Risk of Rising Construction Material Prices and Labor Costs

「Further increases in construction costs reflecting persistently high labor costs caused by the industry’s serious shortage of workers, as well as material shortages and price increases resulting from instability in securing resources」

「Meanwhile, the earnings environment is beginning to support the securing and improvement of construction earnings as rigorous risk management is applied to each construction project and the persistently high construction costs are gradually being passed on to contract prices.」

「Meanwhile, although the order environment has gradually improved as the domestic economy has finally emerged from a prolonged deflationary period and price dumping competition for construction work has subsided, logistics and labor costs are also rising due to persistently high construction material prices, tighter regulations on overtime work and the worsening labor shortage. As there are limits to securing earnings through DX and productivity improvements, downward pressure on earnings remains strong and the future business environment cannot be viewed optimistically.」

「Although the current earnings environment has largely absorbed persistently high construction material prices and higher logistics and labor costs resulting from the promotion of work-style reforms and the labor shortage, and improvements in employee compensation are also progressing, the future earnings environment is expected to change significantly depending on trends in the order environment」

「The earnings environment remains under pressure from persistently high construction material prices and higher transportation and labor costs due to the labor shortage, with increased costs to address the construction industry's “2024 problem” also added, and the downward pressure on earnings continues to intensify.」

「Meanwhile, in the earnings environment, persistently high construction material prices and rising labor costs due to the chronic labor shortage are increasingly weighing on earnings. In addition, the increased burden of costs to address the so-called “2024 problem” of work-style reform in the construction industry, implemented from 1 April this year, has added to the pressure, making the future earnings environment increasingly uncertain.」

「In the earnings environment, persistently high construction material prices and rising distribution and labor costs due to the worsening labor shortage are increasingly weighing on earnings. In addition, higher miscellaneous expenses associated with the implementation of the Work Style Reform-related Act from 1 April this year are a concern, leaving the outlook for future performance uncertain.」

「Meanwhile, the earnings environment is already being weighed down by persistently high construction material prices and rising distribution costs and labor costs, while higher miscellaneous expenses associated with the full implementation of work-style reforms will add further negative factors, leaving the outlook for future performance uncertain.」

「There are concerns over persistently high construction material and energy prices and declining investment sentiment due to higher costs, and the operating environment surrounding the construction industry is expected to become increasingly challenging.」

「In addition, the earnings environment remains difficult to view optimistically overall, as soaring construction material prices driven by the invasion of Ukraine and the rapid depreciation of the yen, together with higher labor costs and other factors, are increasingly likely to put pressure on earnings.」

「The increase in construction costs resulting from higher construction material prices and labor costs is a factor behind the decline in inquiries for projects」

「The order environment in the construction industry, the Group’s core business, is expected to remain firm, supported by continued public investment under extensions of the national resilience policy. A certain level of private construction demand is also expected from large-scale urban redevelopment, renewal and renovation of aging facilities, and the solid housing market. However, the earnings environment is expected to become even more challenging as pressure for higher labor costs due to soaring material prices and chronic shortages of construction engineers and skilled workers is intensifying beyond previous levels.」

「In addition to the increasingly pronounced rise in prices for construction materials such as steel and cement, if unit labor costs for construction workers rise, quoted prices will increase and weaken price competitiveness when bidding for projects, while if this occurs during construction, it will affect the construction schedule and costs」

「Profitability is beginning to show signs of weakness due to soaring and persistently high material prices, among other factors,」

「In the public works sector, the order environment in the construction industry, the core business of our Group, remains stable, with steady demand for infrastructure renewal and other projects related to national resilience policies. In the private-sector construction field, housing demand remains firm for both for-sale and rental housing despite the COVID-19 pandemic. However, the earnings environment is becoming increasingly difficult as signs of price competition have begun to re-emerge amid a trend toward fewer projects, while major general contractors are increasingly entering regional projects as large-scale projects decline, particularly in major metropolitan areas. This is compounded by higher labor costs resulting from chronic labor shortages and rising material prices.」

「The order environment in the construction industry, the Group’s core business, is expected to remain firm in public investment due to measures to strengthen national resilience and extend the service life of social infrastructure. However, private-sector construction investment is beginning to trend downward. The earnings environment is expected to deteriorate as price competition to secure projects reduces profitability, compounded by higher labor costs due to shortages of technical and skilled workers and increases in the prices of some materials. The outlook remains uncertain.」

「In the construction market, competition over order prices is intensifying, and some labor costs and construction materials have shifted to an upward trend,」

「Regarding the outlook for construction investment, government construction investment is expected to remain at the previous year's level due to the promotion of national resilience policies and other measures. However, private construction investment could slow sharply if the COVID-19 pandemic is prolonged. In addition, chronic labor shortages, the aging of construction workers, and declining productivity are expected to persist, while labor costs, material prices, and personnel expenses are also expected to rise. As a result, the business environment surrounding the construction industry is expected to become even more difficult.」

「Looking ahead, although the increasing number of foreign visitors to Japan and the upward trend in public works are positive factors, the earnings environment is becoming more challenging due to lost ordering opportunities caused by labor shortages and persistently high labor and material costs. Economic sentiment is gradually deteriorating, particularly in regional areas.」

「Higher construction material prices, labor costs, and personnel expenses due to labor shortages are difficult to avoid,」

「At the same time, pressure for higher costs is beginning to emerge as construction demand remains elevated, labor shortages become more severe, and work-style reforms are enacted. Competition for orders to secure projects after the Olympics and Paralympics is also beginning to flare up, and the business environment is becoming increasingly difficult to view optimistically.」

「In addition to higher construction costs, declining public investment in regional areas, and worsening labor shortages and the resulting difficulty in responding to orders,」

「In regional areas, the business environment continues to contain risks of deteriorating operating performance, including broad restraints on public investment, sluggish demand associated with increasingly severe labor shortages and population declines, and rising prices of materials and equipment.」

「The construction market is expected to remain in a difficult business environment, as competition over order prices intensifies, labor costs and construction material prices rise sharply, and shortages of construction engineers and skilled workers become increasingly severe.」

「The company is concerned that the business environment may become significantly more difficult, as further cost-increasing factors arising from chronic labor shortages and work-style reforms are expected to emerge.」

「The construction market is expected to remain in a difficult business environment, as competition over order prices intensifies, labor costs and construction material prices rise sharply, and shortages of construction engineers and skilled workers become increasingly severe.」

「The upward trend in construction material prices and labor costs has largely subsided」

「The pass-through of cost increases into order prices has become largely established, and construction profit margins improved further」

「If prices for construction materials such as steel and cement and unit labor costs for construction workers rise, quoted prices will increase and weaken the company's price advantage in order competitions. If such increases occur during construction, they will also affect the construction period and costs,」