medium-term management plan (2021-2023)...revisions to the medium-term management plan 1 kondotec...
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Medium-term Management Plan (2021-2023)
August 6, 2020
Tekka Kuba
Revisions to the medium-term management plan
1
Kondotec had set new targets in light of the acquisition of TOKAI STEP CO., LTD. and the influence of COVID-19 infection.
Previous
Million yen 2020 2021 2022
Net Sales 63,070 65,010 66,570
Operating income 4,010 4,180 4,300
Ordinary income 4,080 4,240 4,370
Profit attributable to owners of parent
2,760 2,840 2,920
Revised
Million yen 2021 2023
Net Sales 62,000 67,000
Operating income 3,700 4,350
Ordinary income 3,800 4,420
Profit attributable to owners of parent
2,500 2,940
Overview of the 2020
2
Million yen 2019 2020 YoY Overview Topics
Industrial Materials
Net Sales 32,459 35,459 + 2,999 Sales and profits increased due to the contribution from New subsidiary TECBUILD CO., LTD., and the improvement in the gross profit ratio.
Acquired shares of TOKAI STEP CO., LTD. Operating
income 1,954 2,111 + 156
Structural Steel Materials
Net Sales 16,756 16,429 △ 326 Sales decreased affected by difficulty in procuring some materials, but profits increased due to improvement in gross profit ratio
Operating income
1,717 1,718 + 0
Electrical Equipment
Net Sales 8,612 8,710 + 98 Achieved sales and profit due to steady demand and improvement gross profit ratio Operating
income 262 281 + 18
Total (Consolidated)
Net Sales 57,828 60,599 + 2,771 Kanto Factory acquired certification of ISO 14001 Operating
income 3,907 4,085 + 177
In recent years, sales of Structural Steel Materials, which have been driving the business performance, have been sluggish. However, due to the contribution of the new subsidiary TECBUILD CO., LTD. and the capture of steady demand, sales and profits of Industrial Materials and Electrical Equipment increased, and overall sales and profits increased. We were promoted the organic growth strategies, such as cultivation of distribution routes / adoption of flexible sales methods, in addition to the M&A.
Basic Policy
3
Aiming for sustainable growth and improvement in long term corporate value while responding to changes in the business environment by strengthening the management base and promoting growth strategies through appropriate allocation of funds.
Growth strategy
Reinforcement of management base
Organic growth strategies
Periphery-strengthening M&A
Capital investment Strategic investment
Initiatives for ESG Utilization of digital
technology
During 2020s Net sales
100 billion yen
ROE 10% or more DOE 2.5% or more
Appropriate allocation of funds
Sustainable growth and improvement in long term corporate value
Management Target
4
Financial Target
The final fiscal year of our new Medium-term Management Plan(2023)
Net Sales 67 billion yen
Operating income 4 billion yen
2020(Actual) Net Sales 60 billion yen Operating income 4 billion yen Breaking past profit records for the 9th consecutive period
Capital Efficiency Target Shareholder Return Target
ROE 10% or more
2020(Actual) 10.4%
DOE 2.5% or more
2020(Actual) 2.8%(dividends 29 yen)
Increase dividends for the 9th consecutive period
Aim for breaking past sales and profits records, and further enhancement of shareholder returns (increased dividends).
33,258
27,347
35,548
38,745
41,153
47,991 49,168
50,211 50,410
52,811
57,828
60,599
62,000
67,000
1,911
933 1,275
1,926
2,664
3,271 3,303 3,441 3,516 3,537 3,907
4,085 3,700
4,350
09/3 10/3 11/3 12/3 13/3 14/3 15/3 16/3 17/3 18/3 19/3 20/3 21/3 22/3 23/3
Net Sales (million yen)
Operating income (million yen)
Recognition of the Business Environment
5
So far, capital investment related to inbound demand and urban redevelopment projects had continued. We assume that in the future, in the short term, there will be a temporary decline in capital investment due to COVID-19, and in the medium to long term there will be various demands for construction investment, but the content will change.
