Expansion of Regions and Projects in the Overseas Construction and Development Business

「The U.S. logistics warehouse development business, for which we plan to sell approximately 10–15 properties during the current fiscal year, has already completed 3 sales and entered into purchase and sale agreements for multiple additional properties, progressing generally in line with the plan.」

「We are accelerating the global expansion of the distribution warehouse development business by leveraging the track record and expertise accumulated in the US. We have begun new projects in Australia, in addition to Europe and Southeast Asia. Cumulative warehouse development floor area since 2015 has expanded to 7.45 million m².」

「Construction operations at overseas subsidiaries saw gross profit exceed the previous fiscal year, mainly due to higher profit margins in Europe and Southeast Asia. Meanwhile, in development and other operations, gross profit and non-operating income fell below the previous fiscal year, mainly because the sale of development properties was changed from the current fiscal year to the next fiscal year and beyond based on judgments reflecting trends in interest rates and real estate market conditions. As a result, net income attributable to owners of the parent for the overseas subsidiaries as a whole declined from the previous fiscal year.」

「The construction business of overseas affiliates improved profitability in many regions, particularly Europe and Southeast Asia. Although revenue declined from the previous interim consolidated accounting period, gross profit increased substantially. In the development business and other operations, revenue and gross profit fell below the previous interim consolidated accounting period, mainly because fewer real estate development properties were sold in the US. We expect the US real estate sales market to become more active as policy interest rates are cut, and expect property sales to increase from the third quarter onward, including in the distribution warehouse development business.」

「During the current interim consolidated accounting period, Batson-Cook Holdings, Incorporated, which operates a construction business in North America, was newly established and made a consolidated subsidiary. At overseas affiliates, construction revenue and gross profit exceeded those of the previous interim consolidated accounting period, due to the contribution from the US construction company acquired in the first quarter and the recovery in gross profit in Southeast Asia.」

「For the fiscal year ending March 2025, revenue is expected to exceed ¥1 trillion, supported by steady progress on projects under construction in each region and property sales in the development business. Profit is also expected to increase, supported by recovery in Southeast Asia and the steady recognition of gains on development property sales.」

「In the construction business of overseas affiliates, conditions improved from the second quarter of the current consolidated fiscal year, although the pandemic continued to affect some projects in Southeast Asia. In the development business and other operations, 8 distribution warehouses were sold in the US and the performance of hotel and other operating businesses in Southeast Asia recovered, but profit remained below the high level recorded in the same period of the previous year. Through the end of the current consolidated fiscal year, we expect overseas affiliates' performance to improve through sales of development properties in the US and further improvement in construction business profitability.」

「During the second quarter of the current consolidated fiscal year, Kajima Germany GmbH, a newly established company engaged in the construction business in Germany, became a consolidated subsidiary. Overseas affiliates benefited from investment in the real estate sales business, including the sale of 7 distribution warehouse properties in the US, while utilization rates in the hotel and other operating businesses in Southeast Asia continued to recover. The construction business in Southeast Asia, however, remained affected by the pandemic.」

「Revenue rose 10.5% year on year to ¥154.3 billion (¥139.7 billion in the same period of the previous year), mainly because construction revenue increased in the US and Southeast Asia, despite fewer real estate sales in the US. Operating profit and loss was a loss of ¥0.8 billion (profit of ¥1.3 billion), largely because of the decline in US real estate sales. In the US distribution warehouse development business, multiple property sales are expected to be completed in the second quarter, and an increase in property sales is expected to contribute to consolidated results going forward.」

「During the first quarter of the current consolidated fiscal year, Kajima Construction (China) Co., Ltd., which operates a construction business in China, was removed from the scope of the equity method and made a consolidated subsidiary because its importance had increased.」

「In North America, we are actively expanding the distribution warehouse development business, selling 10 properties and commencing 13 new developments during the current consolidated fiscal year. We will continue to sell properties and launch new developments while assessing project profitability and risks.」

「From the third quarter of the current consolidated fiscal year, 1 consolidated subsidiary of Eaton Real Estate Co., Ltd. and 1 consolidated subsidiary of Kajima Europe Ltd. became subsidiaries through the acquisition of shares and were newly included in the scope of consolidation.」

「From the second quarter of the current consolidated fiscal year, 1 consolidated subsidiary of Kajima Asia Pacific Holdings PTE Ltd. became a subsidiary through the acquisition of shares and was newly included in the scope of consolidation. A full recovery in the performance of overseas affiliates in Southeast Asia, where the effects of the pandemic remain, will take more time. As of the end of the second quarter, the impact of the situation in Ukraine on Europe was limited, while the impact of rising prices and policy interest rates in the United States was also minor. In the US development business, 8 distribution warehouse properties were sold, while the rental housing development business and other operations conducted in collaboration with partners remained strong, making a significant contribution to the overall performance of overseas affiliates.」

