Strengthening order selection and construction structures and productivity in consideration of risks

「In addition to tight labor supply and demand, some oil-derived products have shown price increases and supply restrictions, making appropriate cost management and securing an appropriate construction system ongoing challenges.」

「Domestic construction demand is expected to remain high for the time being. The Company will secure construction capacity sufficient to meet strong demand, thoroughly implement organisational controls over safety, the environment, quality, schedules and costs, and promote productivity improvements in construction processes through automation and remote management using AI and digital technologies.」

「We believe that, in addition to securing orders for projects with appropriate construction systems in place, thorough risk management during construction contributed to improved profitability.」

「Gross profit exceeded that of the previous interim consolidated accounting period because of higher contract prices resulting from additions and design changes, as well as appropriate responses to rising construction costs.」

「The Company expects gross profit margins in civil engineering and building construction to improve toward the end of the period through the execution of additional change-order contracts and cost reductions.」

「Looking ahead, domestic construction demand is expected to remain high for the time being. The Company will secure an appropriate construction structure to meet deadlines, maintain quality and steadily secure profits, while promoting productivity improvements through the automation, digitalisation and remote management of construction using ICT tools and other technologies, as well as outsourcing non-core operations, in response to regulations limiting overtime and work-style reforms.」

「The gross profit margin in civil engineering was 13.2%, below 15.3% in the year-earlier cumulative period of the same quarter, but the Company expects profitability to improve through the execution of additional change-order contracts and cost reductions on projects scheduled for completion by the end of the fiscal year. The building construction margin was 9.6%, above 8.8% in the year-earlier cumulative period despite persistently high materials and equipment prices, and is progressing steadily against the full-year forecast of 9.7%.」

「The gross profit margin in civil engineering was 13.0%, below 14.5% in the year-earlier cumulative period of the same quarter, but the Company expects profitability to improve through the execution of additional change-order contracts and cost reductions. The gross profit margin in building construction was 9.8% and is progressing steadily against the full-year forecast of 9.7%, partly because the impact of rising materials and equipment prices remains within the range forecast at the beginning of the period.」

「In both civil engineering and building construction, the Company’s revenue and gross profit margins exceeded those of the year-earlier cumulative period of the same quarter, and progress against the full-year forecast was steady. In response to rising construction costs, it is thoroughly implementing measures such as preparing estimates that reflect the latest price trends, early procurement, and discussions with clients regarding changes to contract prices and designs, while advancing initiatives to improve productivity.」

「In domestic construction for the fiscal year ending March 2024, the Company remains mindful of the impact of rising construction costs. However, construction of the ample projects on hand is progressing steadily in both civil engineering and building construction, and the Company expects profitability to improve, particularly on projects reaching completion, through initiatives to improve productivity and reduce costs.」

「During the current third-quarter cumulative consolidated period, prices rose across a broad range of materials and equipment. However, through measures against higher costs such as early procurement, productivity improvement initiatives, and continued discussions with clients regarding changes to contract prices and designs, the impact of rising materials and equipment prices remained within the range incorporated as a risk factor at the beginning of the period.」

「The impact of rising materials and equipment prices remains within the range incorporated as a risk factor at the beginning of the period. The Company is nevertheless continuing to implement measures against higher costs, including early procurement, and initiatives to improve productivity. Where significant price fluctuations occur, it is seeking clients’ understanding of changes to contract prices and designs in order to maintain and improve gross profit margins.」

「The Company is preparing estimates that reflect price trends and working to procure materials early. In response to unforeseeable short-term price spikes, it is also taking measures such as seeking clients’ understanding of changes to contract prices and design changes.」

「During the current third-quarter cumulative consolidated period, the Company’s construction business faced a year-on-year decline in large-scale projects reaching completion, rising materials prices and continued intense competition for orders, particularly in private-sector building construction. It is seeking to maintain and improve gross profit margins by taking measures against rising construction costs, including placing orders for major materials early, and accelerating initiatives to improve productivity.」

「During the current second-quarter cumulative consolidated period, the Company’s construction business faced a shortage of large-scale projects reaching completion and rising materials prices. Nevertheless, it is seeking to maintain and improve gross profit margins in both civil engineering and building construction by advancing initiatives to improve productivity and reduce costs.」

