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Summary of President's speech / Main questions and answers 4Q FY2010
Financial Results Briefing for the fiscal year ended March 2011
Summary of President's speech
Present market situation and Taisei's goals for the current fiscal year
- Due to the effects of the recent large earthquake, production in Eastern Japan is stagnant and consumption has also reduced due to people doing and spending less out of a sense that doing otherwise after a disaster would be improper. As power supply shortages will continue to have significant effects on the economy, it will take a long time before the economy fully recovers.
- Against this background, we have set goals that exceed those for the fiscal year ended March 2011 in terms of the amount of orders and sales as well as various profits. Although the market has become increasingly uncertain due to the effects of the earthquake, we believe these goals are not unattainable.
State of overseas projects
- As of April 1, 2011, the amount of ongoing overseas construction work decreased by 66.3 billion yen, compared to the same period of last year, to 199.6 billion yen. This is roughly the same as the amount that we set as the target for the amount of construction work (200 billion yen) that can be controlled by Taisei during the last fiscal year (fiscal year ending March 2012) of our medium-term business plan. We expect to maintain the amount of construction work at approximately the same level in the fiscal year ending March 2012.
- We will continue our efforts to make overseas business central to Taisei's profitability without fail, based on effective risk management.
Future business development
- Recovery from the earthquake and the elimination of radiation from the Fukushima Nuclear Power Plant will have large effects on the Japanese economy in the future and eventually on construction demand in Japan. For this reason, these factors will also greatly affect Taisei's business development.
- The three most important factors that we currently believe will affect our business development are the overseas transfer of production by Japanese companies, the acceleration of energy conservation programs in various areas, and the enhancement of seismic resistance, isolation and control of architectural structures.
- These circumstances provide us with a great opportunity to secure new orders. Therefore, we intend to proceed with developing related technologies and proposal services, while at the same time further increasing our efforts to reduce various costs, including overseas procurement costs.
- Despite the current unfavorable business climate, the amount and profit margin of construction projects we have undertaken remain among the highest in the industry. Our most important task in the future is to improve financial results in the area of civil engineering, especially overseas civil engineering.
Main questions and answers
- The profit margin for domestic building for the fiscal year ending March 2012 is predicted to decrease. I assume that this decrease is due to an expected rise in the price of materials rather than accepting orders at low prices. I believe your order acceptance policy has not changed. Is my understanding correct?
- That's right. I have maintained the same order acceptance policy ever since I was appointed as the president.
- There are concerns about various restrictive measures that may be taken to cope with power shortages in the future. Under these circumstances, is it possible to increase sales in construction for the fiscal year ending March 2012? Some people are also concerned about possible delays in construction work during summer. What are your plans to cope with this situation?
- Some of our large construction projects will be moving into full swing, thereby contributing to increasing sales. If measures are taken to reduce power demand during peak periods in summer, we will need to discuss issues, including construction schedules, with our customers.
- What measures are being developed to prevent the effects of long-period earthquake ground motion?
- We used technology to prevent the effects of long-period earthquake ground motion for the Shinjuku Center Building, where our head office is located, for the first time in Japan. The Japanese construction industry is also concerned that there are still many buildings that do not meet the new seismic resistance standard established in 1981. In particular, the industry is proposing that measures be taken as soon as possible to renovate facilities used by many people that serve as evacuation centers in case of a disaster, such as hospitals, government offices, schools and train stations.
- I believe overseas projects will be a key issue in Taisei's next medium-term business plan. The 200 billion yen level is currently regarded as the standard for the amount of work that can be controlled by Taisei. Will this level change in the future?
- The domestic market is unlikely to expand in the near future and to cope with the current circumstances, we are stepping up our efforts to develop a system within our company (to make overseas business central to Taisei's profitability). In order to increase the amount of work that can be controlled by Taisei from the current level (200 billion yen), we need to win orders for projects that allow us to effectively use our advantages. I also believe that we need to maintain our current policy of carefully reviewing accepted project orders.