My name is Toshio Shibata, and I am the newly appointed president.
In fiscal 2023, both sales and profits grew over the previous fiscal year, putting us in the black for the first time in three fiscal years. Although profits from building construction fell far short of published figures as a result of additional losses in the building construction business, we are having good success with our earnings recovery, with record highs in profits from the civil engineering business and in sales and profits from the overseas business.
In the domestic civil engineering business, performance is expected to remain favorable for some time: construction related to strengthening the resiliency of national land and renovating aging infrastructure is going well, while reconstruction work related to the Noto Peninsula earthquake has begun. In fiscal 2023, we saw an increase in orders for large-scale renovation work, including large-scale renovations of highway bridges. Since it is also important to acquire new construction projects in order to strengthen our technical capabilities, we intend to focus our efforts on winning orders for bridges and tunnels, which are our forte. We are also attempting to establish new bidding formats, including the ECI method*1.
In the domestic building construction business, with regard to one large-scale domestic building construction project that resulted in significant losses, an Investigation Committee that included external experts has identified the cause and developed measures to prevent recurrence. A special response team has also been formed and the entire company is providing support. Construction is now progressing smoothly, with the framing complete and finishing work underway. For the domestic building construction business as a whole, while we expect the market to remain strong going forward, we are implementing thorough measures that have seen us reduce contracts and take on only those of the highest quality. Currently, we are considering building an order portfolio to win quality construction projects in the next fiscal year and beyond.
We have positioned our overseas business, which achieved record highs for both sales and profits in fiscal 2023, as a growth driver for the company. India is a country where we entered the market early on and have a particularly good track record as a Japanese construction company. Since the number of Japanese companies entering India continues to grow, we intend to focus our efforts there the most. The main focus of our overseas construction business is currently on the local factories of Japanese companies. In Singapore and Thailand, however, Japanese companies are seeing their presence shrink. Going forward, we will strengthen our system by targeting non-Japanese companies and non-factory projects. Meanwhile, our civil engineering business is centered on ODA-funded projects, with large railroad bridge and subway projects currently underway in the Philippines, Indonesia, Bangladesh, and other countries. We are considering expanding into other Asian countries and even Africa in the future, and will also actively pursue energy-related projects as part of our move away from ODA, while giving due consideration to country risk and other factors.
- *1 Early Contractor Involvement approach. With this ordering approach, the technical capabilities of the construction company are reflected in the design content from the early stages of the project.
Recruiting and developing human resources as a high-priority theme Implementing measures to support and speed the recovery of frontline capabilities
Both the domestic and overseas construction markets are expected to remain strong for some time. However, if there is any risk to be concerned about, it would be the labor shortage caused by the declining birthrate and aging population. This is already starting to become evident in the construction sector with M&E work. In the future, even if there is demand for construction work, the supply may not be there due to the labor shortage. We see this as an issue not only for our company, but for the entire construction industry. Furthermore, the domestic construction market is expected to shrink in the medium to long term as the population ages and declines. In the face of this, expanding our overseas business will be an essential strategy for achieving sustainable growth, and we hope to increase the percentage of overseas sales, which currently stands at 21.5% (in fiscal 2023), to 25% in the near future, and eventually to 30%.
Recruiting and training human resources is a particularly important issue for our company, and we believe it is a theme that should be given the highest priority. Looking at our employee mix, we tend to have a relatively small number of so-called mid-career workers. To overcome this weakness and strengthen our frontline capabilities, we will refine our system to better support the early development of young employees. How to pass on the knowledge accumulated by experienced employees is another issue we need to keep in mind. The younger generations no longer "learn by watching others' examples" as we did, so we must consider creating a system that matches the needs of these generations. Furthermore, if we are to expand our overseas business, which is expected to grow, recruiting and training global human resources will be key. Although there is some circulation of human resources between Japan and other countries in the civil engineering sector, this circulation has barely begun in the building construction sector. To this end, we have established global human resources development centers (HDCs) in the Philippines, India, Thailand, and Indonesia, and will further focus on developing global human resources using these HDCs as bases. Along with hiring foreign nationals from Japanese universities, we have recently begun directly recruiting from universities in countries such as the Philippines, Myanmar, and Bangladesh.We also use HDCs to provide Japanese language education to foreign nationals who are from these places and to whom we have extended job offers.
Regarding the cap on overtime work that came into effect in April 2024, we have been able to accommodate this change by implementing measures ahead of schedule. Although this change will present a number of potential challenges for our frontline project sites, we view it as a positive move and are forging ahead with reforms. This includes using a system for outsourcing complicated on-site administrative tasks, and adopting a system that enables employees at the head office and branches to provide support to sites with tight construction deadlines. Carrying out DX is another crucial strategy for us, and we are currently conducting DX for our construction oversight operations, including introducing BIM/CIM*2 and deploying a system for remote inspection using tablet devices.
- *2 A system that makes it easier to share information by introducing 3D models from the planning, research, and design stages, thereby improving efficiency and sophistication.
Sustainability presents new business opportunities Building workplaces where diverse employees can work in a variety of ways
We see our sustainability efforts not only as a way to enhance our corporate value, but also as business opportunities to achieve new growth for our company. Among these, I believe energy-related business is particularly important.