「The gross profit margin in civil engineering was 11.9%, below the full-year forecast of 15.1% set at the beginning of the period, but is expected to improve as construction progresses. The gross profit margin in building construction was 10.5%, in line with the full-year forecast, and the Company has not revised its full-year forecast for the construction business at this point.」

「In the Group’s core construction and development businesses, the Company aims to strengthen earnings power and production capacity by using both software and hardware technologies, as well as digital and physical technologies. In construction, it will enhance competitiveness by strengthening proposal, design-build and engineering capabilities with a view to growth areas, while further evolving the next-generation construction production system it has been developing and improving productivity.」

「To prepare for the busier period ahead, the Company is pursuing early procurement and diversification of suppliers, further strengthening its procurement capabilities for materials, equipment and labour. It is also seeking to improve productivity and expand production capacity through robotics, remote management and the use of digital data.」

「The gross profit margins on completed construction contracts in the Company’s civil engineering and building construction businesses during the current third-quarter cumulative consolidated period were 13.5% and 11.9%, respectively, below full-year forecasts of 15.2% and 12.2%. However, the Company expects improvement as construction progresses, supported by construction rationalisation and productivity improvements contributing to cost reductions, as well as the acquisition of additional change-order contracts.」

「The gross profit margin on completed construction contracts in the Company’s civil engineering business during the current second-quarter cumulative consolidated period was 12.7%, below the full-year forecast of 15.2% set at the beginning of the period, but is expected to improve as construction progresses. The gross profit margin in building construction was 12.5%, above the full-year forecast of 11.5%.」

「The gross profit margin on completed construction contracts in the Company’s civil engineering business during the current first-quarter cumulative consolidated period was 8.7%, below the full-year forecast of 15.2% set at the beginning of the period. However, the Company expects the margin to improve as construction of projects on hand progresses.」

「Revenue was in line with the forecast, but operating profit exceeded the forecast because gross profit margins on completed construction contracts in civil engineering and building construction were above forecast, at 19.0% and 12.5%, respectively, versus forecasts of 15.7% and 11.7%. This reflected cost reductions from productivity improvements and construction rationalisation, construction costs remaining more stable than expected, and the acquisition of additional change-order contracts for some projects. The development and other businesses and the domestic and overseas subsidiaries also performed steadily.」

「The gross profit margins on completed construction contracts in the Group’s core civil engineering and building construction businesses were 18.2% and 12.7%, respectively. In addition to construction costs remaining more stable than expected, productivity improvements contributing to cost reductions and the acquisition of additional change-order contracts for some projects enabled the Company to secure margins above its full-year forecasts of 15.7% for civil engineering and 11.7% for building construction. The Company believes results are progressing steadily against its full-year forecasts.」

「The gross profit margins on completed construction contracts in the civil engineering and building construction businesses during the current second-quarter cumulative consolidated period declined from the year-earlier cumulative period of the same quarter, but exceeded the levels assumed at the beginning of the period through measures including securing profitability when orders were received, rationalising and streamlining construction, and acquiring additional change-order contracts for some projects.」

「Although results for the current first-quarter cumulative consolidated period declined in profit from the year-earlier cumulative period of the same quarter, the main reason was that gross profit on completed construction contracts in the year-earlier period was unusually high, owing in part to a reduction in the total losses on overseas civil engineering projects recognised in prior years. Excluding one-off factors, the Company believes it largely secured a certain level of gross profit on completed construction contracts in its civil engineering and building construction businesses through front-loading before orders were received, cost reductions from productivity improvements, and the acquisition of additional change-order contracts for some projects.」

「In domestic construction, the Company aims to build a next-generation construction production system with strong competitiveness in terms of both people and technology. It will promote strategic R&D and improve productivity through mechanisation and the use of ICT, while developing an attractive working environment to secure the future workforce needed by the construction industry.」

「In the construction business, the Company will maintain its policy of accepting projects after comprehensively considering the risks involved. To prepare for the expected future workload, it will ensure an effective construction structure through company-wide personnel allocation and collaboration with partner companies, while seeking to maintain and improve earnings by developing labor-saving technologies and improving productivity through the use of ICT and other measures.」