「During the first quarter of the current consolidated fiscal year, we acquired shares in Central Capital Holdings PTE Ltd., which operates a development business in Singapore, and made it a consolidated subsidiary.」

「Positioned as a key growth area, the distribution warehouse development business, which is being actively expanded in North America and Europe, continued to benefit from a buoyant market driven by the growth of e-commerce and other factors. While 12 projects in North America and 2 in Europe were sold and the resulting profits recognized, we also began planned new developments, including 18 projects in North America and 5 in Europe, in coordination with the construction business, with the aim of making a sustained contribution to future results.」

「A full recovery in the business environment in Southeast Asia, where the pandemic's effects have persisted, will take time. In North America and Europe, however, the construction business remained solid and the development business grew, making a significant contribution to consolidated results. The distribution warehouse development business benefited particularly from favorable market conditions, with the profitable sale of 9 projects in North America and 2 in Europe. The results of the real estate development investments actively pursued to date are steadily emerging.」

「From the first quarter of the current consolidated fiscal year, 1 consolidated subsidiary of Kajima Europe Ltd. became a subsidiary through the acquisition of an equity interest and was newly included in the scope of consolidation.」

「Revenue at overseas affiliates rose 35.8% year on year to ¥153.0 billion (¥112.7 billion in the same period of the previous year), mainly because revenue from both the construction business and the development business and other operations increased in North America and Europe. Operating profit rose 213.0% to ¥10.6 billion (¥3.3 billion), mainly due to higher gross profit from the development business and other operations in North America. The distribution warehouse development business performed particularly well, with the profitable sale of 7 projects in North America and 1 in Europe, making a significant contribution to consolidated results.」

「We will further develop our five-region structure covering Japan, North America, Asia, Europe and Oceania, and generate synergies between the construction and development businesses globally.」

「Revenue at overseas affiliates rose 12.5% year on year to ¥359.8 billion (¥320.0 billion in the same period of the previous year), mainly due to growth in North America. Operating profit rose 226.2% to ¥4.7 billion (¥1.4 billion), mainly due to higher revenue.」

「At overseas affiliates, the impact of the pandemic on the construction business in North America was limited, and the distribution warehouse development business performed steadily. In Southeast Asia, however, worksites in several countries were temporarily closed under public regulations and other measures from mid-March 2020, and some sites had not yet returned to full operations even after reopening.」

「Revenue at overseas affiliates rose 8.3% year on year to ¥11.27 billion (¥10.41 billion in the same period of the previous year), mainly because of growth in the construction business. Operating profit rose 109.8% to ¥3.3 billion (¥1.6 billion), mainly due to improved gross margins in the development business and other operations.」

「Revenue increased, mainly due to steady progress on construction projects in North America and the sale of multiple development projects. However, operating profit declined because gross profit from the construction business decreased, reflecting deteriorating profitability on some projects in Oceania, while SG&A expenses increased. Revenue at overseas affiliates rose 2.9% year on year to ¥469.0 billion, while operating profit fell 27.8% to ¥4.5 billion.」

「During the second quarter of the current consolidated fiscal year, the company newly established and made a consolidated subsidiary Kajima Student Housing Limited, which oversees development business in Poland. In addition, Kajima Europe B.V., a consolidated subsidiary that oversaw subsidiaries and conducted construction business in Europe excluding the United Kingdom and qualified as a specified subsidiary, was liquidated following the resolution to dissolve it after the regional oversight functions for Europe were consolidated in a new headquarters established in the United Kingdom in July 2008. During the third quarter of the current consolidated fiscal year, following completion of the organizational restructuring in Asia, the company changed the name of Kajima Overseas Asia PTE. Limited, a consolidated subsidiary overseeing subsidiaries in Asia and providing loans and investments to affiliates, to Kajima Asia Pacific Holdings PTE. Limited. It also changed the name of Kajima Overseas Asia (HQ) PTE. Limited, a consolidated subsidiary of that company overseeing the construction business in Asia, to Kajima Overseas Asia PTE. Limited.」

「Overseas affiliates performed weakly because of losses on certain projects in Oceania and other factors, but the company is working to create new business opportunities by further strengthening its construction-business management structure and acquiring a student-housing development and management company in Poland. Net sales at overseas affiliates decreased 6.4% year on year to ¥208.4 billion because of a decline in the construction business. Operating profit decreased 51.1% to ¥1.6 billion, also reflecting a lower gross profit margin in the construction business.」

「Net sales at overseas affiliates remained at approximately the same level as in the same cumulative period of the previous fiscal year, increasing 1.0% to ¥104.1 billion from ¥103.1 billion. Although gross profit increased, operating profit decreased 19.9% to ¥1.6 billion from ¥2.0 billion because of higher selling, general and administrative expenses.」

