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Summary of President's speech / Main questions and answers

Financial Results Briefing for 4Q FY2018

Summary of President's speech

New orders

  • On the whole, we secured more new orders than planned in FY2018, which is a good start toward expanding our business scale as targeted in the medium-term business plan. Though civil engineering decreased year-on-year in reaction to new several large-scale orders received in the previous fiscal year, building construction increased year on year due to new orders of major construction projects including large-scale redevelopment projects in the Greater Tokyo Area successfully received.
  • Based on the outlook that the domestic market will continue to be robust after the 2020 Tokyo Olympic Games, we set an aggressive order target for domestic construction projects for FY2019, which is a 10% increase from the previous fiscal year.

Profit forecasts

  • Profits in each stage in FY2018 achieved the second highest ever, although they decreased from the previous fiscal year, which achieved an all-time high record. Even though the major factor contributing to the decreased profits is a decrease of non-consolidated gross margin ratio, we regard the decreased profits as a result of a combination of various factors such as the acquisition of additional works in large-scale projects nearing completion in the previous fiscal year.
  • Unconfirmed items such as the acquisition of additional works are not incorporated in the FY2019 plan, which caused the gross margin ratio to decline from FY2018 results. However, it is the same level as the FY2018 plan initially formulated and there is no particular change in the essential profit level. We expect that profit level will be higher than the plan to a certain extent thanks to the acquisition of additional works as many large-scale projects will be completed in FY2019.

Return to shareholders

  • As the business results in FY2018 exceeded the plan initially formulated, we will increase the dividend per share to 130 yen from 125 yen for boosting returns to shareholders and improving capital efficiency. In addition, we plan to acquire treasury stock equivalent to 28 billion yen for four consecutive years.

Other

  • The construction industry is making full-fledged industry-wide efforts to secure young skilled workers. The full-scale launch of the Construction Careerup System* in April is one of such initiative, which aims to assure an appropriate wage level based on workers' skills and experience whereby securing new construction workers. We will implement the system at all sites excluding small-scale construction projects to take an initiative in promoting and spreading the system.
    * Evaluation tool for “visualizing” skills and experience of each skilled worker in a unified framework within the industry.
  • We expect that this year will be busier than ever, which often causes us to focus only on the tasks in front of us. However, we should keep in mind that there will be no sustainable growth of the construction industry unless we make efforts to resolve the issues facing us and be committed to these initiatives with a sense of mission.

Main Questions and Answers

Q:
In FY2018 new orders were significantly concentrated in the fourth quarter. Will there be an imbalance in timing of receiving new orders in FY2019?
A:
We have planned for a more equal distribution of new orders throughout the year of FY2019 compared to the previous fiscal year.
Q:
 A significant increase of overseas orders is planned in FY2019. What do you think about the prospect of achieving it?
A:

As a medium- and long-term target, we aim to increase the share of overseas projects to approximately 10% of the total sales. We also expect large overseas projects in FY2019.

Q:

Do you think that you will be able to achieve the sales target of 1,870 billion yen set in the medium-term business plan?

A:

We think that the plan has been steadily progressing toward expanding our business scale from 1,650.9 billion yen recorded in FY2018 to 1,740 billion yen planned for FY2019. We are making group-wide efforts to achieve the medium-term target, through increasing overseas projects and securing other new business opportunities, including M&As.

Q:

Many large-scale projects will be completed in FY2019. Are they on schedule? Is there any influence of delayed delivery of materials?

A:

Some projects were originally planned to be on a tight schedule, and a strict process control has been implemented. So, there have been no particular problems.

Q:

Regarding the outlook for gross profits in FY2019, to what extent do you expect it to be higher than the plan?

A:

As the profitability of construction works tends to improve toward the end of construction time thanks to the acquisition of additional works, cost reduction, etc., the number of projects completed in each term affects the profitability. Many large-scale projects are scheduled to be completed in FY2019, so we anticipate that profits will be higher than the plan compared to the previous fiscal year.

Q:

Please tell us about the implementation status of the investment for growth set in the medium-term plan. To what extent has it been incorporated in the performance forecast?

A:

The amount of the investment for growth implemented in the first year (FY2018) accounts for approximately 30% of the total amount of 300 billion yen for three years planned in the medium-term business plan. The primary fields of the investment include domestic real estate, research and development and ICT. The performance forecast for FY2019 has incorporated only the investment for growth that has been decided to be implemented.

Q:

Regarding work style reform how is the progress of the effort for realizing eight closed days every four weeks at work sites?

A:

We have been working on work style reform in phases toward FY2024 when the revised law will be adopted to limit the maximum overtime working hours. As of the end of FY2018, around 60% of the work sites have realized six closed days every four weeks. As a rule, we are continuing our efforts to fully achieve the target in FY2019.