Future
Changes in the contents of construction investment
Hitherto
Robust construction investment demand
Robust demand in the private capital investment ・Capital investment related to inbound
demand ・Urban redevelopment projects
Solid public investment ・Prevention / mitigation measures for natural disaster ・Construction work related to the Linear
Chuo Shinkansen and projected Shinkansen lines
Working environment and production form ・Labor-intensive
Changes in private capital investment ・Stagnation of domestic markets due to
population decrease and COVID-19 ・Increase in Capital investment related to E-
commerce and IT
Changes in public investment ・Prevention / mitigation measures for natural disaster ・Decrease in new construction and
increase in maintenance/repair construction work
Working environment and production form ・Increase in capital investment related
to labor-saving ・Advances in digital technology ・With COVID-19
the aging of social infrastructure
a declining birthrate and an aging /Technological
innovation
Changes in domestic market
Financial Target
Consolidated target (million yen)
2020 (Actual)
2021 (Plan)
2023 (Plan)
Net sales 60,599 62,000 67,000
Operating income 4,085 3,700 4,350
Ordinary income 4,177 3,800 4,420
Profit attributable to owners of parent
2,875 2,500 2,940
The Medium-term Management Plan adopts the rolling method which responds to changes in the business environment while verifying the outcome and issues every year in an effort to realize the mid-to-long vision.
6
We will aim to achieve increase in net sales and income by financial target based on the Existing sales structure.
《Medium-term Target》
《Long-term target》
During 2020s Net Sales(Consolidated) 100 billion yen
Growth Strategy
7
accelerating the growth
Organic growth strategies Periphery-strengthening
M&A Strategy
Continue to supply "rice" for industrial infrastructure by strengthening existing businesses by capturing diverse demands
Active investment in the future to strengthen initiatives other than existing businesses
Accelerate growth through existing business growth and periphery-strengthening by transforming funds into profitable businesses
Main initiatives
Expansion of operating sites, Offer of new products and merchandise
Diversification of sales methods
Response to natural disasters
Cultivation of new customers etc
Main initiatives
Increasing presence in foreign markets
Entry into the neighboring industry
Expansion of the online business
Adapting to digitalization etc
Four perspectives in pursuing M&A
① Neighboring industry
Pursue M&A with companies associated with industries other than the construction industry
② Deepening the business
Pursue M&A with material manufacturers, etc.
③ Expansion of business area
Pursue M&A with companies that maintain overseas sites
④ Amplifying sales patterns
Pursue M&A with companies that operates different sales patterns from those of KONDOTEC
Example on M&A
Acquired TOKAI STEP CO., LTD. in February 2020
Sale of scaffolding for civil engineering and architecture
Examples of initiatives related to Growth Strategy
Company name
TOKAI STEP CO., LTD. Segment Industrial Materials
Business areas
Sale of scaffolding for civil engineering and architecture
Head office
Fujieda city, Shizuoka
Acquired TOKAI STEP CO., LTD. in February 2020 to strengthen the field of maintenance and repair.
【Example】
【Latest performance】
8
Condominium new construction Overpass repair construction
2,699 2,960 3,077
61
345 400
2017/6 2018/6 2019/6
Net Sales
Operating income
【Positioning in our group】
Main initiatives
Preventing failure in receiving an order by sharing skilled workers
Sharing expertise of both companies (TOKAI STEP: scaffolding construction for non-housing and TECBUILD: rental business)
Strengthen the field of maintenance and repair
Sustainable growth and improvement in long term corporate value
TECBUILD CO., LTD.
TOKAI STEP CO., LTD.
Collaboration
Reinforcement of management base
9
Reduction of environment load Initiatives for work style reform
Expansion of the handling of environment-related products and merchandise
Environmental protection and Energy-saving initiatives
Management of emissions
Recruiting diverse human resources year-round recruitment
Reconsidering initiatives to adapt to work system reforms
Reinforcement of governance Utilizing digital technology
Prevention of the manifestation of potential costs by reinforcement of corporate governance
Investment with conscious of capital costs Initiatives to improve of effectiveness of the board of
directors
Development of systems to promote digital
transformation Expanding opportunity to profit and improving of
business process and productivity by utilizing digital technology
We fulfill our social responsibility through business activities while taking the initiatives which are conscious of SDGs and ESG. Moreover, we will strive to reinforcement our management base to achieve our growth strategy.