「As both the construction and development businesses secured net sales and gross profit margins above those of the previous consolidated fiscal year, they absorbed the increase in selling, general and administrative expenses mainly caused by M&A, resulting in a substantial increase in operating profit. The company is further strengthening cooperation between its overseas construction and development businesses, actively promoting investment in development, and working to expand earnings at overseas affiliates.」

「Construction orders increased 1.8% year on year to ¥1,195.0 billion, compared with ¥1,174.2 billion, as higher overseas orders, including the effects of M&A at overseas affiliates, more than offset lower domestic orders. Net sales at overseas affiliates increased 9.6% to ¥349.7 billion from ¥319.1 billion. Operating profit increased 41.1% to ¥4.7 billion from ¥3.3 billion, reflecting higher net sales and an improved gross profit margin.」

「Net sales at overseas affiliates increased 12.6% year on year to ¥222.7 billion, compared with ¥197.7 billion, mainly because of higher completed construction revenue. Operating profit increased 66.5% to ¥3.2 billion from ¥1.9 billion, also reflecting improved gross profit margins in the construction, development and other businesses.」

「During the first quarter of the current consolidated fiscal year, the company acquired equity interests in Flannery Development Group L.L.C., which conducts development business in North America, and Flannery Construction Group L.L.C., which conducts construction business in North America, and made them consolidated subsidiaries. It also acquired the shares of IFEMS PTE. Limited, which oversees engineering business in Asia, and made it a consolidated subsidiary. In addition, it newly established Kajima Myanmar Company Limited, which conducts construction business in Myanmar, and made it a consolidated subsidiary.」

「In the overseas business, the company aims to expand earnings by developing businesses that leverage its construction and development expertise. In addition to developing new markets and business areas through business alliances and M&A with local companies, it will further promote development businesses tailored to the characteristics of each region and encourage collaboration among local subsidiaries and cooperation across businesses. Net sales at overseas affiliates increased 9.0% from the previous consolidated fiscal year to ¥437.1 billion, while operating profit decreased 85.6% to ¥1.6 billion because of a lower gross profit margin and higher selling, general and administrative expenses.」

「During the third quarter of the current consolidated fiscal year, the company newly established and made a consolidated subsidiary KYP Investment PTE. Limited, which oversees development business in Myanmar. Net sales increased 27.2% year on year to ¥319.1 billion, compared with ¥250.9 billion, mainly because of growth in the construction business. Operating profit decreased 33.9% to ¥3.3 billion from ¥5.0 billion, mainly because of higher selling, general and administrative expenses.」

「During the second quarter of the current consolidated fiscal year, the company newly established Kajima Cockram Holdings Pty Limited and Kajima Cockram International Pty Limited under Kajima Australia Pty Limited and made them consolidated subsidiaries. In addition, through Kajima Cockram Holdings Pty Limited, it acquired the shares of Cockram Holdings Pty Limited, which conducts construction businesses in Australia, New Zealand, China, the United States and elsewhere, and made it a consolidated subsidiary. It then transferred the construction companies in China, the United States and elsewhere among its subsidiaries to Kajima Cockram International Pty Limited.」

「During the first quarter of the current consolidated fiscal year, the company newly established and made consolidated subsidiaries Kajima Overseas Asia (HQ) PTE. Limited, which oversees the construction business in Asia; Kajima Development PTE. Limited, which oversees the development business in Asia; and Kajima Overseas Asia (Singapore) PTE. Limited, which conducts construction business in Singapore.」

「At a meeting of the company's Board of Directors held on 14 December 2016, the company resolved to establish Kajima Overseas Asia (HQ) PTE. Limited, a subsidiary overseeing the construction business in Asia; Kajima Development PTE. Limited, a subsidiary overseeing the development business in Asia; and Kajima Overseas Asia (Singapore) PTE. Limited, a subsidiary conducting construction business in Singapore.」

「During the second quarter of the current consolidated fiscal year, the company newly established and made consolidated subsidiaries Kajima Vietnam Company Limited, which conducts construction business in Vietnam, and Kajima Development Vietnam Limited, which oversees development business in Vietnam. Net sales remained at approximately the same level as in the same cumulative period of the previous fiscal year, increasing 3.0% to ¥167.8 billion from ¥162.9 billion. Operating profit increased 25.5% to ¥3.5 billion from ¥2.8 billion, mainly because of an improved gross profit margin.」

「Mainly because of an increase in completed construction revenue, net sales increased 30.4% year on year to ¥90.2 billion, compared with ¥69.1 billion in the same cumulative period of the previous fiscal year, while operating profit increased 48.5% to ¥1.8 billion, compared with ¥1.2 billion.」

「In the overseas construction and development businesses, the company aims for steady growth by deepening existing businesses and establishing the business infrastructure needed to develop markets in new regions and promote new development projects.」