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Summary of President's speech on Medium-term Business Plan / Main questions and answers 4Q FY2017

Financial Results Briefing for the fiscal year ended March 2018

Briefing for Analysts: Summary of President’s Speech on Taisei Group Medium-term Business Plan

Basic Policy

  • Under the previous medium-term business plan, we were able to achieve a record high profit that significantly exceeded the target, enabling us to further strengthen the financial base. Under the new plan, with the basic policy of ”establishing a foundation for growth with the construction business as the core”, we will strive to continue to grow even further.

Recognized Business Environment

  • The construction industry is facing the issue of labor shortages. It is not an issue that can be solved overnight, and we must make ceaseless efforts for work style reform and improving productivity. The industry has started competing to deploy ICT, robotics and other advanced technologies, and successfully incorporating such technologies is the key to our future growth.
  • Although I feel the domestic construction market will continue to be strong at least until 2020, there is uncertainty in the market after that due to risks such as a rapid change in the economic environment.

Targeted Business Scale in the Medium to Long Term

  • While maintaining the preexisting business policy of emphasizing profits, we will aim to establish a two-trillion-yen scale business in the medium- to long-term.
  • To this end, we will strengthen our initiatives in overseas markets that are expected to grow. During the previous medium-term business plan period, we worked on developing and bolstering the system for conducting business overseas. Currently, the domestic construction business is steady, and so now is the time to shift our business resources to overseas business activities and position the business as our growth engine.
  • We will also improve the production capacity and leverage open innovation to grow the targeted fields, thereby growing to become a two-trillion company group.

Investment for Growth

  • We will invest 300 billion yen in growth during the next three years. We will appropriate cash to be generated over the three years and part of cash in hand to the investments.
  • With regard to “strengthening overseas business and targeted fields”, “investment in technology development”, “investment for work style reform and improving productivity”, and “investment in other business infrastructure such as human resources and equipments”, we will implement and invest in these initiatives while carefully examining associated risks and returns with a view toward making investment in new business as well as M&A activities.

Numerical Targets for Business Performance in 2020

  • Our performance targets (on a consolidated basis) are: 1,870 billion yen in net sales, 187.0 billion yen in operating income and 130 billion yen in net income. I recognize these targets as challenging toward establishing an ideal two-trillion-yen scale business in the medium- to long-term.

Financial Results Briefing for Analysts: Main Questions and Answers

Q:
What are the measures for achieving consolidated net sales of 1,870 billion yen, which is the target for the last year of the medium-term business plan?
A:
I see the possibility of achieving 1,700 billion yen or so in net sales with the current capacity. Although an increase of 10% in the target is challenging to meet, we will generate those sales from domestic market.
Q:
The profit will be reduced year-on-year in the first year (current period) of the medium-term business plan. What are the improvement measures looking ahead toward the last year of the plan?
A:
We will make an improvement mainly with domestic construction business. Additional works were concentrated during the previous period due to a number of large projects having been completed in the period. Although the current period falls between peaks, it is expected that the number of projects to be completed as we approach the last year of the plan will increase and we will improve the profit in such situation.
Q:
What are the reasons for stepping up efforts for overseas business? What is your idea of risk management?
A:
Under the circumstances where how long the brisk market environment in Japan will last is uncertain, we must be prepared now to expand the overseas business. We have been developing and bolstering the system for risk management and others based on our bitter experience of the past, and we will make such efforts with a view to engaging in M&A as well as alliances with other companies.
Q:
What are the focused regions of the overseas business? Will you be engaging in any real estate development projects, too?
A:
Since it offers official development assistance (ODA) and infrastructure export projects and has relatively developed legal systems, we will be focusing on the Asian region for the time being. We are also considering overseas real estate development projects; we will mainly work on joint projects with Japanese developers while working on projects of local companies in light of the state of development of the respective legal systems.
Q:
Will you continue share repurchase? What is the balance with investment?
A:
Although we will make every effort to determine the best allocation of funds by maintaining the balance with investment, we would like to continue share repurchase if there is cash available.