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Summary of President's speech / Main questions and answers 4Q FY2015
Financial Results Briefing for the fiscal year ended March 2016
Summary of President's speech
New orders and prospect of profit
- The result of overall new orders decreased by approximately 5% compared to that of FY2014. It is because although new orders of both public and private sectors of civil engineering and public sector of building construction declined, new orders of private sector of building construction was strong with new orders of large scale redevelopment projects.
- The trend of FY2015 new orders were (1) series of large scale redevelopment projects, (2) start of the orders of Linear Chuo Shinkansen projects, (3) orders of Olympic related facilities are well under way.
- Since large scale projects are expected to be continuously ordered in FY2016, I understand that it is important to focus on adjustment of the work force.
- Non-consolidated gross margin ratio of FY2015 recorded the highest level since the bubble era. Civil engineering gross margin ratio of FY2016 forecast excludes the influence of acquisition of additional works as in FY2015. Building construction gross margin ratio of FY2016 is expected to be almost the same level of FY2015.
- For the time being, there is high possibility to maintain the same building construction profitability level as FY2015 because it is unlikely that supply of constraints of construction industry side will be dissolved.
Regarding to revision of targets of Medium-term Business Plan, share repurchase, and dividend increase
- We revised the target of consolidated operating income to 115.0 billion yen from 75.0 billion yen. The differences of assumption from the time of initial plan are (1) easing of competition of construction industry side was more than expected because of strong private demands, (2) less than expected increase of labor cost and fall of material cost. However, implementation of 5 target fields along with the basic policies, “Deep Cultivation of the Construction Industry , our core business” will be continued.
- We made decision to repurchase our stock, and also, decided to propose matters concerning dividend increase at the general meeting of shareholders in June in order to enhance the shareholder returns and to improve capital efficiency by the reason of substantial improvement of business performance of FY2015 compared to the initial plan.
- Other construction companies also recorded the highest profit level ever since bubble era. It appears that overall construction industry is sailing smoothly, however, we are not so uplifted because the current favorable business performance is due to certain external factors such as unimaginable strong demands and unexpected drop of material costs.
- We are now at the phase to deal with the fundamental problems of construction industry such as securing younger workers and dissolution of multiplex subcontracting.
Construction industry is behind other industry in areas such as improvement of productivity and ICT (Information and Communication Technology) of worksites. It is management’s duty to initiate proactively to solve these problems.
- As the president of Taisei Corporation, I will continue to manage the company with high degree of commitment to undertake a role in the sustainable development of construction industry into the future.
Main questions and answers
- What is the circumstances leading to the stock repurchase and its further implementation in the future?
- In FY2015, which is the first year of Medium-term Business Plan, we recorded the highest profit ever. Because we have assumption to ensure suitable profit continuously during the term of Medium-term Business Plan, we decided to acquire own shares as a part of improvement of capital efficiency and enhancement of the shareholder return. As for future stock repurchase, we will consider by balancing the investment environment and the shareholder return.
- The result of civil engineering gross margin of FY2015 was strongly affected by acquisition of additional works and design changes. Is there change in environment of public works? Also, what is the view of building construction gross margin of FY2016?
- There is no particular change in environment of civil engineering public works though civil engineering is strongly affected by acquisition of additional works and design changes due to large size of each project. Building construction is realistic forecast with accumulation of each project.
- What is the assumption of gross margin ratio of both civil engineering and building construction which is reflected in the final year of revised Medium-term Business Plan?
- In the case of non-consolidated basis, civil engineering is expected to improve slightly, and building construction will be in line with FY2016.
- What is the attitude toward strategic-holdings in client companies?
- We make valuation of holding shares and balance. We assess that all of the currently holding shares have economic significance.
- In the speech, why did you mention that there is no uplifting feeling among the construction industry?
- It is because each company have the feeling that we should not be satisfied with the current situation.
- Operating income is now at the high level. What is your enthusiasm regarding the future?
- As the manager, it is a matter of course to sustain the current level and aim for further improvement.