E
G DX
S
Examples of initiatives related to reinforcement of management base
To contribute to the continuation of business activities and the improvement of productivity, the following initiatives were taken.
10
Kanto Factory acquired certification of ISO 14001
Following Shiga Factory, Kanto Factory acquired certification of ISO14001 (environmental management system) in March 2020.
We plan to acquire ISO14001 at the other two plants as well. And we will carry out activities with even more consideration for environment conservation.
Shift to a Company with Audit & Supervisory Committee
We shifted to a Company with Audit & Supervisory Committee. The purpose is to improvement the transparency and objectivity of management as well as reinforcement of the supervision function of the Board of Directors in order to further enhance corporate value as well as further enhance its corporate governance.
Ensuring the safety of all stakeholders including employees and customers and preventing the spread of infection
Meetings within the company are to be held using online tools as much as possible.
Business trips are to be avoided.
We place alcohol disinfectant in the operating sites.
Employees may work from home to the extent possible.
Reinforcement of governance
Consideration for the
environment
Response to COVID-19 infection
Allocation of funds
11
Operating CF 11,000
million yen (*)
Funds on hand 8,305
million yen
We maintain high capital efficiency through growth investment with conscious of capital costs and stable shareholder returns.
Continuous increase in dividends Purchase of treasury stock
Dividends
DOE 2.5%
or more
Execution of M&A etc. Strategic
investment 4,000
million yen
Equipment replacement, Relocation and rebuilding of sites etc.
Capital investment
7,600 million yen
Transformation of lump-sum retirement allowance to defined-benefit corporate pension plan
Investment in people
400 million yen
Shareholder return
(*) Temporary increase in contributions due to the transformation of lump-sum retirement allowance to defined-benefit corporate pension plan is not included.
Operating income 4,350
million yen
ROE 10%
or more
2023 (Plan)
Investment for growth
Actual of Investment for growth
12
We made the necessary investments based on the previous plan (2020-2022).
Contents Previous Plan 2020~2022
Revised Plan 2021~2023
Investment in people
Transformation of lump-sum retirement allowance to defined-benefit corporate pension plan
Capital investment
Equipment replacement, Relocation and rebuilding of sites etc.
Strategic investment
Execution of M&A etc.
400
4,957
Execution rate 123.9%
Execution rate 14.6%
Execution rate 50.0%
800 million yen
6,300 million yen
4,000 million yen
2020(Actual) Total (3year plan)
Total (3year plan)
4,000 million yen
Rate of change ±0.0%
Total (3year plan)
7,600 million yen
Rate of change +20.6%
Total (3year plan)
400 million yen
Rate of change △50.0%
917
Dividend Policy
13
It targets consolidated DOE of at least 2.5% and ROE of at least 10.0%. We have a policy of continuous increases in dividends.
【Transition in dividends】
Since the initial listing: No decrease in dividends Plan to increase dividends for the 10th consecutive period
Note : We executed a 2-for-1 stock split of common stock on January 1, 2012. Dividend per share is all figures taking into consideration the impact of stock split.
5Yen 6Yen
11Yen
13Yen 14Yen
15.5Yen
20Yen
23Yen 24Yen
26Yen
29Yen
31Yen
(Plan)
5.5Yen
10Yen
13.5Yen
22Yen
1995 1999 2003 2007 2011 2015 2019
Ordinary dividend
Increase in ordinary dividends
Commemorative dividend
◆ Notes on forward-looking statements
This document contains forward-looking statements including operating forecasts and business plans. Future operating performance projections that the Company releases are based on data available at the time of making the release. Actual results may differ considerably from projections due to various factors and changes.