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Summary of President's speech / Main questions and answers 2Q FY2017

Financial Results Briefing for the 1st half of Fiscal Year ending March 2018

Summary of President's speech

New orders

  • Non-consolidated civil engineering increased by about 22% on a year-on-year basis because of the reception of new orders for our focused projects such as an Interim Storage Facility as ordered by Ministry of the Environment and the Construction for the first Chukyo area tunnel of the Chuo-Shinkansen (the Saio section). Although non-consolidated building construction decreased by about 26% on a year-on-year basis due to a reactionary decline to orders of large scale projects such as the Construction Work on the New National Stadium in FY2016, it exceeded the initial forecast by about 13% because of new orders for Construction Work at Tokyo International Airport, and others.

Profit forecasts

  • Regarding consolidated profit, gross profit and other profit items continued to record an all-time high record for the three consecutive interim periods because of the acquisition of additional works and cost reduction. The full year revised forecast needs to be achieved and we aim for further improvement in the second half of FY2017 because the same smooth transition as in the first half in expected.

Balance sheet

  • Although cash and deposits are increasing due to the prospect of profits, not restraining investment but working on new business of investment in good development projects and airport concession, and others.

Other

  • In the construction industry now, in preparation for the coming of a mass leaving of construction skilled workers or the losing a job era due to the aging of the workers, a roadmap for the securing of a five-day workweek system and the realization of long-term labor correction is drawn because of the improvement and reserve of the working environment of construction engineers. Starting in earnest from this spring, an understanding of this "Work Style Reform" is advanced also on the client side.
  • However, the realization of this "Work Style Reform" is premised on self-help efforts such as higher productivity on the industry side, and our company has developing throughout itself "TAISEI i-Innovation," a collective name for initiatives to higher productivity and technological innovation from this year onward. We are accelerating research and initiatives such as ICT and robot utilization, promotion of unmanned construction technology, and the pre-casting of parts.
  • I myself recognize that this initiative for a "Work Style Reform" is a turning point that will make the construction industry into a healthy one. I will treat this improvement in the business environment as an unprecedented chance and shall work proactively on this initiative.

Main questions and answers

Q:
What is the net sales outlook going forward and new orders outlook after the Olympics?
A:
Net sales for this full fiscal year are expected to be lower than the initial forecast, but there is no particular delay in the process. We expect the peak to be from 2018 to 2019. New orders are expected to remain strong for several years after 2020.
Q:
What is the prospect of gross margin ratio? Can we expect for further improvement?
A:
In addition to becoming busy toward 2020, labor costs are expected to rise due to the influence of the “Work Style Reform” such as the five-day workweek system. Therefore, it is expected that making considerable improvements from the current level will not be easy.
Q:
A large amount of cash and deposits has been built up, but do you think that it is at the proper level?
A:
Although money received tends to concentrate at the fiscal year end in our company, I think our situation during the period is not greatly different from that of other companies. However, we think that the use of cash and deposits will be an important theme in the medium-term management plan to be started next period.
Q:
Do private customers understand the “Work Style Reform”?
A:
It is difficult to change the construction period of the projects that have already been ordered, so I think that our efforts are necessary in areas such as efficiency at first. As the next step, I think that it is necessary to have a call for action so that we can gain our customers’ understanding at the time of their order.