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Summary of President's speech / Main questions and answers 4Q FY2007

Financial Results Briefing for the Year Ended March 31, 2008

Summary of President's speech

On the business environment:

  • Although the past fiscal year was a year of severe changes to the external environment, such as issues related to subprime loans and the amendment of the Building Standard Law, it also can be said to have been a year in which Taisei was able to spread thoroughly throughout the company the management policies of freeing ourselves from unfruitful busy times and focusing on profitable businesses.
  • As a result, the profitability of the construction business is recovering and last year we were able to achieve our order targets by strengthening our marketing efforts in fields where we have a competitive edge over the others, despite the uncertainties in the domestic economy.
  • However, there are concerns about factors such as future worsening of the real-estate market and decreased capital investment due to a slowing of the Japanese domestic economy. In addition, since there is no sign of easing up in price competition among general contractors and increases in raw-materials prices are growing even more severe, we believe the tough business environment will continue in this fiscal year as well.

On the Taisei Group Medium-term Business Plan:

  • While we recognize that it will be very hard to achieve the targets for the final year of the Taisei Group Medium-term Business Plan, at this point in time we plan to give priority to the strategic issues covered in the plan and carrying out measures intended to resolve such issues.

On forecasts of business performance:

  • This year's building construction business leads us to expect a recovery of profitability, and they are highly likely to achieve their targetsprojection.
  • Overall, our efforts toward the final targets of the Taisei Group Medium-term Business Plan are showing results, and in the future as well the entire company and the entire group plan to make great efforts together.

Main questions and answers

On the market environment:

Q:
In light of today's Japanese economy, don't you think the figures in your order projection are somewhat optimistic?
A:
Basically, these figures represent totals of specific projects, and at this point in time we believe they are achievable.
Q:
How is underlying domestic private-sector construction demand?
A:
Led by the subprime crisis, demand is weakening. We would like to make up for this weakening demand in fields where we have a competitive edge over the others, such as urban redevelopment projects and engineering solution business.

On marketing policies:

Q:
Isn't it difficult to respond as a single firm to increases in underlying raw-materials prices? What kinds of efforts will you take in response to these rising prices?
A:
Industry organizations are making requests to customer institutions such as national and local governments to implement measures such as utilizing sliding cost scales.
Q:
Some developers and real estate agents are saying that general contractors' approach of passing on costs in the form of higher prices is softening in order to secure order volume. Are you really sticking to your intention of passing on costs?
A:
We plan to carry our intentions through, since this is an issue that affects the continued existence of the company.

On profitability:

Q:
Please tell us about the background of the recovery in the profitability of building construction business.
A:
We believe this is a result primarily of a thorough focus on profitability. We also plan to make even greater efforts at cost reduction in the future, using technology.
Q:
Is the profitability of the domestic civil engineering business in a worsening trend?
A:
The profitability of public-sector construction is worsening as competition intensifies due to the spread of open tendering.