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Operating Environment
In fiscal 2001, ended March 31, 2001, the Japanese economy turned
away from what at the beginning of the year was described as a
gradual recovery. In the latter half of the year, the sense of
buoyancy deteriorated rapidly in the face of a declining U.S.
economy, a sluggish stock market, concerns over the retirement
of bad debts, uncertainty in the financial industry, and political
and government turmoil. Fears arose, particularly in the field
of information technology (IT), that private-sector capital investment
would stall, despite having previously been on an upward path.
Positive signs are hard to identify, given the state of employment,
personal consumption, and exports.
Overseas, in the latter half of 2000 the U.S. economy showed clear
signs of a drop, and while the European economy sustained its
expansionary tone, in some regions there were signs of worsening
business conditions. The Asian economies, which had appeared to
be on the road to recovery, bore the brunt of the decline in the
U.S. economy and increasing political turmoil, and by the end
of the year were showing signs of a slowdown in recovery.
The domestic construction market was in an upturn, primarily due
in the first half of the year to capital investment in the manufacturing
sector, but in the latter half, investment in non-manufacturing
sectors decreased, creating an overall outcome commensurate with
last year. Public works was characterized by tight restraint by
administrations at both the national and regional level concerning
the placement of contracts. As a result, the volume of public
works contracts was down compared to the previous year.
In the overseas construction market, the trend was comparatively
bullish in Europe, but as a result of the worsening economy, the
U.S. market has been characterized since the latter half of last
year by limited capital investment. The Asian construction market
had been on the road to recovery, but declining exports due to
the slumping U.S. economy manifested in the latter half of last
year as a sudden drop in investment in plant and equipment.
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Results
In this operating environment, the Kajima Group's consolidated
performance was as follows.
Consolidated revenues were up 10.5% in comparison with the previous
fiscal year, to 1,909.9 billion, primarily as a result of two factors: improved sales
in the construction division largely due to the adoption of the
percentage-of-completion method in recording construction revenues,
by both the parent and domestic subsidiaries; and the completion
of some large-scale real estate development projects.
Despite a 2.9% drop in gross profit on sales, consolidated operating
income fell only 0.1%, to 51.5 billion,
as a result of reduced general and administrative expenses.
Consolidated net income for the period was up 2.8%, to 9.2 billion,
as a result of a significant improvement in the profitability
of offshore entities, and despite a decline in the parent company's
net income.
Medium-Term Management Plan
The domestic construction market is in a period of structural
transition. It is difficult to avoid the conclusion that the traditional
pattern of construction investment will gradually disappear in
the medium to long term.
Recognizing that fact, the Company set as its goal the establishment
of a company structure that is appropriate to ensuring stable
profits at the required level. To that end, the Company previously
formulated a medium-term management plan, the New Three-Year Plan,
which applied to the three years from fiscal 1999 to fiscal 2001
and consolidated the Kajima Group in a powerful push to improve
performance.
The outcomes were the aforementioned results in fiscal 2001, and
achievement of the expected performance targets set forth in the
plan. To follow up and ensure that the Group continues to grow
and develop in the 21st century, the Company has formulated a
new medium-term management plan, the "Next Three-Year Plan,"
effective fiscal 2002.
Under the new plan, existing business processes and areas of activity
will be reviewed with the intention of expanding the business
of the Group overall and making it more cost-efficient. At the
same time, operational innovation and productivity improvements
will be pursued through the use of IT, and strategic development
will focus on technology development.
Specific business strategies designed to consolidate total Group
strength include
boosting
marketing capability and priority given to technology and greater
cost-competitiveness, all aimed at securing orders and profits;
focusing
on renovation (renewal) works, housing, and environmental engineering
fields;
targeting
greater diversity in sources of revenue throughout the entire
life cycle of a structure;
placing
an emphasis on and enhancing the efficiency of R&D;
bolstering
profitability from the real estate development and overseas business
operations;
improving
consolidated performance; and
achieving
a more robust financial profile.
As part of structural management reform, the Company will look
at organizational restructuring, reducing total staff levels and
marketing and management costs, and reforming its human resources
systems. It will also build an integrated database network, improve
the overall efficiency and productivity of business activity,
and speed up management processes.
The Company thanks its stockholders for their support and looks
forward to ongoing endorsement from stockholders of its activities.
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Rokuro Ishikawa
Chairman
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Sadao Umeda
President
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