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Summary of President's speech / Main questions and answers 2Q FY2015

Financial Results Briefing for the 1st half of Fiscal Year ending March 2016

Summary of President's speech

New orders and prospect of profit

  • The same as last fiscal year, there is successive new orders of large scale projects which resulted 10% increase compared to the previous fiscal year.
    In addition to continuous new orders of redevelopment projects in Tokyo metropolitan area, new orders from manufacturing industry outside of Tokyo increased.
  • The result of gross profit in building segment was more than expected. The main reason of recovery is cost reduction due to the fact that rise in construction cost was below our initial assumption, and completion of low-profit projects which was affected by sudden cost inflation.
    Also, competitive environment is easing because of increase of workload from non-manufacturing industry in the environment of tight capability.
  • In revised forecast of full-year, non-consolidated building gross profit of the second half is expected to worsen compared to the first half, but we believe that the impact of macroscopic profit deterioration risk such as rise in labor cost and material cost will be limited.

Market outlook and other

  • Because of economic slowdown in China, we cannot be optimistic about capital investment of manufacturing industry. But we expect that there will be Olympic related large scale projects in Tokyo metropolitan area continuously.
  • There is positive sign for domestic market after 2020 (Tokyo Olympic) because the construction of Linear Chuo-Shinkansen is started and in addition to that, redevelopment projects that will start after 2020 are gradually coming up with details.
  • In the situation where large scale projects are increasing, it is not easy to keep balance between production capability and order volume. I will carry out the business using my own initiative not to decline the profit level which was once recovered.

Main questions and answers

To what extent the building gross margin ratio will improve?
I have a feeling to improve profitability one step above, but since it is difficult to foresee the future construction cost trend, and there is uncertainty about the construction market after 2020 (Tokyo Olympic), it is not so easy.
Why there is downward revision on 2nd half operating income?
It is because of conservative judgment about additional works that are under negotiation.
What is the future stance of investment?
In accordance with current real estate market, it is not time to buy. In terms of overseas market, investment is necessary for some extent, but there will not be immediate M&A.
Do you have an idea to increase number of employees if the outlook of construction demand after 2020 is likely to be strong?
At this time, it is difficult to anticipate that workload will be more than just before Tokyo Olympic.
What is the plan of future capital investment?
In recent years, we are investing for next-generation technology such as ZEB (Zero-energy Building) Demonstration Building in Taisei Technology Center. Because of the business category of the main business, it is not always the case that there will be investment equivalent to depreciation.