Greetings from the President
to Our Shareholders and Investors
During the fiscal year 2022 (April 1, 2022 to March 31, 2023), the domestic economy showed signs of recovery as socioeconomic activities normalized. However, the situation continued to require close monitoring of exchange rate fluctuations and price trends due to global monetary tightening policies and geopolitical risks.
In the construction industry, orders received were higher than in the previous fiscal year due to firm orders for both public-sector and private-sector construction, but earnings faced a difficult business environment due to soaring material prices and other factors.
In May 2022, the Group announced the “Medium-Term Management Plan 2024 Rolling Plan” to promote the evolution of value provided to customers in the core businesses of architecture, civil engineering, and strategy. In addition, the Company has identified the construction of new TODA BUILDING, overseas business, and renewable energy business such as floating offshore wind power generation as key management priorities. During the consolidated fiscal year under review, the Company continued to promote growth investments under the active involvement of top management in order to strengthen our business portfolio by making growth investments in these businesses and to achieve further medium- to long-term growth. To achieve ROE target of 8% in the medium to long term while promoting growth investments, we also worked to strengthen our investment process by applying IRR (internal rate of return), cost of capital, and other indicators to manage post-investment profitability.
Under these circumstances, the Group’s consolidated results were as follows:
Consolidated net sales increased 9.1% from the previous fiscal year to ¥547.1 billion, mainly due to an increase in net sales from the construction business, domestic group companies, and overseas investment and development business, despite a decrease in net sales from the civil engineering business and domestic investment and development business.
Operating income increased in the overseas investment and development business compared to the previous consolidated fiscal year, but gross profit decreased 8.5% from the previous consolidated fiscal year to ¥57.3 billion due to the posting of allowances for construction losses in several construction projects in the Architectural Construction Business as a result of rising prices of steel frames and other materials due to changes in market conditions. Selling, general and administrative expenses (SG&A) expenses increased 12.8% from the previous fiscal year to ¥43.1 billion due to an increase in personnel expenses and amortization expenses, as well as an increase in expenses due to the easing of restrictions on activities associated with the COVID-19. As a result, operating income was ¥14.1 billion, a decrease of 42.0% from the previous fiscal year.
Ordinary income decreased 32.3% from the previous consolidated fiscal year to ¥19.0 billion, despite an increase in non-operating income due to dividend income from investment securities held and foreign exchange gains.
Net income attributable to owners of the parent increased compared to the previous fiscal year due to extraordinary gains, including gain on step acquisitions and gain on sales of investment securities. However, the Environment & Energy business incurred an impairment loss on fixed assets, and overall, net income amounted to ¥10.9 billion, down 40.8% from the previous consolidated fiscal year.
As is said to be the era of VUCA, the business climate in which we operate is rapidly changing, and uncertainty about the future is rapidly increasing.
In particular, the impact of the current spread of the COVID-19 is projected to be a paradigm shift in the business model from a mid-to long-term perspective, as well as in terms of performance.
There has been also a need for management that emphasizes social value (ESGs and SDGs) and economic value, such as proactively addressing social issues associated with climatic change, resource shortages, and demographic changes.
Furthermore, this will be a "transformation phase" to build a new earnings base, including the construction of the (tentative) new TODA building (headquarters building) scheduled for completion in 2024.
Our group, based on this recognition, will promote this plan, implement continuous reforms, and continue to change itself (Transform) to realize sustainable growth.
We are pleased to advise that we have revised the "Medium-Term Management Plan 2024"announced in May 2020 and formulated the "Medium-Term Management Plan 2024 - Rolling Plan" covering the three-year period through FY2024.
In the "Medium-Term Management Plan 2024", we positioned the five-year period from FY2020 to FY2024 as a "transformation phase" for developing a new revenue base and has been working to reform our business portfolio by strengthening the competitiveness of our construction business and investing in growth.
In the meantime, the assumptions we made for the original plan are rapidly changing against the backdrop of the prolonged COVID-19 outbreak, soaring prices, and stagnant construction investment. In addition, we recognize that it is important for us to clarify strategies to realize the "Future Vision CX150" announced in July 2021, and to make group-wide efforts to achieve the goals. Based on these recognitions, we have revised some of our performance targets, strengthen our strategies to achieve them, and achieve sustainable growth by promoting further reforms.
Toda Corporation Group Formulation of "Medium-Term Management Plan 2024 - Rolling Plan"（PDF：248KB）