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Summary of President's speech / Main questions and answers 2Q FY2009

Financial Results Briefing for 1st Half of the Fiscal Year Ending March 2010

Summary of President's speech

1. Present market situation and future prospects

  • Japan's construction market continues to be sluggish due to the decline in private capital investments and stagnant real estate market caused by the economic recession. This may be accompanied by a further decrease in public investments, which leads us to believe that demand for construction work is unlikely to recover before the next fiscal year.
  • During the second quarter of the fiscal year ending March 2010, Taisei was able to achieve financial results that exceeded our targets. Although the current economic climate leaves little room for optimism, we expect to achieve our targets for the fiscal year as a whole as well.
  • We will faithfully implement the medium-term business plan we formulated this year so as to ensure that we continue to earn profits in the fiscal year ending March 2011 and onward.

2. State of overseas projects

  • As a result of measures we introduced to compensate for losses related to overseas construction work undertaken during the fiscal year ending March 2009, the risk of a decline in profits from ongoing construction work has decreased considerably. Since April 2008, we have also taken measures to enhance our risk management with respect to contracts for overseas projects. Given that most of our overseas building projects have generated healthy profits, we believe that proper risk management will enable us to achieve a certain amount of profits from overseas work as well.
  • In any event, demand in the Japanese construction market is unlikely to recover in the near future, leaving us no choice but to seek business opportunities overseas. We will therefore take the necessary measures to improve our access to overseas markets.

3. Group strategy

  • Our new medium-term business plan emphasizes the need to increase the earning power of our group companies in order to improve our overall business capability.
  • TAISEI U-LEC Corporation, which has become a wholly owned subsidiary of Taisei, has posted surpluses on a consistent basis. In order to achieve greater profits, we will also work to improve the business efficiency of Yuraku Real Estate Company, which will become a wholly owned subsidiary of ours in the near future, and Taisei Rotec Corporation.

Main questions and answers

Q:
What is the outlook for the profit margins generated by your domestic construction projects?
A:
Although we continue to face serious competition in the domestic construction market here in Japan, we are taking measures to achieve further reductions in our construction costs in order to maintain our profit margin at its current level. One example of our cost reduction measures is the establishment of a new head office for our Procurement Division.
Q:
It has been reported that your highway construction project in Algeria has been delayed. What is the current situation and how do you plan to deal with this?
A:
We are unable to go into specifics on individual projects but it is true that the construction work has been delayed.
Q:
You mentioned that Yuraku Real Estate will become a wholly owned subsidiary of Taisei. How do you plan to improve its business efficiency?
A:
The policies we adopt for Yuraku Real Estate will be the same as those we have adopted for all other companies that become wholly owned Taisei subsidiaries. We achieve maximum management efficiency by using our subsidiaries as business resources for the management of the company group as a whole in order to increase our business flexibility.