We are a pioneer in floating solar power generation, and operate solar projects in reservoirs and other freshwater areas at eight locations across Japan using our independently developed floating panels. To promote the broader use of these panels, we are conducting an offshore floating solar power generation demonstration in Tokyo Bay -- the first such demonstration in Japan. We are also engaged in offshore wind power generation, which is primed to become a major market in the future. These initiatives include participating in a project being promoted by France-based BW Ideol in Japan, and taking part in a feasibility study for a floating concrete substructure made with our precast manufacturing technology, which is one of our strengths. Additionally, we are keeping a close eye on hydrogen, which is expected to become a next-generation energy source, and have completed a pilot installation of a hydrogen production and storage facility at our precast manufacturing plant. At the same time, we are looking into storage tanks for ammonia, which is seen as a promising carrier for hydrogen in the near term. We are also developing a number of other sustainable technologies, including ultradurable precast slabs ("Dura-Slab®") and eco-friendly concrete ("Sustain-Crete®"), which contribute to reducing Scope 3 CO2 emissions. In these efforts, it is important to find a balance between social and economic values. For this, we will continue to pay close attention to social trends and take a flexible approach to investing.
We also established a D&I (Diversity and Inclusion) Policy in 2023 that guides a number of measures we are currently developing. As measures toward women's advancement, we have been focusing on recruiting women and promoting them to management positions, as well as improving the workplace environment. These efforts are steadily yielding results, and changes in mindset have also been observed. One issue we will focus on in the future is creating a system that allows female employees to choose from a variety of work styles and workplaces in accordance with changes happening in their lives. Furthermore, caring for one's parents or one's own illness is not a domain exclusive to female employees; an increasing number of male employees are also taking parental leave. One goal of ours is to create an environment where diverse employees, regardless of gender, generation, or nationality, can work with respect for one another. Changing the mindset of management is an important step in internalizing D&I and putting it into practice. While harassment is something that must never happen, at the same time, leadership is essential to ensuring the organization runs in a disciplined fashion. We plan to foster a flat and open organizational culture as we work to solve this trade-off problem.
In order to put sustainability management into practice, strengthening corporate governance is an important issue that we must continue to address. Two new Directors and three Outside Directors were elected at the General Meeting of Shareholders held in June 2024. With one woman among them, two of the three newly appointed Outside Directors have experience as top corporate executives. We expect them all to provide appropriate advice concerning the future growth of our company, as well as guidance on strengthening our corporate governance.
There is something else we must always remember to do: ensure safety and quality on site. We have seen an increase in the number of occupational accidents at project sites in recent years, and feel that the number of cases, if including those that have not yet come to light, has become quite significant. One reason cited for this is the increasing age and increasingly multinational nature of our subcontractor workforce. In the future, along with ensuring that everyone has a thorough awareness of safety management, we will incorporate age-friendly measures to prevent accidents as we work to create an environment in which a diverse workforce can play an active role on the front line. Meanwhile, we will share safety-related information via an AI-powered safety alert system that compiles a database of past accident cases for use in on-site guidance and management.
Making a company-wide effort to revitalize and reinforce the front line, where all earning begins
Since joining the company in 1985, I have spent my career primarily in the civil engineering business. I worked at civil engineering sites for about four years after joining the company, and this was a valuable experience that kicked off my career. I then got involved with design work for quite some time. Looking back, I think the turning point for me was my time as General Manager of the Civil Engineering Technical Consulting Department, a position I held for seven years starting in 2012. Over a seven-year period, I was deeply involved in all kinds of civil engineering projects, and peer reviewed nearly 1,000 technical proposals submitted by our firm for public works bids. I think it was around this time that, along with developing a generalist's perspective, I started seeing the "big picture." I learned how to do this from the game of Go, which teaches you to win by accepting some sacrifices and looking at the whole forest and not just the trees. It is an indispensable way of looking at things in the workplace as well, and now that I have taken on the heavy responsibility of being president, I would like to reflect once again on the importance of seeing the big picture. As I go about the business of managing the company, I will always maintain a big picture view, with a focus on the front line.
The first thing I told my employees when I became president was to "go back to the front line." Needless to say, as a general construction company, our front line is where all earning begins. Unfortunately, I feel that our front-line capabilities have stagnated of late. I want to see us revitalize and reinforce the front-line capabilities that many of our employees have cultivated and inherited, and to share a renewed awareness of the need for all employees to support these workplaces. In my mind, our company has always had one of the more open and free-spirited cultures within the construction industry. I believe that my important role is to bring some fresh air into the company and get back that atmosphere of people working with cheerfulness and motivation.
I visited many companies, including our customers', when I became president. At that time, many shared encouraging words and spoke of the hopes they had for us, making me realize anew the deep trust people have in us and the long history we have built up. Going forward, we will actively engage in dialogue with our shareholders and other stakeholders, and will focus on building relationships that will enable us to move forward into the future together. With the front line as our starting point, and with our gaze fixed on the future, we will all work together to achieve new growth.
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October 2024 |
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