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To Our Shareholders
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Mikio Kunisawa President and Representative Director |
Business Results
During the past fiscal year ended in March 2008, the Japanese economy maintained moderate recovery momentum, driven by robust exports and private capital investment, but the economic picture darkened in the second half as the subprime crisis in the US deepened and oil prices soared.
Private sector capital investment driven by strong corporate performances enabled the construction industry to maintain growth momentum, but chaotic implementation of the Revised Building Standards Law had lasting impact and the rapid rise in the price of steel materials, which impacted costs, created further problems. Public sector construction investment continued to decline, and the overall business environment for the construction industry remained difficult.
Against this backdrop, the Company focused its resources on improving business performance.
However, we were unable to prevent order bookings from slightly falling year-on-year, despite intensive marketing initiatives amid a difficult environment for construction demand. Revenues from operations declined steeply year-on-year, as did recurring profit*, hit by a string of unprofitable major projects in overseas markets and exchange-rate losses. Hence, we regret to report that Nishimatsu could not avoid another net loss for the past fiscal year.
The total value of orders fell 1.6% year-on-year to ¥402.5 billion (US$4.02 billion), with increases in the real estate business more than offset by reduced construction orders for projects in Japan and overseas.
We posted a 4.7% decline in construction orders to ¥380.4 billion, which included ¥46.8 billion in overseas orders (down 24.8%). However, orders in our real estate business more than doubled to ¥22.1 billion, from ¥10.0 billion in the previous year.
By construction business sector, civil engineering orders declined 21.4% year-on-year to ¥108.4 billion, and orders in building operations increased 4.1% to ¥271.9 billion. By client type, the value of orders placed by the public sector fell 24.0% to ¥89.5 billion and private sector orders rose 3.4% year-on-year to ¥290.8 billion.
Revenues from operations (posted under net sales) for the year totaled ¥414.0 billion (US$4.13 billion), a decrease of 13.1% year-on-year on a non-consolidated basis.
Revenues from construction operations fell 15.9% to ¥391.9 billion, including a 26.7% rise in overseas projects to ¥23.4 billion, while revenues from real estate operations totaled ¥22.1 billion, up from ¥10.0 billion in the previous year. In the construction business, revenues from civil engineering operations fell 9.6% year-on-year to ¥114.2 billion, while revenues in building operations declined 18.3% to ¥277.7 billion. By client type, orders from the public sector declined 13.5% to ¥93.7 billion, while private sector projects slipped 16.7% to ¥298.2 billion.
As a result of the foregoing, the year-end order backlog declined 1.9% year-on-year to ¥599.5 billion.
Turning to earnings on a non-consolidated basis, gross profit declined 10.3% year-on-year to ¥23.2 billion, (US$0.23 billion), and operating profit fell 53.8% year-on-year to ¥2.1 billion (US$0.02 billion). The Company posted a net loss for the year of ¥3.2 billion (US$0.03 billion), an improvement from the red ink totaling ¥7.4 billion in the previous year.
On a consolidated basis, sales during the past fiscal year declined 12.1% year-on-year to ¥432.7 billion (US$4.32 billion). The net loss was ¥3.0 billion (US$0.03 billion), an improvement from ¥7.5 billion in the previous fiscal year.
The Company declared a total annual dividend of ¥9.0 (US$0.090) per share.
* Due to reclassification, recurring profit does not appear on the statements of operations.
Private sector capital investment driven by strong corporate performances enabled the construction industry to maintain growth momentum, but chaotic implementation of the Revised Building Standards Law had lasting impact and the rapid rise in the price of steel materials, which impacted costs, created further problems. Public sector construction investment continued to decline, and the overall business environment for the construction industry remained difficult.
Against this backdrop, the Company focused its resources on improving business performance.
However, we were unable to prevent order bookings from slightly falling year-on-year, despite intensive marketing initiatives amid a difficult environment for construction demand. Revenues from operations declined steeply year-on-year, as did recurring profit*, hit by a string of unprofitable major projects in overseas markets and exchange-rate losses. Hence, we regret to report that Nishimatsu could not avoid another net loss for the past fiscal year.
The total value of orders fell 1.6% year-on-year to ¥402.5 billion (US$4.02 billion), with increases in the real estate business more than offset by reduced construction orders for projects in Japan and overseas.
We posted a 4.7% decline in construction orders to ¥380.4 billion, which included ¥46.8 billion in overseas orders (down 24.8%). However, orders in our real estate business more than doubled to ¥22.1 billion, from ¥10.0 billion in the previous year.
