Our Perception of the Business Environment
In the overall building construction business environment, global economic recovery has led to improved performance for the manufacturing sector, with investment that had been held back during the COVID-19 pandemic resuming. Investment in logistics warehouses remains strong while the use of renewable energy to achieve carbon neutrality and sustainability-oriented investment in such areas as ZEB and ZEH are steadily increasing. We will continue to aggressively pursue progress accordingly.
The biggest challenge we are currently facing is a sharp rise in material prices. Since January 2021, building construction material prices have risen an unprecedented 25%, resulting in a situation we have no prior experience in. Moving forward, we will continue to share information on the status of material prices with clients and subcontractors as needed and engage in discussions on costs in good faith.
Business Characteristics and Strengths
Our building construction business creates well-rounded, safe living spaces tailored to the needs of customers in wide-ranging sectors, from collective housing, represented by high-rise residential buildings, as the core of our business to commercial facilities, distribution warehouses, offices, and production facilities for various industries.
In the field of collective housing, one of the Company's strengths, we take pride in a high level of competitiveness and an extensive track record in the construction of high-rise residential buildings, leveraging our proprietary SQRIM building frame method, which enables higher quality and shorter construction periods. Going forward, we will continue to provide buildings utilizing PCa technology for a variety of applications, leveraging the strength of having a PC plant within the Group.
Results and Major Efforts in Fiscal 2021
Fiscal 2021 marked the final year of the previous Mid-term Management Plan, and it was a year of both intense competition for orders and soaring material prices. Orders received in fiscal 2021 amounted to 193.3 billion yen. The value of completed construction contracts was 176.0 billion yen due to slower-than-expected project execution, and losses recorded due to the worsening profitability of ongoing large-scale construction projects led to losses on construction contracts amounting to 9.7 billion yen (compared with 13.3 billion yen in fiscal 2020). With regard to the deterioration in the profitability of large-scale construction projects, we have established and implemented a new framework that includes more stringent screening of new orders upon receipt and will thoroughly endeavor to prevent recurrences.
Amid these circumstances, we continued to secure orders for logistics warehouse projects, which we have been pursuing as a growth area. We have also achieved results in urban redevelopment projects, including being selected as a new specified business agent. In DX, a tower crane operation support system linked to BIM information has been installed at an actual worksite to address the labor shortage of skilled operators. In the area of SX, construction was completed on our first "ZEB-Ready" project. We have also made other achievements in both the ZEB and ZEH fields. Utilization of green electricity at field offices is also advancing, and we will continue to expand this and other initiatives to achieve carbon neutrality.
Future Policies
With the opening of the current fiscal year, we began implementing the Mid-term Management Plan 2022-2024. In the Building Construction business, the challenges are to raise profit levels and strengthen profitability while the basic policy is to enhance our ability to win orders and to enhance our on-site management.
To enhance our ability to win orders, we have established a department dedicated to urban redevelopment projects and pharmaceutical manufacturing facilities, designating these as growth areas and focusing efforts accordingly. In addition, to boost the cost competitiveness of the Building Construction business, we have established a system that consolidates cost information and provides centralized cost reviews and support for major projects. Through these measures, we are working to improve our capacity to take on new orders.
To enhance our on-site management, we will further implement front-loading to increase the efficiency of on-site management operations and enhance on-site support functions.
We will continue to advance initiatives related to DX and SX to realize Vision 2030.
Opportunities and Risks as well as Basic Policies of the Mid-term Management Plan as Countermeasures
Risks
- Shortage of human resources among mid-level employees and need to address limits on overtime work
- Soaring prices of resources and materials and product shortages due to global economic turmoil
- Shrinking domestic building construction market and intensifying price competition
Opportunities
- Growing needs for sustainability-related technology
- Production system reform through digitalization centered on BIM
- Renewal and stock market expansion in Japan
Related Mid-term Management Plan Initiatives
In the Building Construction Business, under the theme of strengthening profitability, we are focusing on (1) enhancing our ability to win orders, (2) enhancing our on-site management, and (3) developing our human resources. As for our strategy regarding winning orders, we will focus on high-rise residential buildings, which is our forte, as well as on logistics facilities, environment, and pharmaceutical-related fields, where demand is expected to grow. To enhance our on-site management, we will quickly establish a front-loading system and create a work environment that allows us to focus on core on-site business issues (safety, quality, cost, process, and environment). In terms of enhancing our human resource base, through employee education and the better utilization of human resources as well as the promotion of D&I, we will improve our overall capabilities and employee engagement by enhancing our employee's abilities and promoting diverse career development.
Another theme is reinforcing our foundations for growth. We will focus on creating a competitive advantage through the further evolution of PCa technology, another one of our strengths, and the development of technologies that take advantage of the trend toward sustainability. In addition, we will proactively take on the challenge of expanding business domains by creating new value based on our proprietary technologies, thereby strengthening our business foundation.
Key Projects Completed in Fiscal 2021
|
Project name |
(Tentative) Hamaogi Plan, Kamogawa City, Chiba Prefecture |
|---|---|
| Project area | Chiba Prefecture |
| Client | Mitsui Fudosan Residential Co., Ltd. |
| Completion | July 2021 |
| Overview | Reinforced concrete construction, 1 basement floor, 22 floors above ground Site area: 26,525.96 m² Total floor area: 47,419.58 m² |
| Project name | (Tentative) Sumitomo Fudosan Shibaura 3-chome Plan |
|---|---|
| Project area | Tokyo Metropolis |
| Client | Sumitomo Realty & Development Co., Ltd. |
| Completion | April 2021 |
| Overview | Steel structure, steel reinforced concrete structure, 8 floors above ground Site area: 2,603.58m² Total floor area: 12,885.63 m² |
| Project name | (Tentative) Brillia Ariake IV Plan |
|---|---|
| Project area | Tokyo Metropolis |
| Client | Tokyo Tatemono Co., Ltd. |
| Completion | November 2021 |
| Overview | Reinforced concrete construction, 1 basement floor, 33 floors above ground Site area: 4,913.17 m² Total floor area: 30,607.66 m² |