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Summary of President's speech / Main questions and answers 4Q FY2012

Financial Results Briefing for the fiscal year ended March 2013

Summary of President's speech

Current Situation of the Domestic Construction Market and Taking of Orders

  • As we have all been expecting, there are signs of bright prospects ahead as the available data shows that the volume of new construction orders and requests for estimates, etc. is beginning to grow. During the term ended March 2013, we exceeded our order target by around 5%, due in part to demand related to rebuilding work following the Great East Japan (Tohoku) Earthquake of March 2011 and other reconstruction work as well; foreign exchange-rate factors also played a part.
  • However, competition still remained fierce, and it was no easy matter to maintain our stance of maintaining a strong focus on profitability when taking orders.
  • The order target for the term to March 2014 is lower than the result for the previous year. This goal was set by closely examining the degree of certainty with which an order for each project could be won, adding up the results of such examination, and taking into consideration our stance with regard to taking orders and our ability to fulfill them.
  • I always insist that the amount of profit earned is important. I believe that the amount can be maximized through high income ratios and a certain amount of orders won, and that the order target for the term to March 2014 is set in a way that fits in with this belief.

Overseas Construction Projects

  • The pace of order-taking is currently declining, partly because we are making all-out efforts to ensure proper risk management in overseas business expansion. We hope that you will understand that this is an indication of our determination not to suffer any losses in overseas construction projects again.
  • On the other hand, when I joined Prime Minister Shinzo Abe's mission to Russia and the Middle East a short while ago, I experienced for myself how each of the countries we visited placed great expectations on Japanese companies, and realized anew that there are many projects worldwide where we could demonstrate our technological prowess.
  • In Turkey, the last stop of the mission, I made a presentation on the strong relationships being built up between Taisei and Turkish companies in the projects for the railway tunnel under the Bosporus Strait and Doha International Airport.
  • In the future, we will actively win orders, mainly for projects where we can make the fullest use of our technological capabilities, or where we can obtain support from the Japanese government.

Rebuilding-and Reconstruction-related Construction Projects

  • Two years and two months have passed since the Great East Japan (Tohoku) Earthquake, and debris-removal projects are making a reasonable amount of progress. But the fact is that it will still take a long time before relocation operations in the affected areas is completed; the reconstruction of the affected communities will also take time.
  • One of business issues we are working on under our Medium-term Business Plan is the “development and improvement of social infrastructure and contribution to post-earthquake reconstruction.” We are currently involved in post-earthquake reconstruction projects such as debris removal, decontamination, and relocation of houses to higher areas inland.
  • However, further technological development is essential, to accelerate reconstruction in earnest, and also to prepare for the massive earthquakes that are predicted to occur in the future.
  • Recently, we have built in the Taisei Technology Center, a Tsunami Creation System which enables the simulation of massive tsunamis like the one experienced after the Great East Japan (Tohoku) Earthquake. We have also created a Construction ICT Laboratory, where research in unmanned construction work using construction robots in harsh work environments is conducted, among other subjects. With these facilities in place, we have started research and development in these fields in earnest. Through these initiatives, we intend to achieve a positive and lasting contribution to society.
    Reference

    http://www.taisei.co.jp/about_us/release/2013/1353287448008.html

  • Concerns about rising labor and material costs, intensifying competition and so forth are set to continue going forward. These kinds of concerns cannot easily be dispelled. The other day, however, the Ministry of Land, Infrastructure, Transport and Tourism issued a request (notification), titled “Appropriate Pricing When Placing Orders for Construction Projects.” The notification was issued to private organizations that place orders for construction projects, and industry leaders expressed their intention to avoid excessive price competition. We expect that these initiatives will produce results to a certain extent.
  • This is the second year of our Medium-term Business Plan, and this term will be the key to predicting whether the Plan can be achieved in its final year. Therefore, we will make every effort to achieve the objectives of the Plan.

Main questions and answers

Q:
Can we predict that as the real-estate market improves, domestic demand will grow, and competition will become relaxed, and that this will help improve the profit margin?
A:
We feel that corporate sentiment is improving, but unfortunately, we still face difficulties in actual competitive bidding. We do not have an optimistic outlook for the immediate future.
Q:
How attractive did you find the Russian market when you joined Prime Minister Shinzo Abe's mission to Russia and the Middle East?
A:
In light of our current policy of focusing on areas where we have been achieving good results, the possibility that we will penetrate into the Russian market is slim.
Q:
If the domestic order environment improves and the number of projects increases, do you aim to actively win more projects?
A:
It is true that our capacity to fulfill orders taken is becoming tight, but we are taking measures not to lose the opportunity of winning more orders by, for example, employing mid-career workers.
Q:
The equity ratio has improved. What do you think is an appropriate level for the ratio?
A:
We do not believe that the higher the level goes the better, but rather that we have to raise the ratio to a slightly higher level than now.