By construction business sector, civil engineering orders declined 21.4% year-on-year to ¥108.4 billion, and orders in building operations increased 4.1% to ¥271.9 billion. By client type, the value of orders placed by the public sector fell 24.0% to ¥89.5 billion and private sector orders rose 3.4% year-on-year to ¥290.8 billion.
Revenues from operations (posted under net sales) for the year totaled ¥414.0 billion (US$4.13 billion), a decrease of 13.1% year-on-year on a non-consolidated basis.
Revenues from construction operations fell 15.9% to ¥391.9 billion, including a 26.7% rise in overseas projects to ¥23.4 billion, while revenues from real estate operations totaled ¥22.1 billion, up from ¥10.0 billion in the previous year. In the construction business, revenues from civil engineering operations fell 9.6% year-on-year to ¥114.2 billion, while revenues in building operations declined 18.3% to ¥277.7 billion. By client type, orders from the public sector declined 13.5% to ¥93.7 billion, while private sector projects slipped 16.7% to ¥298.2 billion.
As a result of the foregoing, the year-end order backlog declined 1.9% year-on-year to ¥599.5 billion.
Turning to earnings on a non-consolidated basis, gross profit declined 10.3% year-on-year to ¥23.2 billion, (US$0.23 billion), and operating profit fell 53.8% year-on-year to ¥2.1 billion (US$0.02 billion). The Company posted a net loss for the year of ¥3.2 billion (US$0.03 billion), an improvement from the red ink totaling ¥7.4 billion in the previous year.
On a consolidated basis, sales during the past fiscal year declined 12.1% year-on-year to ¥432.7 billion (US$4.32 billion). The net loss was ¥3.0 billion (US$0.03 billion), an improvement from ¥7.5 billion in the previous fiscal year.
The Company declared a total annual dividend of ¥9.0 (US$0.090) per share.
* Due to reclassification, recurring profit does not appear on the statements of operations.
Outlook
Looking ahead, we see clouds gathering over the Japanese economy for various reasons, including deceleration in the US economy triggered by the subprime loan crisis and its impact on the global economy, and rising prices for petrochemical products due to persistently high oil prices.
We expect the construction industry to continue to face severe headwinds in the operating environment. Although we expect recovery momentum to return as the industry comes to terms with the Revised Building Standards Law, we see no end to the trend in declining public sector construction investment. Against this backdrop, employees of the Company will rally round the goals of the three-year medium-term business plan for Fiscal 2008 to Fiscal 2010, and step up their commitment to good governance and responsible corporate citizenship, enabling us to maintain construction orders and revenue levels to improve profitability while strengthening our business base.
To improve our competitiveness in our mainstay construction business, we aim to strengthen marketing to generate new orders and broaden the scale of our operations. Key to this endeavor will be strengthening our technical proposal ability, design proposal ability, and information gathering ability in order to obtain a high score under the “Comprehensive Evaluation System” for project bidding. Another crucial factor to this endeavor is to aggressively cultivate new premium quality customers.
We are also taking various measures across all our operations to reduce costs through further technological innovation, enabling us to create a foundation for robust profit and to improve competitiveness.
For overseas projects, we will further investigate various risk analyses and risk avoidance techniques at the order and project works stages to generate stable earnings growth.
Copyright © 2008 Nishimatsu Construction Co., Ltd. All Rights Reserved.
We expect the construction industry to continue to face severe headwinds in the operating environment. Although we expect recovery momentum to return as the industry comes to terms with the Revised Building Standards Law, we see no end to the trend in declining public sector construction investment. Against this backdrop, employees of the Company will rally round the goals of the three-year medium-term business plan for Fiscal 2008 to Fiscal 2010, and step up their commitment to good governance and responsible corporate citizenship, enabling us to maintain construction orders and revenue levels to improve profitability while strengthening our business base.
To improve our competitiveness in our mainstay construction business, we aim to strengthen marketing to generate new orders and broaden the scale of our operations. Key to this endeavor will be strengthening our technical proposal ability, design proposal ability, and information gathering ability in order to obtain a high score under the “Comprehensive Evaluation System” for project bidding. Another crucial factor to this endeavor is to aggressively cultivate new premium quality customers.
We are also taking various measures across all our operations to reduce costs through further technological innovation, enabling us to create a foundation for robust profit and to improve competitiveness.
For overseas projects, we will further investigate various risk analyses and risk avoidance techniques at the order and project works stages to generate stable earnings growth.