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Summary of President's speech / Main questions and answers

Financial Results Briefing for 2Q FY2018

Summary of President's speech

New orders

  • The first half of FY2018 has progressed broadly as planned, although it has not been as good as in previous years, so the full-year target remains unchanged. With regard to the full-year target on a year-on-year basis, civil engineering is anticipated to decrease as a reaction to new large-scale private orders received in the first half of the previous fiscal year. Meanwhile, building construction is anticipated to achieve the same level as FY2017 on a full-year basis because orders of large-scale major projects are biased towards the second half in FY2018, although they were received in the first half of the previous fiscal year. Accordingly, overall demand remains robust.

Profit forecasts

  • Gross profit and other profit items in the first half of FY2018 decreased while the previous fiscal year achieved an all-time high record. With regard to the full-year target, this year may be seen to be not as good as FY2017, which was too good due to various factors such as acquisition of additional works in large-scale projects nearing completion. Nevertheless we still anticipate that we will achieve higher profits. We expect that the profit forecast will be exceeded thanks to the acquisition, etc., of additional works going forward.

Balance sheet

  • Although cash and deposits are increasing due to the recent improved profit performance, an investment policy towards growth in 2020 and onward has been set up in the medium-term business plan starting this year. From now on investment will be implemented by carefully considering risk and return for each project.

Other

  • The construction industry is strongly aware that it is facing a crisis of shortage of construction skilled workers. Under such awareness, industry-wide efforts have started toward the improvement of the working environment, including the securing of a five-day workweek system and amending long working hours.
  • This year, our company started an initiative for uniformly closing construction sites on Saturdays to make the second Saturday of each month a day on which construction sites are closed. With the aim of reducing how busy each construction site is, a new department called the "Digital Product Center" has been launched to promote the consolidation of drawing preparation from design to construction drawings and the digitization of building information, which is called BIM (Building Information Modeling).
  • I recognize that these initiatives for productivity improvement are a turning point that will make the construction industry into a truly healthy one and am committed to these initiatives with a sense of mission.

Main Questions and Answers

Q:
Please tell us about the current environment for orders. Has the competition become tougher than before?
A:
We are developing marketing activities to win orders that avoid busy periods for construction works where we do not have extra capacity to receive more orders. As a general impression, we do not think that competition is intensifying.
Q:
With regard to the prospect for gross profits, do you expect further improvement?
A:
Construction costs continue to moderately rise but are still within the range of our expectations. So, we do not think that the profit ratio will deteriorate immediately. On the other hand, the profitability of construction works tends to improve towards the end of construction time, which means that the number of projects completed in each term affects the profit. Fewer projects have been completed in the current term compared to the previous term, but this is expected to increase in the next term.
Q:
What do you think about expansion of the acceptance of foreign human resources?
A:
The construction industry is now making an industry-wide effort to improve treatment of Japanese construction skilled workers. I believe that we should not try to just secure cheap labor.
Q:
You mentioned (in your speech) about the Digital Product Center. Does it have an ICT-related technological development function?
A:
The Digital Product Center is intensively engaged in drawing preparation from design to construction drawings that has been done mainly by each construction site as well as the digitization of them in order to reduce how busy sites are and to improve efficiency of drawing preparation. Technical development is handled by the Technology Center and the technology department of the head.