hospital PFI projects, was highly evaluated.

Taking on the Challenge of New Business Fields towards Achieving Sustained Growth

In the field of development projects in which we are one of the project owners, Shinagawa Season Terrace was newly opened in 2015. This project is thought to have created a new model for urban spaces, through effective utilization of the upper spaces of the Shibaura Water Reclamation Center (Tokyo Metropolitan Government Bureau of Sewerage) as offices, shops and large green blocks. We will achieve increased earnings stability by utilizing knowhow accumulated to date, including property management experience gained in relation to Ochanomizu Sola City, a building opened in 2013.

Ochanomizu Sola City

This development project carried out by Taisei applies all of our planning, designing, leasing, and PM expertise. Employing cutting-edge seismic base isolation and environmental technologies, the building has a high occupancy rate.

Recipient of 2015 City Planning Institute of Japan Design Project Award

In the future, to achieve continuous growth, we intend to respond to the requests of our customers and the needs of society by accumulating and utilizing higher level development skills while actively investing with the aim of enlarging our overseas development areas such as ASEAN countries and taking on the challenge of new business fields such as concessions.*

Concession: Refers to an arrangement in which a public-sector entity such as a government sells the operation right of an airport or water supply business, for example, to a private-sector enterprise while retaining ownership. Concessions allow the central government or municipality to achieve a reduced funding burden for infrastructure maintenance and development, and provides the private-sector enterprise with the commercial opportunity of running the infrastructure.